The Australian childcare industry could be in line for a shakeup with large New Zealand operator Evolve Education (ASX: EVO) announcing their expansion into the Australian market, starting with the acquisition of four centres in Melbourne.
The acquisitions were funded from existing cash reserves with a total purchase price of A$11.8m and are expected to deliver the Group an additional $2.5m EBITDA across the centre’s total licence capacity of 384 children per day.
“The acquisition of these premium centres is an excellent start to our growth strategy in Australia and we are excited about future opportunities currently present in the Australian market,” said Evolve Education Group Managing Director, Chris Scott.
The expansion to Australia is a significant one for Evolve with the Australian childcare industry deemed favourable for operators where parents which fall in low income brackets receive generous Government subsidies. Subsequently, industry rates for childcare services in major Australian cities range from $90 – $140 per day depending on the brand, location and occupancy.
These daily rates are notably higher than in New Zealand where an online search identifies fees to range from NZD $45 – $75 per day.
Whilst the expansion of Evolve into the Australian market is still in its infancy, the Group already operates 129 centres in New Zealand where existing infrastructure should see a smooth transition for its Australian acquisitions.
Should the expansions continue, major Australian operators G8 Eduction (ASX: GEM), may be impacted with G8’s earnings per share having been on a steady decline since 2015 when returning $0.23 EPS down to $0.16 EPS in 2018, where they operate more than 500 centres across Australia.
In that same period, Think Education (ASX: TNK) shareholders also saw a less substantial EPS decline from $0.12 to $0.10.
Alfred Chan is a Business Reporter at The Sentiment specialising in ASX-listed small cap companies, a bloodstock enthusiast and former equities analyst.
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