Early Years Education: An Investment Hotspot?

Courteney Donaldson BSc (Hons) MRICS, Director & Head of Child Centric Sectors

presents at the EducationInvestor Summit 2015

Early Years Education:

An Investment Hotspot?

14/05/14

Early Years Education: An Investment Hotspot?

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Landscape, Growth and Composition of the UK Early

Years Sector

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Capacity of the UK Children’s Day Nursery Market 2002-2014 (0000’s)

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Total Nurseries Total Places

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Sector Overview:

• Under 5’s population is a significant demographic driver of demand

• 15,490 nurseries in the UK with an average capacity of 47 places

• Between 2010-2012 the has been an 8% growth in mothers aged over 30 having

children

• 60% of mothers with children under 4 yrs are in employment

• 42% of mothers work full time, compared to 32% in 2003

• Occupancy patterns have changing with a shift toward an increased combination of

formal and informal care utilisation

• 46.5% of children attend either 3 or 4 days per week

• Average fee £37 per day (£185 pw) – Greater London £47.50pw (£237.5pw)

• While significant regional fee variances, groups achieve higher average fees £220

per week

• A highly fragmented sector – The two largest groups, Busy Bees (239 settings) and

Bright Horizons Family solutions (208 settings) have a combined market share of

5.2%

• Organic growth opportunities remain

• Location is paramount to performance

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Structure of the Market UK Nursery Group Market Distribution is Highly Fragmented

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

0

50

100

150

200

250

300

Total Nurseries

Market Share %

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Early Years Transactions Update

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UK Transactions

UK Transactions – Summary Illustration

September

2012 – Busy

Bees

acquire Just

Learning, a

portfolio of

71 settings.

£70M deal

price

reported

April 2013 –

Bright Horizons

acquire

Kidsunlimited 64

settings - £45M

deal reported

October 2013 –

Ontario Teachers

Pension Fund

acquire majority

shareholding in Busy

Bees, a Portfolio of

213 nurseries in a

circa £220M deal

May 2014 –

Four

nurseries

owned by the

Old Station

nursery group

sold to

Children First

nursery group

August

2014 –

Magic

nurseries

acquire The

Laurels

group – 8

settings –

Price

undisclosed

October 2014 -

Mace Montessori

acquire Fortune

Green Nursery

North West

London

January 2015 -

Busy Bees

acquire 48

nurseries in

Singapore and

12 in Malaysia

from

Knowledge

Universe

March 2014 –

Busy Bees

acquire Kinder

Nurseries

comprising 11

nurseries in

Kent and one

in Lewisham.

Price Confidential

July 2013 - August

acquire Minerva

comprising Eaton

Square and

Ravenstone School.

Price Confidential

February 2013 –

Treetops acquire

Toybox Nursery

Group. Price

Confidential.

June 2014 – Busy

Bees, the largest

provider in the

UK, purchased

Caring Day care

Nursery group

comprising 12

settings

March

2015 -

Peaches

West

Midlands

group

acquire

Springtime

nursery in

Streatham

May 2014 –

Bertram

Acquire

Oranges and

Lemons a

portfolio for

four settings –

Price

Confidential

April 2014 –

Treetops

acquired Happy

Child Nursery

Group

comprising 15

Nurseries in

London. Price

Confidential

May 2012 –

Bright Horizons

acquired

Casterbridge

comprising 27

settings – Deal

Price - £70M

reported

November

2014 –

Phoenix

announces

investment

into Just

Childcare .

April

2012 –

ISIS

invest

£3.7m in

Happy

Days

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8/20

Single Trading Assets and D1 Property Sales

• Leasehold nursery

• 5 years remaining £6k pa rent

• Registered for 20

• Turnover £75,000

• Sold off £40,000 asking price

• Long Leasehold Nursery



• EBITDA £239,000 (28%)

• Sold off £1.3M asking price

• Freehold nursery



• EBITDA £89,000 (30%)

• Sold off £470,00 asking price

London

Cheshire

peterhead

• Freehold

• Existing D1 consent

• Sold with vacant possession

• Circa 3,376 sq ft

• Sold off an asking price of £725,000

• Freehold

• Sold with vacant possession

• Property with D1 consent

• Circa 5,3926 sq ft (GIA)

