Nido Education Limited Acquires Four Child Care Services for $12 Million
NIDO EDUCATION LIMITED (NDO) Share Update September 2024 Sunday 29th
Nido Education Acquires Four Child Care Services for $12 Million
Nido Education Limited (ASX: NDO) has announced the successful acquisition of four child care services from its incubation pipeline, marking its first acquisitions since the company's IPO.
Instant Summary:
- Acquisition investment totals $11.85 million.
- Expected EBIT impact for CY2025 is $2.6 million.
- Average daily fee is $172 with 349 licensed places.
- Locations include two in Victoria and two in Western Australia.
- Nido's incubation model de-risks acquisitions with earnout and claw-back mechanisms.
Acquisition Details
Nido Education Limited has completed the acquisition of four child care services for a total investment of $11.85 million. These services are part of Nido's incubation pipeline and represent the company's first acquisitions since its IPO. The services have shown strong trading performance, with the oldest opening in June 2023 and the latest in October 2023. This rapid trade-up period highlights Nido's effective site selection and development capabilities.
Financial Impact
The acquired services are projected to generate an EBIT of $2.6 million in CY2025. Despite acquisition costs, the services are expected to contribute positively to Nido's earnings. The acquisition investment is de-risked through an earnout and claw-back mechanism, allowing up to 10% of the investment to be recouped based on the first 12 months' earnings.
Incubation Model
Nido's unique incubation model differentiates it from traditional roll-up growth strategies. The company only acquires proven, profitable services that are purpose-built and approved by Nido. This model ensures consistency in service quality and minimizes integration risks post-acquisition. Nido's growth pipeline remains robust, with 12 services in incubation and approximately 100 sites at various development stages.
Operational Excellence
Nido manages all operational aspects of the acquired services, including human resources, financial management, and compliance. The company receives a per-service management fee of $120,000 annually and an establishment fee of $250,000 when a service begins trading. This comprehensive management approach ensures high standards and operational efficiency.
Future Prospects
With 56 owned services and 46 managed services, Nido continues to expand its footprint in the child care sector. The company's pipeline of 100 services at various development stages underscores its growth potential. Nido's revenue streams include child care fees, government funding, and management fees, providing a diversified income base.
The acquisition of four child care services is a strategic move that strengthens Nido's market position. The projected EBIT of $2.6 million for CY2025 indicates a positive financial impact. The de-risked incubation model further enhances investor confidence by minimizing acquisition risks. Overall, this acquisition is likely to have a favorable impact on Nido's stock price as it demonstrates the company's growth potential and operational excellence.
Investor Reaction:
Analysts are likely to view this acquisition positively due to the strong financial projections and the effective de-risking mechanisms. The rapid trade-up periods of the acquired services highlight Nido's successful site selection and development capabilities, which should bolster investor confidence.
Conclusion:
Investors should monitor Nido's ongoing growth and operational performance. The company's unique incubation model and robust pipeline of development projects position it well for future success. Nido's strategic acquisitions and effective management practices are likely to drive long-term value for shareholders.