Mayfield Childcare confirms restructure and capital raise in bid to unlock value 

ASX listed early childhood education and care (ECEC) provider Mayfield Childcare has confirmed a comprehensive restructure and a $4.6 million capital raise as it seeks to unlock the value of its core portfolio and reposition the business for future growth. 

Central to the restructure is the divestment of ten underperforming centres to a newly created incubator vehicle and the consequent downsizing of Mayfield’s support office function to reflect the reduced operational expense needed to support the centres. 

Post the transaction Mayfield will retain a network of approximately thirty centres in its core portfolio with a substantial uplift in occupancy and profit performance anticipated as loss making centres are removed from the business. 

In addition, Mayfield aims to raise $4.6 million via the sale of shares to new investors, with the proceeds earmarked to support the proposed restructure and strengthen the balance sheet ahead of bank facility renewal discussions later in 2025. 

“The capital raise, coupled with the proposed restructure, will provide stability for the Company and is expected to be earnings accretive on a per-share basis for shareholders,” Chairman David Niall explained.

“We believe that the changes put in place will mitigate the risks facing the Company heading into 2025 and establish the basis for improved performance and long-term shareholder value creation.”

Divestments of underperforming centres to new incubator central to restructure plans 

The proposed divestment of ten underperforming Mayfield centres to a newly formed third party incubator, Steps Early Learning, is at the heart of a restructuring plan designed to remove a  substantial occupancy and profitability drag from the business as a whole. 

Although no operational or financial details on the proposed divestments were included in the company’s release, it is understood from Mayfield’s FY23 Results Investor Presentation that six centres ear-marked for divestment (all of which are more than likely included in the current batch) recorded occupancy ranging between 30 per cent and 41 per cent across the year highlighting the potential uplift should the divestments complete. 

Notably the new incubator, which has already acquired ten centres from Genius Childcare with the help of finance extended from non-bank financier Finexia, will be led by outgoing Mayfield CEO Ashok Naveinthiran who announced his intention to leave the Group in September 2024.

Post the divestment Steps will become a key source of acquisitions for Mayfield with the arrangement enabling the company to not only de-risk its portfolio but also secure future growth opportunities as new centres are ramped up and underperforming centres rehabilitated. 

Mayfield will retain a right of first refusal over all centres within the Steps portfolio and will be granted an option to acquire centres as they meet specific performance thresholds, on acquisition terms to be determined through an appropriate arms-length process.

In addition, Mayfield will also hold a management agreement with Steps whereby it will extend services, yet to be defined, to the incubator in exchange for a management fee, providing the Group with a second source of income. 

$4.6m capital raise to support working capital needs and balance sheet 

Mayfield also confirmed that it had received commitments to complete a $4.6 million capital raising via an institutional placement of 9,837,992 fully paid ordinary shares to new professional and sophisticated investors.

The raising amounts to an increase in share capital of around 15 per cent and was issued at a price of $0.4653 per share representing a 5 per cent discount to the 10-day VWAP (volume weighted average price) up to and including 20 December 2024 of $0.4903.

The sale proceeds will provide a significant boost to existing cash resources which stood at $160,525 as of 30 June 2024 and support the proposed restructure and strengthen the balance sheet ahead of the implementation of the ECEC Worker Retention Grant and bank facility renewal.

The current loan facility of $22.2 million, of which $6.5 million has been drawn down, is set to renew on 2 August 2025.