Early education provider Mayfield Childcare (ASX: MFD) has successfully concluded the acquisition of two high-performing childcare centers, right in time as the Aussie government boosts childcare subsidies for parents.
The Company’s latest move includes the acquisition of a centre in Sandringham, which complements Mayfield’s existing facility in Cheltenham, thereby fortifying its Bayside operations. With 60 approved places, the center currently boasts an 86% occupancy rate as of the week commencing May 15, 2023. Additionally, Mayfield has acquired the Home Hill center, expanding its reach south of Townsville and complementing its existing centers in Wulguru and Cannonvale. The Home Hill facility comprises 80 approved places and currently maintains a 78% occupancy rate.
Mayfield financed the acquisitions through its existing debt facilities, with a total purchase price of $2.4 million. The Company anticipates generating $485k in EBITDA in the calendar year 2023.
Chief Executive Officer, Ashok Naveinthiran, said, “The company is pleased to have negotiated an all‐cash transaction for two high‐performing centres, on terms comparable to market and consistent with our strategy to purchase centres within existing regional clusters”.
The centers were acquired from Genius Learning, a strategic partner with an extensive pipeline of greenfield and developing childcare centers across Australia. Mayfield opted for a cash consideration rather than issuing scrip to minimize dilution impact on existing shareholders.
With the addition of the Sandringham and Home Hill centres, Mayfield now operates a total of 38 centers across Queensland, Victoria, and South Australia. The Company remains committed to acquiring high-performing centers that complement its existing footprint, facilitating further scalability and operational advantages at the regional level.
Mayfield is poised to benefit from the Australian Government’s recent increase in the Child Care Subsidy (CCS) for eligible families. Effective from July 10, 2023, families earning less than $530,000 will receive an enhanced CCS, with the maximum subsidy amount rising from 85% to 90% for those earning up to $80,000. However, there is a possibility that childcare facilities may raise their prices, offsetting the overall impact of the subsidies.
Nevertheless, Mayfield’s need for such a boost remains uncertain, as the Company has yet to release its financial results for 2022. This delay follows a scandal involving the misappropriation of funds.
Following the recent announcement of investigations into past misappropriations and misallocations, which resulted in the restatement of accounts, the Board of Mayfield Childcare has decided to allocate additional resources to enhance the company’s corporate and financial governance capabilities.
Plus, it has gotten an external advisor on board to conduct a comprehensive governance review. This review encompasses an assessment of existing board policies and procedures, risk management frameworks, and the development of a skills matrix to guide future director appointments.
Furthermore, Mayfield’s Chief Financial Officer, Glenn Raines, has tendered his resignation, prompting the Company to initiate a search for a suitable replacement.
While its FY22 results are awaited, the Company is attempting to ensure that the FY23 acquisitions cushion the decline ushered in by the misappropriation.
Alinda is a Business Reporter for The Sentiment
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