ABC Learning is an Australia

Australia

Australia , officially the Commonwealth of Australia, is a country in the Southern Hemisphere comprising the mainland of the Australian continent, the island of Tasmania, and numerous smaller islands in the Indian and Pacific Oceans. It is the world's sixth-largest country by total area...

n company that was the world's largest provider of Early Childhood Education

Early childhood education

Early childhood education is the formal teaching and care of young children by people other than their family or in settings outside of the home. 'Early childhood' is usually defined as before the age of normal schooling - five years in most nations, though the U.S...

 services. It is listed on the Australian Securities Exchange

Australian Securities Exchange

The Australian Securities Exchange was created by the merger of the Australian Stock Exchange and the Sydney Futures Exchange in July 2006. It is the primary stock exchange group in Australia....

 with its market capitalisation reaching A$

Australian dollar

The Australian dollar is the currency of the Commonwealth of Australia, including Christmas Island, Cocos Islands, and Norfolk Island, as well as the independent Pacific Island states of Kiribati, Nauru and Tuvalu...

2.5 billion in March 2006. The company is now in administrative receivership after fallout from the subprime mortgage crisis

Subprime mortgage crisis

The U.S. subprime mortgage crisis was one of the first indicators of the late-2000s financial crisis, characterized by a rise in subprime mortgage delinquencies and foreclosures, and the resulting decline of securities backed by said mortgages....

 caused debt repayments to overwhelm the company and the auditors failed to sign off on the financial reports citing the need to recast previous year's reported profits. ABC Learning is now operated by the not-for-profit syndicate GoodStart Childcare Limited.

History

ABC Developmental Learning Centres was founded in 1988 in Ashgrove, Brisbane, Queensland. ABC rapidly expanded, reaching 43 childcare centres by 30 June 2001. By November 2005, it had 697 Early Childhood Education centres throughout Australia and New Zealand. In March 2006, it forecast that would have 950 centres in Australia and New Zealand by 30 June 2006.

It has purchased the third largest childcare operator in the United States- Learning Care Group Inc. which itself operates 467 centres in the US and other educational facilities in south-east Asia. The purchase provides the ABC Learning with 70,000 additional licensed childcare places in addition to the 50,000 it had previously. Other mergers with Peppercorn Management Group and the purchase of Child Care Centres Australia helped provide a considerable increase in the number of ABC's centres. The company planned to increases its number of centres by four a week. In March 2006, it announced a bid for Kids Campus, one of its few remaining large competitors in Australia which would give it another 106 centres.

On 13 December 2006, it was announced that ABC would acquire the second largest child care provider in the United States

United States

The United States of America is a federal constitutional republic comprising fifty states and a federal district...

, Chicago

Chicago

Chicago is the largest city in the US state of Illinois. With nearly 2.7 million residents, it is the most populous city in the Midwestern United States and the third most populous in the US, after New York City and Los Angeles...

 based La Petite Academy

La Petite Academy

La Petite Academy, Inc. joined the Learning Care Group family in January 2007. As one of the largest early education and child care providers, La Petite Academy operates more than 500 locations in 34 states and the District of Columbia....

 for 330 million US Dollars as well as the 5th largest provider in the UK, Busy Bees Group, Ltd. With these acquisitions they are expanding into the UK market and increasing their market share in the US to 1%.

It expanded aggressively into the outsourcing of child care services, negotiating deals with some of Australia's largest employers including the Australian Department of Defence

Department of Defence (Australia)

The Australian Department of Defence is a Federal Government Department. It forms part of the Australian Defence Organisation along with the Australian Defence Force . The Defence mission is to defend Australia and its national interests...

 which involved taking over the Department's nineteen childcare facilities. Aside from offshore expansion, the company is also expanding in training and education. It runs the ABC Early Childhood Training College, providing training for childcare workers, publishes a magazine Small Wonders aimed at parents with young children.

It was a highly profitable company, in the FY2004/5 recording net profit after tax of $52.3 million on total revenues of $292.7 million. The six months ending 31 December 2005 showed no slowing in the financial momentum for the company with profit after tax reaching $38 million and revenues of $219.8 million.

ABC Developmental Learning Centres was the major sponsor of the Adelaide 36ers

Adelaide 36ers

The Adelaide 36ers are Adelaide's men's professional basketball team, established as the Adelaide City Eagles when they joined the National Basketball League in 1982. The Adelaide 36ers tally of four championships is equal with the Melbourne Tigers and second behind the Perth Wildcats as the most...

 in the NBL

National Basketball League (Australia)

The National Basketball League, also known as the iiNet NBL Championship for sponsorship reasons, is the pre-eminent men's professional basketball league in Australasia....

.

In March 2008, ABC announced it would sell 60 percent of its American child care business to Morgan Stanley

Morgan Stanley

Morgan Stanley is a global financial services firm headquartered in New York City serving a diversified group of corporations, governments, financial institutions, and individuals. Morgan Stanley also operates in 36 countries around the world, with over 600 offices and a workforce of over 60,000....

, using the proceeds to pay off accumulated debt. The sale, which valued 100% of the US subsidiary Learning Care Group at US$700 million, also involved a replacement of three board members.

