april 2017 | volume 24 | issue 1 caremarkets p7 cqc should take a role in care service...

Care property the best laid plans

In focus

Independent. Intelligent. Insightful.CareMarketsApr i l 2017 | V o l u m e 2 4 | I s s u e 1

Care home provider is almost back in the black

HC-One cuts lossesEvent fees - the verdictThe Law Commission calls for regulation of housing with care

Latest LaingBuisson research finds self-payers account for almost half care home market value

The power of private pay

The leading adviser to the UK healthcare sector

Rothschild & Co is one of the world’s largest independent financial advisory groups, with 2,800 people in over 40 countries worldwide. Our Global Advisory business has an impartial and insightful perspective on M&A, strategy and financing advisory to help our clients formulate and achieve their strategic goals.

We advise on more healthcare deals in the UK and in Europe than any of our competitors. This provides our dedicated healthcare team of over 30 bankers in London with exceptional insight into the sector, and the experience to advise on the most complex transactions.

Oasis Healthcare (2016)• Adviser to Bridgepoint and

management on the £835m sale of Oasis Healthcare to Bupa

The Cambian Group (2016)• Adviser to Cambian on the £377m

disposal of its adult services business to Cygnet Health Care, a subsidiary of Universal Health Services

Acorn Care and Education (2016)• Adviser to Ontario Teachers’

Pension Plan and other shareholders on disposal of Acorn to the National Fostering Agency

Alliance Medical Group (2016)• Adviser to M&G Investments

and management on the £760m sale of the business to Life Healthcare Group

The Priory Group (2016)• Adviser to Advent International

and management on £1.5bn sale of Priory to Acadia Healthcare

Care UK (2015)• Adviser to Bridgepoint and Care UK

on the disposals of its Learning Disabilities and Mental Health and Care at Home divisions

Abbey Care Homes (2016)• Adviser to Abbey Care Homes and

Lifestyle Care on the disposal of a 10-care home portfolio to Healthcare Homes

Maria Mallaband Care Group (2014)• Adviser to Maria Mallaband Care

Group on the sale and leaseback of 23 care homes to HCP

Autism Care UK (2015)• Adviser to Maria Mallaband Care

Group on the disposal of Autism Care UK to Lifeways

Nuffield Health (2015)• Adviser to Nuffield Health on its

debt facilities

Cancer Partners UK (2015)• Adviser to Apposite Capital on the

disposal of Cancer Partners UK to GenesisCare

rothschild.com

Voyage Care (2014)• Adviser to HgCapital and management

on the £375m sale of the business to a consortium of Partners Group, Duke Sreet and Tikehau

C8541 Healthcare Advert_v12.indd 1 20/01/2017 16:19

Introduction

HOUSING WITH CARE IS A SERIOUS

CHALLENGER TO THE CARE HOME SECTOR

laingbuissonnews.com | APRIL 2017 | 3

As a new financial year begins, so does the research into the state of social care starting with LaingBuisson's Care of Older People Market Report (p6) and IFS examining council spending (p10).

Meanwhile, Ark acquires Housing & Care 21 homecare branches (p40) and L&Q launches its own care provider (p43)

Building blocks

A new role for CQC, the verdict on event fees and a dig into care property

Julian Evans P30

ContentsIndependent. Intelligent. Insightful

This month…

Editor, Eleanore Robinson looks at this month’s key issues

Bricks and mortar - it's the best investment you can make right? But when it comes to care property there are many hoops to jump through before you get the estate of your dreams.

This issue examines just that. Head of specialist care provider Regard, Sandie Foxall-Smith explains how her company is growing its portfolio and Kenneth MacKenzie of Target Advisers gives us the investor's view of the market. There is even some advice from across the pond courtesy of Promatura on how to let your prospective clients shape a housing with care development, while Knight Frank's Julian Evans reveals the latest trends in healthcare real estate.

But what can be built can easily be knocked down. The first article in a new section of CM takes a look at the potential devastation the clawing back of sleep-in payments could wreak on some care providers.

Regulars5 News Analysis LaingBuisson's Care of Older People Market Report Regulation Should the CQC oversee care commissioning? Policy Law Commission's event fees verdict

14 Insider Martin Green calls for fairer funding for providers

17 Inprogress Care UK acquires Hampshire site and Barchester starts work on Lichfield home

32 Inlaw Gaining approval Tom Barton of Trowers & Hamlins explains how to avoid the legal pitfalls of planning

31 Inbusiness HC-One's results; Carewatch and Mears grow but losses rise; Ark acquires HC&21 agencies; and a new housing with care provider emerges

46 Inpost Hutchens swaps HCP for HC-One; two new appointments for Almond Care and Knight Frank's healthcare team is bolstered

4 | APRIL 2017 | CM - LaingBuisson

COMMUNITY

Visit CM’s bloglaingbuissonnews.com

Join LaingBuisson's linkedin grouplinkedin.com/company/laing-&-buisson

Follow us@CareMarketsLB

William Laing reveals latest older care analsyis, p7

CQC should take a role in care service commissioning, p8

Events

Care MarketsCM

CMCM

24 Indepth Evidence driven development Peter Robinson looks at the US-based independent living scene

24 Investing Care Service activity LaingBuisson CEO Henry Elphick analyses the deals that have got the sector talking

Features14 Indetail Could HMRC's interpretation of the law on sleep-ins put providers out of business?

20 Inconversation Sandie Foxall-Smith, group CEO of Regard talks to Andrew Chamberlain


JOIN US! Visit laingbuissonevents.com to find details of forthcoming LaingBuisson health and care conferences, seminars and report launches

CONTACT US [email protected]

EDITOR Eleanore [email protected]+44 (0)20 7923 5398

PUBLISHING DIRECTOR [email protected] +44 (0)20 7841 0049

SUBSCRIPTION SERVICES Janet [email protected]+44 (0)20 7923 5396

DISPLAY [email protected]+44 (0)20 7841 0045

DATA ENQUIRIES [email protected] +44 (0)20 7923 5395

APRIL 2017 Vol. 24 Iss. 1

ISSN 2399-7079

CM is published ten times a year by LaingBuisson Ltd, 29 Angel Gate, City Road, EC1V 2PT. +44 (0)20 7923 5390 Printed by Rapidity, Citybridge House, 235-245 Goswell Road, London, EC1V 7JD ©LaingBuisson Limited 2017. No responsibility can be taken by the publisher or contributors for action taken as a result of information provided in this publication. All rights reserved; no part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise without either the prior written permission of the publisher or a licence permitting restricted copying issued in the UK by the Copyright Licensing Agency Ltd and in the USA by the Copyright Clearance Center Inc.

REGISTER NOW +44 (0)20 7841 0045 [email protected] laingbuissonevents.com

Sandie Foxall-Smith, Regard p20

Property prospects - Knight Frank's point of view, p30

Annual subscription (10 issues) Print & Online £499Print, Online & Digital £749+44 (0)20 7923 5390

SUBSCRIBE NOW

Chosen provider of Independent Sector Healthcare market data to the ONS

ConferenceHealthcare Real Estate 2017 Wednesday 26th April Wellcome Trust London

Private Acute Healthcare 2017 Thursday 12th October Royal Society of Medicine London

SeminarThe voice of professional publishers

News


Private payers bolster value of UK care home market

LaingBuisson analysis reports positives for public-facing providers

The private pay care home market has grown to represent almost half of the total value of independent care home places in the UK, the

latest edition of Laing Buisson’s Care of Older People Market Report has found.

Pure self-payers now account for a 49% share of the total market value, reflecting the premium rate they pay, and 44% of care home places. This latter figure rises to 56% when including quasi self-pay local authority top-ups.

LaingBuisson found that the privately funded care home sector is in robust health, with operators serving a primarily self-paying clientele enjoying the prospect of long term growth in demand with ability to pay via housing assets, development opportunities in affluent areas, a sustain-able business model and sufficient pricing power to recover rising staffing costs from National Living Wage.

This sector has grown at a CAGR of 6% over the past five years, with the whole care home market for older people grow-ing at a CAGR of 3%, taking the amount spent on services in residential settings to £15.7bn, around 1% of GDP.

However, one of the few clouds on the horizon for privately-funded care homes

is the Competition and Markets Authority (CMA) enquiry into the care home market, which will look at if there have been any breaches of consumer law when contract-ing services. The CMA may wish to consid-er whether the wide disparity in fees paid by local authorities and self-payers for the same level of accommodation and service amounts to a cross-subsidy which results in detriment to the consumer. The CMA may also wish to ask whether, if local au-thority paid fees were raised to the level of privately paid fees, it would generate ‘super-profits’ for operators, and what the remedies might be.

Things were not as positive for public facing operators, for who the financial environment remains challenging. Here there remains uncertainty and risk as cash-strapped councils and CCGs con-tinue to put pressure on providers’ prices and margins. The negative impact for care service operators is strongest in the north and other less affluent areas of the coun-try with high exposure to public pay.

But the picture for this sector is not one of unremitting gloom after the increase in the NHS Funded Nursing Care (FNC) rate from £112 to £156.25 per week last year.

LaingBuisson estimates that the increase of £44 per week is being paid for about 110,000 privately paying and council supported recipients of nursing care, adding about £250m to nursing homes’ annual income. Since the NHS FNC contribution is paid direct to nursing homes, not to residents, it could not be better targeted for operators and it is likely that most of the additional money paid for council-funded residents went to repairing their depleted margins.

Report author William Laing explained: ‘Because of its targeting, the NHS FNC contribution (which is being maintained at almost the same rate, £150 per week, for 2017/18) is much more important for the nursing home sector than the additional £1bn of general funding for social care which was announced for 2017/18 in the March 2017 budget, little of which might find its way into enhanced fees.

‘The other good news for care homes was strengthening occupancy rates. Even more impressive upward movements in occupancy rates have been reported by two of the UK’s largest care home groups with a focus on the state-paid market, Four Seasons Health Care and HC-One. The two factors together, the NHS FNC

SOURCE CARE OF OLDER PEOPLE - 28TH EDITION, LAINGBUISSON

3,967 4,480 4,823 4,864 5,010 5,322 5,953 6,233 6,771 6,864

5,493 5,504 5,512 5,869 6,129

6,678 6,720

6,906 6,951 7,156 2,618

2,508 2,552

2,608 2,413 2,389

2,119 2,098

1,856 1,698

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Self-pay* State-pay** independent sector provision State-pay** public sector provision

MARKET VALUE BY PAYOR GROUP IN NURSING, RESIDENTIAL AND LONG-STAY HOSPITAL CARE OLDER PEOPLE AND PEOPLE WITH DEMENTIA


CM

hike and higher occupancy, had a material effect, raising EBITDAR as a percentage of rev-enue for Four Seasons’ FSHC and brighterkind divisions from a worrying 12.4 % in calendar 2015 to 17% in Quarters 2 and 3 of 2016. A similar material improvement was reported by HC-One, with EBITDAR for the year ending Sep-tember 2016 rising sharply to 19%, from the previous year’s barely adequate 15.1%.

‘While this will encourage investors, a down-side is that Treasury officials, who were last year presented with data from major groups showing that a substantial proportion of mainly state-paid care homes were unprofitable, may conclude “job done – profitability restored”.

Such a conclusion would be mistaken, however, because financially stretched local authorities are likely to continue to offer only sub-inflation fee uplifts to care homes and, other things being equal, National Living Wage inflation will mean the recent margin improvement is likely to be fully eroded again within two to three years.’

At a local level, markets are typically more polarised towards one type of funding or the other, though there are few areas where either public pay or private pay is totally dominant. Mixed client profiles remain the rule for most homes, the report found.

State-paid fees, including NHS FNC, remain inadequate to incentivise new investment in care homes, or even main-tain investment in existing ones. Con-sequently, the ‘capacity crisis’ scenario that LaingBuisson has been predicting remains a live possibility. In this narrative, capacity shortages due to the exit of unprofitable homes and absence of new capacity in locations dominated by public pay will lead to rising occupancy rates (driven by population ageing) which will strengthen providers bargaining power, leading in turn to a general upward correction in prices and an end to this current ‘famine’ phase of the independent sector’s relationship with public sector commissioners. Whether, and how fast, this ‘capacity crisis’ narrative plays out depends on how successful local authorities will be in further reducing the number of placements they make. The key factors will be:

• Care home capacity, which now appears to be on a downward trend, driven by inadequate investment incentives in the state-paid sector.

• Underlying, demographic driven demand, which is rising.

• Age-specific care home usage rate i.e. the propensity to convert underlying demand into expressed demand for paid care home services, which has perhaps surprisingly continued to decline to date, despite the highly dependent profile of the residual care home population. The phenomenon appears to be driven by public sector

cost containment as local authorities have ratcheted up their eligibility criteria for financial support. Self-pay demand, in contrast, has at least tracked underlying, demography driven demand in recent years.

The reason why a capacity crisis has not occurred to date is that local authorities have succeeded in containing placement numbers. If they can continue to do so in future, a capacity crisis can be averted. If they cannot, a capacity crisis is very likely. And, because the lead time for developing new capacity is two to three years, the impact of any such crisis will extend over several years. Laing said: ‘A consequence of a full-blown capacity crisis would,in all probability, be an upward correction in the prices that the state pays for outsourced care home services. It may be premature to pursue the more detailed consequences at this stage, but a stronger case might emerge for the care home sector to be treated as a utility in the future, with an ‘Ofcare’ function to set a benchmark rate of return on investment in order to sustain investment in care home property. LaingBuisson has stated the case for an Ofcare in the past as a means of ensuring that councils pay sufficient to offer a reasonable rate of return to investors / operators. In a new situation in which market power lay with providers, the purpose of Ofcare would rather be to avoid the state overpaying for sub-standard assets.’

