Why we should be worried about the super-profits Evolve Education is making in ECE

[g1_row] [g1_1of2] Education Minister Hekia Parata’s comment that the All Blacks are a great model for the education system (because they use ‘data’, have ‘high standards’, focus on ‘quality achievement’)…



Education Minister Hekia Parata’s comment that the All Blacks are a great model for the education system (because they use ‘data’, have ‘high standards’, focus on ‘quality achievement’) is playing out in the early childhood education (ECE) sector, but not in a good way.

A former All Black, Mark Finlay, is a founder of the new publicly listed ECE provider, Evolve Education, and yesterday it announced a super profit of $8.4 million, after tax, for the first six months of the year.

Evolve now owns a chain of 100 centres, plus a home-based business.





Its half-year profit is earned on tangible assets, owned by the company, of $19 million – giving the company a rate of return of some 43 percent. Revenue was $70.2 million of which some $45 million, on an industry norm, would be government subsidy.

It’s a licence to print money!

But to give the Minister the benefit of doubt, it’s probably not what she had in mind when she talked about ‘data’ and ‘quality achievement’. Her intention, surely, is to spend taxpayers’ money in order to protect and benefit New Zealand’s youngest children. But more on that later.

First a quick look at the winning formula that puts a pot of gold at the base of the goalpost.

The trick to it is in the word ‘tangible’, as in tangible assets. On tangible assets – things you can touch and hold and have immediate value – the company is light, only $19 million. Its main asset, some $176 million, as recorded in its financial statements, is intangible – it is goodwill, loosely translated as ‘future earnings potential’. If you put this intangible asset to one side, the company is technically insolvent.

But the model works for providers so long as there is no economic downturn, so long as the government continues to pay out subsidies with minimal monitoring, so long as both parents have to work to afford housing, so long as parents continue to buy the marketing around ‘quality’.

The model also relies on low-paid teachers, and unqualified teachers, working long hours of contact time – which, as a great deal of research indicates, is not a formula for the provision of actual (as opposed to advertised) quality early education. This leads back to the other issue of what the government is trying to achieve with the way it spends taxpayers’ money on ECE.

The government has essentially ignored the recommendations from the taskforces it set up on how to improve the quality of ECE, in particular, the key recommendations of reducing ratio sizes for babies and infants, and introducing spot checks on services.

There is growing evidence that some service providers see ECE regulations as maximum legal requirements, rather than minimums.

There are many reasons to worry about the current model of ECE provision. The government needs to break out of it’s ‘hands-off’ mindset and, well, govern. When marketing replaces evidence as the criteria for quality provision, then the notion of parental choice becomes a myth.