KEY POINTS:
ABC Learning Centres
ABC Learning Centres intends raising more than A$1 billion ($1.12 billion) to fund its US expansion plans. ABC Learning operates more than 2300 childcare centres in Australia, New Zealand, the US and Britain. It was founded in 1988 with a single childcare centre and has grown significantly through organic growth and by acquisition. It floated in 2001, when it had 40 centres, raising A$8.7 million. In 2004 it merged with its main Australian rival, Peppercorn Management Group. And in September 2006 it acquired The Children's Courtyard, a US childcare company. ABC has shown how far a niche company focused on a single industry can go with determination to grow fast. It seems to have a model that works well for it and there is no reason why it cannot continue to roll this out for years to come. Pivotal to its success, however, is whether it can improve a somewhat low return on capital once it gets through the costly expansion phase.
Hellaby Holdings
Hellaby Holdings (HBY) has issued a second profit warning and now says after-tax earnings will be down about 30 per cent this year. The underlying after-tax profit for the year to June 30 is expected to be about $12.5 million compared with about $18 million a year ago. The company says the retail operations have recovered strongly in the second half but this has been offset by some "temporary impacts" on the company's industrial and automotive businesses. Hellaby recently put its shoe-retailing subsidiaries Number One Shoe Warehouse and Hannahs on the block. It's hard to know what to make of HBY nowadays. The company has had a great run in recent years, backed by a policy of acquiring leading branded businesses in industrial and retail industries. The expansion took it into Australia with targeted investments. The turning point seemed to come when it acquired the BBQ Factory - a seasonal business which had failed in an attempt to list on the sharemarket.
* Views expressed in this article are those of IRG, not the Weekend Herald