Care of Older People - 28th edition£1,305 for Single-user Printed Hard Copy£3,262.50 (+ vat) Multi-user Digital PDF

+ Printed Hard Copy

Available soon from www.laingbuisson.com

Author William Laing is the founder of LaingBuisson. His views are often quoted in the media and he is frequently invited to speak at conferences and to participate in think tanks and policy initiatives.

He authors LaingBuisson’s market reports focused on independent sector social care delivery, as well as titles on mental health support systems and primary care services delivered outside of hospital settings. He also provides bespoke consultancy to private and public sector clients and was the creator of the Care Costs Benchmarks toolkit and the forthcoming long term care market management system CareSustain.

Before founding LaingBuisson in 1976, William worked for the Association of the British Pharmaceutical Industry and the Office of Health Economics where he was deputy director.

LaingBuisson view

Capacity crisis scenario

News


Care commissioning role for CQC recommends CLG CommitteeThe Care Quality Commission should oversee the market-shaping, com-missioning and procurement activi-ties of local authorities, an inquiry by the parliamentary Communities and Local Government Committee has concluded.

The Committee’s final report into adult social care, found some councils paying as little as £2.24 per hour for residential care. Furthermore, the committee found evidence of poor consultation with providers and offering unfair contracts. Increasingly, councils are taking a ‘price first, quality second approach’ when commissioning adult social care, it found.

It concludes:’ Councils should be reminded that their market -shaping responsibilities extend to and include oversight of the financial viability of their local providers.

‘The Care Quality Commission’s remit should be extended to include oversight of these activities, as well as the extent to which councils comply with the fair costs of care in their negotiations and contractual relationships with providers. It should also work with the sector to produce best practice template contracts for the provision of care services. The Department of Health should also review the guidance on commissioning which accompanies the Care Act 2014.’

Providers, however, should be monitored too with councils annually auditing the services they commission, regularly carrying out spot checks to ensure people are receiving the care they need and providers pay the National Minimum Wage, covering care workers’ travel time, mileage and sleep-ins.

Crucially, the report recommends that: ‘The Government should take steps to resolve the uncertainty over paying for sleep-in shifts and confirm the approach to paying for sleep-in shifts. Furthermore, the Government should, with the HMRC, find a solution to the payment of back pay for sleep-ins which avoids severe financial consequences on care providers.’

The Committee acknowledges that the root of the problem is inadequate funding, and said that the additional £2bn for social care falls short of the amount required to close the funding gap.

Clive Betts, chair of the Communities and Local Government Committee, said: ‘During our inquiry we heard mounting concerns about the serious impact which inadequate funding is having both on the quality and on the level of care which people receive. We heard compelling evidence of acute threats to care providers' financial viability and an increasing reliance on unpaid carers. It is clear there

are also severe challenges in the care workforce, with high vacancy and turnover rates, and low pay, poor employment terms and conditions, lack of training and inadequate career opportunities the norm across the sector.

‘A long-term fix, working on a cross-party basis and involving the public and social care sector, is urgently necessary to meet the ever-increasing demographic pressures on the system. This review must be ambitious and consider a wide range of potential funding sources, looking again at age-related expenditure, options such as a hypothecated tax for social care, a compulsory insurance scheme, and differences in how individuals contribute. The review must take a

wide look at what we will spend this money on in the future—on support, on preventative care and intervention, on the care workforce—and ensure that care users are at the centre of how care is organised and that they get the assistance they deserve.’

As well as this, the Government should work with the Local Government Association to publish a care workers’ charter, setting out what care workers can expect from their employer on wages, terms and conditions and training and development. It also states that Government funding should be used for the training and development of care staff.

Cllr Linda Thomas, vice chair of the LGA’s Community Wellbeing Board, said: 'We have been clear that government needs to set out contingency plans to deal with major failure in the care provider market, with the lack of funding already causing some providers to hand contracts back to councils or cease trading altogether. However, oversight and inspection is not the answer.

'Sector-led improvement and learning between councils and providers has delivered more personalised, community based services that promote health and wellbeing. The LGA has also published guidance for councils on commissioning for better outcomes and continues promote and share good practice across the country. However, despite this important work, councils remain under significant financial pressure and are struggling to deliver on their responsibilities. Therefore, burdening councils with external oversight would be unhelpful and unnecessary.

COUNCILS ARE TAKING A 'PRICE FIRST, QUALITY

SECOND' APPROACH WHEN COMMISSION-

ING ADULT SOCIAL CARE

Clive Betts, chair, Communities and Local Government Committee


Nursing rateThe Department of Health (DH) has announced the NHS-funded nursing care standard rate is being reduced to £155.05 from 1 April.

The drop of £1.20 follows a second review of costs by accountancy firm Mazars

LLP in 2017, this time into agency costs. Based on the latest evidence provided, the government will now reduce the agency cost component of the rate by £3.29 to allow for lower agency costs. This will be partially offset by an uplift in the remainder of the rate by 1.7% to reflect over-all nursing wage pressures.

The higher rate of NHS-funded nursing care will be reduced to £213.32 per week, the same drop as the standard rate.

The Registered Nursing Home Association said the drop was disappointing. A spokesman said: ‘It is difficult to put into words the disappointment felt over

Law Commission delivers event fees decision

Following a two-year investigation, the Law Commission has concluded that there is real potential for abuse when housing with care providers charge event fees. In order to pre-vent this, the government should regulate the sector and bring in a new code of practice, the Commission concluded.

Its inquiry found that, in some cases, owners of extra care properties were not always being told about the charges, which can be up to 30% of the property price, while others are charged when the occupant of the property changes.

The Law Commission proposes that event fees can only be charged when the property is sold or, in limited circumstances, when it is sub-let, when the resident has died or the property is no longer their primary home. However, if a resident’s partner or carer moves in as their principle home, an event fee could not be charged.

It is also recommending a cap on the fees charged for sub-letting or change of occupancy of no more than 10% each year of the total event fee for the sale.

This, and the Law Commis-sion’s other reforms, would

only apply to new leases after the reforms are imple-mented and, in some cases, would take effect on the next sale of an existing lease.

Law Commissioner Ste-phen Lewis said: ‘For many, event fees are a good way to enable the purchase of a quality retirement property now, by deferring payment of some of the running costs until they come to sell their home later.

‘But, in the worst cases, a few unscrupulous landlords are getting away with very high hidden fees buried deep in the small print of a long and complicated lease.

‘We’d urge the government to crack down on rogue landlords by regulating the sector and making sure that before consumers sign on the dotted line, they have already been told exactly what’s being provided for their money.’

Standardised and trans-parent information should be provided to prospective buy-ers at an early stage in the purchase process, including how much the fee is likely to be, how it is calculated, who receives the fee and what the home owner gets in return.

The Law Commission wants to see changes to the Consumer Rights Act 2015

so that if landlords breach the code of practice, event fee terms would likely be unenforceable. Furthermore, guidance and an online database for estate agents and consumers should be created to ensure event fee information is included in all advertisements.

Executive director of Asso-ciated Retirement Communi-ty Operators (ARCO) Michael Voges said: ‘ARCO has been saying for years that we need more regulation on event fees, not less, so we are very supportive of the proposals to add statutory require-ments for the disclosure of event fees. It’s been long overdue, and we believe that an event fee that has not been transparently disclosed should not be charged.'

Stephen Lewis,Law Commissioner

"Care providers welcome the Committee's recommendation that Care Quality Commission oversee the market shaping, commissioning and procurement activities of councils. We also welcome that the Committee has listened to providers and is recommending a standard process both for assessing the costs of care, taking into account local variations in wage rates, and for setting fair prices that reflect costs, in order to help guide local authorities in setting fees. "Tim Hammond, chief executive, Four Seasons Health Care

"We recognise the financial pressures that local authorities are under, but the pursuit of low fees should not be the end goal. We therefore welcome the Committee's recommendation that CQC should oversee the market shaping, commissioning and procurement activities of councils."Professor Martin Green, chief executive, Care England

CLG report Sector reaction


News

IFS reveals disparities in council social care spending

Social care spending by councils in England dropped by 11% in real terms between 2009/10 and 2015/16, according to new analysis by the Institute for Fiscal Studies (IFS). The largest fall in average spending was in London (18%) and metropolitan districts covering urban areas such as Greater Manchester, Merseyside and Tyneside, which accounted for 16%.

Large disparities remain across the country with one in ten council areas spending less than £325 per adult residents, while the same proportion of councils spent more than £445 per adult. Care recipients own contributions also varied widely from £35 per person in 10% of council areas while, at the other end of the spectrum, one in ten raised £95 or more.

Overall, the cuts tended to be more severe in the north of England than the south, reflecting the trend that higher local earnings levels are also associated with higher levels of social care spending.

Spending, naturally, was also higher in areas with more people of pensionable age, disability claimants and where deprivation was more prevalent.

IFS found that, despite these factors, different councils are likely to make

different trade-offs between spending on adult social care and spending on other services, with overall budgets (from council tax, business rates, and grants) from which to fund their service spending.

No correlation was found between local authorities’ own spending and fee income, with no evidence that all high spenders charge lower fees, nor that all low spenders rely on high income from co-payments to meet costs.

Associate director at IFS David Philips, said: ‘One thing that stands out in these figures are the big differences in spending per adult on social care among councils assessed to have very similar spending needs by the government.

‘Whether this means spending needs assessments are inaccurate, or reflects differences in available funding or the priority placed on social care relative to other services or council tax levels, is unclear. But it emphasises that the government has got its work cut out in its Fair Funding Review of how to measure different councils’ spending needs from 2019 onwards. That debate could get quite fraught.’

Margaret Willcox, president elect of the Association of Directors of Adult Social Services (ADASS), responded to the findings saying: ‘Councils have

protected spending on adult social care as much as possible but significant pressures caused by people living longer and with increased complex needs, and the welcome National Living Wage means the ability to identify further savings have all but run out.'

She added that the £2bn for adult social care for the next three years, which the government has said would be pooled into the Better Care Fund, would help plug the funding in the short-term, it 'needs to be a national priority and this means finding a long-term solution to tackle the funding crisis to help provide care and support for elderly and disabled people and their families, both now and for future generations'.

such a derisory reduction. The Care Quality Commis-sion in its annual report in 2016 identified that Adult Social Care was at a “tipping point”. Many independent commentators have con-firmed the current fragility of the sector.

‘One must ask the ques-tion where does this reduc-tion sit in the whole scheme of things ? The Budget reported a £2bn increase in funding and a Green Paper in the Summer to look at the whole question of funding.

‘In the meantime a payment which is made to individuals, whether funded by local authorities or themselves to cover the cost

of their health care needs is to be reduced by £1.25 per week ….. an amount which will probably be lost in the transaction cost of making the changes.’

The first Mazars’ review in summer 2016 increased the nursing care rate by 40% to £156.25 from the long-standing £112 per week, backdated to the pre-vious April.

The main driver behind the suggested increase was a recalculated average hourly rate of pay plus on-costs for a registered nurse, based on payroll and agency costs which Mazars put at £21 per hour.

The DH now plans to consult on the introduc-tion of the regional rate of NHS-funded nursing care ahead of future rate change announcements.

CQC fees The Care Quality Commis-sion is to raise its registra-tion fees once more in a bid to recover the cost of regulating the sector.

Following a consultation last year, in 2017 it will be homecare providers who will be hit the hardest, with a £823 hike for a single-lo-cation to £2,192 per year,

while care home operators with 26-30 residents will now be charged £4,375 per year - a £163 increase.

The regulator said its fees for 2017/18 represented 0.16% of overall indicative turnover of the health and social care market.

David Behan, chief ex-ecutive of the Care Qual-ity Commission, said: ‘All providers of health and care must be registered in order to provide services. CQC provides the public with independent assurance that services are operating in their interests. The fee paid by providers is the charge for being registered with CQC.’

Margaret Wilcox,vice president, ADASS


Deprivation of Liberty Safeguards not fit for purpose

Law Commission calls for reform of assessment process

CM

Thousands of vulnerable people with dementia and learning disabilities are being unneces-sarily detained in hospitals and

care homes as the Deprivation of Liberty Safeguards (DoLS) are unfit for purpose, the Law Commission has concluded.

It said, following the Cheshire West ruling in 2014 which widened the definition of deprivation of liberty, last year 100,000 people who required the authorisation following an assessment did not receive it due to a sharp increase in demand.

To resolve this situation, the Law Commission, which was commissioned by the Department of Health to look into the matter, has proposed a new system to ensure everyone’s rights are respected, including people being cared for in their own homes.

Law Commissioner Nicolas Paines QC said: ‘The Deprivation of Liberty Safeguards were designed at a time when considerably fewer people were considered deprived of their liberty. Now they are failing those they were set up to protect. The current system needs to be scrapped and replaced right away.

‘We know there are enormous pres-sures on health and adult social care at the moment and our reforms will not only mean that everyone is given the protec-tions they need, but could also deliver a saving to the taxpayer. That’s cash that can then be directly reinvested to support those most in need.’

Reform

The Law Commission said its Liberty Protection Safeguards would mean:

• enhanced rights to advocacy and periodic checks on the care or treatment arrangements for those most in need;

• greater prominence given to is-sues of the person’s human rights, and of whether a deprivation of their liberty is necessary and pro-portionate, at the stage at which

arrangements are being devised;• extending protections to all care

settings such as supported living and domestic settings –therefore removing the need for costly and impractical applications to the Court of Protection;

• widening the scope to cover 16- and 17-year-olds and planned moves between settings;

• cutting unnecessary duplication by taking into account previous assessments, enabling authori-sations to cover more than one setting and allowing renewals for those with long-term conditions;

• extending who is responsible for giving authorisations from councils to the NHS if in a hospital or NHS health care setting;

• a simplified version of the best interests assessment which emphasises that, in all cases, arrangements must be necessary and proportionate before they can be authorised.

The Commission added that the reforms are designed to ensure that safe-guards can be provided in a ‘simple and unobtrusive manner’ which minimises distress for family carers.

