Abc Learning Centres Information

Topics: Child care, 2009, ABC Learning Pages: 22 (6940 words) Published: May 21, 2011
Chapter 2
ABC Learning Centres
There are few barriers to entry and expenses are low, so the childcare industry is a licence to make money. A Gold Coast real estate agent and 'child-care specialist', Bryan Hayden, says: 'I've got a client and he's got 20 bottle shops, 10 hotels and three child-care centres. I say to him, 'I'm 77 and the child-care business is the best business I've ever seen in my life.' The Government pays subsidies, the parents pay you two weeks in advance and property prices keep going up. 1

2.1 The collapse of ABC Learning, which was the catalyst for this inquiry, added significant momentum to the movement to improve the provision of childcare across the country. That an organisation catering for up to 25 per cent of the long day care market should fail so rapidly following its rise to market dominance says as much about the deficiencies in childcare policy and regulation as it does about the highly questionable business practices of the company. 2.2 In June of this year, a representative from the Australian Competition and Consumer Commission (ACCC) informed the Senate Economics Committee of the ACCC's belief that ABC Learning's failure was not due to a lack of competition but probably 'prudential reasons' such as high levels of debt and acquisitions as well as complicated business practices. 2 2.3 However, any detailed analysis of the financial collapse of ABC Learning is beyond the scope of this report. It has much more to do with issues of corporate governance and requires the attention of the ACCC and the Australian Securities and Investment Commission (ASIC). One submission to the inquiry drew the attention of the committee to the apparent failure of ASIC to examine closely claims made by ABC Learning about the valuation of its operating licences. Although these licences had no trading value, ABC Learning put high valuations on them and then raised additional shareholder funds, in large part based upon such valuations. 3 This matter was also dealt with in an article in the Sydney Morning Herald, which reported that ASIC was taking 'a close look at the ABC Learning collapse and is expected to be a little more active this time around'. 4

1 2 3 4

James Kirby, 'Playgrounds', Business Review Weekly, 13-19 November 2003, p. 33. Mr Tim Grimwade, Economics Committee Hansard, 22 June 2009, p. 24. Mr Steve Trzcinski, Submission 63. Colin Kruger, 'Lessons to be learnt from ABC Learning's collapse', Sydney Morning Herald, 2 January 2009, Available at http:/

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2.4 The committee requested from ASIC some details of its progress in this investigation. ASIC continues to investigate the collapse of ABC Learning but advised that no further details are yet available. Regarding the revaluation of licences, ASIC advised that in accordance with its initial investigation, revaluation of the licences was not 'material to the company’. ASIC informed the committee that: [r]evaluation of licenses was permitted under the accounting standards for the year ended June 2005 and new accounting standards applied thereafter. The new standard AASB 138 "Intangible Assets" ("AASB 138") only allows the revaluation of intangible assets in certain circumstances. However, the standards only apply where an accounting treatment has a material impact…ASIC noted that at the time of its enquiries, the financial impact of these concerns on the 2006 financial statements was not material to the company. 5

2.5 The more important aspect of the collapse of ABC Learning was to focus attention on the appropriateness of corporate sector participation in childcare provision. There was a strong view expressed through many submissions that provision of quality childcare was incompatible with shareholder aspirations. There is an inherent conflict of interest between the two. This chapter will consider the lessons to be learnt from market domination by the corporate sector, and the...
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