ABS - ABC Learning Centres
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prawn_86
Mod: Call me Dendrobranchiata
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This is proving to be yet another shining example of government short termism and lack of regulator powers in dealing with monopolies and enforcing proper competition.
A good example of why industries shouldnt be protected...
A good example of why industries shouldnt be protected...
AEU (Australian Education Trust) own the land and buildings to 415 ABC Centres. The receivers will only be able to sell the business in these situations.
I was of the thought that ABC had 1040 centres Austalia wide.
Please correct me if I'm wrong please!
From what I have been able to glean is that ABC Learning Centres is really only a manager of child-care centres. Most of the buildings were sold off over the years to a variety of trusts and independent landlords. The biggest of these trusts is the Australian Education Trust, which owns more than 400 centres. It seems that these trusts are independent of ABC Learning and are not in receivership. For example, Orchard Funds Management has a Childcare Property Fund which has over 200 ABC learning centers and it is not in receivership nor is the Australian Education Trust.
This is the problem that the receivers are now facing. ABC Learning does not seem to hold any tangible assets and in the main, only held child care licenses, which are issued under State Government legislation and cannot be legally sold (you can sell a child care business to someone else but that apparently voids the license and the new owner has to apply for a new licence specific to that centre.)
From what I understand - and I could be wrong of course - it seems that ABC even attempted to create a market (internal to itself) and revalued the licences in its accounts.
Very, very messy but in the end it is probable that shareholders will receive zip from the receivers and legal action may be their only recourse but, then, you need to find someone with dosh to get it back from them.
Have a read of this and it will give you some idea of the extent of the problem
http://www.orchardfunds.com.au/News/Archive/2008/November/6 November 2008 - ABC Learning.aspx
This is the problem that the receivers are now facing. ABC Learning does not seem to hold any tangible assets and in the main, only held child care licenses, which are issued under State Government legislation and cannot be legally sold (you can sell a child care business to someone else but that apparently voids the license and the new owner has to apply for a new licence specific to that centre.)
From what I understand - and I could be wrong of course - it seems that ABC even attempted to create a market (internal to itself) and revalued the licences in its accounts.
Very, very messy but in the end it is probable that shareholders will receive zip from the receivers and legal action may be their only recourse but, then, you need to find someone with dosh to get it back from them.
Have a read of this and it will give you some idea of the extent of the problem
http://www.orchardfunds.com.au/News/Archive/2008/November/6 November 2008 - ABC Learning.aspx
Isn't AET owned by Eddy Grove's brother-in-law, or something like that? I can't remember the details, but I'm sure I read something along those lines ...
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Interesting part about the whole ABC deal was that it never added up.. Child care centres have been traditionally run by small operators making a living after paying wages. There was never going to be any capacity for the economies of scale that would enable the huge profits Groves made from the business.
That meant that the "profits" came from the same place that Enron, BNB, Firepower, Westpoint and others have made them - financial sleight-of-hand.
And yet the banks, financial analysts all accepted the magic pudding. That's our money they have lost.
Learning an old lesson: a sucker is born every minute
* Ian Verrender
* November 14, 2008
For his 40th birthday a couple of years back, Eddy Groves took 24 or so of his closest friends on a round-the-world jaunt in a jet chartered for the event. His Cessna Citation jet, which seated just 16, was not big enough.
Details of the itinerary are sketchy. There were suggestions they assembled in Las Vegas for a spot of gambling.
Variously described as reclusive and shy during his rapid rise, his largesse, and where exactly all that money came from, is a touchy subject for Groves these days.
He says the Citation, his helicopter, the Ferrari, the 26-metre yacht moored at the Versace marina and the various waterfront and Gold Coast hinterland properties are all gone.
That could well be true. Strangely, however, a few weeks ago - just after Groves trousered an $800,000 payout when he jumped from the soon-to-collapse child-care group ABC Learning Centres - he was spotted on the Gold Coast highway in a new silver Mercedes with the number plate BULLETS.
That probably was not his either. More than likely it is owned by the collapsed Brisbane basketball team Groves owned.
Taxpayers have tipped in $22 million as a lifeline to keep the child-care centres open until Christmas while the collapsed group's receivers began begging the banking syndicate this week to extend extra cash to prevent the entire network shutting down.
Put aside the accounting irregularities now emerging from the collapsed company. Ignore the allegations of conflicts of interest that allegedly enriched various family members on construction and maintenance contracts.
The scandal of the rise of and fall of Eddy Groves is how anyone was seduced into his fantasy tale in the first place.
