Acquisition of Cherie Hearts G8 Education Limited (ASX:GEM) 28 - - PowerPoint PPT Presentation

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Acquisition of Cherie Hearts G8 Education Limited (ASX:GEM) 28 - - PowerPoint PPT Presentation

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For personal use only Acquisition of Cherie Hearts G8 Education Limited (ASX:GEM) 28 October 2010 Overview For personal use only Following the acquisition of Cherie Hearts G8 Educations child care portfolio will comprise: 140

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Acquisition of Cherie Hearts

G8 Education Limited (ASX:GEM) 28 October 2010

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Overview

  • Following the acquisition of Cherie Hearts G8 Education’s child care

portfolio will comprise: ▫ 140 child care centres in Australia; ▫ 66 child care centres in Singapore; and ▫ a majority interest in a training operation and enrichment school in Singapore.

  • The acquisition of Cherie Hearts in Singapore will expand the current
  • peration by a further 66 child care centres with 18 owned and 48

franchised centres.

  • The acquisition will provide the platform to provide quality care through

an established business in Singapore in addition to Australia.

  • The Singapore business includes a training operation and enrichment

school which are majority owned by Cherie Hearts.

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Acquisition Update: Cherie Hearts

  • On 28 October 2010, G8 Education announced the acquisition of Cherie Hearts, Singapore’s

largest private provider of child care services.

  • Chris Scott, Managing Director of G8 Education will oversee the Singapore operations, as well

as existing operations in Australia. Chris is a permanent resident of Singapore and has over 30 years business experience in Singapore.

  • Sam Yap, joint founder of Cherie Hearts will join the board of G8 Education. Sam will

continue as a key executive of Cherie Hearts, together with co-founder Gurchran Singh who is his alternate director.

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Acquisition consideration

  • The purchase price of Cherie Hearts is AUD19.23 million*(including the assumption of debt).
  • The forecast EBIT for Cherie Hearts for the 2011 calendar year is AUD4.3 million*. This represents:
  • an EBIT purchase price multiple of 4.47 times; and
  • a tax affected multiple of 3.75 times EBIT once the Singapore corporate tax rate of 17% is taken

into consideration.

  • The guidance for the 2011 calendar year for Cherie Hearts is as follows:

The purchase price of AUD19.23 million represents an EBIT multiple of 4.47 times. The Singapore corporate tax rate is 17% so the tax affected equivalent multiple is 3.75 times EBIT on a like for like basis with Australian acquisitions. The guidance assumes no synergies and no revenue from the 23 franchisee businesses signed and awaiting completion.

Calendar Year 2011 Guidance for Cherie Hearts Revenue AUD16.70 million Expenses AUD12.40 million Earnings before Interest and Tax AUD4.30 million Interest AUD0.30 million Net Profit before Tax AUD4.00 million Net Profit after Tax AUD3.35 million

* Assuming an exchange rate of $1.28 for each Australian dollar

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Key Statistics

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Key Statistics

Current share price (at close of trade on 27 October 2010) $0.78 Market capitalisation (at close of trade on 27 October 2010) $117.24 million Shares on issue during 2010 (following issue of announced acquisitions) $162.30 million Market capitalisation at finalisation of announced acquisitions, and assuming share price of $0.78 at close on 27 October 2010 $126.60 million

Price history: 1 July 2010 to 27 October 2010

1,000,000 2,000,000 3,000,000 4,000,000 5,000,000 6,000,000 7,000,000 $0.00 $0.10 $0.20 $0.30 $0.40 $0.50 $0.60 $0.70 $0.80 $0.90

Volume Close

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2011 Guidance

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2011 Guidance

2011 Guidance for Australian centres AUDmillion 2011 Guidance for Cherie Hearts AUDmillion 2011 Guidance for the Group AUDmillion

Revenue 115.47 16.70 132.170 Expenses 98.19 12.40 110.59 Earnings Before Interest and Tax 17.28 4.30 21.58 Interest 2.11 0.30 2.41 Net Profit Before Tax 15.17 4.00 19.17 Net Profit After Tax 10.62 3.35 13.97 Source: GEM ASX Announcements: 22 September 2010, 29 September 2010 and 28 October 2010

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Capital structure

Shares on issue 150,304,537 Shares to be issued as consideration for announced Kindy Patch transaction 12,000,000 (no shares to be issued for Cherie Hearts transaction) Options over unissued shares (250,000 vest in 2012) held by Chris Sacre 250,000 Debt Current debt – National Australia Bank $15,543,000 Debt to be assumed on acquisition of acquisitions 1, 2 and 3, the subject of the 18 August 2010 announcement $7,900,000 Debt to be drawn during 2011 to fund the deferred component of Acquisitions 1, 2 and 3

  • f the 18 August 2010 announcement

$6,303,000 Debt to be assumed on acquisition of the Cherie Hearts business $5,650,000 Dividend Policy Quarterly dividends at 50% - 60 % payout ratio

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About Cherie Hearts

  • Cherie Hearts was founded by Sam Yap and Gurchran Singh in 2001 and is the largest private

child care provider in Singapore.

