ReadCloud up 6% on acquisition of early childcare training provider Southern Solutions

Mon 17 Oct 22, 12:25pm (AEST)
A child plays with blocks
Source: Unsplash

Key Points

  • Southern Solutions made earnings of $364,000 in FY22 from revenue of $2m
  • Acquisition sees ReadCloud pay $1.35m for Southern Solutions with possible payment up to $3.15m depending on FY23, FY24 earnings
  • Acquisition funded through ReadCloud’s existing cash reserves

ReadCloud (ASX:RCL) shares are up 6% heading into lunchtime Monday trades, retaining gains from Friday’s notice of acquisition of Southern Solutions.

Southern Solutions is a training provider specialising in offering certification for early childcare workers. ReadCloud, which offers educational products to the school system and vocational training institutions, notes the acquisition is instrumental in its expansion strategy. 

ReadCloud highlights some 3.9m Australians undertake vocational training every year, with childcare one of the most common certificates. However, worth keeping in mind is that participation numbers have dropped this year. 

The National Skills Commission predicts strong future demand for childcare workers. According to the body, at least 16,000 more workers are needed across Australia.

ReadCloud is hoping to eventually expand into the aged care and generalised healthcare sectors in a similar fashion, but, that’s down the line for now. 

How much is ReadCloud paying? 

Of foremost noteworthiness is that ReadCloud will have no debt post-completion of the takeover.

The company is handing the owners of Southern Solutions $1.35m from its own cash reserves to purchase 100% of the (privately held) shares in Southern. 

Part of this move gives Southern Solutions execs $375,000 in ReadCloud shares “at 20c payable upon completion.” Owners Jayne Marsh and Janina Puttick will continue to work with the company following ReadCloud’s purchase.

A further $1.8m stands in the wings for Southern Solutions, contingent on its ability to meet earnings expectations placed upon it by ReadCloud in FY23 and FY24 results. 

In FY22, Southern Solutions made just under $0.4m from $2m revenue. 

Skills shortage a growth opportunity: management 

“This acquisition represents a large growth opportunity for ReadCloud as we are utilising [our] technology to address the national skills shortage in childcare,” ReadCloud CEO Lars Lindstrom said. 

“The industry has a high demand for training of new and existing teachers and strong government focus and funding.” 

Southern Solutions CEO Jayne Marsh was succinct in her enthusiasm. 

“We are very excited to join ReadCloud and to combine our expertise,” Marsh commented.

A look at ReadCloud's three month charts; YTD returns are down -38%
A look at ReadCloud's three month charts; YTD returns are down -38%


Written By

Jonathon Davidson

Finance Writer

Jonathon is a journalism graduate and avid market watcher with exposure to governance, NGO and mining environments. He was most recently hired as an oil and gas specialist for a trade publication.

Get the latest news and insights direct to your inbox

Subscribe free