G8 Education up 208%

Collins Acquisition have dealt with G8 the past 12 months and were very pleased to see such exciting news in today’s paper. Their continued growth is bound to raise confidence in the child market and we look forward to continuing our relationship.

Reported in the Goldcaost.com.au by Nick Nichols, business editor.

GOLD Coast-based G8 Education has put to bed any lingering doubts about the commercial viability of the childcare sector with a stunning surge in profit.

The childcare centre operator has reported a $13.91 million net profit for the year to the end of December — 208 per cent up on a year earlier and 9 per cent ahead of expectations.

The result has been buoyed by a series of acquisitions through the year, despite a troubled and unresolved venture into Singapore.

Legal costs in Singapore took $956,000 off the bottom line, but this was outweighed by a $4.29 million write-back of an earn-out already accounted for in the books for an earlier acquisition.

The G8 result buries for good the ghost of Eddy Groves’ ABC Learning Centres which collapsed in 2009 and threw into doubt the commercial viability of the childcare sector.

G8 Education, which controls 206 childcare centres in Australia and Singapore, is now the sole childcare company listed on the Australian Securities Exchange.

Its business strategy is significantly more conservative than that of ABC Learning.

“The underlying business hasn’t changed,” G8 managing director Chris Scott said.

“What’s changed is the multiples on which they’re sold.”

G8 has stuck firmly to a format of buying childcare centres on multiples of about four times earnings.

Mr Scott said during the boom years, ABC Learning was acquiring centres on multiples of 10 to 12 times earnings and, in one case, 76 times the earnings.

“We’re disciplined about what we pay for these businesses,” he said. “If you start paying too much you can’t get a decent return.”

Mr Scott conceded G8 was in a “sweet spot” at the moment, with childcare centre prices subdued by constrained capital markets.

The latest G8 result was delivered on a 115 per cent lift in revenue to $142.89 million and a 98 per cent lift in expenses to $118 million.

Pre-tax profit surged 309 per cent to $22.69 million.

G8 has rewarded shareholders with a 50 per cent increase in dividends to 6 a share. The company pays its dividend quarterly, with the first 1.5 instalment of the increased dividend to be paid in April.

Mr Scott said G8 was expecting a judgment on its stoush with Singapore’s Cherie Hearts Group before the end of next month.

G8 shares jumped 4 to 86.