For personal use only Acquisition of Cherie Hearts G8 Education Limited (ASX:GEM) 28 October 2010
Overview For personal use only • Following the acquisition of Cherie Hearts G8 Education’s child care portfolio will comprise: ▫ 140 child care centres in Australia; ▫ 66 child care centres in Singapore; and ▫ a majority interest in a training operation and enrichment school in Singapore. • The acquisition of Cherie Hearts in Singapore will expand the current operation by a further 66 child care centres with 18 owned and 48 franchised centres. • The acquisition will provide the platform to provide quality care through an established business in Singapore in addition to Australia. • The Singapore business includes a training operation and enrichment school which are majority owned by Cherie Hearts. Page 2
Acquisition Update: Cherie Hearts For personal use only • On 28 October 2010, G8 Education announced the acquisition of Cherie Hearts, Singapore’s largest private provider of child care services. • Chris Scott, Managing Director of G8 Education will oversee the Singapore operations, as well as existing operations in Australia. Chris is a permanent resident of Singapore and has over 30 years business experience in Singapore. • Sam Yap, joint founder of Cherie Hearts will join the board of G8 Education. Sam will continue as a key executive of Cherie Hearts, together with co-founder Gurchran Singh who is his alternate director. Page 3
Acquisition consideration For personal use only • The purchase price of Cherie Hearts is AUD19.23 million * (including the assumption of debt). • The forecast EBIT for Cherie Hearts for the 2011 calendar year is AUD4.3 million * . This represents: • an EBIT purchase price multiple of 4.47 times; and • a tax affected multiple of 3.75 times EBIT once the Singapore corporate tax rate of 17% is taken into consideration. • The guidance for the 2011 calendar year for Cherie Hearts is as follows: Calendar Year 2011 Guidance for Cherie Hearts Revenue AUD16.70 million Expenses AUD12.40 million Earnings before Interest and Tax AUD4.30 million Interest AUD0.30 million Net Profit before Tax AUD4.00 million Net Profit after Tax AUD3.35 million The purchase price of AUD19.23 million represents an EBIT multiple of 4.47 times. The Singapore corporate tax rate is 17% so the tax affected equivalent multiple is 3.75 times EBIT on a like for like basis with Australian acquisitions. The guidance assumes no synergies and no revenue from the 23 franchisee businesses signed and awaiting completion. Page 4 * Assuming an exchange rate of $1.28 for each Australian dollar
For personal use only Key Statistics Page 5
Key Statistics For personal use only Current share price $0.78 (at close of trade on 27 October 2010) Market capitalisation $117.24 million (at close of trade on 27 October 2010) Shares on issue during 2010 $162.30 million (following issue of announced acquisitions) Market capitalisation at finalisation of announced acquisitions, $126.60 million and assuming share price of $0.78 at close on 27 October 2010 $0.90 7,000,000 $0.80 1 July 2010 to 27 October 2010 6,000,000 $0.70 5,000,000 $0.60 4,000,000 $0.50 $0.40 3,000,000 Price history: $0.30 2,000,000 $0.20 1,000,000 $0.10 $0.00 0 Page 6 Volume Close
For personal use only 2011 Guidance Page 7
2011 Guidance For personal use only 2011 Guidance 2011 Guidance 2011 Guidance for Australian for Cherie Hearts for the Group centres AUDmillion AUDmillion AUDmillion Revenue 115.47 16.70 132.170 Expenses 98.19 12.40 110.59 Earnings Before Interest and Tax 17.28 4.30 21.58 Interest 2.11 0.30 2.41 Net Profit Before Tax 15.17 4.00 19.17 Net Profit After Tax 10.62 3.35 13.97 Source: GEM ASX Announcements: 22 September 2010, 29 September 2010 and 28 October 2010 Page 8
Capital structure For personal use only Shares on issue 150,304,537 Shares to be issued as consideration for announced Kindy Patch transaction 12,000,000 (no shares to be issued for Cherie Hearts transaction) Options over unissued shares 250,000 (250,000 vest in 2012) held by Chris Sacre Debt Current debt – National Australia Bank $15,543,000 Debt to be assumed on acquisition of acquisitions 1, 2 and 3, the subject of the 18 August 2010 announcement $7,900,000 Debt to be drawn during 2011 to fund the deferred component of Acquisitions 1, 2 and 3 $6,303,000 of the 18 August 2010 announcement Debt to be assumed on acquisition of the Cherie Hearts business $5,650,000 Dividend Policy Quarterly dividends at 50% - 60 % payout ratio Page 9
