A leading private provider of Early Childhood Education in Australia, Oxanda Education aims to ignite the spirit of learning, friendship and community delivering an early education programme focussed on excellence.
Before founding Oxanda Education, Managing Director Adrian Fonseca spent seventeen years in investment banking in Sydney, Singapore and London, with Macquarie Bank and Deutsche Bank. He is a Director of ASX and NZX listed early learning centre operator, Evolve Education Group, Chairman of childcare search providers CareforKids.com.au and Toddle, as well as Deputy Chairman of AFL Club the GWS Giants and Deputy Chairman of the Giants Foundation. Married with three children of his own, Mr Fonseca is extremely passionate about the early education needs of children and is heavily involved in community groups relating to them. Mr Fonseca speaks to us about transition from investment banking into the education sector, Oxanda’s business model of greenfield centres in growth corridors, and the focus on excellence that sets the provider apart from its competition.
“We’re in the business of Long Day Care,” Mr Fonseca says, “and this is the traditional, most well-known form of childcare. Other forms exist, such as Before and After School Care and Family Day Care – but the main industry piece is Long Day Care and the provision of care and education between the hours of 7am and 6pm.”
Currently, there are around 8,000 childcare centres across Australia, and the market is a fragmented one, historically dominated by parent-run services, traditionally with about 70% of owners owning one to two services.
“It’s changing dramatically. Thirty years ago, that percentage was higher, but it’s grown from a cottage industry to a very sophisticated offering involving well designed purpose built buildings with high levels of amenity, and as an industry now led by a range of sophisticated groups providing a high level of quality care.”
At the large end of the market in terms of number of centres is Goodstart Early Learning with over 650 centres and G8 Education with more than 470 centres followed by a group of operators owned by large private equity groups or large not for profit groups, with between 100-150 centres each. Oxanda sits within a cluster of sophisticated private groups operating between 20 and 50 centres.
“The most positive aspect about the childcare industry is it’s treatment as an essential service. We saw that most dramatically during COVID – it was one of the few industries outside of the health industry where businesses remained open throughout the crisis. Even during the second lockdown in Melbourne, all childcare centres in Melbourne (except those themselves affected by COVID) remained open.”
Mr Fonseca started Oxanda Education in 2013, after seventeen years in investment banking. His last role was running a strategic solutions business across Asia, based in Singapore. His time in the country ended up being significant in terms of his subsequent career transition.
“Our youngest child was born in Singapore, and we got to experience childcare and early learning in Singapore. There’s a very heavy emphasis on early education and learning through discovery. It provided great insights, and there were some key elements to local business models that we’ve adopted.”
At the time Mr Fonseca and his family were in Singapore, the world was experiencing the devastating economic effects of the Global Financial Crisis. This made it an extremely challenging period for many businesses, including childcare.
“You may recall ABC Learning Centres, the large ASX listed operator, it went into receivership in 2009, but from that tumultuous period Goodstart was born. The key proponents for Goodstart were Social Ventures Australia, which together with some other charitable institutions formed a consortium to bid and acquire ABC out of receivership.”
Mr Fonseca’s previous time with Macquarie Bank had left him with contacts and former colleagues within Social Ventures, and he used this period to network and spend time with them and executives from Goodstart, introducing himself to an entirely new industry in the process.
“Leaving banking I had a mission to do something entirely different. That mission started with a clean sheet of paper and ultimately turned into a business plan that involved me starting a childcare group.”
“What do you know about education or the sector” people said. “You’re a banker”. “So, I thought, let me be a banker and in banking style I acquired 3 portfolios of centres in quick succession with personal capital”.
“All of a sudden I’m no longer an ex banker. People started seeing me and us, as a respected childcare operator and our network and connections grew from there”.
“In all of that, I acknowledged I had no background in the sector so my most critical first step alongside acquisition of the portfolios was to also hire a leading Management team. I drew on my own experience from banking in identifying the right people and building an incredible tight knitted, leading edge and visionary culture.”
“We’ve benefitted immensely from our ability to hire great talent in the sector with high levels of expertise inclusive of legal, finance and compliance executives, and then combined that with my own people management, financing, and development skills. Three of my Senior Management team (Rosina O’Brien, Kara Parata and Greg Smith) are from G8 Education and the remaining member Oliver Meehan was from one of Australia’s leading law firms in the childcare space.”
From a standing start and being a new entrant in 2013 Oxanda Education quickly grew to over 30 centres entirely through acquisition.
“They were great centres and we learned much through that journey, but within a few years we’d taken those centres to a high point and the journey had focussed our minds on what centres we wanted to create and how we wanted to deliver our educational learning environments.”
“By 2017 we decided to pivot. We now wanted to develop our own centres – centres designed, built and resourced with our go forward vision in mind – providing education and care in a way that really matched the philosophies and rituals we had developed. If we truly wanted to be a provider like no other, we had to ensure our centres matched who we said we are and what we said we were doing. So in 2017 we sold virtually all of those acquired centres to a range of large groups.