It has also recommended a wider set

of reforms which would improve deci-sion-making across the Mental Capacity Act.

Rebecca Fitzpatrick, partner at law firm Browne Jacobson, however, said it was unlikely that the proposed reforms would be given a lot of priority (or funding) by the government anytime soon, as it has other things on its mind.

She said: ‘Practitioners are very likely to have to muddle on with the system that we have for several years at least. Any change in the meantime is more likely to come from significant case law. The High Court is currently hearing the judicial review being brought by four local authorities alleging, essentially, that the government has failed to fully fund the extent of their obligations under DoLS.

‘We also await a decision as to whether the Supreme Court will hear an appeal from the family in the Ferreira case which may be an opportunity to consider the breadth of the application of the Cheshire West test more generally, as well as in acute medical in patient scenarios specif-ically.’

Coroners will no longer have a duty to undertake an inquest into the death of every person who was subject to an authorisation under the Depri-vation of Liberty Safeguards (DoLS) under the Mental Capacity Act 2005.

Professor Martin Green Chief Exec-utive for Care England welcomed the move saying: 'Care England has worked hard to ensure that these changes take place. At present many older people with dementia, whose deaths are expected, are frequently subjected to investigations after death.

Often police who are uniformed attend care homes under their legal duties and begin questioning staff and relatives as though a crime has been committed. This is extremely distress-ing for families, care home staff and fellow residents. Investigations into deaths under DoLS take needless time which prevents families from being able to mourn and proceed with funeral arrangements. This does not allow for the calm and dignified death that most people and their families want.'

DoLs inquest ruling

Indetail

The price of sleep-in on the job

Sleep-ins have been a topic of controversy for some time now, but as a result of escalating costs in the sector, coupled with

a new approach by HMRC to the payment of the National Minimum Wage (NMW) for sleep-ins, the issue is causing a potential crisis for care providers.

The basic legal position

Following case law, a worker who is required to be on the premises and who would be disciplined if they left the workplace will be deemed to be working for the whole of their overnight shift even if they are sleeping during some, or all, of this time. This means that they are enti-tled to be paid the NMW (which can also be the National Living Wage) for every hour that they are working. This legal line

is set out in the BEIS guidance, Calculat-ing the minimum wage (October 2016).

The current BEIS guidance is different to previous government guidance. The Department for Business Enterprise and Regulatory Reform (BERR) National Minimum Wage Guide (September 2008) specifically stated that if a worker slept at or near their place of work the time that they were permitted to sleep did not count as time when the NMW would be payable, but if they had to get up and do work during the night this time would count.

We recently undertook a survey with Agenda Consulting and Voluntary Organisations Disability Group (VODG) and established that the average time workers were disturbed during a sleep-in is 30 minutes.

HMRC auditsHMRC appears to have followed the

previous government guidance in its internal guidance to inspectors and has only recently changed its approach to argue that time spent sleeping should be paid at the NMW. This change has taken place without any regard to the impact on care providers. As a result many care providers have not budgeted for the additional costs of sleep-ins and some face, possibly fatal, financial difficulties. In particular, HMRC can make orders for payment of outstanding wages going back six years.

HMRC inspectors do not consider whether commissioners, who are mainly local authorities, are prepared to pay for sleep-ins at the NMW or indeed for the on-costs. Many care providers find them-selves in a position where they will have

Ahead of a planned judicial review challenging HMRC's interpretation on the law on sleep-ins, Emma Burrows, partner at Trowers & Hamlins, examines the issue and shares the firm's latest research on the matter


1.001.04

1.07 1.09 1.11 1.131.16 1.17

1.201.24

1.30

1.39

1.48

1.58

1.68

1.001.03

1.07 1.08 1.111.14 1.16 1.18

1.211.25

1.35

1.42

1.50

1.59

1.68

0.90

1.00

1.10

1.20

1.30

1.40

1.50

1.60

1.70

1.80

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Gross Pay Index for all hourly paid staff in for-profit homes

Gross Pay Index for all hourly paid staff in for-profit homes – proj.

National Minimum Wage adult rate

National Living Wage (age 25 plus) – proj.

SOURCE LAINGBUISSON DATABASE AND ANALYSIS

INDEX OF HOURLY PAID CARE HOME STAFF, WEIGHTED AVERAGE ACROSS ALL SHIFTS FOR-PROFIT HOMES


LIfeways is one of the operators involved in the judicial review. Project director Adam Penwarden explains its position.

The legislation on NMW/NLW has always been very clear on the issue of sleep-in time not being considered when calculat-ing NMW or NLW.

This was clearly the intention of the Government and Parlia-ment when the legislation was created, and this was the basis upon which the whole sector worked, from 1999 until 2016. All respectable social care providers have supported NMW/NLW policy, and gone to great lengths to make sure that we are compliant. In addition, we have always encouraged staff to take on permanent contracts, have offered learning and development opportunities and career progression.

Then, in 2016, pretty much out of the blue, the BEIS Guidance changed. According to Ministers, this was because case law had changed. As a consequence, HMRC are now pursuing providers for back payments for up to six years. It has also forced local authorities to allocate scarce resources to fund sleep-ins at a much higher rate. However, other local authorities have ignored the issue, claiming that the law has

not changed, despite clear guidance from Government to the contrary.

All of which has placed providers, large and small, private and charitable, in an impossible situation. We are faced with retrospective action by HMRC which puts providers at risk of bankruptcy, despite having conformed to NMW Guidance at it then stood. Looking into the future, we have to persuade cash strapped LAs to pay out substantial sums, in order to provide exactly the same service. The current position being taken by Government has no benefit whatsoever for the people we support.

The research undertaken by Cordis Bright, which was done on a conservative basis, shows that the extra cost to the tax payer of the current policy is in the region of £120 million. It is important to point out that the extra costs resulting from this decision are wholly unfunded.

The current situation is simply unsustainable, and urgent action by government is required to prevent very serious and wholly avoidable damage being done to the LD sector.

The provider's view Lifeways

to terminate existing contracts as they are now unaffordable. Indeed our survey found that unless commissioners pay for sleep-ins, care providers will seek to hand back an average of 25% of services to commissioners.

Paying pay arrears

As can be seen the biggest concern for care providers appears to be the risk of having to pay back-pay to employees.

HMRC can, where they find a care pro-vider is not complying with the law, issue a Notice of Underpayment (NoU).

The NoU sets out the arrears of NMW to be paid by the employer in addition to a financial penalty for non-compliance. The penalties imposed on employers that underpay their workers in breach of the minimum wage legislation have been increased from 100% to 200% of arrears owed to workers. The 200% figure applies to any NoU relating to a pay reference period beginning on or after 1 April 2016 and is subject to a minimum and maximum of £100 to £20,000.

There are a number of good reasons why orders of back pay should be limited:

• The financial implications and the security of the sector are really affected by this issue. Our survey results show that it is considered that an average of 31.5% of ser-vices provided would become un-viable if this cost is not resourced properly by commissioners. Only 14% of commissioners that have been approached have agreed to fund sleep-ins.

• HMRC's approach to the applica-bility of the NMW to sleep-ins has changed in recent months so that care providers who previously hav-en't had their approach to sleep-in payments challenged are now finding that these arrangements are being closely scrutinised and NoUs are being issued. In the in-terests of consistency of approach the NoU could be limited to the period from the date of the new BEIS guidance, October 2016.

• A number of care providers are

currently considering judicial review action against HMRC for its change in approach.

• There are practical difficulties in self-correcting and making back payments to workers who have left more than three years ago. Regulation 59(8) of the National Minimum Wage Regulations 2015 requires employers to hold data for three years, and not the six years which HMRC has the discretionary right to demand. There are no statutory protections in place to ensure that payment are not made to historic accounts to which the ex-employee no longer has access.

This is an area which is crying out for a practical solution, and fast. We are cur-rently assisting VODG in their approach to central government to raise the issue and seek solutions to alleviate the difficult financial situation which care providers currently find themselves facing. CM

receiving care when this announcement was made, the Act was not paused, it was abandoned because they will be dead long before a new solution was found.

Level playing field

There was also a lot of emphasis on giving local authorities time to develop systems and put in place processes that would underpin this new legislation. There is certainly a double standard which is always used by governments when changes affect them, and they had to deliver something. For the rest of us, when we are told that legislation is changing, or taxes are increasing, we sometimes, following a budget, have a matter of hours before it is implemented, and yet, if it is the Government at a national, or local level that is required to do something, the lead in time is often years, rather than weeks or months. I'm a great believer that you have to plan for changes in service delivery patterns, but I wish there was a level playing field, where the rest of the world was given the same latitude as Government departments.

Despite the fact that we are going to have yet another process to try and find a solution to the funding of long-term care, I would urge everyone to engage in the discussions and to influence the Green Paper because it is an opportunity for us all to define the future.

However, in doing this, we as organisations, and as citizens, need to send a very clear message to politicians that we want a long-term solution, and we will not tolerate another 20 years of fudge and broken promises.

will not change. However, the health and care sector will, now they are customers, expect to see some service standards from the Commission, and we need to know what the target times on producing reports, correcting factual inaccuracies, changing website information, are going to be. In an era of transparency, accountability and service standards, this must apply to all departments of Government and their arm's-length bodies, as well as to those who provide services.

The other announcement that we got in the budget was the decision to have another Green Paper on the future of social care. This will be the latest in a long line of commissions and reports that have inquired into the question, and offered solutions. What we have always lacked is the political will to implement the recommendations and to have a real conversation with the electorate about what elements of care and support the state will pay for, and what will be the responsibility of the individual.

It is now 20 years since Tony Blair asked Lord Sutherland to chair the Royal Commission, and since that time we have had endless inquiries and also the Dilnot Commission, which formed the basis of the Care Act, which received Royal Assent on 14 May 2014.

We all thought that this would define the future of social care funding for the next generation, and yet, one of the first acts of the new Government was to pause large parts of the act and postpone them until 2020. For many people who were

The Chancellor's announcement of an extra £2bn going into the social care system should be greatly welcomed as a much-needed

increase in resources. In the past year, we have seen the announcement of the Social Care Precept, and now this new money will put a significant amount of extra resources into the system. The problem with it is that it goes into the system, and not necessarily into front-line care services. Despite the fact that most councils raised the Precept which was supposed to go directly into social care, many of them have not given fee increases to front-line care providers, or the percentages that they have offered, have not kept up with the significant amount of increased costs that we are facing.

Care Quality Commission

Social care has been subject to the National Living Wage, and to significant increases in regulatory costs, which have shifted the cost burden of regulation from the Government to the care provider. Unlike GPs, who are also private businesses on contract to the government, and who have had their regulatory costs paid for, independent care providers, have got to shoulder the entire increase themselves.

As the cost burden of regulation moves towards the people who provide care, the Care Quality Commission need to understand that, as well as being the agency that defines quality, they are now also in a customer supplier relationship with both the health and care sector. The judgement of the CQC is their independent view of quality, and this

Insider

We need care funding to be fair to providersCare England head Professor Martin Green examines the implications of Budget 2017

Chief executive of Care England, Professor Martin Green



GP surgeries

Hospitals

Dentists

Acute Hospital Trusts

Mental Health Trusts

Community Trusts

Ambulance Trusts

Under County Councils in England, providing local services including Planning, Housing and

Environmental Health. They are the only type of Councils in Northern Ireland with Health, Education and Social Care being provided by regional bodies.

District Councils (England & Northern Ireland)

Ministerial and Non Ministerial Departments. Ultimately responsible for the provision of all Public Services. Headed by a Permanent Secretary and often divided into directorates. In Scotland, Wales and Northern Ireland (devolved governments) each have a series of Departments independent of England, making their own policies.

Government Departments

Funded by government departments. Fulfilling some of the operational responsibilities of the departments and co-ordinating and funding other organisations. Also includes arms length advice and arbitration.

Executive Agencies and Non Departmental Public Bodies

County, Unitary and Metropolitan Councils provide Social Care, Education, Highways, Environmental,

Public Health. County Councils outside England also provide Housing and Planning.

Top tier Councils

Co-ordinate and run all primary and secondary healthcare.

Health Boards (Scotland/Wales)

Parish Councils

Community Interest Companies

Care Homes Housing Associations

Boards of GP and other Social Care professionals that commission healthcare

services.

Clinical Commissioning Groups (England)

Charities

Inpictures

Funding flow in UK health and social care



We advise annually on £10 billion worth of assets across the following sectors:

With our breadth of experience and expert knowledge, we understand your needs.

� Nursing and Residential Care Homes

� Primary Care

� Independent Hospitals

� Specialist Care Homes

� Clinics and Treatment Centres

� Specialist Schools and Colleges

� Children’s Homes

� Children’s Nurseries

� Extra Care and Care Villages

� Development Land

020 7409 5963

[email protected]/healthcare


Inprogress

Barchester Healthcare has started work on a 70-bed care home in Lichfield.

Providing residential care for older people and those with dementia care for older people, the home is expected to create around 100 jobs

Work starts on Barchesterhome

VoyageVoyage Care has started work on a supported living service for adults with learn-ing disabilities and complex needs in Wolverhampton.

The £2.1m development will comprise 16 sole occupancy supported living flats when open in October.

when it opens in summer 2018.

Mark Bennett, director of property services at Barches-ter Healthcare said: ‘We are very excited about the construction of our new care home in Lichfield, which is in a

beautiful setting. ‘We hope this new care

home will become an inte-gral part of local life and we are working hard to ensure it offers the best possible setting for our future staff and residents.’

CEO Andrew Cannon said: ‘It is really exciting that we are finally breaking ground on the Barnard Road site. We are responding to a growing need for these kind of facilities in Wolverhampton, many people are forced to move away from the area because there is nowhere to provide the level of care and

support that they require.'

Target REITTarget Healthcare REIT has acquired two purpose-built care homes in Wimbourne, Dorset, for an undisclosed sum.

