Finance charges push up kidsunlimited’s losses

KIDSUNLIMITED reported an increase in sales and profit in 2011 as the number of sites in its portfolio increased, but finance charges incurred led to its losses widening.

The Wilmslow-based nursery chain, which was bought by private equity firm LDC in a £45m deal nearly four years ago, increased sales by 9% to £38.1m in the year to April 30, 2011 (2010: £35m).

Earnings before interest, tax, depreciation and amortisation (ebitda) also increased by 4% to £4.7m (£4.4m), but when interest and other charges were added it reported an increased pre-tax loss of £4.3m (£3.9m loss).

Financial controller Darren Powell said that only £1.1m of the £4.4m in interest was repayable in cash on bank loans, though – the rest is rolled-up and only owed to its private equity backers on exit.

He added that the company had also worked to make a number of voluntary repayments to its bank during the course of the year to reduce its overall level of loans.

The company said that revenues from maturing nurseries had increased, but that this had been mitigated by costs incurred through increased investment in the business via new outlet openings, training, nursery support teams and marketing.

It opened three new nurseries during the year at Highbury in North London, Esher in Surrey and at Timperley in Greater Manchester. It also acquired a Kiddi Kids nursery in Barnet which was then converted into a kidsunlimited outlet, but closed a nursery at St Pancras Hospital prior to its redevelopment.

Five new nurseries are due to open by the end of its current financial year at Woodstock in Oxfordshire, Wokingham, Maidstone, Reigate and at Sale in Greater Manchester.

Powell said that demand for the new 100-place nursery in Sale, which will employ 30 members of staff when it opens by the end of March, had been strong.

“We’ve had people phoning in already and the level of interest has been way beyond expectations,” he said.

The company has also secured five new sites to develop during its next financial year and even has five more potential locations (some of which will need planning approval) to develop in 2013/14.

“We’ve taken advantage of the weak property market and we’ve worked with a number of developers who are keen to work with us again,” he added.

“We’re really going for quality with the new openings.”

The company has also made investments in its existing operations, including a new IT system which provides real-time data on staff positions and money being brought into each site. One advantage of the system, he said, is that it has allowed the company to redeploy staff in areas which have clusters of sites in order to cut down on the number of agency staff used.

It has also appointed a new Early Years Advisory Board consisting of educational experts, and increased spending on facilities including a new range of robust computers designed for pre-school children in all of its nurseries. It has also worked with nutritional experts on a new range of menus featuring new meals and snacks within each site.

The pre-tax loss incurred means the company’s net liabilities have increased to £5.3m (£1m), but it generated £5.9m of cash during the year and a directors’ report states that “the board and LDC will continue to finance the group’s growth with conservative funding”.

Powell said that although “by its very nature” LDC would look for a return on its investment at some stage in the future, there was no deal currently in the pipeline.

“I’ve been here for seven months and they’ve been great backers for us so far,” he said. “As you can see from the number of sites we’re opening, they’ve clearly been investing in the business.”

The commercial director who joined Kidsunlimited last year, Karen Bach, has recently decided to leave the company to pursue other projects.