April 1 2003 By Christopher Webb
Child's play gets cash for Kroger
Nice to see that interests associated with Michael Norman Kroger are keeping a tight grip indeed on the affairs of Child Care Centres Australia.
The group is raising $8.5million through an under-the-market placement and the Kroger camp is presiding over the disbursement of fees flowing from the issue, handled by Ord Minnett and Tolhurst Noall.
Kroger was heavily involved in the listing of Child Care Centres last year and continues to have a role with the group's board - which numbers father-in-law Andrew "The Sunlamp Kid" Peacock - engaging Kroger's JT Campbell & Co outfit as its adviser on buying child care centres and capital raisings.
And a pretty penny flows Kroger's way as a result.
Take the current placement. The Kroger company will get a 4per cent fee and out of that "a placement arrangement" fee of 3per cent will be paid to each of Ord Minnett and Tolhurst Noall on the amount of stock they place.
Now that isn't the only fee that flows JT Campbell's way.
The advisory concern gets $7500 for each child care centre bought by Child Care Centres, which means that the "ultimate addition" of 46 centres in Western Australia, announced last week by the company, is money-making news for the JT Campbell crew.
Now, it should be pointed out that there is a cap of $300,000 payable to the Kroger interests as far as the $7500 fee and placement fees are concerned for the current financial year. Payments thereafter are to be agreed between the parties.
Managing director Christopher Stear is also entitled to get $7500 for each centre: so far this year he has been paid $150,000, the maximum payable for the current year.
Most of the centres that have just been bought in Western Australia for about $24million are subject to possible performance bonuses.
The purchase price of WA's Mulberry Tree group will be adjusted for a performance bonus.
The vendors will get $5 for every dollar by which earnings before interest and tax for the 2004 financial year exceed $2,829,038 and 25� for every dollar by which earnings exceed $3,929,038.
For the 2005 year, they will be eligible for a bonus of $2.60 for every dollar by which earnings exceed $5.4million, up to a maximum of $8million, and 25� for each dollar beyond $8million.
Managing director Stear said yesterday: "If you think about that from an EBIT multiple perspective, the incentives aren't payable until 2006 (and that's) a fair bit of time.
"The bulk of these centres nationally are selling at anywhere between three to 3.5 and about five times EBIT multiples," he said.
"We looked at the UK and they're selling up to eight times EBIT multiples over there, and that's one of the reasons we're staying here."
"So, when you think about an EBIT multiple being paid three years from now of around five, then we think that's well in the market as to where the market is going to be by then.
"If we can still purchase centres then on an EBIT multiple of four to five in three years time, we'd be pretty happy.
"They've got to make (the money) obviously, and we would see that as a strong incentive ... because you've got people staying on with an intimate knowledge of the existing business and with great incentive to make those businesses even more profitable than they are now."
He added: "We've got a really detailed due diligence process that we go through with each of these centres.
"It's long, it's exhaustive and we've walked away from a lot of deals, we don't believe that all business is good business.
"We've got a very conservative risk management strategy and our governance approach is one of conservatism.
"The object of the exercise is to buy centres that add shareholder value ... if you can't do that you shouldn't be doing it.
"If the company can continue to buy centres that add shareholder value and we can gain some form of organic growth, then certainly I think we're heading down the right track.
"If we're in this to build a long-term business and a long-term profitable business, then, logically, we've got to be discerning in the acquisitions we make.
"I have to say, we're absolutely delighted with (the) Jellybeans and Mulberry Tree centres (that we've bought) ... the Jellybeans centres are some of the best I've seen in Australia, they're great.
"The fellows that have been running them are bright, switched on, one of them is an ex-McKinsey consultant."
Stear, by the way, once worked in newspaper reporting.
"Many years ago I started with the Gold Coast Bulletin and I became a reporter with Willesee when he was top rating and then I went to the ABC to do This Day Tonight."
He says his remuneration this year is $150,000. So how does he live?
"Let me say I'm still driving a Verada and it could probably do with a wash."
Director duo acted improperly: plod
Two directors of an outfit known as Acts Net Limited yesterday pleaded guilty to six charges brought by the corporate plod.
ASIC said Graeme Geoffrey Milner, of Mildura, and Terrence John Hunter, of Perth, pleaded guilty to improperly using their positions as company officers and offering a prescribed interest without an approved deed.
The plod said Acts Net was a Bendigo-based, not-for-profit organisation that claimed its principal activities were conducting religious activities and training religious practitioners.
ASIC alleged that, between 1997 and 1999, the pair dishonestly transferred about $370,000 from funds raised by Acts Net for the benefit of themselves or another.
ASIC said the company raised upwards of $4.5 million from more than 50 investors by selling prescribed interests in an overseas investment program.
ASIC also alleged Milner and Hunter arranged for the investors to buy prescribed interests in the scheme without the protection of an approved deed as required by the Corporations Law.
The schemes failed, resulting in the loss of nearly all the money.
Milner and Hunter were bailed to the County Court at Melbourne for a plea hearing on April 15.
http://www.theage.com.au/articles/2003/03/31/1048962701236.html
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