The players

The biggest provider, Kidicorp, has an estimated 5.7% of the local market. It has some 70 centres under its wing but they don’t carry its brand. Kidicorp was the name developed for investors but Wayne Wright says it sends the wrong message to parents. “We prefer to go with names supported by the local community.”

It started out buying existing centres but now purpose builds them, with construction currently underway in Christchurch, Palmerston North, Taradale, Hamilton, Taupo and Auckland.

Kidicorp listed in 2003 under a reverse takeover by Feverpitch International, and its share price — hovering between 12 cents and 22 cents in the past year — is currently around 15 cents. The Wright family are the biggest shareholders, with 54% held through trusts, and the next biggest shareholder is Fisher Funds Management, with 19%. Fisher’s Wayne Couillault is pleased with the investment although he’s aware the business is not a licence to print money because of the current teacher shortage.

Wright warns fees will rise on the back of wages for early childhood teachers increasing almost 25% last year — from an average $15 an hour to $22 for a graduate teacher in Auckland.

“Smaller early childhood education centres started offering much higher wages to attract qualified teachers, who are in short supply. That’s raised the cost for everyone. I’m in favour of boosting professionalism, but this is going to create severe pressures over the next three years. Not enough trained teachers are coming out of the schools, and I expect some good teachers to be lost because many employers won’t be able to afford them,” Wright says.

But the big factor behind Kidicorp’s $700,000 loss last financial year was the move into New Zealand by Australian rival ABC Learning Centres. Kidicorp had contracted another Australian company, Peppercorn Management, to help manage its centres in New Zealand. But that deal proved expensive to unwind again a short time later when Peppercorn was taken over by ABC. Kidicorp’s half-year result to September was a much-improved $1.1 million profit.

The dominant force in the Australasian market is ABC Learning Centres, which now has 752 centres in Australia and New Zealand, and moved into the US and Canada recently with the $217.9 million acquisition of the Learning Care Group — the third-largest childcare centre provider in the US.

ABC has been on a buying spree, purchasing three sharemarket-listed childcare operators since late 2003. Investors have also approved its expansion with the share price now hitting the $8.50 mark, compared to $7.50 at the start of the year. It’s confident the private childcare market will continue expanding in New Zealand.

”Currently we have less than 2% of the market in New Zealand but we aim to gradually increase that market share through both developing new centres and acquisitions,” says Martin Kemp, chief executive (operations) for Australia and New Zealand.

ABC has been joined in its push into New Zealand by Australia’s Macquarie Bank. Last year it bought 20 North Island early childhood education centres — including six operating under the popular Strawberry Fields banner in Auckland. The move into New Zealand came only two years after it started up in the sector in Australia. Macquarie has formed a new business, Forward Steps, to operate and manage childcare centres throughout New Zealand.

It was, in fact, a New Zealand mum who originally led the investment bank to get into the sector. Leslie Wait has worked for Macquarie for around a decade, and after returning to work from maternity leave, she identified childcare as a fruitful area for the bank’s investment in Australia. Then, while on a holiday home to New Zealand, Wait saw room for more quality centres here. Wait is currently on maternity leave, but Forward Steps Director Tony Frehon says the company is delighted with its growth in New Zealand — in less than a year it has expanded to 32 centres. All were existing centres, which continue to operate under their previous names.

“Why would we want to rebrand something that is working well, and that parents identify with?” says Frehon. The company will look to purpose-build centres later, “once we get more runs on the board”.
His company’s approach is to cluster together five or six centres under one manager who then helps the person running each centre. While Frehon dislikes the word corporatisation, he agrees that this is a sector that lends itself to efficient service — something larger companies are better placed to provide.

“We want to free the centres up to offer a high-quality, creative product, but consistent, and well backed up by a good structure. Amalgamation helps that.”

One centre alone would find it hard to do the necessary administration and organisation required in this highly regulated sector, he says, so centralisation makes practical and business sense.
The fourth biggest player on the New Zealand scene is the unlisted Kindercare, which describes itself as ‘100% New Zealand owned’. It runs 48 licensed centres between Auckland and Christchurch, but despite its size, founder and managing director Glennie Wendleborn sees herself as “on a different journey” from the big private corporations in the sector.

“I’m hands-on and involved, and have kept many of my staff for 28 years. We’re all passionate and enthusiastic about early childhood education.”

Kindercare centres are open from 7.30am to 5.30pm — though government funding only covers a maximum of 30 hours — and are towards the top end of the price range.

Wendleborn bemoans the increased administration the government now requires of the sector. “The more you’re funded, the more it costs to administer it. It’s a catch-22.”


Keeping them happy

Deirdre Coleman and her husband Glen had a good look around when choosing a daycare centre for their two children — Dayna (3) and Ari (1). They eventually selected one in the Auckland suburb of Ellerslie, just down the road from where Deirdre Coleman, a writer, then worked. The centre had been personally recommended by work colleagues but that didn’t stop her shopping around first. “A personal recommendation is great but I would not send my child to one without seeing what else is out there so you get a perception of what makes a great place,” Coleman says.

She shied away from choosing the flashest-looking place with the newest gear but instead focused on whether her children were happy in the environment, how well they were nurtured and whether the outdoor space was adequate to allow them plenty of physical activity. Price did come into it as centres in some affluent areas were charging over $90 per day for one child, which was unaffordable for the Grey Lynn couple.

The cultural mix of both children and teachers was also an issue.

“Without being politically incorrect, I looked at the cultural mix of the centre because I didn’t want too many people speaking English as a second language at a time when the language acquisition of my children is so important. I wanted my children learning to speak English well,“ she says.

Whether the centre is owned by a corporate entity or a couple of individuals makes little difference to Coleman or her partner. “We looked at each centre on its own merits and at the people running it. They’re not homogenised across the board. It’s about the individuals running it and having good teachers in place.”

The most important thing is that your children are happy in the environment you leave them in, says Coleman. “The worst thing is leaving them at daycare when they’re crying and miserable and then having to drive to work and focus on a day’s work knowing the children are potentially miserable. I know parents who have pulled their children out of daycare after they spent two weeks screaming their heads off.”