About Cherie Hearts For personal use only • Cherie Hearts was founded by Sam Yap and Gurchran Singh in 2001 and is the largest private child care provider in Singapore. • Owns 18 centres in Singapore • Operates 48 franchised centres; and • Has a further 23 franchised centres awaiting completion. • Cherie Hearts currently caters for over 5,000 families in Singapore. • Cherie Hearts provides quality child care and pre-school education to children aged between 2 months and 12 years of age, and offers bi-lingual (English and Chinese Mandarin) full day and half day services to children across a number of programs: • Infant care : for children aged 2 months to 18 months; • Playgroup 1 (P 1): for children aged 18 months to 2 years; • Playgroup 2 (P2) : for children aged 2 to 3 years; • Nursery : for children aged 3 to 4 years; • Kindergarten 1 (K1) : for children aged 4 to 5 years; • Kindergarten 2 (K2) : for children aged 5 to 6 years; and • Before and After School Care (BASC) : for children aged 7 to 12 years . Page 10
Professional Development For personal use only • Cherie Hearts owns 51% of the issued capital in The First Learning and Training Centre Pte Ltd . This centre provides accredited courses to child care professionals at certificate and diploma level in early childhood education. The centre is accredited by the Singapore Ministry of Community Services, Youth and Sport and the Ministry of Education. • The enrichment company, The Children’s Repertoire Pte Ltd , is wholly owned by Cherie Hearts and provides both proprietary and external enrichment programs to Cherie Hearts’ centres and franchisees. The current programs available are: • The Theatrical Kids’ (Chinese): performing arts program for children aged 3 to 6 • Acts of Life Speech and Drama: prepares children to take the Trinity Exam for the award of London’s Trinity Guildhall Young Performer Certificate. • Sporty Joe’s: a highly interactive gymnastics and fitness program for children aged 2 to 6. • Lego Robotics: cultivates analytical skills through the art of play. • Kindermusik: established for 30 years internationally, this program focuses on the importance of fundamentals music for children aged 2 to 6. • Future Kids: interactive computer mastery program for children aged 4 to 6 years. In addition to developing children in the use of technology, the program also promotes learning of the English language, science and general knowledge. Page 11
Cherie Hearts: Awards For personal use only • Cherie Hearts Group has received more than 30 national awards over the past 5 years: Page 12
Board and Management Team For personal use only Jenny Hutson, Chris Scott, Chairperson Managing Director B.Com, LLB, FAIMM, MAICD B.Econ (Hons) Craig Chapman, Sam Yap, Chief Executive Officer Non-Executive Director B. Com., A.S.C.P.A., C.S.A. B. Sc (Hons) Gurchran Singh Brian Bailison, Non-Executive Director (Alternate) Non-Executive Director Masters Early Childhood Education B.Com., B.Acc (Cum Laude), ACA Garry Edwards, Chris Sacre, Chief Financial Officer/ Financial Controller/ Joint Company Secretary Joint Company Secretary B.Bus, CA, SA Fin, G Dip AppFin MBA, FAICD Page 13
For personal use only G8’s vision Page 14
G8’s mission For personal use only Our mission is to be Australasia’s leading provider of high quality, developmental and educational child care services, and to achieve this through growth and sustainability: Quality Education & Care Employees • To nurture and develop • To commit to employee children’s minds, social skills development and a rewarding and confidence in a safe and culture which will ensure an stimulating environment. engaged and driven workforce. Community Profitability • To be responsive to local • To grow and derive value for families and deliver upon shareholders through community expectations. innovative services, systems and management. Page 15
The vision of G8 Education For personal use only • A portfolio of outstanding child care brands: • Cherie Hearts • Early Learning Services • World of Learning • Bourne Learning • Community Kids • Holiday Club • Kindy Patch • Focus on the importance of child care • Make good centres great through focusing on outstanding child care management Page 16
For personal use only Centre Overview Page 17
For personal use only Page 18
Australian Centres For personal use only Total Australian centres State (assuming completion of all announced acquisitions as at 27 October 2010) Queensland 70 New South Wales 38 Victoria 9 Australian Capital Territory 5 South Australia 15 Western Australia 2 Tasmania 1 Total centres 140 Total licence capacity 9,854 Page 19
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