“Since 2017 we’ve opened more than 20 greenfield centres, with another 15 opening in the next 24 months, and by the end of our growth phase in a few years, we’ll be around the 50 centre mark, which puts us at the top end of that middle segment of the market.”
Operating greenfield services has many benefits, affording the opportunity to build centres from the ground up, with complete control over location, design and specification.
“Our business model now is to develop and operate newly built centres in growth corridors in Sydney, Melbourne and Southeast Queensland. The next two decades will bring incredible population and employment growth as well as associated infrastructure (traditional and social) and amenity opportunities to Western Sydney and equivalent growth corridors in Melbourne and South East Queensland and this has childcare and Oxanda positioned very well on a go forward basis.”
The development side of the business
From a development perspective, the most important pillar is sourcing and originating the best opportunities and interacting with agents, developers, Real Estate Investment Trusts (REITs), architects, project managers and builders. All this means a great deal of networking, time, research and relationship management.
Oxanda Education has partnerships in place with several REITs and Funds, including Arena REIT, HABEN Property Fund, the Charter Hall Social Infrastructure REIT, Argus Property Partners, Home Co. and Primewest. It also works closely with the leading childcare agents CBRE, Burgess Rawson and Cushman & Wakefield. On the building and architecture side it has great relationships in Sydney, Melbourne and Brisbane with Childcare Construction Solutions, Lanskey Constructions, Total Force Maintenance, Tango Projects, Point Architects and Kaunitz Yeung Architecture.
“Opportunities typically arise from a relationship or referral. The property aspects of a transaction can involve a 2-3 year journey from the first discussion to a centre opening and there are usually twists and turns along the way. It’s thus important to have committed and loyal development partners. This side of the business is relationship driven and we treat our development partners inclusive of lawyers (King & Collins and Arnold Bloch Leibler), financiers (NAB), accountants (Maxim Chartered Accountants) and planners (GSA Planning) as clients.”
“As we grow, we continue to develop new relationships and given our increasing size and profile, new relationships and opportunities naturally come to us.”
Partnering with Oxanda Education on their recently opened purpose-built centre, Bluebird Early Education Roseville, in Sydney’s North Share, Childcare Construction Solutions (CCS) delivered an amazing world class centre, describing its partner Oxanda as one of Australia’s leading private providers of Early Childhood Education.
Mr Fonseca was equally impressed by the quality of work delivered by CCS, a specialist commercial building firm focusing on industry leading early learning spaces. “CCS delivered an incredible centre ahead of time and budget,” he says. “The way they were able to integrate and deliver a stunning centre in a natural bush setting in an urban location was just phenomenal. It’s a unique centre in a wonderfully unique setting and I welcome families and children to visit it.”
Purpose and Profit
“We’re definitely for-purpose,” Mr Fonseca says. “But we’re also for-profit. We find that in getting the purpose and the values correct, the profit and the results come naturally. I think our three points of difference are our people, our setup as an organisation and our focus on excellence.”
On the people side, as noted earlier, Oxanda has hired great people from other successful industry players who have adapted to and thrived within the Oxanda setup. The company has an empowering management structure, and this enables the team to develop ideas, execute end to end, and flourish in that activity.
“They’ve got a great entrepreneurial and visionary spirit, and that comes through in everything that they do in terms of creating beautiful spaces, managing all operational aspects and formulating the curriculum, philosophies, rituals and programmes that embody our vision of providing exceptional early education and care.”
The group is privately owned, with Mr Fonseca the sole Director and Shareholder. This is a key difference and advantage and means Oxanda is not beholden to a listed market or a private equity group looking for fixed or increasing returns.
“No disrespect to those groups,” he adds. “It’s just to say that when I visit a centre, I’m never focused on the budget. I’m focused on – are things right? Can we improve things? What do we need to change here? We’ll always do what’s right, and in getting things right, we end up winning the hearts and minds of the community, reflected in families wanting their children to attend our centres.”
The focus on excellence encompasses all the aspects Mr Fonseca has already discussed. By providing quality care and value for money, there’s a symbiotic and positive vibrational exchange with families. Everyone is happy and wins.
“In holding true to those pillars, we end up getting success as a derivative. So, we think let’s deliver a beautiful centre, in a high needs area, with great educators that really care for the children, and then through all of that and everything we do, families will just want to attend naturally.”
“At its most fundamental, we love WHAT we do and we love WHY we do it and this is what drives us. In essence, we’re as vocational as a not for profit and it’s that vocational aspect and being on Purpose that generates the wins.”
“Our commitment to communities is unparalleled and a key pillar of our core values. Childcare centres are essentially community-based enterprises and as such, we are very active in the communities in which we operate and dedicated to ensuring we’re making a difference as well as listening to and satisfying the needs and wants of the community. That makes perfect sense and quite simply is good practice.”
