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EXCERPTS
"This is a business subsidised by government - how can it be unprofitable?"
Former ABC Learning chairman Sallyanne Atkinson may have regretted this very public lament made soon after the child-care operator collapsed, but many could understand the sentiment.
ABC Learning received $300 million in child-care benefit payments from the government this year. This is on top of a 50 per cent rebate on child-care fees and the Government's $22 million emergency injection to keep about 400 loss-making ABC Learning centres afloat until New Year's Eve.
The collapse on Tuesday of CFK Childcare Centres - one of only two remaining publicly listed child-care operators - raises the question: can for-profit child-care operators indeed make one?
The community-based child-care groups have said for years that the commercial promise of listed child-care operators was a pipedream. The business case relied entirely on economies of scale that were never going to eventuate thanks to Government-mandated staff levels at centres.
"I think the whole notion of generating profits on the back of child care was flawed from the beginning," Barbara Romeril, the executive director of Community Child Care Victoria, said.
"There simply are not economies of scale to generate decent profits."
The major misunderstanding with child-care organisations is how expensive they are to operate. Labour costs are high due to the intensive needs of young children and are usually matched by rent costs, which in the case of ABC exceed $1 million a year for some of its centres.
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- reprinted from the Sydney Morning Herald