"The bitterness of the contest over Affinity underscores concerns G8 may have oversold growth forecasts, with some analysts telling clients recently added centres were having difficulty hitting target earning multiples."
This applies to both corporates, they have focused solely on growth by acquisition.
There has been little or no organic growth in a large number of centres. There are a large number of centres in both of these corporates, where occupancy has fallen over 10% since acquisition.
The introduction of The National Quality Framework saw the number of trained professional staff required to meet regulations in childcare centres increase. Staff were employed for their qualification rather than the quality of care they delivered and therein lies the problem with low occupancy.
Both large corporates have failed to find the balance between delivering quality care to children and dividends to shareholders. Both corporates need to examine closely the delivery of service by under performing centres.
Hopefully the turmoil of the last few months will serve as a wake up call to both.
GEM Price at posting:
$2.99 Sentiment: None Disclosure: Not Held
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