Located next to each

other, the homes offer a total of 70 rooms. They have been leased to Dorset Healthcare Limited, part of the Care Concern Group. The 44-bed Oakdene home will be renovated to enlarge some bedrooms, providing additional lounge space and to bring the property in line with Target’s other assets.

Kenneth MacKenzie, managing partner of Target Advisers LLP, said: ‘The transaction brings our total funds invested since our May 2016 fundraise to in excess of £80m. We continue to progress other investment opportunities.”

New CareNew Care is to open a 57-bed care facility in Sale, Greater Manchester this spring.

Ashland Manor will be the first of two New Care facilities to open this year in the north west of England.

Care UK has acquired a development site in Hythe, Hampshire for an undisclosed sum. Following the deal brokered by Savills, the operator plans to build a three-storey, 62-bed care home with en suite wet rooms. There will be day and dining rooms on each floor.

We advise annually on £10 billion worth of assets across the following sectors:

With our breadth of experience and expert knowledge, we understand your needs.

� Nursing and Residential Care Homes

� Primary Care

� Independent Hospitals

� Specialist Care Homes

� Clinics and Treatment Centres

� Specialist Schools and Colleges

� Children’s Homes

� Children’s Nurseries

� Extra Care and Care Villages

� Development Land

020 7409 5963

[email protected]/healthcare

Intelligence tables


Organisation MH hospitals

MH hospital beds

LD homes

LD home beds

MH homes

MH home beds

Total beds

Priory Group 63 2,519 164 1,551 46 597 4,667

Voyage Care - - 246 1,882 19 211 2,093

Cygnet Health Care Ltd 48 1,669 23 293 - - 1,962

Four Seasons Health Care 12 388 15 370 14 568 1,326

CareTech Community Services 1 30 116 889 6 62 981

Elysium Healthcare 20 916 - - - - 916

St Andrew's Healthcare 8 813 - - - - 813

Mencap - - 87 681 - - 681

Prime Life Ltd - - 12 210 17 450 660

Regard - - 65 580 4 77 657

Lifeways Group - - 55 510 4 69 579

Tracscare Group Ltd 1 72 25 143 47 321 536

Caring Homes - - 60 515 - - 515

Choice Care Group - - 45 375 10 90 465

Care Management Group - - 66 456 - - 456

Hft - - 42 446 - - 446

Potens - - 31 322 6 103 425

Allied Care Ltd - - 34 360 5 56 416

Turning Point 3 34 28 247 9 111 392

Sussex Health Care Ltd - - 12 338 1 10 348

Milestones Trust - - 24 220 14 120 340

Exemplar Health Care - - 5 57 9 272 329

Minster Care Group - - 24 236 6 90 326

Cambian Group plc 4 33 23 289 - - 322

St Anne's Community Services 31 233 6 86 319

The Disabilities Trust 3 87 12 75 15 135 297

Community Integrated Care - - 53 270 1 20 290

Heathcotes Group - - 31 265 3 19 284

Danshell Group 10 151 11 117 1 10 278

The National Autistic Society - - 36 277 - - 277

Sense - - 45 272 - - 272

MacIntyre Care - - 34 265 - - 265

Dimensions (UK) Ltd - - 48 262 - - 262

Embrace Group Ltd - - 14 131 3 129 260

Mental Health Care (UK) Ltd 3 69 10 137 5 37 243

MCCH Society Ltd - - 23 195 4 48 243

Swanton Care & Community Ltd - - 16 144 4 79 223

Rethink - - 24 221 221

FitzRoy - - 20 221 - - 221

Royal Hospital for Neuro-disability 1 220 - - 220

Leonard Cheshire Disability - - 30 193 2 19 212

Linkage Community Trust - - 23 210 - - 210

United Response - - 41 202 1 5 207

Livability - - 27 204 - - 204

Major providers of mental health and learning disability care in specialist hospitals and residential settings

NUMBER OF REGISTERED MENTAL HEALTH (MH) AND LEARNING DISABILITY (LD) HOMES AND HOSPITALS OWNED/LEASED BY INDEPENDENT OPERATORS RANKED BY TOTAL BED NUMBERS, AS AT APRIL 2017. 1. PRIORY GROUP NUMBERS INCLUDE PARTNERSHIPS IN CARE FACILITIES. 2. FORMED BY BC PARTNERS FOLLOWING ACQUISITION OF 22 PRIORY FACILITIES. SOURCE LAINGBUISSON

INFOCUS


With the exception of homecare, all care businesses are based on bricks and mortar. This issue we take a look

at care property, looking at what are the key trends and developments, Regard's strategy for growing its portfolio and

getting a lesson on how estates are developed State-side.

CARE PROPERTY

APRIL 2017

Inconversation


CM How did you come to work in social care? SF-S I’ve always done charitable work, both in this sector and with the homeless, and I’m a past ‘Prince of Wales Ambassador’ for the homeless. Learning disabilities care is fabulous and I love it. Every day is rewarding, and every day is different. We have 1,100 clients to look after, so no two people, personalities or behaviour are the same. Our work is very challenging, but very fulfilling. I am lucky because I have some fantastic staff and we’ve achieved a huge amount in the nearly five years I’ve been at the helm.

CM What do you think is the biggest challenge facing your business at the moment? SF-S There isn’t enough joined-up writing between healthcare and social care. We get challenged on our fees like everyone else, and we are not seeing the precept figures coming through to us from the government even though we tell them our wages, food and utilities bills have all increased. I can understand why this happens - they need to stretch their budget as far as possible, but any reduction in our income means an economy has to be made somewhere. So that might mean some of the vulnerable people we support can no longer go swimming every week, or we have to withdraw another activity they enjoy - because we have to cut our cloth according to our means. However these kind of interesting and enjoyable activities add value to their lives, and they so look forward to them. When you start cutting back on the things

Sandie Foxall-Smith, chief executive of specialist care provider Regard, tells Care Markets what she

thinks the key to good leadership is, the difficulties faced by small-scale operators, and why she is not

afraid to put on a pair of rubber gloves and get stuck into cleaning a toilet.

CM meets...Sandie Foxall-Smith

they enjoy, their behaviour changes and that is not good either. The biggest struggle is going to be the social care budget. Our homes are just that – homes. They are not big care homes or institutions, and running a home with just five people can be very expensive. A big challenge for the sector will be that the smaller companies will go out of business, and there will be a reduction in available beds. Then we really are going to be stuck.

The demographics in our business are changing significantly too. It used to be that people came to us for care or they stayed with mum and dad. But mum and dad are ageing, and are less able to care for their adult children as they used to. And our demographics are changing, too. One of our clients who, sadly, passed away recently was 96 years old. That was almost unheard of in learning disabilities years ago, because people with learning disabilities often had other medical conditions which meant a shorter-than-average life expectancy. But advances in medical care mean that is no longer true.

So now, not only have they got learning disabilities, they are elderly as well.

CM Last year, you were named Leader of the Year by Investors in People. What is the most important quality to being a good leader? SF-S Yes, winning was a bit of a shock. I wasn't paying attention when the award was announced and I didn't even hear my name mentioned. My staff all screamed and had to give me a nudge in the direction of the stage. In our line of work you have to genuinely care about what you do. You live and breathe the sort of care we deliver. My job isn’t about driving a fancy car or playing golf every week while my staff are left to do all the work. I care passionately about what I do, and I remain hands-on. So yes, I will spend three hours on the road driving to a care home in the middle of nowhere just to make sure I'm happy with it. And I strongly believe in leading by example. If your employees see you actively engaged all day, every day, it is amazing how that filters down and what cohesion it inspires among your work-force. I don't mind cleaning a toilet. I’ve done it before, and I’ll do it again if I need to. Why wouldn't you just get a pair of rubber gloves and get on with it if necessary? The staff think that’s wonderful. You can inspire that level of commitment in your staff and expect them to reciprocate if they know you’re prepared to get stuck in yourself. The way we deliver care is changing, moving increasingly to delivery in home situations and coaching of vulnerable clients in the life skills they need. That

THERE ISN'T ENOUGH JOINED-UP WRITING BETWEEN HEALTH CARE AND

SOCIAL CARE

might mean teaching them how to catch a bus into town, or to spend wisely the £5 a day they have to go shopping. Our aim is to ensure everybody's life is fulfilled so when, as a boss, you encourage people to pursue that goal, and train them to do it, and bang the drum about it all the time, that helps make you a good leader.

CM What Makes Regard different to others? SF-S We ensure all our homes are real homes. Everyone has choice and if they want a purple room they can have one because it's their home. It's those sorts of things that make a difference. Regard trains everybody whether they are a carer, cleaner or client. We give them as many skills as possible to enable them to have the best life they can. And that is a culture that IIP (Investors in People) recognises and that we live and breathe by. I even write birthday cards to all my managers and then everyone sees that's how it should be. Everybody in the organisation gets a birthday present, and we look after them.

CM What is The Regard Group’s strategy when it comes to growing its residential care estate? SF-S We agree with supported living and not just residential care. Clients have keys to their own bedrooms and to the front door. They often have tenancy agreements so it feels like their own home. Can you imagine how satisfying it is for a parent of a less-abled child to see them with a set of keys to their own home? That it is amazing.

CEO, St Peters Hospice (2008 - 2012)Development Director, Circle (2007 - 2008)Hospital General Manager, Bupa (1998 - 2007)

EducationSt Dominics School, Stoke-on-Trent

CareerGroup CEO, Regard Group (2012 - present)

CM meets...Sandie Foxall-Smith Chief Executive, Regard

Sandie received an IIP Leader of the Year award in 2016, from Investors in People.

linkedin.com/in/sandie-foxall-smith-52456b1a/

CM What barriers/challenges do specialist care providers, who typically have smaller homes than care home providers for older people, face when it

comes to opening new homes?SF-S It is finances again. When buying small homes you are competing with ordi-nary residential buyers. We can’t afford to buy any more homes in Twickenham, Richmond or Surrey because it is so

expensive. Renovation of re-purposed properties costs a lot too, and I think that will be a


Inconversation

22 | FEBRUARY 2017 | CM - LaingBuisson

CM

LaingBuisson

News magazinesFeaturing the latest business activities across the healthcare sector, LaingBuisson’s news magazines are the only independent monthly publications to concentrate solely on bringing readers news, interviews and in depth features covering developments and trends in the market.

Ten print editions delivered through the year

News insight which take stories far beyond the headlines

In depth features written by authors with a deep

understanding of the markets

Interviews with leading healthcare figures

Unique data tables presenting LaingBuisson figures on

market sizes

Special supplements including roundtable reports, cost

surveys, infographic posters

Online archive of news and features dating back well

over a decade

Single printed hard copy

title just £499 a year, or

upgrade to receive print and

digital copies for £749*,

or take out a subscription

to both titles and pay

just £749 for print and

£999* for the digital

package

ORDER NOW +44 (0)20 7841 0045 [email protected] laingbuissonnews.com

Subscribe now

* plus vat

barrier moving forward. I’d expect some small businesses to disappear because of the new living wage which – by the way -- I entirely support. If you are not big enough to weather the storm and then suddenly your staffing bill goes up by 8%, that’s a massive pressure. I also think Brexit will cause problems for the sector. Some areas have virtually no unemployment so if you open a care home there, who will want to work for a living wage? About 15% of my staff don’t come from the UK, so it also has implications for how the sector will access new staff.

CM How do you incorporate the preferences of your service users into this process? SF-S We do this in a lot of different ways. They are heavily involved in their care plan, whether that is going for walks, swimming, making papier-mâché or going on holiday. There’s menu-choosing, where they voice their preferences about a curry or a

tapas night. If we are interviewing for staff, a lot of the clients become involved in the hiring. If we can involve them, we will. Everyone has their own personal development plan to illustrate what they might want to be able to do. That could be to go on a bus, a train, go to Paris or Disneyland. These are their aspirations and we take all this into consideration and plan it with them. We treat them like one of us. It is sometimes other people who treat those with learning disabilities differently.

CM After merging with ACH last year, what have been the challenges and benefits of bringing the two organisations together? SF-S We were on the road permanently for a month meeting every single member of staff, because we believe that if you can touch and feel the new company that employs you it makes a massive difference. We set up focus groups to look at both

companies’ care plans and we picked the best from both. We wanted them to get fully involved, and that was really good.The ACH staff have seen some benefits in their terms and conditions, and now receive bank holiday pay. They have seen some positives in how we treat the clients, and ACH used to be all residential but now they have also adopted the supported living model.

CM If you could change one thing in the care sector what would it be? SF-S For people with learning disabilities to be accepted just like everybody else is. They have just as much right to funding as everybody else and I don’t see why we have to fight so hard to get it. But fight I will - for every penny and every vote they are entitled to. Our specially set-up benefits team achieves great results in this respect. People with learning disabilities should not be the poor relations. They should have a certain standard of life just like everybody else.

laingbuissonnews.com | FEBRUARY 2017 | 23

Inlaw


Indepth

Amidst the clamour to capitalise the growing UK market opportunity in age-qualified, service-enriched housing, a focus on what the customer actually wants (and is willing to pay for) should be at the heart of every robust business plan. Yet solid, reliable consumer ‘needs’ data (drawn, first-hand from real potential buyers) to evidence planning applications or validate internal sales projections is a rarity here in the UK. Not so with our clients in the USA.

The Power of Full Engagement

In the US (and now in the UK), we undertake Community Planning Research Seminars with actual potential residents for an identified site or range of concepts. We recruit these groups to give us their views in exploring various product, service & pricing options.

These are NOT sales events and may be conducted both in person, online and via mail and we have done this many

hundreds of times in the States for our land owner, developer, operator and financier clients.

The results are highly illustrative - imagine actually building specifically what people really need, want and are willing to pay for…?

These potential buyers also offer potential for later consumer focus groups with which to test marketing messages – so much age-qualified advertising misses the mark and is highly patronising. Some of this initial contact group will then become the first residents to buy or rent in our client’s facility and they were not sold anything, they helped design something for themselves.

