Positive outlook forecast for nursery businesses
Catherine Gaunt
Friday, January 20, 2012
There could be more consolidation among nursery groups this year, corporate agents Christie + Co. is predicting.
Director of childcare and education Courteney Donaldson said that there could be a number of large deals this year, and that January occupancy levels would shape the year for the sector.
Nervousness in the sector hampered transactions last year, as the education and childcare sector was affected by the economic climate, Ms Donaldson said.
‘In 2011, day nursery transactional activity continued the stumbling pace of the previous year, although we witnessed an increase in one-off, confidential opportunities as the year progressed and vendor aspirations became more closely aligned with the prices buyers’ were willing to pay,' she said.
Notable deals highlighted by Christie’s include Co-operative Childcare’s takeover of Buffer Bear Nurseries.
Despite nurseries facing pressure on margins, Ms Donaldson said the sector remains buoyant.
She added, ‘Many nurseries continued to enjoy reasonable levels of occupancy. Levels of distress were lower than in other business sectors, although there was significant regional variation where, in some instances, high operational and staffing costs led to margins being squeezed.’
But she claimed that local authorities were continuing to give greater allocations to maintained nurseries than their private sector counterparts, and that this was a cause for concern.
‘It is positive to note that private equity and the lending community maintain a strong interest in the nursery and childcare sector. Indeed, increasing investor interest from overseas demonstrates continuing confidence in the sector.
‘However, maintaining investor and lender interest, and boosting occupancy levels will come back to quality – quality of the property assets, quality of care and education delivery and quality of revenue and levels of contribution or EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization,’ she said.
Christie’s predicts that despite 2011's mixed performance for the sector, banks and investors are likely to lend to successful childcare and education businesses with a proven track record.
However, it also warned that independent day schools, especially small pre-prep schools, could face growing sustainability problems.
Nervousness in the sector hampered transactions last year, as the education and childcare sector was affected by the economic climate, Ms Donaldson said.‘In 2011, day nursery transactional activity continued the stumbling pace of the previous year, although we witnessed an increase in one-off, confidential opportunities as the year progressed and vendor aspirations became more closely aligned with the prices buyers’ were willing to pay,' she said.
Notable deals highlighted by Christie’s include Co-operative Childcare’s takeover of Buffer Bear Nurseries.
Despite nurseries facing pressure on margins, Ms Donaldson said the sector remains buoyant.
She added, ‘Many nurseries continued to enjoy reasonable levels of occupancy. Levels of distress were lower than in other business sectors, although there was significant regional variation where, in some instances, high operational and staffing costs led to margins being squeezed.’
But she claimed that local authorities were continuing to give greater allocations to maintained nurseries than their private sector counterparts, and that this was a cause for concern.
‘It is positive to note that private equity and the lending community maintain a strong interest in the nursery and childcare sector. Indeed, increasing investor interest from overseas demonstrates continuing confidence in the sector.
‘However, maintaining investor and lender interest, and boosting occupancy levels will come back to quality – quality of the property assets, quality of care and education delivery and quality of revenue and levels of contribution or EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization,’ she said.
Christie’s predicts that despite 2011's mixed performance for the sector, banks and investors are likely to lend to successful childcare and education businesses with a proven track record.
However, it also warned that independent day schools, especially small pre-prep schools, could face growing sustainability problems.
