Kidicorp owner driven by a passion for preschooling

Wayne Wright puts Kidicorp's profitability down to a return to in-house management. Picture / Alan Gibson

When Kidicorp executive director and majority owner Wayne Wright hands over to a new chief executive early next year, there will be some sighs of relief.

And that will be from among the people who like him.

The founder of New Zealand's biggest private early childhood education provider is "quite formidable", says an investor.

"He's a man used to getting his own way. As long as you are on his wavelength you'll be okay, but I think he only tells you what he thinks you need to know."

But on the subject of the listed company asking shareholders at this month's annual meeting to approve the issue of a further five million shares at an issue price of not less than 16c, Bay of Plenty-based Wright is positively garrulous.

The issue will raise at least $800,000, to be used for company growth. But capital raising isn't the reason for the issue.

It was "an absolute nutcase, expensive timewaste" to satisfy the Takeovers Panel, barks Wright.

"Last year, knowing that five million shares were going to be cancelled, I transferred some shares from our family trust into one of my son's trusts, which took my shareholding momentarily under 50 per cent, knowing that [after cancellation] I would bounce back over 50 per cent.

"The Takeovers Panel said 'you can't do that, you have to reduce your shareholding below 50 per cent'. The only way I can do that is either sell some shares, which I don't want to do, or issue another five million shares."

Directors planned to buy the new shares, but the Takeovers Panel said no, requiring the board to ask shareholders to approve directors buying the shares. Also, the panel said directors could not buy more than 50 per cent of the issue.

As a result, directors will subscribe to 2.3 million shares, and a person not associated with Wright, and not a director, will take the other 2.7 million.

"Then I'll be where the Takeover Panel want me at 49.6 per cent or whatever, then I have to make a partial takeover offer to get myself back to 51 per cent."

Wright didn't particularly want this printed, calling it a "bureaucratic boondoggle", and very confusing for the public.

"But I'm telling you because I don't want you to think I'm trying to cover anything up or misrepresent anything."

Straight-talking is his speciality.

New Zealand-born Wright started his career in construction and in the 1970s went to California and founded a large construction company there, specialising in retaining walls.

After selling up and returning to New Zealand in 1993, he changed tack and moved into childcare with the purchase of 10 childcare centres.

From next year Wright will relinquish day-to-day involvement in Kidicorp's 80-centre empire to a chief executive as the company embarks on an aggressive new growth phase.

Instead, he'll go out hunting new acquisitions, now that Kidicorp has turned around two years of losses.

It reported an unaudited net profit of $1.5 million for the year to March 31, up from a loss of $746,920 the previous year and a loss of $11.6 million in 2004.

The main reason for the turnaround was returning to in-house management, Wright says.

Kidicorp had to terminate a management agreement with Australia's Peppercorn Group last year after Peppercorn was taken over by ABC Learning Centres, which also operates in New Zealand.

Unwinding the agreement cost about $2 million.

Kidicorp has enough critical mass and quality top management to deal with growth of more than 15 per cent a year, Wright believes.

After 10 years acquiring centres, it is now building new ones. When they are built, they will be sold and the preschool will become the tenant. Kidicorp is not in the real estate business, Wright says.

Kidicorp centres are gearing up for a 10 per cent increase in new children from July next year when the Government starts paying for up to 20 hours a week for 3 and 4-year-olds. Centre occupancy rates are currently in the low 80 per cent, Wright says.

Kidicorp will also hire out its management and administration skills after being asked by small independent operators for help.

Wright isn't alone in believing in Kidicorp's growth. The second-biggest shareholder after the Wright family, at 19 per cent, is Fisher Funds, which has a small but select portfolio of growth stocks.

Kidicorp has around 6 per cent of the preschool market. ABC has less than 2 per cent but is on the acquisition trail, and Australia's Macquarie Bank arrived last year, buying 20 North Island early childhood centres. The fourth biggest corporate player is unlisted Kindercare.

With the January 1 deadline drawing closer for preschools to have 50 per cent of staff qualified and registered as teachers, Wright, 60, is calling for "the little guys to stop going out there and jacking up wage rates".

The "little guys" are other centres in a bidding war, he says, for a dearth of qualified teachers.

Wright says they are offering "outlandish" pay packages to prepare for compliance and causing high staff turnover in the sector. Kidicorp's wage costs have gone up 25 per cent in the past 12 months, he says.

What is outlandish in Wright's book is more than $4 an hour over the industry average. But he couldn't quantify the average because hourly pay varies.

He believes the teacher shortage makes the January 1 target so unrealistic that the Government will postpone it.

Wright thinks he's managed "extremely well" to juggle three stakeholders - "shareholders who want a return and an increase in the value of the shares, teachers who want as much money as possible, and parents who want to pay as little as possible".

"It's no mean feat."

If he's worried about competition, he's not letting on.

"There's very little point to being a public company in the early learning sector in New Zealand. It's quite different from Australia in the way it's funded and there isn't the scope here for the same growth and acquisition there was in Australia."

What about private company rivals?

"Possibly, but I don't see it. There's no bar to entry but it's not a particularly glamorous sector. It's hard work, fraught with difficulty and not particularly profitable.

"I have to wonder sometimes why someone would do it. The reason I am here is that I have a passion about affecting the lives of as many young children as possible.


WAYNE WRIGHT

Executive director, Kidicorp
Born: New Zealand
Lives: Bay of Plenty
Age: 60
Family: Five children, four grandchildren
Started Kidicorp in Tauranga in 1996 with son Wayne jnr; listed it in 2003 by backing into shell company Feverpitch.