Commodities or Communities?

As a Brit based in London, I see two of the key challenges for the UK & US age-qualified property industry as commoditisation and a lack of human consideration. We can back that up with hard data from our work in the

States where we cover all aspects of site validation, concept creation, buyer intent, pricing, demand & sales modelling, resident and employee satisfaction surveys.

Over the 33 years of our operations we have built up penetrating buyer insights helping our clients move away from a commoditised approach to one of buyer personalisation.

Positioning and marketing of age-qualified housing in the US and UK can be lumpen and repel free-thinking consumers with housing lifestyle options.

We know the UK has a drastic housing shortage, that older residents often occupy a home that is inappropriate to their needs in terms of size, utility, lifestyle and companionship.

But when, seemingly, the only consumer option is an unaspirational and generic ‘care home’ (no matter how good and appropriate that may be for their needs) ‘age-qualified’ housing shall be avoided for as long as possible.

From generic to specific

Providers and stakeholders in the provision of service-enriched housing often only see age and need, not the multitude of differences among the individuals that create many market sectors. The majority of customers do not want or need to be entertained. They just want a great residence, with easy access to friends, where they can continue the lifestyle they already enjoy.

The industry in the US, when solely driven by investors (and their focus upon commercial modelling, IRR, need to scale and exit) has often been unable to deliver what consumers really want.

Evidence drives great business decisionsDo you know what your customers really need and want?

Peter Robinson, partner at the London office of ProMatura International, explains how the company uses the views of potential residents to shape retirement communities in the USA and how it plans to use this strategy over here

Key learnings from the USA & announcing the largest UK research study of its kind

FIGURE ONE GENERIC OR SPECIFIC MARKET APPROACH

Generic Specific

National average Your target market

Assumes everyone same Details your customers

Yields communities that are the same Identifies who they are and what they want

Commoditised product Differentiates product

Must compete on features and price Competitive edge, difficult to duplicate

Generates prospects


Only when such investors have moved from a generic to a specific approach have they been successful, as illustrated in Figure One.

Resident satisfaction proven to drive sales

Let’s now move to the importance of genuine human considerations and how they deliver directly to the bottom line.

For example, the difference between a ‘very satisfied’ resident vs a ‘satisfied resident’, for example, is profound for the owner / operator of the retirement community directly influencing their revenues.

Our all-industry and private client research studies have focused down upon the critically identified component to ensure residents ‘Feel at Home’.

Our 2014 Independent Living (IL) study for ASHA (American Seniors Housing Association) surveyed over 6,800 IL residents in eleven US cities. From this, feeling at home is the single dominant attribute that determines if your customer will be satisfied. Yet satisfied customers will not recommend your community to their friends, but very satisfied customers will. The sales & marketing implications of this are significant, as our 60-page report explores in detail.

Out of eleven specific attributes identified as impacting satisfaction, just two of them claimed 52% of the total vote – ‘Sense of feeling at home / Contentment’.

The full breakdown can be seen in Figure Two, taken from our report.

Social identity undercurrents

Those research respondents who said they were ‘Not at Home’, described difficulties making friends, being lonely, not fitting in, not having common interests, bullying by cliques and missing their friends. Cliques are classic bullying, explored further with potential remedies

in our report. So how do you deliver ‘I feel at Home’

responses from your residents? Here our respondents told us that groups of friendly people, having their own belongings and furniture, friendly and caring staff and being with friends made them feel at home. The study then goes on to recommend a number of specific actions to deliver this.

Other subjects covered include camaraderie, ‘being in control’, storage, light and decoration.

Still on the subject of human consideration, people who choose an IL or AL community tend to self-select by nature of their more open-minded and outgoing social nature. So one needs to consider product attributes for privacy-seeking individuals as well as those readily embracing the social aspects. People understand that living in a community will change their lifestyle and social identity, making your biggest competitor someone’s existing home.

This cannot be understood by just poring-over generic market data.

What we have found in the States (and the UK) is that a specific plot of land or project is binary with a geographic /demographic defined market from which it will attract its residents.

Predictive analytics removes the guesswork

Sitting behind such all-industry reports is our private client work. We can look at (or hypothetically model) any project

anywhere in the world and predict what will work, where and why through our predictive analytics.

This has many applications, for example supporting the Planning consent process in proving market demand characteristics and to obtain a C2 designation or to evidence buyer intent with accurate sales modelling to an investment committee.

The ProMatura Proof Positive Process (PPPP) removes the guesswork, provides concept ‘insurance’ and has saved our clients millions in mistakes over 33 years.

SOURCE DATA SUPPLIED COURTESY OF ASHA – AMERICAN SENIORS HOUSING ASSOCIATION, WWW.SENIORSHOUSING.ORG

Sense of feeling at home

Sense of contentment

Dining

Administration

Activities and recreation

Sense of community and camaraderieMy private residence

Sense of belonging

Relationship with the staff

Appearance of the buildings and surroundingsHousekeeping services

FIGURE TWO IMPACT OF SPECIFIC ATTRIBUTES AND SERVICES ON SATISFACTION AMONG INDEPENDENT LIVING CUSTOMERS

Peter Robinson, ProMatura

Indepth

SOURCE PROMATURA INTERNATIONAL

FIGURE THREE SALES MODELLING THE NEED VS WANT


Announcing the largest UK research study of its kind

ProMatura is partnering with ARCO in the UK to conduct the first ARCO Retirement Communities Resident Survey 2017. As we have helped create all-industry data in the US, so we seek to do in the UK. The ARCO member study aims to build a better understanding of the reasons why people move to retirement communities, what residents think about life in their community and which services they value most. This research is now underway with 10,000 surveys distributed through ARCO members to their residents and prospect databases. We will present the research results at the ARCO conference this May. If you would like to know what is in the survey please drop me a line.

The future

In conclusion, the US does not have it all worked out. Our 2013 IL report for ASHA identified diminishing satisfaction and perception of value for the price-paid

within the US independent living sector. In summary, most age qualified, service-enriched housing was deemed:

• Over-built in amenities• Under-built relative to residences• Over-programmed in communal

activities• Over-priced

A caveat for UK market: UK IL typically does not include meals and is ‘light’ on social programming. Whilst products & definitions differ on both sides of the Atlantic, our UK resident research through ARCO will shine a spotlight on the evolving models in both countries. The social hubs restaurants facilitate, supported by some planned community activities, not to be so easily discounted in the UK.

The US market is in flux and the pattern of demand is changing as new, younger generations ‘come of age’ to consider IL / AL community living while the existing residents age in place.

The US industry has moved from selling independent living to selling care to sales based on ‘need’ but not necessarily what people want, as Figure Three

For 33 years, ProMatura has provided research & consultancy on age-qualified, service-enriched housing in the USA and now in the UK. With a focus upon identifying best practices for great communities and great service for customers of Active Lifestyle, Independent Living, Assisted Living & Memory Care Communities, ProMatura works with operators, developers, financiers and other industry stakeholders. They are now providing their services in Europe out of London and Peter may be contacted through; [email protected]. www.promatura.com

Hostage Sales

Sustainable Sales

No Sales Emotional Sales

Nee

d

Want

demonstrates. In many cases this has seen

Independent Living turn into ‘Assisted Living light’ in the US.


ORDER NOW +44 (0)20 7841 0045 [email protected] laingbuisson.com

LaingBuisson

Market ReportsSector knowledge is at the heart of what LaingBuisson does. We inform clients about their markets with a portfolio of sector reports delivering exclusive data, analysis and commentary on a wide range of specialisms in the health and care markets. For further information on any title visit laingbuisson.com where you can download full brochures and contents pages, or contact our account managers on [email protected] or +44 (0)20 7841 0045

Social care

Care of Older People

Extra Care and Retirement Communities

Homecare , Supported Living and Allied Services

Children’s Specialist Care

Care Home Pay Survey

Adult Specialist Care

Children’s Nurseries

Healthcare

Flexible Staffing

Mental Health Hospitals and Community Services

Health Cover

Primary Care and Out of Hospital Services

Private Acute Medical Care

Dentistry

Private Acute Medical Care in Central London

Retail Pharmacy


The UK's elderly care sector contin-ues to see good levels of invest-ment activity, benefiting from the favourable underlying population

dynamics which are driving demand in the sector.

The number of over 85 year olds is set to double in the next 20 years and treble in the next 30 years. At the end of the 19th century the average retiree lived for two years post-retirement compared to 20 years today. But as the years advance so does the proportion of people with dementia increase among seniors, and residential care is often the most suitable accommodation for these members of society.

Approximately 15% of over 85 year olds are expected to make use of residential care of one form or another and to meet this demand the UK's ageing care home stock requires to be substantially upgrad-ed and new facilities built.

Only 20% of care-home stock has been built post-2000 and a lesser 17% of all homes have full ensuite wet-room facilities (Target homes have near 100%). Research also indicates that 80,000 lower quality beds may be in imminent

Investing

danger of closure, and in fact closures outweighed new beds for the first time over the last couple of years. Couple this with the prediction from LaingBuisson who believe the need for care beds could rise by over 40% over the next decade and the investment case seems compel-ling. If only it were so easy!

Future-proof

There is a litany of disappointed real estate investors in healthcare in the last two decades. Buyer beware! The wise investor owns future proof assets, and if they invest in older stock a clear strategy to bring these assets up to full wet room condition is a core need. A quick paint job and limited refurbishment is often done, but insufficient for long term returns.

Around 40% of the costs of our National Health Service is spent on the over 65's, a cohort of 11.4m people, and some 17.7% of the total population. And in the next 20 years that will rise by 50% to in excess of 16m people. Around 1.3m people work in the NHS. The total cost of the NHS is running at approximately £115bn pa, some £45-50bn of which therefore will be spent on the over 65's, whose number is going to rise by 50%, a further investment at steady state of almost £25bn.

We are all living longer, because the NHS and modern medicine is doing such a good job of keeping us alive for longer. But, by around the 9th decade many of us begin to experience greater frailty with dementia impacting 30% of the remain-der. This brings some fresh challenges to the healthcare sector which we are already beginning to see. For a start the NHS needs to do less for more so it is moving its general hospitals to be a short stay high acuity service, with bed capac-ity cut to the bone and recovery times continually shortened to try to lessen the ever-present bed-blocking scenarios which hit the headlines.

Recent figures published by NHS England show a 40% rise in the last two years of the total bed days lost through delayed discharge. In 2016, Lord Carter who was working with Health Minister Jeremy Hunt suggested that hospitals could build their own social care facilities

or arrange for their patients to be nursed in private care homes; the latter a more likely scenario.

In truth, this is already occurring. As these care homes fill the demand for bed spaces, those responsible for constructing and running homes must be cognisant of the need to ‘future-proof’ the properties by ensuring dementia-friendly interiors and exteriors. Dementia patients in hospitals are a recipe for significant regression in wellbeing.

Target Healthcare REIT invests around the country, always based on localisation fundamentals. Effectively all care home businesses operate within local discreet markets, as families wish to have the relative close to hand and easy to visit. National brand is less important than lo-cal brand, as a family only makes a single purchase of care in its life cycle, so fam-ilies are always looking for best in class affordable care, according to personal circumstances, close to their homes. When buying assets, close attention needs to be paid to setting an affordable and sustainable rent based on local fee levels and expected occupancy levels, and taking into account future demand.

Reputation

As in any service-led sector, there is the potential for reputational issues as a result of poor provision of care which investors must seek to insulate them-selves from. It is essential that underly-ing care fundamentals are strong in all circumstances, and flowing from this then financial performance typically follows.

Therefore, the care ethos and focus of owners, managers and carers is an important consideration, and assessing span of control is a very important part of the investment decision. Larger operators try to develop systems and processes to enable area managers to operate multiple numbers of homes, but Target prefers to see a strong personal and relational ele-ment to the management of care homes. This is a people business that needs best in class care facilities. But, good rents flow from well run and managed facilities, which become homes not institutions.

Investing in care homesKenneth MacKenzie, of Target Advisers, gives his view on the state of play in residential care facilites

Kenneth MacKenzie, Target Advisers


SPEAKERS INCLUDE

WEDNESDAY 26TH APRIL 2017WELLCOME COLLECTION, LONDON, NW1 2BE

#LBRealEstatewww.laingbuissonevents.com

Sir Robert NaylorNHS Property and Estates

Peter WardJohn Laing Infrastructure

Helen DavisArcadis

REGISTER TODAY£275 + VAT

� 020 7841 0045 [email protected] � laingbuissonevents.com

Who should attend• Providers

• Retirement Home Operators

• Social Landlords

• Investors

• Banks

• Private Equity

• Architects

• Property Developers

• Policy Writers

• Lawyers

• REITs

• Management Consultants

• Valuers

• C-suite audience• Launch of LaingBuisson’s

Healthcare Real Estate report• High quality, expert speakers• Topical agenda with forum

debates• Exclusive delegate offers

Healthcare Real Estate

Lead Sponsor Executive Sponsors Media

John GoodeyWelltower

Kieren ColeKnight Frank

Mel KnightCastleoak Group

Care

Coming after MIPIM and with an outstanding line up of speakers and three themed panels, this half day seminar offers an overview of healthcare as an asset class as well as a unique opportunity to learn about healthcare real estate as a provider and investor:

• Opportunities in NHS property• REITs and investors as landlords• Healthcare real estate financing, including ground rents, development funding and construction

Our lead sponsor, Welltower, is the recognised leader in providing consistent, low-cost capital to fund healthcare infrastructure and real estate. Our executive sponsors are Knight Frank, the leading advisors on healthcare property and Coutts & Co, the leading wealth manager and specialist healthcare lender.

• Do you need to own your real estate?• What will be your relationship with your landlord? • Where should I invest in healthcare real estate? • What are yields and pricing in the market?• Where are the opportunities?• How can you fund developments?

