Janet Collins
Billy MWould You Buy a Used Car from this Man?
November 20th 2008 11:01
If I asked if you would buy a used car from this man a few years ago you probably would have said yes. This is Eddy Groves, the latest entrepreneur who has gone belly up. Eddy Groves is from ABC Learning Centres fame. These centres are now so far down the tube that our Federal Government has had to step in so that children will have somewhere to go – at least until Christmas.
It was only a few years ago that Eddy Groves was being hailed as a bright and successful businessman. The story is familiar enough. It goes like this.
His family immigrated to Australia from South Africa in 1970. His “tough” father encouraged a business drive in him and at the age of 19, Groves ventured into business as a distributor for Pauls milk. By 2005 Groves owned the largest Pauls distribution network in Queensland.
Groves started the ABC Learning Centres business in 1988 and by 2001 had 34 centres and was listed on the stock exchange. The company further expanded three years later when they acquired the Peppercorn company, a long day child minding company with branches across the country. By 2005 ABC Learning Centres boasted a position of the largest operator of private childcare businesses in Australia and second largest in the world.
That was in 2005. A good rags to riches story don’t you think? We all just love these until the story changes from rags to rogues. Right now the stories about Groves aren’t so kind. None of the worship and adulation reported about him earlier. We now get the story behind the story.
The company went into voluntary administration this month and debts are estimated at more than $1 billion. There are 1200 centres in Australia and New Zealand that care for around 120,000 children, so closure of them all would have been catastrophic. To head off this catastrophe, even if temporarily, our federal government has kicked in $22 million just to keep them open until Christmas.
Stranger still is how Groves, although parting with all his toys, jumped ship pocketing $800,000. His toys included a private jet, a helicopter, a Ferrari, a 26-metre yacht and several properties on the Gold Coast – and they’re the ones we know about.
More and more keeps seeping through the cracks of the wreckage. It is now coming out that there were some pretty shifty business dealings going on behind the scenes including large contracts for building and other works being awarded to relatives and friends. And you can be sure there will be much, much more.
That is on top of all the questions about the business model of the organisation. Now, of course, everyone is saying it couldn’t possibly have worked anyway. Funny that – the banks didn’t seem to question the model and neither did the government when Groves started the organisation. Neither did they question the model throughout the company's expansion.
To further add to the woes of the childcare industry, this week CFK Childcare – a smaller operator but still a significant one that operates 43 centres in New South Wales - was placed in receivership.
The whole debacle of the childcare industry should at least draw some much needed attention to private organisations providing necessary services in the community – particularly when they are listed companies. These companies were competing against the not-for-profit organisations with the difference being that the shareholders would expect a profit.
Add to that the government subsidies that were given to them with absolutely no strings attached. Often there are services that either our governments or our not-for-profit organisations should have total control over and obviously, childcare is one of them.
Eddy Groves is just another shonky person who has managed to con the banks, the government and the media. And just like all the ones before him and the many that will come after him, he will not end up on the list of the homeless.
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Comment by mistersmith
Comment by Janet Collins
The Social Critic
Janet Collins Blog
With all that is going on in this industry and other industries at the moment, no-one surely can run the line that private enterprise does it better. Their interests are not for the "public good". ABC Learning Centres were being subsidised by government as well - a listed company? How does that happen? And without any accountability.
Thank you for stopping by and your valuable comment.
Comment by Chris Champion
moneywhither
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While Eddy makes the headlines, however, I think it should be said that the great majority of people conducting business do so ethically and honestly. There will always be rogues in the private sector, just as there will always be inefficiencies in the public sector.
We need both of them, warts and all.
Comment by Janet Collins
The Social Critic
Janet Collins Blog
Thanks for the comment.
Comment by Morgan Bell
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Comment by Chris Champion
moneywhither
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The current global economic crisis is a whopper of an example. It was caused by a whole raft of Eddy Groveses messing around with the definitions of practical, sustainable and ethical lending practices.
In the end, we will clean up the mess and rewrite the rules and revise our expectations, and get back to business. Until the next Eddy Groves comes along.
Perhaps it is inevitable that it happens this way. Perhaps the system, like individuals, learns primarily from its mistakes.
Comment by colocountry
Compliments on the insights. Could I add that one can be swept along with the rhetoric, convinced that those who are dominant, aka shareholders, have an inalienable right to profit because of the risk involved in 'risky business'. It all sounds so rational and reasonable until you examine mutually exclusive situations such as hedge funds that demand maximum returns to retirees that invest in childcare centres that can't trim costs unless they employ only juniors as carers so that ..... Yes, it all sounds so rational until we admit that we too are shareholders or are reliant upon superannuation to provide us with the wherewithall to live our lives in comfort forever and ever ....amen!!
Col
Comment by colocountry
Compliments on the insights. Could I add that one can be swept along with the rhetoric, convinced that those who are dominant, aka shareholders, have an inalienable right to profit because of the risk involved in 'risky business'. It all sounds so rational and reasonable until you examine mutually exclusive situations such as hedge funds that demand maximum returns to retirees that invest in childcare centres that can't trim costs unless they employ only juniors as carers so that ..... Yes, it all sounds so rational until we admit that we too are shareholders or are reliant upon superannuation to provide us with the wherewithall to live our lives in comfort forever and ever ....amen!!
Col
Comment by Mrs M
Mum's Word
Eddy Groves is a nasty piece of work.
My youngest attends an ABC Centre, and the staff there are fabulous and it really makes my blood boil when these guys have had their holidays and superfunds frozen by the administrators.
The director didn't have one nice word to say about him. From what I understand ABC has one convoluted business plan and basically he didn't look after the centres he had before opening and/or acquiring new ones.
He's an arse.
Love & stuff
Mrs M
Comment by Janet Collins
The Social Critic
Janet Collins Blog
Yes, seeing things first hand would make your blood boil. What I can't understand is why our government subsidises companies that are listed on the stock exchange and the subsidies are given wthout them having any accountability for them.
Look how many in high places he has fooled to get that.
Thanks so much for dropping by.
Janet