  • Owns 18 centres in Singapore
  • Operates 48 franchised centres; and
  • Has a further 23 franchised centres awaiting completion.
  • Cherie Hearts currently caters for over 5,000 families in Singapore.
  • Cherie Hearts provides quality child care and pre-school education to

children aged between 2 months and 12 years of age, and offers bi-lingual (English and Chinese Mandarin) full day and half day services to children across a number of programs:

  • Infant care: for children aged 2 months to 18 months;
  • Playgroup 1 (P1): for children aged 18 months to 2 years;
  • Playgroup 2 (P2): for children aged 2 to 3 years;
  • Nursery: for children aged 3 to 4 years;
  • Kindergarten 1 (K1): for children aged 4 to 5 years;
  • Kindergarten 2 (K2): for children aged 5 to 6 years; and
  • Before and After School Care (BASC): for children

aged 7 to 12 years.

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Professional Development

  • Cherie Hearts owns 51% of the issued capital in The First Learning and

Training Centre Pte Ltd. This centre provides accredited courses to child care professionals at certificate and diploma level in early childhood

  • education. The centre is accredited by the Singapore Ministry of

Community Services, Youth and Sport and the Ministry of Education.

  • The enrichment company, The Children’s Repertoire Pte Ltd, is wholly
  • wned by Cherie Hearts and provides both proprietary and external

enrichment programs to Cherie Hearts’ centres and franchisees. The current programs available are:

  • The Theatrical Kids’ (Chinese): performing arts program for children aged 3 to 6
  • Acts of Life Speech and Drama: prepares children to take the Trinity Exam for the

award of London’s Trinity Guildhall Young Performer Certificate.

  • Sporty Joe’s: a highly interactive gymnastics and fitness program for children

aged 2 to 6.

  • Lego Robotics: cultivates analytical skills through the art of play.
  • Kindermusik: established for 30 years internationally, this program focuses on

the importance of fundamentals music for children aged 2 to 6.

  • Future Kids: interactive computer mastery program for children aged 4 to 6
  • years. In addition to developing children in the use of technology, the program

also promotes learning of the English language, science and general knowledge.

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Cherie Hearts: Awards

  • Cherie Hearts Group has received more than 30 national awards over the past 5 years:

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Board and Management Team

Brian Bailison, Non-Executive Director B.Com., B.Acc (Cum Laude), ACA Jenny Hutson, Chairperson B.Com, LLB, FAIMM, MAICD Chris Scott, Managing Director B.Econ (Hons) Sam Yap, Non-Executive Director

  • B. Sc (Hons)

Garry Edwards, Financial Controller/ Joint Company Secretary MBA, FAICD Chris Sacre, Chief Financial Officer/ Joint Company Secretary B.Bus, CA, SA Fin, G Dip AppFin Gurchran Singh Non-Executive Director (Alternate) Masters Early Childhood Education Craig Chapman, Chief Executive Officer

  • B. Com., A.S.C.P.A., C.S.A.

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G8’s vision

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G8’s mission

Quality Education & Care

  • To nurture and develop

children’s minds, social skills and confidence in a safe and stimulating environment.

Employees

  • To commit to employee

development and a rewarding culture which will ensure an engaged and driven workforce.

Community

  • To be responsive to local

families and deliver upon community expectations.

Profitability

  • To grow and derive value for

shareholders through innovative services, systems and management.

Our mission is to be Australasia’s leading provider of high quality, developmental and educational child care services, and to achieve this through growth and sustainability:

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The vision of G8 Education

  • A portfolio of outstanding child care brands:
  • Cherie Hearts
  • Early Learning Services
  • World of Learning
  • Bourne Learning
  • Community Kids
  • Holiday Club
  • Kindy Patch
  • Focus on the importance of child care
  • Make good centres great through focusing on
  • utstanding child care management

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Centre Overview

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Australian Centres

State Total Australian centres (assuming completion of all announced acquisitions as at 27 October 2010)

Queensland 70 New South Wales 38 Victoria 9 Australian Capital Territory 5 South Australia 15 Western Australia 2 Tasmania 1 Total centres 140 Total licence capacity 9,854

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Singapore Centres

Location Total centres Owned centres – 100% ownership by Cherie Hearts 18 Franchised centres in operation 48 Franchised centres pending confirmation of licence 23 Enrichment Program Teacher training company Total centres 89 Total licence capacity 5208

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