Kip McGrath listed on Fri closed up 30c to 80c and has put on another 10c today. The company operates in the very lucrative child tutoring business and plans to open over 400 new centres over the next few years just in UK alone.
Kip McGrath makes strong debut Author: Matthew McAdam Date: 15/08/2003 18:59:00 Words: 408 Publication: Financial Review Section: IPOs Source: AFRBreaking Kip McGrath Education Centres made the grade with investors on Friday. Shares in the education centre franchisor hit the boards at 11.00 AEST at 72y - a 40 per cent premium to their issue price - and rode as high as 80y within the first hour of trade. The strong debut leaves members of the McGrath family who founded the business - including Kip McGrath, his wife and fellow teacher Dugnija and their son Storm, a director of KMEC - sitting on paper profits of more than $2 million. The McGrath family retained a 55 per cent stake in the business, which the market now values at almost $13 million, after underwriter ABN Amro Morgans wrapped up a $3.8 million capital raising earlier this month at 50y a share. Proceeds from the float will be channelled into expanding its proprietary learning systems offshore. KMEC hopes lift its current stable of 38 centres in the UK to more than 400 over the next few years. But the directors are also doing their homework on the potentially lucrative education sector in China and have set up a joint venture pilot program to teach non-English speaking students in Beijing. KMEC receives income from the sale of franchises, marketing and educational materials, monthly royalty fees and training programs. KMEC booked net profits of $442,000 last financial year on revenue of $1.8 million and expects to record a $530,000 result in the current year, rising to $995,000 in fiscal 2004. It expects to distribute about 80 per cent of net profits to shareholders and has forecast a fully franked final dividend of 4.68y per share in fiscal 2004, representing a yield of 9.36 per cent. The Newcastle-based firm has been offering individually tailored tutelage and testing services in reading, spelling, comprehension and numeracy to children between six and 16 years of age for almost 30 years. The company began franchising its business model in 1987 and now boasts almost 200 centres in Australia and 400 worldwide, including 40 outlets in South Africa and 7 in Scotland. New centres were being opened at an average rate of about one per fortnight while in any week, more than 40,000 children are tutored in its centres.
ABS Price at posting:
0.0¢ Sentiment: Buy Disclosure: Not Held
