G8 Education childcare centre deal pleases investors

GOLD Coast-based childcare provider G8 Education has outlaid $27 million to add 19 new centres to its swelling portfolio, which now numbers 500 in Australia.

Investors responded positively sending the stock up 17¢ higher to close at $3.94 yesterday. G8 said in an ASX statement that the acquisitions of the centres, six in Queensland, five in NSW and eight in Victoria, were from a single unnamed vendor.

The deal, which represented an earnings multiple of 3.75 based on EBIT of $7.2 million, was due to settle in October.

G8 managing director Gary Carroll said the centres were in addition to its previously announced pipeline of acquisitions and were expected to add $1 million to pre-tax earnings for the 2017 calendar year.

“The acquisition represents a positive opportunity for the group to grow its portfolio by acquiring high-quality operating centres in complementary locations at an attractive multiple,” he said.

G8 said it had funded the purchase from existing cash and finance reserves and settlement was conditional upon licensing and landlord approvals for the centres.

The Varsity Lakes-based company is cashed-up having taken steps to strengthen its balance sheet during the first six months of the year.

These included raising $100 million via institutional investors and a further $95 million via a placement with Hong Kong-based CFCG Investment Partners International (Australia).

Last month G8 unveiled a half-year profit of $30.5 million, up 23 per cent, while there was a 2.1 per cent gain in revenue to $368.7 million. This was despite falling occupancy at its centres.

The company said cost savings from its wages bill, contributions from centres acquired last year, and lower finance costs contributed to the result.