Australia's biggest banks believed him. They are owed $1.1 billion between them. Even more amazing, the Singapore Government's investment arm Temasek tipped in a lazy $400 million.
Despite sophisticated investment models and analytical tools employed by our big banks and investment houses, it shows a sucker is born every minute.
Despite all the high-powered negotiations and due diligence, they missed the bleeding obvious - that small family-run suburban child-care centres will always be more efficient than small corporate-run ones.
It is the same ethos that has ruled the economics of rural production in this country. Corporate farming has never overtaken family-run operations because a family will run their business on a much tighter budget and will endure leaner returns than any corporation just to ensure their survival.
A corporation will only be more efficient than a family business if it can amalgamate small disparate holdings, achieve economies of scale in purchasing power or marketing power, and lower the cost of production.
It works in retailing, and that is the reason large retailers can offer lower prices than corner shops.
That model was never adopted by ABC Learning because it could never be implemented. Child care is labour intensive. It requires skilled labour by individuals devoted to the task, not just paid employees.
Groves and ABC could not lower the cost base of a family-run operation. His business merely added to costs because of the enormous amount of administration required to maintain the compliance demands of a stockmarket-listed public company.
Did anyone in the investment world or our big banks realise that it simply was not possible for Groves to shut down 10 suburban centres and amalgamate them into a "super preschool"? Did they ever twig that there were no economies of scale, just extra costs?
Every boom throws up these types of "entrepreneurs". Just as Christopher Skase, the Brisbane property and media mogul of the 1980s, kept borrowing and expanding, so too did Groves.
It is a neat strategy because no one can ever compare the performance with the previous year. There are always one-off costs associated with the last big acquisition. The idea is to keep juggling those balls so no one can ever really count how many you have in the air.
When Groves ran out of child-care centres to buy in Australia he turned his attention overseas. Almost three years ago to the day he spent $218 million buying the third-biggest child-care group in America.
The banks were happy because their job is to lend money and they picked up handsome fees on the transactions. Groves was happy because the bigger the company, the more he could pay himself. And the investors swallowed the whole silly tale hook, line and sinker that they were part of an expanding international empire.
Groves has gone to ground. He may only be worth a fraction of his previous fictitious wealth, but at least he has it in cash and he has more than most families would ever be able to amass.
Like those who have gone before, Groves absolved himself of blame. It was short sellers who brought him undone, working in tandem with nasty stockbrokers. And then, of course, there were those he left in charge of the Australian operations who let him down.
That meant that the "profits" came from the same place that Enron, BNB, Firepower, Westpoint and others have made them - financial sleight-of-hand.
And yet the banks, financial analysts all accepted the magic pudding. That's our money they have lost.
Learning an old lesson: a sucker is born every minute
* Ian Verrender
* November 14, 2008
For his 40th birthday a couple of years back, Eddy Groves took 24 or so of his closest friends on a round-the-world jaunt in a jet chartered for the event. His Cessna Citation jet, which seated just 16, was not big enough.
Details of the itinerary are sketchy. There were suggestions they assembled in Las Vegas for a spot of gambling.
Variously described as reclusive and shy during his rapid rise, his largesse, and where exactly all that money came from, is a touchy subject for Groves these days.
He says the Citation, his helicopter, the Ferrari, the 26-metre yacht moored at the Versace marina and the various waterfront and Gold Coast hinterland properties are all gone.
That could well be true. Strangely, however, a few weeks ago - just after Groves trousered an $800,000 payout when he jumped from the soon-to-collapse child-care group ABC Learning Centres - he was spotted on the Gold Coast highway in a new silver Mercedes with the number plate BULLETS.
That probably was not his either. More than likely it is owned by the collapsed Brisbane basketball team Groves owned.
Taxpayers have tipped in $22 million as a lifeline to keep the child-care centres open until Christmas while the collapsed group's receivers began begging the banking syndicate this week to extend extra cash to prevent the entire network shutting down.
Put aside the accounting irregularities now emerging from the collapsed company. Ignore the allegations of conflicts of interest that allegedly enriched various family members on construction and maintenance contracts.
The scandal of the rise of and fall of Eddy Groves is how anyone was seduced into his fantasy tale in the first place.
Australia's biggest banks believed him. They are owed $1.1 billion between them. Even more amazing, the Singapore Government's investment arm Temasek tipped in a lazy $400 million.
Despite sophisticated investment models and analytical tools employed by our big banks and investment houses, it shows a sucker is born every minute.
Despite all the high-powered negotiations and due diligence, they missed the bleeding obvious - that small family-run suburban child-care centres will always be more efficient than small corporate-run ones.
