Mid-sized with seven centres

Enjoying economies of scale but more grants needed amid rising costs

A nursery class at the Yishun AceKidz childcare centre, which opened in late 2015. CEO David Wong attributes its success in part to the staff's quality engagement with parents.
A nursery class at the Yishun AceKidz childcare centre, which opened in late 2015. CEO David Wong attributes its success in part to the staff's quality engagement with parents.ST PHOTO: CAROLINE CHIA

Talk to Mr David Wong, chief executive of mid-sized pre-school operator AceKidz, and he is feeling the pinch as he looks enviously at the heavily subsidised centres run by larger anchor operators.

His plea: Give us more government funding, like those received by anchor or partner operators, and we would be able to pay our teachers well and offer good-quality programmes, too.

Mr Wong, 55, who runs seven AceKidz childcare centres, tells Insight: "The market has been turbulent. My staff costs have risen by at least 20 per cent in the past three years and profit margins have narrowed."

Anchor and partner operators are government-appointed. They must cap fees at $720 and $800 a month respectively for full-day childcare and have stricter quality criteria, but they get sizeable grants. In 2015, the Government set aside $250 million over five years for the 28 anchor and partner operators. Over 40 per cent of Singaporean children are enrolled in centres run by these operators.

Mr Wong says the two schemes for such operators have helped push down fees for parents, but have pushed up staff costs in the market.

"I don't blame them for raising wages to attract and retain staff. But if we could have some of those grants, we'd be better able to raise wages and quality," he says.

FEELING THE SQUEEZE

The market has been turbulent. My staff costs have risen by at least 20 per cent in the past three years and profit margins have narrowed.

MR DAVID WONG, chief executive of mid-sized pre-school operator AceKidz, on its difficulties compared to anchor and partner operator-run centres.

He suggests centres be given grants on a per-child basis - centres are incentivised to raise quality and serve more children; those that do more, get more funds.

The grants for anchor operators, and the fact that Ministry of Education kindergartens are exempted under the Early Childhood Development Centres Bill passed in Parliament last month, unilaterally regulating both childcare centres and kindergartens, have led to an "uneven playing field", he says.

He suggests the authorities abide by the "Yellow Pages rule" - made famous by former Minister of State for Trade and Industry Raymond Lim - where government bodies refrain from competing in business areas found in the Yellow Pages.

Meanwhile, the popularity of the seven AceKidz centres is varied.

One, in Serangoon, has a fifth of its places filled. The two newest ones, which opened last year and are in Jurong West, are about 35 per cent full.

This is despite the fact that AceKidz won open-site tenders for the Jurong West centres under a system which takes pre-school quality into account, not just the bid price.

Mr Wong believes the low enrolment is due to the areas' demographics - there are some vacant HDB units in Jurong West, while the Serangoon centre is in a private estate where pre-school demand is lower. He hopes demand picks up in Jurong West soon, when young families move in, and believes the authorities put up the sites for tender after projecting high pre-school demand in future.

  • ACEKIDZ

  • COMPANY SIZE: Seven childcare centres

    FOUNDED IN: 1998

    At one of the centres...

    WHERE: Block 315C, Yishun Avenue 9

    FEES: $866.70/month for full-day childcare, after GST

    CAPACITY: 93 places; about 80 per cent full

Most of the other AceKidz centres are 70 to 80 per cent full. Mr Wong attributes their success to the staff's quality engagement with parents and the firm's long track record - it was set up in 1998 by him and his wife, both former staff of a secondary school.

Near his AceKidz centres, there are a few anchor operator-run centres, whose fees are lower. "But nobody can assure me whether this would still be the case in the next few years," he says.

After business picks up at the newer AceKidz centres, he hopes to open more. Running seven centres across the island has allowed him to reap economies of scale and hire staff more easily, as many prefer to work in centres near their homes.

Madam Puspa Sahadevan, who joined AceKidz as a principal in May last year, says: "During the interview, I could tell the directors care more about how I work with the children or teachers, rather than increasing enrolment or revenue."

It is also easier to share expertise with teachers when working in a small firm, says Madam Sahadevan, who had worked at two large childcare chains for about a decade.

Parent Ms Sisiliana, 36, a customer service officer, has had a four-year-old son enrolled at AceKidz in Yishun since 2015.

"It's convenient as I live in the same block, and clean. I find the teachers capable, and I can communicate well with them and the principal about my son's development."

Priscilla Goy

A version of this article appeared in the print edition of The Sunday Times on March 19, 2017, with the headline 'Enjoying economies of scale but more grants needed amid rising costs'. Print Edition | Subscribe