Ann: GEM: GEM to make a takeover offer of AFJ at a 29.6% premium, page-29

Hi Aries,

My apologies, I did mean to say vacancies from the government website.

I have never said I disbelieve the reported utilisation levels reported by G8. My belief is they have plenty of room for improvement and in my opinion there has been very little organic growth, based on the following:
The last reports showed occupancy level growth for the previous 12 months, for centres acquired pre 2011 (78 centres) at o.37%, for centres acquired during 2011 (43 centres) at 1.59%, for centres acquired during 2012 (33 centres) at 0.18%.

In the Investors Overview it states 'that occupancy peaked at 90.60% in November 2014', it does not say, 'and remained at that level for the remainder of the year'. I would therefore assume that the peak was achieved for a short period of a few days. This is a normal occurrence in childcare in the latter part of the year, (never seen a centre not full on Melbourne Cup Day) parents purchase additional days to allow them to meet their own obligations in preparation for the holiday season, thus temporarily increasing occupancy levels.

In 2013 the price paid per licensed place varied between $18,220 and $22,181. In 2014 that price range was between $21,187 and $59,090. The purchases during 2014 included centres contracted to The Sterling Group. From that group 91 centres were purchased in March 2014, premium centres, average price, per licensed place, $36,756. In October a further 3 from that group, again premium centres, average price per licensed place $59,090. Premium centres at that price would indicate, 100% occupancy and fees well above the australian national average. These, high occupancy level centres, would be inflating the overall occupancy levels, the 90.60% mentioned for November 2014, in my opinion, with planned organic growth could be higher.

When G8 first commenced acquiring acquisitions, they had a very strict criteria; no more than 12 kilometres from a major metropolitan city, wouldn't consider any centre with under 48 licensed places and occupancy had to be above 85%. The last few years though, have seen competition in corporate childcare and the accumulation of acquisitions has been astounding, by both G8 and Affinity. This accumulation has seen a softening of the initial criteria for purchase. There will almost certainly, be in those purchases, low performing centres, which came as part of a group purchase and they will be affecting the occupancy levels also.

Disclosure: I did buy into Affinity on Thursday and am still holding. My decision was based on share price only.

I would assume that G8 will continue to accumulate shares in Affinity. I did think, however, that any buyout in Affinity may have come from Evolve. Tomorrow should be an interesting day.