London, 26th April 2017

PartnersExhibitor

The Americans are coming

North American investors will continue to be involved in the healthcare market, not least because of the exchange rate play. But HCP have shut down their Euro-pean office and inevitably some competi-tive tension will subside.

That said, quality assets, in an increas-ingly polarised market, will continue to drive premium pricing. Asia-Pac investors are making big noises, they’ve a chronic requirement for social care infrastructure, so there’s a good chance they’ll acquire a UK platform to enable them to reverse a western platform and intellectual property back in to their homeland. That could well set a precedent and then suddenly the North American funds have serious competition. We will see.

Appetite for acuity

Depending on the acuity curve, there is still an appetite for hospital facilities providing specialist care despite govern-ment policy to move people with learning disabilities and autism into community settings. But clearly the hub and spoke model enabling service users to step down into the community is a moral must.

Cambian have been one of the market leaders in assisting their clients to reen-gage with community settings. To be able to provide such a pathway is extremely complex and as such barriers to entry remain high for investors to enter the market. Investor appetite for specialist sectors continues to increase. It’s a fas-cinating area of the market that provides amazing care and its arguably the unsung hero of the healthcare arena.

Housing with care is a serious chal-lenger to the care home sector. But when 85% of the UK care home market real

proposition for the incumbent proper-ty owner. We estimate there’s already £500m of healthcare ground rent deals in pipeline for 2017. Ground rents are a mature product in core commercial and residential markets and it will now likely take off in healthcare. Watch this space.

Opportunities in integration

The integration of health and social care offers some real opportunities in terms of property. The NHS holds around 7m hectares of land. That’s a phenom-enal amount of land and property for an island the size of the UK.

The latent value within the estate is mind blowing. If properly co-ordinated future care facilities and housing could be unleashed to change the face of UK healthcare.

The NHS is defunct but it’s a political football all governments have been and are frightened to tackle because the public see it as an institution. It’s like the old Wembley stadium - anachronistic – it needs knocking down and replacing with state of the art of facilities.

There have been a number of standout deals in healthcare prop-erty in the past 12 months. Oasis, Cambian’s adult services but the

sale of Priory Group to Acadia for £1.5bn was a fantastic result not only for Advent but for UK healthcare per se. Given the Brexit headwinds we face it was a major statement that global capital has the confidence to invest in the UK, and £1.5bn is big ticket stuff. Make no mistake though, Priory Group is a truly world class business and brand that is the envy of many overseas oper-ators.

Keeping grounded

Knight Frank selling CareTech’s £30m ground rent transaction to Alpha Real was pioneering because it was the first ever care home ground rent portfolio to be executed. The bond market is driving investors towards ground rents and CareTech has set a precedent for other healthcare transactions. It’s a cheaper form of finance which is an attractive


Insight

Knight Frank's head of healthcare Julian Evans gives the real estate perspective on the major deals and developments in healthcare and what the future trends will be

Property prospects

Julian Evans, head of healthcare, Knight Frank

THE BOND MARKET IS DRIVING INVESTORS

TOWARDS GROUND RENTS


estate is over 40 year of age, a deficit of around 2,000 care beds in 2016 due in part to the cost of raw materials fettering development and national living wage closing sub 25 bed care homes, then frankly there’s a bigger picture to worry about.

Care crisis ahead?

We are on the verge of facing a national crisis of bed capacity in the care home sector so we need to embrace housing innovation which interestingly many of the not for profit operators, such as Methodist Homes and Anchor, are taking first mover advantage. We urgently need more bed capacity.

The secondary care home mar-ket continues to trade well not least because bed capacity is declining thus improving occupancy and ulti-mate profitability. Moreover there is absolutely a place for converted well run assets – it is still fundamentally about care.

Lets not forget the care home market is still highly fragmented and dominat-ed by owner operators. Small group operators are highly active in the market and tend to be overlooked in their abilities to run quality operations. These operators remain keen for growth and high street clearing banks re-mains supportive in the main.

Bright futures

In the next 12 months, the continua-tion of headwinds involving over-zealous CQC inspectors, a deficit of nurses and burgeoning agency costs will impact operations but these will now be offset by improving occupancy levels, improving local authority fees and operators reposi-tioning to focus on self-funding personal care. The Silver Private Rented Sector for the over 65 years will start to emerge, especially when one considers there’s over £1.3trn of un-mortgaged private dwellings in the over 55s market; they will down size.

The north south divide focus will fade as operators source bet-ter value sites outside of the M4 corridor and M25 but prime asset values will continue to dislocate against secondary assets, across all registration types, for both going concern values and fixed income, as investors chase quality EBITDARM and institutions chase long dated income, respectively.


Inlaw

Advice for developersClear and early communication with

local authorities particularly during pre-purchase due diligence is critical.

Developers should correspond with the relevant local authority with a view to establishing the authority's requirements for a particular designation. As a minimum, developers should provide the following:

• The proposed number of residents at the home;

• Residents ages;• The residential status of carers;• The extent to which facilities are

shared;• The extent to which occupants are

responsible for the whole house (including common parts) or just their particular rooms;

• The extent to which residents can lock their doors (locked doors are not a factor that contribute positively to an argument that the unit is functioning as a single household); and

• The mode of living; to what extent communal and to what extent independent.

Likewise if purchasing operational care facilities it is crucial that specialist planning advice is sought to ascertain the factual position on the ground.

Change may be on the horizon, though. Parliament is debating a statutory duty on the Secretary of State to provide guidance to local authorities on meeting the housing needs of older and disabled people and some critics have supported the introduction of a new C2(a) Use class, specifically for the purpose of 'extra care' living.

The government's promise of 'innovative models of housing' is encouraging news for care home providers. Expert guidance on C2 and C3(b) would also be very well received.

where it is used by not more than six residents living together as a single household where care is provided for residents.

In many cases it is advantageous to have use categorised as C3(b) as this is unlikely to trigger a requirement for new consent when moving from residential only use. The actual nature of the use must be carefully considered though.

While 'care' is defined in statute (personal care for people in need of care due to old age, disablement, addiction or mental disorder) a 'single household' is not. With no definition to rely upon, local planners are left to deliberate what constitutes a 'single household' and, in turn, whether a care home should be designated C2 or C3(b) Use.

Important factors to consider:

• Will the property (or units therein) be self-contained?

• How many residents does the proposed development cater for?

• Is this number liable to increase in the future?

• Does this number include children?

• Will carers also be resident at the property?

• Are facilities shared?

These are only some of the considerations local planners face. Some lucid guidance has emerged from the Courts; for example, we know that for C3(b) Use staff do not need to 'live-in' for a continuous 24 hour period if those being cared for are capable of looking after themselves.

If care is being provided to children (as was the case in the Parkview Care matter) there is an additional presumption in favour of C2 rather than C3 Use.

In the case of North Devon District Council v First Secretary of State [2004] 1p. & c.r. 38 it was determined that children alone cannot form a household and that if their carers do not live permanently at the property, the use would fall within class C2 of the UCO.

The recent decision by the Planning Appeal Inspectorate in respect of Parkview Care's site in Ashford, Kent has highlighted the dangers of seeking to rely on residential planning consent to operate a care facility. In this case a large detached former residential home was being operated to provide care for up to three young people under the care of two adults at all times. For a number of reasons the Borough Council contested and the Planning Inspectorate agreed that the use fell within C2 rather than C3(B) meaning the site was oper-ating without the benefit of planning permission.

When dealing with large facilities such as a residential nursing home the planning position is clear as the use falls neatly within a planning 'use class', in this case C2 of the Town and Country Planning (Use Classes Order) 1987 (the UCO). Things become much less clear when care is being provided within the setting of what would have been a residential dwelling house – even in a very large one. The issue is particularly relevant to extra-care homes where accommodation is self-contained but residents have access to communal facilities.

This has led to several care providers finding that they do not have the necessary planning consent to operate sites turning them from an asset to a very expensive liability.

The legal issue

The distinction between Use Class C2 and C3(b) of the UCO is an uncertain area of law, and local planning authorities are less than consistent in determining whether properties are a 'residential institution' (C2 Use) or a 'dwelling house' (C3 Use).

The guidance provided by the Courts is that a 'residential institution' is a facility which functions to provide accommodation and care to people who need it. This is a logical interpretation. However, the picture is muddied by the definition of C3(b) under which a care home will constitute a 'dwelling house'

Decisions by the Planning Appeal Inspectorate care often deliver a swerve-ball . Tom Barton, associate at Trowers & Hamlins LLP, investigates

Planning approval avoiding the legal pitfalls

INBUSINESS


APRIL 2017

INDEX

Amore Care 40 HSBC 36

Ark Home Healthcare 40 Impact Healthcare REIT 43

Ashley House 39 L&Q Living 43

Bupa 39 Lyceum Capital 37

CareTech 39 McCarthy & Stone 43

Care UK 37 Mears Group 37

Carewatch 36 Minster Care 43

CLS Care Services 43 Nestor Healthcare Group 37

Court Cavendish 35 NHP 35

Craegmoor 40 Places for People 39

Croftwood Care 43 Primetower Care 39

DE Shaw 40 Priory Group 40

Deutsche Bank 34 RBS 36

East Thames 43 Richmond Care Villages 39

Embrace Group 39 Safanad 35

Formation Capital 35 Southern Cross Healthcare 35

HC-One 34 Tracscare 40

HCP REIT 34 Varde Partners 40

Helen McArdle Caredle Care 34 Your Housing Groupusroup 39 9

Housing & Care 21sCare 21 39 , 400

INBUSINESS

The exceptional costs related to restructuring costs of £0.5m (2015: £5.8m), and impairment of fixed assets £0.8m (2015: £5.5m). HC-One also reported closure costs of £1m (2015: £223,000) and increases in onerous lease provision to £2m (2015: £1.9m) follow-ing a review of the property lease portfolio.

The directors also reported an average occupancy rate of 93%, up from 83% in No-vember 2011, when the busi-ness started operating. At the report end, the company had net assets of £30.7m (2015: £34.2m).

So far, HC-One has invest-ed £150m towards maintain-ing and improving its real estate and services.

Since the end of the report period, HC-One has acquired Helen McArdle Care from HMC Group for an undisclosed sum in

January 2017. The deal included 19 care

homes in the north east of England and a further facility currently under construction, offering a total of 1,343 beds. HC-One will also take on Helen McArdle’s ‘At Home’ business, which offers homecare services in the Newcastle upon Tyne area.

In its latest results for the year ended 31 March 2016, Helen McArdle recorded revenues of £31.7m, EBITDAR was £9.7m and it made a pre-tax profit of £1.7m.

Four of the acquired homes have been rated as Outstanding by the Care Quality Commission and the remaining 12 that have been inspected against the fundamental standards were judged to be Good.

Financed by Deutsche Bank, HC-One said the deal

HC-One is almost back in the black after significantly reducing its pre-tax losses, its accounts for the year ended 30 September 2016 show. Revenues rose 2.3% from £291.5m to £298.1m for the UK’s fourth largest care home group.

Cost of sales of £288.2m (2015: £302.5m) including exceptional costs of £1.3m (2015: £13.1m) and admin-istrative expenses of £8.6m (2015: £9.4m) left HC-One with an operating profit of £1.3m, compared with a loss of £21m the previous year.

After taking into account restructuring costs of £3m (2015: £0.2m), a £1.4m loss on the disposal of fixed assets (2015: £11.7m), and interest charges of £3.2m (2015:£2.5m), HC-One was left with a pre-tax loss of £3.5m, significantly lower than the £35.4m loss it re-corded the previous year.

HC-One almost back in the blackOccupancy rates up 10% since operator established


was the latest step in its strategy to focus on strong regional growth.

Furthermore, this month HC-One announced that Justin Hutchens is to become chief executive officer from 1 June.

Currently president of HCP Inc, he has also held the posts of executive vice-president and chief investment officer at the US real estate investment trust, which bought £175m of Barchester Healthcare’s debt in 2013.

HC-One said once Hutchens joins the care home operator, current chairman and chief executive Dr Chai Patel will start a handover process which is due to end on 30 September. After this time, Patel will continue as chairman of HC-One.

CM

EBITDAR AS A PERCENTAGE OF REVENUE OF MAJOR CARE HOME GROUPS


10%

15%

20%

25%

30%

35%

40%

Barchester (y/e Dec)

Care UK (Residential Care Division)

Bupa (y/e Dec)

Four Seasons Care Homes Division (y/e Dec)*

HC-One (y/e Sept)

Caring Homes (y/e March)

Avery Healthcare (y/e March)

AGGREGATE (excluding Avery)

CM


A P R I L 2 0 1 7

HC-One significantly cuts its losses

HC-One Ltd commenced business in November 2011 as a wholly owned subsidiary of care home landlord NHP plc man-aged by Court Cavendish Ltd, when it took over operation of the NHP owned portfolio of homes principally for older peo-ple, formerly operated under leases by Southern Cross Healthcare plc.

In November 2014 NHP announced that Formation Capital in partnership with Safanad, a global principal investment firm, and Court Cavendish, the healthcare turnaround specialist and the management team at HC-One, had signed a binding commitment to acquire NHP for £477m. Formation Capital is a US-based private investment management firm focused on seniors housing and care, post acute and health care real estate

HC-One Company profile

investments. Safanad is a global investment firm that invests in real estate, private equity and public markets. The EBITDA multiple paid for NHP is not transparent because NHP Ltd does not report a full profit and loss account and its parent company which reports consolidated accounts, Libra2, is registered in the Cayman Islands. The £477m paid for NHP represents 10.4 times historic EBITDAR of £45.9m reported for the year ending September 2013 by NHP's principal subsidiary, HC-One Ltd. HC-One operated 235 of the 273 homes owned by NHP at the time of the sale. Allowing for this, and also for some increase in HC-One's EBITDAR during 2014, it is likely that the EBITDA multiple paid for NHP was in the 8 to 9 times range. In February 2015 Meridian was acquired by Formation Capital and HCP Inc. in partnership

with Safanad. The deal makes Meridian a sister company of HC-One Ltd, under common ownership. In June 2016 it was reported that HC-One was negotiating a sale and lease back deal for about 70 homes with the aim of using the funds raised to pay off £200m of debt. The deal was designed to strengthen HC-One's balance sheet. A spokesman stated that: 'this process will put us in a strong financial position, with almost double rent cover

and long term tenancies. We will continue to own half of all our care homes.' In January 2017 HC-One announced the acquisition of the Helen McArdle Care portfolio of 19 operating homes in the North East, and one home under construction, with a total of 1,343 beds. Pre-acquisition sales were reported as in excess of £32m a year. The deal value was not disclosed.