• Sold Off an asking price of £1,200,000

• Freehold

• Church Hall

• D1 planning use

• Freehold

• 1,962sq ft (0.31 acre)

• Sold £285,000

Camberwell, London

Muswell Hill, London

Morley Green Church, Nr Wilmslow

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Case Study – Investor Entrant Irish Investors Lydian Capital Partners

Christie + Co facilitated platform investment in 2005 & provided Vendor

valuations and advice on exit

Timeline

2004

First acquisition

of the Dolphin

Nursery chain (5

settings)

Total – 5 settings

2005

Acquisition of the Hatton Hill

Nursery Group (5 settings) in

June and Caterham Nursery

(a single setting)


2006

Acquisitions of

Saplings Nurseries in

February, Barnstead

Nursery in May,

Children’s House in

July & Tassel Road in

November


2007

Acquisitions of Sam Bell (2

settings), Starfish Nursery

(1) and Kings Hill Nursery

(1)


2008

Acquisitions of

Inglewood (1 setting)

in April, Richmond

Nursery (1) and

Wembley Nursery (1)


2009

Acquisition of

Weybridge (1 setting)

in September


2010

Sale of Verwood

Nursery a single

setting


2011

Acquisition of

Springfield Nurseries (2

settings)


2012-14

Roll out strategy

included the opening of

new settings in Clapham

Common, Wimbledon

and Crouch End

May 2012

Casterbridge Nurseries

comprising 27 settings

and three development

sites are sold to Bright

Horizons Family

Solutions in a deal

reported at £70m

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UK Early Years Outlook & Scope for Consolidation

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Outlook & Scope for consolidation

• Sector confidence is high and the outlook remains positive

• Childcare is a necessary rather than a discretionary spend

• Government childcare policies seek to support working parents & families

• Consolidation opportunities exist but consolidation can be challenging

• UK national and regional groups, investors & overseas trade buyers all seek acquisitions

• Demand from buyers for quality settings, especially in the South, exceeds supply

• Premium prices achievable for prime businesses

• High demand for ‘value enhancement deals’

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Identifying opportunities: What to look out for:

• Location

• Capacity

• Fee levels

• Occupancy

• Ofsted

• Staff retention

• CAPEX

• Quality of MI

• Performance / EBITDA

• Value Added Opportunities

• Competition

• Price & Returns

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Valuation Methodology

Profits Method

The profits method of valuation applies an

all-risk YP (years’ purchase)/multiplier to

the fair maintainable operating profit to

provide a capital value. This value includes

the property interest, business or locational

goodwill, and fixtures and fittings, all as a

single figure. It is not the sum of the

constituent parts.

Personal goodwill, attaching to a particular

operator, should not be included. This

effectively departs upon a disposal.

The YP selected is derived from market

evidence.

Registered capacity 100

Average fee £220

Occupancy 75%

Turnover £825,000

Wages £453,000 (55%)

Other Operating Costs £136,000 (16.5%)

FMOP £236,000 (28.6%)

YP 6.75

Market Value

£1,595,000

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Early years Education: An Investment Hotspot?

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T: +44 (0) 20 7227 0766

M: +44 (0) 78310 999 85

E: [email protected]

@courteneyccs

@ChristieCoUk

W: www.christie.com

Courteney Donaldson MRICS

Director & Head of Child Centric Sectors

14/05/14


16/20

• We have been providing brokerage and professional advice for over 80 years

• We have16 UK and 14 international offices

• Specialists Sectors include Childcare and Education:

o Early Years Childcare

o Mainstream and Specialist Education

• We inspect over 15,000 businesses annually

• Our clients include owners, Banks and Investors

• We employ 200+ highly experienced business agents, Chartered Surveyors and consultants

• We have advised on every major UK Childcare transaction since 2006

• During 2014 alone we advised on childcare, education and care businesses with an aggregate value

in excess of £1.6bn

• We provide services across the entire business lifecycle from conception to exit

Introduction to Christie + Co

Healthcare

Early Years Education: An Investment Hotspot?