Controversy and criticisms

Critics of ABC Developmental Learning Centres say it is making these considerable profits at the expense of Australian taxpayers whose money subsidises the use of childcare with means-tested tax rebates. ABC Developmental Learning Centres received $128 million of its revenue from government subsidies in the last financial year.

There is also controversy about the dramatic expansion of the company with claims that in some areas ABC - by acquisition - has achieved a monopoly in the provision of childcare services. The Australian Competition and Consumer Commission

Australian Competition and Consumer Commission

The Australian Competition and Consumer Commission is an independent authority of the Australia government. It was established in 1995 with the amalgamation of the Australian Trade Practices Commission and the Prices Surveillance Authority to administer the Trade Practices Act 1974...

 reviewed the company's acquisition of Peppercorn and permitted the deal to go ahead after imposing certain conditions including a requirement to close centres in some areas and agreeing not to purchase in other areas.

ABC Developmental Learning Centres is also using its considerable financial resources to support challenges to regulations governing childcare and enforcing vicarious liability

Vicarious liability

Vicarious liability is a form of strict, secondary liability that arises under the common law doctrine of agency – respondeat superior – the responsibility of the superior for the acts of their subordinate, or, in a broader sense, the responsibility of any third party that had the "right, ability...

 on the company. In one case, in 2006 it challenged a $200 fine imposed by a Victorian Magistrate for the actions of its staff who failed to adequately supervise a two-year old child who escaped from a centre in suburban Melbourne and was found by a neighbour and brought back to the centre. It argued that the company had done all it could reasonably be expected to do to provide facilities that made escape difficult and that any legal liability should rest with the staff involved.

In August 2006, ABC Developmental Learning Centres pleaded guilty to 'Failing to Enclose' in the Fremantle Magistrates Court and were fined $1300. A three-year old boy escaped from the centre in Lynwood, Western Australia, through a broken fence and was found by staff in a nearby car park.

The company is under investigation by the Australian Securities and Investments Commission

Australian Securities and Investments Commission

The Australian Securities & Investments Commission is an independent Australian government body that acts as Australia's corporate regulator...

.

Financial troubles

An unexpected drop of 42 per cent in profit in the second half of 2007 to $37.1 million and its inability to service its $1.8 billion debt triggered a decline in the company's share price. Several directors of the company were then forced to dump millions of shares after receiving margin call

Margin Call

Margin Call is a 2011 American independent drama film, written and directed by J.C. Chandor. The film has an ensemble cast that includes Kevin Spacey, Demi Moore, Paul Bettany, Jeremy Irons, Zachary Quinto, Stanley Tucci, Simon Baker, and Penn Badgley...

s. The combined effects caused the share price to plummet 43% to $2.15 after trading as low as $1.15. By the end of the selling, founder Edmund/Eddy Groves

Eddy Groves

Edmund Stuart "Eddy" Groves is an Australian businessman, founder and former Chief Executive Officer of ABC Learning, once one of Australia's largest companies and one of the world's biggest childcare providers prior to going into administration.-Early life:Eddy Groves was born in Durban, South...

 and his wife sold virtually all of their stakes of 20 million and 6 million shares respectively while director Martin Kemp unloaded 2.7 million shares. The combined Groves' stake represented 8 per cent of the company.

Trading in ABC Learning shares was suspended in August 2008 after the company failed to release its earnings for the 2007-08 financial year.

Receivership

Despite selling off assets, the company fell into receivership in November 2008 after increasing debt servicing obligations and its auditors were unable to sign off on its accounts. The federal government injected $22 million into the company to keep its childcare centers open until the end of 2008.

The company was subsequently delisted from the S&P/ASX 200

S&P/ASX 200

The S&P/ASX 200 index is a market-capitalization weighted and float-adjusted stock market index of Australian stocks listed on the Australian Securities Exchange from Standard & Poor's...

.

Creditors voted to wind up the company in June 2010. The ABC Learning centers were purchased by GoodStart, a consortium of Mission Australia

Mission Australia

Mission Australia is a provider of family and community services throughout Australia. The organisation has at least 3200 staff, 1,000 volunteers and 300 services in every state and territory of Australia, and is one of the largest community organisations in the nation. It is currently headed by...

, the Benevolent Society

Benevolent Society

The Benevolent Society, founded by Edward Smith Hall in 1813, is Australia's first charity. It is an independent, non-religious, non-profit organisation which aims to help people overcome the barriers preventing them from participating fully in society...

, the Brotherhood of St Laurence

Brotherhood of St Laurence

The Brotherhood of St Laurence is an Australian not-for-profit organisation. Based in Melbourne, the Brotherhood has a national profile. The organisation's vision is for an Australia free of poverty. In working towards this vision it undertakes research and develops and delivers services and...

 and Social Ventures Australia.

External links

• ABC Developmental Learning Centres Website
• Sydney Morning Herald Report on ABC Learning
• Controversy over ABC Learning legal actions
• Sydney Morning Herald Report on ABC Learning Takeover of Kids Campus
• Allco responds to ASX's 'please explain
• Eddy Groves on Inside Business
  Inside Business
  For the business newspaper based in the United States, see Inside Business Inside Business is an Australian television program broadcast on ABC TV. Making its debut on 4 August 2002, it presents analysis of the financial world, including the Australian sharemarket, business activities and the...