Edleun confirms its profitable business model and
CALGARY , Nov. 27, 2012 /CNW/ - Edleun Group, Inc. ("Edleun" or the "Company") (EDU.V), the leading provider of quality early childhood education and care in Canada , confirms that its business model is profitable and takes issue with comments made by a guest recently appearing on Business News Network.
The Company was founded in May, 2010 and commenced operations with 1,100 licensed child care spaces in Alberta. It has experienced rapid growth and currently owns and operates 50 child care centres in Alberta, British Columbia and Ontario providing 5,000 licensed child care spaces.
"As demonstrated by our past performance, Edleun is already a company that is cash flow positive with a sustainable - and in fact leveragable - business model," said Dale Kearns , President of Edleun. "In spite of statements to the contrary, the business model supports the Company's current valuation and will support growth in the future. The "same-centre" operating and financial performance of the centres acquired by Edleun as detailed in quarterly financial reports unequivocally demonstrates that our business model is not only working, but frankly, generally delivering results at the centre level better than expected."
The Company notes that:
- In six of the past eight quarters Edleun has recorded positive Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization). Adjusted EBITDA takes into account transaction costs, that under IFRS are not capitalized to the acquisitions they generate and which, in a growth-oriented company, can be significant as these expenditures contribute to cash flow for many years even though they are expensed upfront;
- The Company's recently released financial results for the third quarter of 2012 are less representative of the Company's annual financial performance because the summer quarter is most significantly affected by seasonality. There is typically a reduction in child care centre occupancies, particularly in the recently-acquired Montessori schools, in the summer months. Adjusted EBITDA in the most recent third quarter of 2012 was significantly improved from the loss a year earlier;
- As the Company's recently released third quarter 2012 financial report indicates, in the past year Edleun has invested approximately $17 million to develop, redevelop and open new state of the art child care centres which have yet to contribute to the Company's profitability;
- There are at least four objective and independent research analysts that closely cover and assess Edleun's performance that reference the Company's strategy, market opportunity, valuation and prospect for share price appreciation;
- According to public sources, Bright Horizons Family Solutions Inc. ("Bright Horizons"), a large US-based company controlled by Bain Capital LLC, recently acquired Huntyard Limited ("Huntyard"), a UK-based owner, operator of child care centres for a price of $110.8 million . According to the November 9, 2012 preliminary prospectus for the proposed Initial Public Offering of Bright Horizons filed in the United States , as at December 31 st 2011, Huntyard owned and operated 27 child care centres, generating $42.4 million of revenue and $7.4 million of Income from Operations (analogous to EBITDA). One can independently apply the financial parameters underlying the Bright Horizons acquisition of Huntyard to assess the valuation of Edleun's common shares.
- The potential for Edleun's future growth is significant in the fact that its current portfolio of 50 child care centres amounts to less than 1% of the Canadian total availability of child care spaces, while its peers in other developed countries are much larger. For example, there are larger and more dominant peers in other countries such as: Bright Horizons in the United States , which was privatized in 2008 and is now going public again; the Learning Care Group, which was purchased by Morgan Stanley in 2008; and privately held KinderCare Learning Centers, part of the Knowledge Learning Corporation, the largest global owner and operator of early learning and child care centres; and
- The prospect of the Company's profitability, as detailed in the Company's recent financial reports, is underscored by a solid and conservative balance sheet and financial position. Edleun remains underleveraged with debt capital, has solid banking relationships and has cash, positive cash flow and credit facilities to advance its near term pipeline of growth initiatives.
"We continue to view Edleun's prospects for earnings and cash flow growth as very positive," said Mary Ann Curran , Chief Executive Officer of Edleun. "While it is typical in the industry that the ramp up in enrollment to achieve stabilized occupancy can occur over a 24-month period, we believe, and our track record to date indicates, that our generation of substantial positive cash flow from our investments can occur much faster than industry averages. In fact, the McKenzie Towne centre, which just opened in Calgary in mid-October with 247 licensed child spaces (a size and financial impact of three to four times greater than a typical acquired centre), is anticipated to be fully enrolled in January 2013 . Market participants can now begin to model the additional profitability that these investments are expected to generate for Edleun. As we increase the occupancy from recent developments and acquisitions, apply increased focus on operating effectiveness, continue to pursue our growth strategy through acquisitions, development, co-locations and ancillary revenues, and further invest in programming, technology and people, we are confident that we will deliver substantial returns to our investors and other stakeholders."