CEO and Chairman Dr Chai Patel

Finance director David Smith

Turnover (£m) £298.1m

Operating Profit £1.3m

Pre-tax profit -£3.5m

Portfolio 233 Facilities 12,586 beds

Key Stats (y/e 30 September 2016)

Healthcare IntelligenceLaingBuisson, the leading healthcare market intelligence provider, has been serving clients for over 30 years with insights, data and analysis of health and social care market structures, policy and strategy. Our products and services are based on proprietary primary data and we are the only non-government data source cited by the Office for National Statistics (ONS) for the UK independent healthcare market. We help healthcare providers, commissioners, payors, investors and regulators to understand their markets, access their customers, increase profitability and deliver better quality care through market intelligence, consulting and data

LaingBuisson

CONTACT US +44 (0)20 7841 0045 [email protected] laingbuisson.com

INBUSINESS

Homecare franchisor Carewatch Hold-ings reported revenues of £67.9m for the year ended 31 December 2015, a 7.8% increase on the previous year’s £63m. Acquisitions contributed £9.1m to the total turnover figure (2014: £0.8m) for the group which comprises 33 companies.

Subtracting cost of sales of £43.4m (2014: £38.9m), administrative expenses of £33.7m (2014: £29.1m) and with the addition of £3.5m in other operating income (2014: nil), the business made an operating loss of £5.6m compared to £4.9m the previous year.

After deducting interest and similar charges of £6.1m (2014: £5.5m), Carewatch was left with a pre-tax loss of £11.7m, 12% higher than the loss of £10.5m recorded the previous year.

During the report period, Carewatch acquired Dumgoyne Limited, Drake Family Care Services Limited and Zebedee Care Limited, adding four branches to the company-owned network. It also bought four further branches and stepped in to operate

three franchises. On top of this, the trade and assets of

17 trading subsidiaries were hived up in to Carewatch Care Services Limited on 31 December 2015.

At the year end, average weekly hours in company-owned branches stood at

91,927, compared to 83,282 in 2014, employing an average of 4,061 care workers throughout the year (2014: 3,546).

Since then the group has refinanced, with new facilities to be provided by HSBC and RBS, including £15m of senior loans, a £4m revolving credit

facility, an earn-out facility of £3m and a £10m uncommitted accordion facility to fund future growth of the business. Furthermore, Lyceum Capital have committed that loan notes due to them in December 2017 will either be converted to equity in early 2017 or alternatively the date on the loan will be extended by six years.

Chief executive officer Scott Christie said: ‘Carewatch has traded well during 2015 in a market which is experiencing increasing demand from an increasing elderly population and from those with continuing and long-term care needs or disabilities, where provision of care and independent living services are best undertaken at home, but where the public sector faces continuing constraints from availability of funding.

‘Looking to the future, the directors are confident that opportunities exist for growth. The health and social care market in the UK continues to grow despite the constraints on Government’s financial resources. We believe that the provision of such services by the independent sector is the government’s

*FIGURES BASED ON STATSTICS TAKEN FROM COMPANY ACCOUNTS, ANNUAL REPORTS AND ESTIMATES BASED ON HOURS OF CARE REPORTED IN THE PUBLIC DOMAIN.(REVISED MARKET SHARE FIGURES DUE TO NEW DATA BECOMING AVAILABLE. MARKET SIZE FIGURE BASED ON HEALTH AND SOCIAL CARE INFORMATION CENTRE DATA)SOURCE LAINGBUISSON DATABASE

Operator Annual Home Care and Supported Living Turnover of Independent Sector Providers, all client groups (Older, YPD, LD and Mental Health) 2014/15

£m

Market share %

Allied Healthcare (est. excluding Nestor GP out-of-hours revenue) 198 3.3%

Lifeways Group 195 3.3%

Carewatch (franchisor and direct provider) 165 2.8%

Mears Group plc (including former Care UK homecare division) 153 2.6%

City & County Healthcare 124 2.1%

MENCAP (est. for home care / supported living, exc. care homes) 100 1.7%

Community Integrated Care (estimate excluding care home revenue) 84 1.4%

MiHomecare (MITIE Group) 78 1.3%

Bluebird Care (franchisor) 75 1.3%

Dimensions UK (estimate excluding care home revenue) 74 1.2%

Sevacare UK Ltd 66 1.1%

Turning Point (non-residential care only) 50 0.8%

Remainder 4,593 77.1%

UK independent homecare providers* by market share sponsored by

Carewatch grows but losses rise


THE DIRECTORS ARE CONFIDENT THAT OPPORTUNITIES

EXIST FOR GROWTH

CM


A P R I L 2 0 1 7

Homecare providers Carewatch and Mears report growth and losses

Listed homecare operator Mears report-ed revenues of £940.1m, an increase of 6.7% on the previous year’s £881.1m, for the year ended 31 March 2016. Turnover in its care business rose by 5% from £146m to £152.6m, reflecting the full-year impact of its acquisition of Care at Home from Care UK.

After deducting cost of sales of £695.2m (2015: £649m), administrative expenses of £203m (2015: £193.5m) and amortisation of acquisition intangibles of £10.7m (2015: £10.9m), the business made an operating profit of £31.2m, compared to £27.8m in 2015. Taking into account finance income of £1.2m (2015: £1.2m) and costs of £2.9m (2015: £3.1m), Mears made a pre-tax profit of £29.4m, an increase of 13.3% on the £25.9m recorded in 2015.

The care division, however, reported a loss of £1.2m (2015: £1.6m), which the board said reflected the continued challenges of homecare and the additional costs incurred in restructuring its care activities.

The directors reported EBITDA cash conversion of 70% (2015: 99%) and net debt at 31 December 2016 was £12.4m (2015: net cash of £0.8m), reflecting the working capital expansion required to fund organic growth, a changing sales mix and an outflow of £10m relating to deferred consideration payable in respect of the acquisition of Omega.

Chief executive David Miles said: ‘The

reduction in revenues, following our exit from around 20% of our existing contracts, has allowed the business to focus on operational quality and switch focus to those strategically important clients that we believe have the potential to develop into partnerships and, where we are able, deliver a high-quality service at sustainable margins.

‘Continued funding issues in the care market will create a catalyst for change. While we do not see strong prospects for immediate fundamental change, we are clear in our view that, increasingly, commissioners will have to look to rebalance their contract estate, focusing on working with fewer, better run, service delivery partners.'

Following a review, Mears said it has made significant progress in rebalancing its portfolio of care contracts to focus upon those which have a better mix of longevity, certainty of spend and price, reducing its portfolio by 20%, mainly in the north of England, Northern Ireland and some parts of the Midlands.

As a result, Mears enjoyed a 7% increase in charge rates in England and Wales and 15% in Scotland. It has also secured new contracts worth more than £200m at a win rate of 74% by value (2015: £80m and 63%), with an average length of more than five years and the number of providers involved significantly reduced.

best opportunity for driving efficiency and quality and the Carewatch Network is well placed to service this need. In addition, we believe that the Government’s agenda of personal choice, dignity for the individual and its continuing drive towards a greater level of care in the community means greater opportunity for the Carewatch Network and the clients it serves.’

Carewatch operates partly through directly managed branches and partly through franchises. It provides services to elderly people, people with physical or learning disabilities, people discharged from hospital, children and families where the parents or the children have special needs, people with mental health problems, people who have an acquired head injury, people with dementia, Alzheimer's disease or other long term illnesses or conditions and people who need end-of-life care.

Founded in 1993, Nestor Healthcare Group plc acquired 51% of Carewatch in 1998 and the remainder in 2001. In September 2008 Carewatch was sold for £37m to a company controlled by the UK mid-market private equity group Lyceum Capital. The majority of care is provided through franchisees, who pay the Group a management service fee based on a percentage of revenue. The remainder of the care is provided by company owned branches.

Restructuring puts Mears' care arm in the red


-15%

-10%

-5%

0%

5%

10%

15%

20%

2004 2006 2008 2010 2012 2014 2016 2018

MiHomecare, formerly Enara (y/e March)

Lifeways (80% plus supported living, y/e Aug)*

City & County Healthcare (y/e March)

Mears Group Care Division (y/e Dec)

Allied Healthcare (y/e Jan)

Westminster Homecare Ltd (y/e Dec)

Helping Hands (y/e Sept)

Alternative Futures (y/e March)

Dimensions (UK) Ltd

Turning Point

AGGREGATE HOMECARE

EBITDA AS A PERCENTAGE OF REVENUE OF THE LARGEST HOMECARE PROVIDERS IN THE UK

'Carewatch operates partly through directly managed branches and partly through branches'

INBUSINESS


Recent company results round up

Organisation Year end Revenue £m

Previous£m

PBT £000

Previous £000

Agincare Group Ltd 5 August 16 33.4 28.1 1,172 (2,072)

Bristol Community Health CIC 30 Sept 16 61.9 48.1 91 80

CareTech Holdings PLC 30 Sept 16 149.0 124.3 22,535 9,397

Carewatch Holdings Ltd 31 Dec 15 67.9 63.0 (11,729) (10,466)

Chadderton Total Care-Unit Ltd 31 July 16 4.4 4.1 201 127

Countrywide Care Homes Ltd 30 April 16 50.0 46.9 (898) 2

Dryband One Ltd 30 April 16 4.0 6.0 (2,439) 692

Embrace Group Ltd 30 June 2016 107.5 112.4 (22,405) (3,817)

HC-One Ltd 30 Sept 16 298.1 291.5 (3,504) (35,335)

Horizon 2918 Ltd 31 August 16 19.0 16.7 (1,772) (3,026)

Lorimer Care Home 30 June 16 5.4 4.1 538 411

Making Space 31 March 16 23.5 23.5 210 1,234

McCarthy & Stone Ltd 31 August 16 635.9 485.7 92,900 80,900

Medvivo Group 30 June 16 13.6 14.2 597 1,334

MPS Care Group Ltd 30 April 16 14.8 14.7 1,524 1,457

Palms Row Healtchcare Ltd 29 May 16 4.7 4.3 (366) (1,139)

Risedale Estates Ltd 1 May 16 11.4 11.4 170 630

Ruskin Mill Trust Ltd 31 August 16 17.1 17.5 1,080 129

Sequence Care Group Holdings 31 March 16 10.4 8.2 (4,772) (2,867)

Servoca Plc 30 Sept 16 69.2 58.8 3,414 2,832

South Coast Nursing Homes Ltd 31 Oct 16 14.7 13.8 2,243 1,880

The Disabilities Trust 31 May 16 56.1 54.8 3,130 5,060

TLC Group Ltd 30 April 16 24.3 22.6 1,396 3,964

A SUMMARY OF THE LATEST RESULTS AVAILABLE IN THE HEALTHCARE SECTOR; REVENUES OVER £1M ARE INCLUDED SOURCE LAINGBUISSON DATABASE

CMA P R I L 2 0 1 7

CareTech placing, Ashley House's wait plus Bupa and Embrace results


BupaDespite putting up a large number of its homes up for sale, Bupa restated its commitment to the care of older people sector in its results for the year ended 31 December 2016.

The directors said that during the report period, the provident association refur-bished 20 care homes, began building four new homes and acquired two facilities from Primetower Care.

Furthermore, Bupa is ex-panding its Richmond Care Villages extra care portfolio with two new develop-ments under construction in Worcestershire and South Derbyshire.

They added that average occupancy rates among its care services is 86%.

Bupa’s results showed a 3% drop in turnover for

its UK business due to the disposal of Bupa Home Healthcare (BHH) to Celesio in July 2016. However, the directors said, if revenues for BHH are removed from 2015 and 2016 performance, UK revenue would be up 5%.

EmbraceTurnover dropped 4.3% for hedge fund-backed care home operator Embrace Group for the year ended 30 June 2016 from £112.4m to £107.5m.

Cost of sales reflected this falling to £76.9m (2015: £81.7m) but administrative expenses soared to £45m (2015: £27.3m) largely due to impairment on fixed assets of £22.7m (2015: £7.3m) following a review

of its portfolio. This left Em-brace with an operating loss of £14.4m, compared to a profit of £3.4m the previous year.

After deducting interest and similar charges of £8m (2015: £7.2m), Embrace reported a pre-tax loss of £22.4m, significantly higher than the £3.8m recorded in 2015. At the year end the group had net liabilities of £20.5m, compared to net assets of £1.5m the previous year.

The directors said: ‘Trad-ing in the year ended 30 June 2016 has continued to be challenging with the Group continuing to face the impact of a number of external pres-sures, notably, high agency staff costs (particularly due to the impact of nurse shortages) and the impact of public sector austerity on occupancy and fees. Despite

Ashley House has reported difficulties financially closing extra care pipelines due to its local authority and housing association partners not committing to final arrangements until the outcome of the government’s consultation into supported living housing is known. This has led to the operator being unable to achieve the anticipated levels of profit for the year ended 30 April 2017, it told its shareholders.

The directors said: ‘Despite continued positive discussions between partners, the agreements are still not in place and, although they may yet conclude in time, it is increasingly likely that they may fall into the following financial year.’

The board, however, said in its trading update that it believes the business will still achieve a small pre-tax profit for the current financial year.