It is the same ethos that has ruled the economics of rural production in this country. Corporate farming has never overtaken family-run operations because a family will run their business on a much tighter budget and will endure leaner returns than any corporation just to ensure their survival.
A corporation will only be more efficient than a family business if it can amalgamate small disparate holdings, achieve economies of scale in purchasing power or marketing power, and lower the cost of production.
It works in retailing, and that is the reason large retailers can offer lower prices than corner shops.
That model was never adopted by ABC Learning because it could never be implemented. Child care is labour intensive. It requires skilled labour by individuals devoted to the task, not just paid employees.
Groves and ABC could not lower the cost base of a family-run operation. His business merely added to costs because of the enormous amount of administration required to maintain the compliance demands of a stockmarket-listed public company.
Did anyone in the investment world or our big banks realise that it simply was not possible for Groves to shut down 10 suburban centres and amalgamate them into a "super preschool"? Did they ever twig that there were no economies of scale, just extra costs?
Every boom throws up these types of "entrepreneurs". Just as Christopher Skase, the Brisbane property and media mogul of the 1980s, kept borrowing and expanding, so too did Groves.
It is a neat strategy because no one can ever compare the performance with the previous year. There are always one-off costs associated with the last big acquisition. The idea is to keep juggling those balls so no one can ever really count how many you have in the air.
When Groves ran out of child-care centres to buy in Australia he turned his attention overseas. Almost three years ago to the day he spent $218 million buying the third-biggest child-care group in America.
The banks were happy because their job is to lend money and they picked up handsome fees on the transactions. Groves was happy because the bigger the company, the more he could pay himself. And the investors swallowed the whole silly tale hook, line and sinker that they were part of an expanding international empire.
Groves has gone to ground. He may only be worth a fraction of his previous fictitious wealth, but at least he has it in cash and he has more than most families would ever be able to amass.
Like those who have gone before, Groves absolved himself of blame. It was short sellers who brought him undone, working in tandem with nasty stockbrokers. And then, of course, there were those he left in charge of the Australian operations who let him down.
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Story is pretty close to the mark imo. Doesn't include that the Mercedes he was driving was in his girlfriends name (Viryan Collins) purchased on the back of a $3m loan by Frank Zullo (Brother in Law) to Viryan. You can bet QMS wont see that 3m again.
Next they should try and uncover the Don and Heather Jones money laundry machine (Ex Global 123).
Eddy and Viryan are comfortable living in Currumbin valley on whatever funds and good luck to them. One thing is for certain, the cash cow has dried up and the life style has to change.
Next they should try and uncover the Don and Heather Jones money laundry machine (Ex Global 123).
Eddy and Viryan are comfortable living in Currumbin valley on whatever funds and good luck to them. One thing is for certain, the cash cow has dried up and the life style has to change.
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Todays non-startling media release revelations:
Maybe Mr Jones HAS given a reasonable notice by alerting the public to what may occur. Of course, this would not be to Ms Gillard's taste, but hey - that's business!
then
Seems the cesspit just keeps getting bigger. At this rate, they will probably owe more than AUS$2 Billion by the time all the claims are in.
Time for another KRudd bailout. That should leave about 2c in the kitty.....
Maybe Mr Jones HAS given a reasonable notice by alerting the public to what may occur. Of course, this would not be to Ms Gillard's taste, but hey - that's business!
then
Seems the cesspit just keeps getting bigger. At this rate, they will probably owe more than AUS$2 Billion by the time all the claims are in.
Time for another KRudd bailout. That should leave about 2c in the kitty.....
The most salient point of this whole sorry saga.
Unfortunately for them and their shreholders, ABC's banks/financiers just don't understand how small businesses of this nature are run and survive.
Sean K
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Can't let the little kiddies not have a sand pit to play in....
Maybe the balance between state owned and privitisation tipped too far to the right the last 5 years. And now it will dip back the other way? Then another bullmarket will start....
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I'm increasingly starting to doubt the "things will get back on track, the same as before" argument.
A couple of factors have changed significantly since the last big downturn.
(a) The world wide web has become MASSIVELY connected over the last 10 years. That was not the case the last time or for any major downturn before that. Hell, 'puters were just a dream for most in as recently as the 80's!
(b) Politicians of all persuasions have HATED the apparent loss of control over many aspects of business and society through this WWW thingy.
(c) However, every cloud has a silver lining, and smart politicians of all persuasions would have discovered that spreading their messages (and therefore their influence and control) has been made vastly easier by the same mass media and high-speed broadband networks that they once hated.
