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EXCERPTS
A childcare contractor with close ties to ABC Learning Centres had an "attractive" business in selling childcare centres after running start-up centres for the sector giant.
A creditors' report into now defunct contractor 123 Group also says director Don Jones's salary was $144,000 a month ($1.7 million annually).
But Mr Jones, a former army officer and long-term childcare operator, said this was incorrect and the true amount was far less.
Details about the 123 Group were revealed for the first time in the creditors' report by administrators John Greig and Richard Hughes of Deloitte.
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123's various arms helped co-ordinate new centre developments and run some start-up facilities.
Those entities were wound up last week with debts of almost $136 million, mostly to ABC. Deloitte found ABC's collapse last month largely triggered 123's failure, and early investigations have found no indication of insolvent trading.
ABC in April showed the market a new developers' model which resulted in it settling recently made Australian centres upon reaching 80 per cent occupancy hurdles.
What was not highlighted in presentation slides and less widely known was that ABC had guaranteed to purchase centres in three years even if hurdles were missed.
Citigroup analysts said underperforming centres would fetch 65 per cent of the original price.
Deloitte found ABC, which had 1040 centres, would pay deposits on developing centres that were offset against the final price once occupancy targets were reached.
The report found sale prices for facilities "made it attractive for 123 Operations to operate a start-up centre until sold to ABC".
Management accounts for the 123 Group, which excluded a separate loss-making staffing agency, indicated an $11 million profit on an aggregated basis. But this included some dividends and revenues which might be affected when consolidated.
In the five months that 123 operated this year, it chalked up a $2.6 million loss as ABC business ceased.
As reported last week, staffing agency 123 Careers posted a normalised loss of $6 million (accounting mistakes resulted in the headline figure being a $23 million loss) which included the costs of growing a recruitment database.
Careers had acquired rights to staff ABC centres in 2006 for $46 million in a deal only recently revealed to ABC shareholders.
ABC, under then chief executive officer Eddy Groves, subsequently decided to buy Careers for $70 million earlier this year.
While it is understood KPMG assessed the sale price, the contract was later axed.
- reprinted from the Courier-Mail