Childcare business magnate Chris Scott sits atop a pretty fortune with his numerous childcare investments over the years. He has been on the scene, kind of in an artful Willy Wonka fashion, inviting children and their parents into his massive empire, which has been taking advantage of the increased Child Care Subsidy by the Australian government.
Scott is the original founder of G8 Education (ASX: GEM) which he built to become Australia’s largest for-profit child care operator before exiting in 2017. Now he leads Embark Early Education (ASX: EVO), where he is the Managing Director. The price increases across these centres—in lieu of the increased subsidy—has forced parents who have no other choice to pay up. In CY22, G8 Education’s occupancy stood at 71%, and now, Embark has reported that its occupancy rate has reached an impressive 85% as of June 2023.
Embark is an early childhood education centre that functions through brands like Carlton House, Youngstars, Haven Early Learning, Brighthouse and more. In keeping with Scott’s expertise, the Company has decided to delist from the NZX and re-domicile itself by listing on the ASX.
Given Australia’s lucrative climate to be in the childcare industry (where most companies are shooting up fees), Embark sees an opportunity to make the most of its 85% occupancy. This represents a significant upshot from its 74% occupancy rate in January this year.
While things are looking up as Embark makes its move to Australia, the Company’s CFO, Edmund Mah, has resigned as of July 14, 2023. Following the relocation of the Company to Australia and its official listing on the ASX, Mah decided not to move to Australia and will explore other career opportunities.
Over the past 12 months, Evolve decided to sell its New Zealand operations. Since then, it has solely focused on Australia and recently completed a scheme of arrangement, resulting in its delisting from the NZX and relocation to Australia. Following that, it changed its name to Embark. As of 2022, Embark owned and operated 24 early education centres, and it plans on continuing its acquisition trend as it sets up base in Australia.
The Company’s New Zealand operations started suffering during Covid, when government-mandated closures of centres and restrictions on immigration, reduced the number of immigrants coming to New Zealand. These affected the Auckland area, where 45% of its New Zealand licensed places were located. So, it gave away its centres to Anchorage Capital Partners in September 2022, and made the move.
The Company incurred a loss of $43.8 million in 2022, with childcare fees bringing in only about $19.8 million. Its cash equivalents fell quite a bit from over $47.5 million in 2021 to $17.3 million in 2022. The Aus move is expected to improve things—perhaps to G8’s level, which grew from 38 to 500 centres under Scott.
Alinda is a Business Reporter for The Sentiment
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