(d) Having succeeded in scaring everyone witless with campaigns of fear (Illegal immigrants, terrorism, internet pr0n, world financial crisis etc) they are now finding they have real power via new technology to get and HOLD FOREVER controlling interests in many businesses, censoring what you think, see or read - why, they even got shorts banned!
I really don't think that having discovered this new Tower Of Power (the WWW) they are going to give back thereins to "the free markets" of the world.
No sirree.
The New World will be one where your friendly, caring MP will guide you EVERY step of the way through your business and private life - and punish you severely if you should stray from their ideals.
IMO.
aj
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In the following article an ABC learning employee says the parents are leaving the centres in droves.
http://business.smh.com.au/business/abc-learning-in-race-against-time-20081118-69vi.html
http://business.smh.com.au/business/abc-learning-in-race-against-time-20081118-69vi.html
Another one bites the dust - as Freddy Mercury sang with gusto.
"The operator of 43 child-care centres in NSW, CFK Childcare Centres, has gone into voluntary administration due to a failed asset sell-off to ABC Learning Centres Ltd............................."
http://business.theage.com.au/business/abc-link-spells-end-for-cfk-childcare-20081118-6a9s.html
Now watch out for Funtastic, contracted supplier of toys to ABC Learning.
Note: Have never directly held shares in this lot and I feel very, very sad for those that do.
"The operator of 43 child-care centres in NSW, CFK Childcare Centres, has gone into voluntary administration due to a failed asset sell-off to ABC Learning Centres Ltd............................."
http://business.theage.com.au/business/abc-link-spells-end-for-cfk-childcare-20081118-6a9s.html
Now watch out for Funtastic, contracted supplier of toys to ABC Learning.
Note: Have never directly held shares in this lot and I feel very, very sad for those that do.
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I believe the American term would be "collateral damage".
The Chinese might call it the "domino effect".
Whatever, it is just the tip of a crumbling iceberg.
IMO there are going to be plenty more sad tales to tell come out of this debacle.
aj
Seems the situation is what I feared it was. ABS has no assets to sell, ie $1.7 billion blown by the CBA and other lenders. Shareholders will get zilch.
http://business.smh.com.au/business/empty-playroom-at-abc-20081124-6fkk.html?page=1
"Empty playroom at ABC
* Michael Pascoe
* November 24, 2008 - 1:43PM
* Page 1 of 2
ABC Learning receiver McGrath Nicols came up with a liabilities figure at last week's creditors meeting - $1.66 billion - but what was obviously missing was an indication of assets. Maybe that's because there aren't any.
Well, none to speak of anyway. A bear in there, a chair as well, and that's about it - nothing to sell.
ABC leased the vast majority of the child-care centres it operated. The $657 million of alleged "property plant and equipment" listed in the company's December half accounts is likely to be as fanciful as the rest of the accounts. As someone familiar with the business observed, that seems to be an amazing number of toys and toddler-sized chairs..................."
There seems to be some pretty knowledgeable people commenting on the ABC Childcare dramas, so I was wondering what any of your predictions might be for the private landlords of ABC centres? My father has two - one which made it to the "will continue operating" list and a second that didn't even make it to the "under review" list.......it's definitely folding (even though it is at full capacity). That means a loss of about $120 000 pa income, and as he has a bank loan over the property...he's a little concerned. What do you suppose the future holds for him? Would a private operator be interested in taking over the lease at the same rent do you think? Would love some thoughts.....
Everything is for sale at the right price. The same rent? I doubt it. Make the deal attractive enough and someone might take it on. (ex-child care centre owner here).
Other option is to sell his freehold and lease at the same time. Some buyers prefer that.
Rubbish.... it's got to fold.
Most if not all of the centres will be picked up in some form or another.
If you look at where the asset value is it's in the rent of the property - the landlords want the properties let
The fact the most of the shareholders money went in overpaying for assets and in poorly structured business ventures doesn't mean that the centres themselves can't be profitable or maybe community run.
The government should assist in an orderly transition - it won't take much $
Most if not all of the centres will be picked up in some form or another.
If you look at where the asset value is it's in the rent of the property - the landlords want the properties let
The fact the most of the shareholders money went in overpaying for assets and in poorly structured business ventures doesn't mean that the centres themselves can't be profitable or maybe community run.
The government should assist in an orderly transition - it won't take much $
If it's at full capacity then there is no reason why it shouldn't be viable - I wonder if the rent he's earning is "market value" - if not then he's overpaid for the centre and may need to take a haircut to bring the rents down to viable commercial rates. Alternatively he could put in a manager to run the centre in it's own right.
