Think incubator acquires 6 new Nido services, secures funding for future pipeline

by Jason Roberts

July 01, 2020

Think Childcare Development (TND), the development and incubator arm of Think Childcare Group (TNK), has confirmed that it will be acquiring six new purpose built Nido services and that an independent debt facility has been established to fund future growth. 

 

The six services will transition into TND at around 40 per cent occupancy at a cost of $5 million, with the ramp up risk to target occupancy of 75 per cent being largely borne by the vendor. 

 

Once target occupancy has been achieved, roughly expected to be around 12 to 18 months from now, the services will transition across to TNK at a cost of around $10 million to $12 million, or 4x earnings before interest, tax, depreciation and amortisation (EBITDA).

 

The announcement, with details of how the incubation and transition process will work, including costs and timelines, is the first provided by the company since the restructuring of TNK into two distinct businesses, namely an operator and a developer and provides a useful insight as to how the model is expected to work going forward. 

 

TND will now have 24 sites in its development / incubator portfolio all of which are expected to venture into TNK once occupancy targets have been reached, thus ensuring TNK with a substantial and visible pipeline for growth on top of their current portfolio of around 72 services going forward.

 

With respect to the anticipated earnings contribution from the total TND pipeline, the Group has confirmed that they are projecting EBITDA of around $15.0 million on transition to TNK which, when compared to TNK’s 2019 underlying EBITDA of $14.8 million, highlights the importance of the pipeline for future growth prospects. 

 

The TND pipeline will be fully funded by a new, independently secured $11.5 million, 24 month debt facility with commercial terms in line with market benchmarks. 

 

To read the Group’s release please click here

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