“We’re also very mindful of the need to give back. As our communities support us with their patronage, we support them. We’re very philanthropic with our time, resources and of course money with a wide range of community projects and needs across the Eastern Seaboard. Our main childcare brand is Bluebird but we also have a Western Sydney brand called Little Giants which is a community based partnership with the GWS Giants AFL Club. It’s a partnership we’re very proud of. A percentage of revenue from the 3 Little Giants Centres (Little Giants Oran Park, Little Giants Auburn and Little Giants Killara) goes to the Giants and the Giants Foundation supporting people and communities in need in Western Sydney.
The future certainly looks bright for Oxanda Education. Mr Fonseca explains how the group intends to remain privately owned but will still be looking to achieve significant growth within the coming years.
“We want to be around the 50 centre mark, relatively evenly split between NSW, Victoria and South East Queensland. I know all 3 states very well and find operating in those States relatively easy from a management perspective. Living in Sydney, I can be in Melbourne and Queensland in 2 hours respectively, spending time at the centres and with my Management team as well as networking with developers and other operators.”
With offices in the Gold Coast and Melbourne, and several operational staff members in Sydney in addition to Mr Fonseca, Oxanda Education is already well placed in the way it serves these three regions.
“Opening new services is the key and the path we’re on. We never want to be static. If we grow, we create increased opportunities for people within the organisation. We have more than 500 employees; and as we grow, and in providing high quality care in these communities, then we’re going to derive greater success as an organisation and greater success for all the people involved.”
With childcare in Australia proving in the past to be a big political issue, one that can help win or lose elections, there is still a significant discussion point around affordability that dominates political and community concerns.
“Yes, people will want to discuss affordability and I can appreciate why that is, but cost is a derivative of all the elements in the chain that goes into delivering a childcare centre inclusive of land prices, associated rents, employment expenses and operating costs,” Mr Fonseca, “in my view, the better place to start the conversation is the essential nature of childcare and the role it plays. That’s where the focus should be. Start the conversation with Australia needs a well-funded and resourced childcare sector and build from there.”
“Thankfully, we’ve reached a point where strong bipartisan support exists for childcare, its role as an essential service and the need to ensure its adequately funded. Go back a number of years, the Productivity Commission laid down the framework for childcare to be treated as an essential service and for government to fund it on that basis.”
“Greater government investment in childcare increases access and affordability which drives increases in the participation rate, workplace opportunities, gender equality, increased household income and GDP. Bottom line, the sum of all associated economic and social benefits means that any government subsidies for childcare are self-funding and in fact net positive economically and socially.”
“That’s certainly the evidence from other countries. If you look at Scandinavia, there’s a huge collective focus on early childhood education and its virtually fully funded. Singapore is also a highly funded environment. Australia is definitely well funded but we could do more and the benefits are clear.”
Affordability for families comes down to what Mr Fonseca calls “the gap”, that is, the difference between the childcare fee that the parent is charged and the amount that the government will fund – which is capped at a percentage of a scheduled childcare rate. The lower the “gap” the more affordable childcare is. Virtually all Oxanda centres are priced within the scheduled childcare rate meaning the “gap” if any is low – making the centre, care and offering, affordable for families.
“As I said earlier, there are many elements in a pricing chain. All businesses are subjected to annual increases in rents and wages. Some operators seek to increase prices above benchmarks and that can happen in any sector but in those situations natural forces of demand and supply tend to self-correct, and a new more efficient operator comes in to fill that gap.”
“Overall, it’s a pretty balanced market nationally in terms of demand and supply and pricing. While there may be a shortage of childcare in certain inner city areas due to land shortages that’s in the minority and approval agencies are aware of these supply constrained areas and putting in place initiatives to correct this.”
Mr Fonseca is clear that the industry is, overall, a positive one, and well aligned with government and social purpose, and as a social infrastructure asset is an excellent industry to be involved in.
“The most rewarding part of what I do is being at the centres,” he concludes, “seeing the children running around, playing and learning, and becoming social and school ready. As a society, we should increase our investment in social infrastructure, and we saw that during the peak of COVID.”
At Oxanda we have an initiative called 2040. In 2040 our current toddlers will be 21 and 22 years old. They will have completed time at an early learning centre, primary school, secondary school and potentially some time in a tertiary institution or completed a trade. At Oxanda, we’re thinking about what we need to do to assist the future 21 and 22-year-olds, the adults in 2040, to be bright, positive, forward thinking and socially engaged adults of their time. It’s an exciting initiative with lots of possibilities and opportunities. We love the question, and we love being a part of inspiring the next generation. If we can be a key asset in someone’s development and create early wins for children that create the building blocks for success in later years then we’ve done everything our mission says we wish to do and that fills us with a lot of joy.
With a commitment to achieving excellence, and the deep belief that learning is the ignition switch for change, Oxanda Education is providing an irreplaceable service for children in NSW, Victoria and South East Queensland. Find out more about Oxanda Education by visiting www.oxandaeducation.com.