Barlow backs childcare growth

Norah Barlow says the prospects of early childhood education are robust.

Former chief of retirement village operator sees promise in early childhood sector.

Norah Barlow reckons early childhood education has the potential to become just as big a sharemarket success as the aged-care sector she's more commonly associated with.

The 57-year-old former chief executive of NZX-listed retirement village operator Summerset Group has been appointed chairwoman of Evolve Education Group, which will raise $132 million through its transtasman sharemarket float on December 5.

The Auckland-based company will use the proceeds of the offer to bankroll its acquisitions of childcare providers Lollipops Educare and Porse.

Norah Barlow. Photo / Chris Gorman

Barlow took Summerset public in 2011, when it joined fellow retirement village firms Ryman Healthcare and Metlifecare on the NZX.

With strong profits and solid growth potential, aged care has become a popular sector with local investors.

Barlow said that while early childhood education (ECE) had different growth dynamics to aged care - which is gearing up to service the rapidly greying baby-boomer generation and also benefits from exposure to the property market - its prospects were robust and there were similarities between the two sectors, including the reliance on government funding they both share.

"What we do have is the continued growth in women working," she said. "It used to be the grandmothers, like me, who were looking after the children. It doesn't happen so much nowadays."

The number of children enrolled in ECE services has risen 31 per cent since 2000 to around 200,000 last year, according to Evolve's prospectus.

Time spent in early childhood education had also been on the rise since the turn of the century, with the average enrolled child spending 21.7 hours in care per week, up from 13.5 hours in 2000, the prospectus said.

The ECE sector doesn't have the greatest track record on the local sharemarket - formerly NZX-listed Kidicorp failed to fire as a public company and delisted in 2007 - but the sector has been gaining traction across the Tasman more recently.

Queensland-based Affinity Education Group's stock has gained about 24 per cent since the company listed on the ASX last December, while G8 Education shares have risen from about A30c to more than A$4.40 since the company began an aggressive acquisition push in early 2010.

The ECE centres in Evolve's initial portfolio will account for only around 4 per cent of the total market, suggesting there is much scope for Evolve to grow through further acquisitions.

The sell to investors is that the New Zealand ECE sector is highly fragmented and the company can add efficiency, and boost profitability, through consolidating centres under a single corporate model.

Barlow said Evolve would take a "measured" approach to acquisitions, but nothing was "off the table".

"We want to buy good childcare and add value as we can."

She said acquisitions would be largely debt-funded, but the company could raise additional capital through a share placement at some stage.

Growth area

200,000
Kiwi kids enrolled in early childhood education services, a 31 per cent increase since 2000.

21.7 hours
Average time spent in ECE per week, up from 13.5 hours in 2000.

$1.36b
Government funding for ECE last year, up from $555 million in 2007.

Source: Evolve Education Group prospectus.