‘It is still very much believed that extra care will be an increasing and successful part of the business and will provide signifi-cant growth in the near future’, the directors added. ‘The board, however, is immensely frustrated at the continued impact of govern-

ment policy change on this key area of the business. Consequently, the company has been working to develop business streams less reliant on director government support.’

Ashley House was one of six organisations chosen to join the £650m North Yorkshire Council Framework following a six-month procurement process. Along with Housing & Care 21, Places for People, Galliford Try Partnerships North, Keepmoat Regeneration Limited and Your Housing Group, Ashley House is contracted to design, fund, build, manage and operate the schemes, which will be commissioned by the council, with each organisation bidding to take the lead in developing extra care schemes that meet the criteria set out by the council.

The government announced last summer that supported living housing will continue to be exempt from the Local Housing Allowance (LHA) cap until 2019, after which core rent and service charges will be funded through housing benefit or universal credit up to the level of the applicable LHA rate. However, the government has yet to publish the out-come of its consultation with details about how this new system will work.

LAs block Ashley House pipeline

CareTech raised around £39m through the placing of 11m new shares and 2,060,091 sale shares on AIM last month.

CareTech now intends to use the net proceeds of the placing to accelerate the company’s growth strategy through the funding of its current acquisition pipeline, organic growth projects and further potential bolt-on acquisition opportunities within the next 12 months. Executive chairman Farouq Sheikh said: We look forward to deploying the funds raised for the company.'

CareTech placing

INBUSINESS


Ark Home Healthcare has acquired Housing & Care 21’s homecare division for an undisclosed sum. The deal sees 11 branches delivering more than 50,000 hours of care per week transfer to Ark, which said it would strengthen its pres-ence across the north of England, the Midlands and London.

Robin Sidebottom, managing director at Ark said: ‘This acquisition demonstrates Ark’s long-term commitment to the care industry. I look forward to working closely with colleagues from both businesses who have been instrumental in this deal taking place, and in the smooth transition of Housing & Care 21 branches.’

Housing & Care 21 announced its plans to exit the homecare market last autumn. The housing association said it was making the move and selling on contracts with 150 local authorities as it could no longer afford to train staff properly and provide care services to its own standards.

Its latest accounts for the year ended 31 March 2016 show revenues from its homecare services dropped from £33m to £29.2m and an operating deficit of £4.8m was recorded, compared to a deficit of £1.8m the previous year.

Paul Weston, chief financial officer for Housing & Care 21, said: ‘It was a difficult

decision to sell the homecare operation, and we wanted to make sure it was acquired by a provider who could continue to ensure a high-quality service to customers. We are confident that has been achieved with the acquisition by Ark. We would like to thank all the staff in those homecare branches for their hard work and dedication, and wish them and Ark all the best for the future.’

Ark Home Healthcare Ltd was founded in June 2010 through the acquisition of three independent local domiciliary care providers and secured £17.5m of private equity backing from Ashridge Capital and Core Capital. In April 2011 the company set up a complex care division to help people who need more substantial, long-term health-based services including ventilator dependent patients and patients with spinal cord and brain injuries.

In September 2011 Ark acquired for an undisclosed sum the element of Anchor Trust's homecare business that was not delivered to people occupying Anchor's own properties. The deal took Ark's homecare activities to a reported 30,000 care hours per week. In November 2014, the private equity owners' holding company for the business was changed from Bismarck Holdings Ltd to Minmar (1004) Ltd.

Ark acquires H&C 21 agencies

The Priory Group has merged its two adult care divisions, Craegmoor and Amore Care, to create a new group, Priory Adult Care.

Commencing operating this month, the new division will be headed by Jim Willis who was previously managing director for the central region in Priory Healthcare and Partnerships in Care (PiC).

He said: ‘Bringing Craegmoor and Amore Care together to create Priory Adult Care will allow us to pool our resources in order better to support the needs of our service users and commissioners.’

Priory merger

this, excluding services that have been closed or sold, EBITDA has increased from £5.2m to £9.8m. This reflects the operational improvement in the underly-ing business and the savings in respect of rent following the acquisition of freehold properties from Public Ser-vice Properties Investments Limited in February 2015.’

Furthermore, with the introduction of the National Living Wage, Embrace de-cided to apply the rate to all employees, including those aged under 26. The increase in Funded Nursing Care from £112 to £156.25 will boost Embrace by more than £1m per year.

At the year end, the operator was supporting 2,648 people compared to

2,780 at the same time in 2015 following the closure of services. The directors said on a like-for-like basis occupancy at 30 June 2015 was 2,634. Average weekly fees throughout the report period were £700, compared to £671 the previous year.

In January this year, Embrace Group sold six supported living services and an ABI unit to Tracscare for an undisclosed sum.

Embrace said it disposed of the services in the north west and south west of England and Wales as it had decided to focus on its core business of residential care for working age adults and older people, and specialist support for children and young people.

Formerly European Care

Group, Embrace provides care and support services for adults and young people with learning disabilities, brain injuries and special educational needs.

In April 2014, US-based hedge funds DE Shaw and Varde Partners acquired control of the group.

The details of the transac-tion were not revealed but the companies first set of statutory accounts to June 2014 revealed an enterprise value of £80m to acquire control through an adminis-tration process. The business was immediately rebranded Embrace and commenced trading on 16 April 2014 as a debt free, UK registered entity.

CMA P R I L 2 0 1 7


Intelligence tables

Top 20 younger adults residential care providers2

2. PROVIDER GROUPS WITH MORE THAN 100 BEDS 3. PROVIDER GROUPS FIRST RANKED BY BRANCH NUMBER, THEN BY CQC COMPLIANCE

Top 20 homecare providers3

Top 20 older & dementia residential care providers1

SOURCE LAINGBUISSON'S CARE COMPLIANCE MONITOR AN ONLINE TOOL PROVIDING UPDATES OF CQC INSPECTIONS AGAINST ESSENTIAL AND FUNDAMENTAL STANDARDS. FOR MORE INFORMATION VISIT LAINGBUISSON.COM OR CALL +44 (0)20 7841 0045

1. PROVIDER GROUPS WITH MORE THAN 500 BEDS

Colten Care Ltd 100.0%

Helen McArdle Care 100.0%

Leicestershire County Care Ltd 100.0%

Excelcare 96.8%

NorseCare Ltd 95.2%

The Fremantle Trust 93.3%

Wellburn Care Homes Ltd 92.9%

Springcare Ltd 92.9%

Somerset Care Group 89.3%

Greensleeves Homes Trust 88.9%

Sanctuary Care Ltd 84.7%

Nellsar Ltd 84.6%

Agincare Group Ltd 84.6%

Derbyshire County Council 84.0%

Abbeyfield Society Ltd 80.9%

Royal Masonic Benevolent Institution 80.0%

Quantum Care Ltd 79.2%

Runwood Homes Ltd 78.6%

CLS Care Services Group 77.3%

Sunrise Senior Living 76.9%

Operator % Compliant

Care Monitorranked by % of care home facilities fully compliant with CQC standards

sponsored by

Jeesal Group 100.0%

Brookdale Care Ltd 100.0%

Woodleigh Community Care 100.0%

The Oakleaf Group 100.0%

Sun Health Care Ltd 100.0%

Care Unlimited Group Ltd 100.0%

PJ Care 100.0%

Ramsay Health Care UK 100.0%

Glenside Care Group Ltd 100.0%

Heathcotes Group 95.5%

Voyage Care 93.7%

Choice Care Group 91.7%

Caring Homes 91.1%

Embrace Group Ltd 90.9%

Minster Care Group 90.3%

Outcomes First Group 90.0%

Danshell Group 90.0%

Potens 88.9%

United Health Ltd 88.9%

Lifeways Group 88.6%


Home Instead Senior Care 97.9%

United Response 96.7%

Methodist Homes 96.2%

Nurse Plus 94.7%

Mencap 93.9%

Carers Trust 92.6%

Voyage Care 92.2%

Bluebird Care 92.0%

Creative Support 87.5%

Housing & Care 21 85.7%

Prestige Nursing Ltd 84.0%

Sanctuary Care Ltd 82.4%

Sevacare 79.4%

Caremark Ltd 78.3%

Carewatch Care Services Ltd 77.1%

Mears Care Ltd 75.0%

Lifeways Group 69.2%

Allied Healthcare 65.7%

MiHomecare Ltd 59.4%

City & County Healthcare Group 52.4%


[email protected] www.carterwood.co.uk

For more information about Carterwood or to find out how we can help you please telephone 08458 690777

We buy and sell care businesses and landWe provide consultancy and valuation adviceWe don’t do anything else

Dedicated to the healthcare sector – dedicated to you


Date Target Acquirer Enterprise Value £m

Exit Multiple/Enterprise Value/EBITDA

Major transactions in UK health and social careSignificant transactions since January 2016, deal value £5m and above

NOTES EBITDAR = EARNINGS BEFORE INTEREST, TAX, DEPRECIATION, AMORTISATION OF GOOD WILL AND RENT OF LEASED ASSETS EBITDA = EARNINGS BEFORE INTEREST, TAX, DEPRECIATION,AND AMORTISATION OF GOOD WILL VC = VENTURE CAPITAL/PRIVATE EQUITY INVESTOR * = ACQUISITION PRICE UNCONFIRMED

Mar-17 11 homecare branches operated by Housing & Care 21

Ark Healthcare N/A N/A

Mar-17 Freeholds of Minster Group's care home portfolio

Impact Healthcare REIT 160 Net initial yield of 7.7 per cent.

Mar-17 18 homes with 683 beds operated by CLS Care Group

Minster Care Group 25 (guide price)

N/A

Mar-17 MITIE healthcare division (Enara Group Ltd and Complete Care Holdings Ltd)

Apposite Capital 9.45 MITIE paid Apposite a 'dowry' of £9.45 million, as a contribution to the funding of trading losses and the cost of the turnaround plan

Feb-17 LRH Homes St Cloud Care, backed by Golden House Ltd (Israel) and Ravad Ltd (Israel)

70 14 times latest historic EBITDAR of £5.01 million for year ending July 2015 (Note: only 11 times EBITDAR of 6.39 million for year ending July 2013)

Jan-17 6 supported living services and an ABI unit from Embrace Group

Tracscare N/A N/A

Jan-17 Helen McArdle Care HC-One N/A N/A

Dec-16 Adult Services Business of Cambian Group plc

UHS (Cygnet Health Care Ltd)

377 15.6 times historic EBITDA for year ending December 2015

Nov-16 Oasis Dental Care Bupa 835 13.9 times reported EBITDA run rate of £60m

Nov-16 Alliance Medical Group Ltd Life Healthcare Group Holdings Ltd

760 - 800 12.7 - 13.3 times EBITDA of £60m for the year ending March 2016 (depends on value of performance based deferred consideration)

Oct-16 New Bridges Tracscare N/A N/A

Oct-16 22 Priory hospitals (approximately 1,000 beds)

BC Partners 320 10.5 times EBITDA of £30.4m

Sep-16 Exemplar Health Care Agilitas Private Equity 150* 16.8 times EBITDA of £8.9m for the year ending March 2016

Aug-16 Akari Care Carlyle Group 45.5 20.02 times EBITDA of £2.3m for the year ending October 2015

Aug-16 Acorn Care National Fostering Agency Group

400 N/A

Apr-16 Prime Care Holdings Ltd Apex Companions Ltd N/A N/A

Mar-16 Options Group Outcomes First Group N/A N/A

Mar-16 Oakleaf Care (Hartwell) Ltd CareTech Holdings PLC 20.3 8.8 times EBITDA of £2.3m for the year ending December 2014

Feb-16 Independent Community Care Management (ICCM)

City & County Healthcare N/A N/A

INBUSINESS

CLS Care Services has sold 18 of its care homes in Cheshire for £25m to Croftwood Care, part of the Min-ster Care Group.

The disposal of the homes, which collectively offer 683 beds, forms part of CLS’ strategy to focus on its Belong villages operation, which cater for people with dementia. It will also see the operator rebranded as Belong Ltd.

CLS chief executive Nick Dykes said:’Its emphasis on community and its range of housing and support services means there are many more options and facilities than can be offered in a traditional care home setting.

‘We are confident that the homes will thrive under their new ownership and the deal has been concluded with the best interests of residents at heart. The Minster Care Group is a well-established and reputable care provider and this move ensures the future of the CLS homes.’

Rachel McCarthy, director at Colliers International, who led the transaction, added: ‘This sale demonstrates there is still strong demand for well-performing, regional care home groups, where there are established relationships with local care commissioners, long serving staff and good reputations in the local communities.’

Last month, Impact Healthcare REIT announced it is to acquire a seed portfolio of 54 care homes following its £160m IPO, from Minster Care and Croftwood that is to be leased back to the providers for an initial term of 20 years with an to extend for two further 10-year periods.

The total initial rent and value of assets expected to be leased to Minster are £6.4m per year and £91.4m, respectively, while for the Croftwood deal, the total initial rent is expected to be £4.6m and the value of assets to be leased is £52.9m.

Croftwood buys 18 CLS homes


CMA P R I L 2 0 1 7

Croftwood acquires from CLS, L&Q Living is launched, Mc&S results

L&Q Living Housing association L&Q has launched a new care and support subsidiary for older and vulnerable people. L&Q Living brings together more than 6,600 supported and sheltered housing units from both L&Q and East Thames, following their merger in December last year.

The £47m a per year business is to provide accom-modation and support for older people, adults with learning disabilities, with mental health needs and young people across London and the South East. It aims to become a sector leader in dementia and autism care, expanding mental health provision and developing a new model of accommoda-tion and support for vulnera-ble young people, focussing on those who are leaving care or who have complex needs.

It is also hoped the sub-sidiary will assist the wider L&Q Group to consider and address the needs of more than 5,000 residents aged over 75 living elsewhere in the group’s stock.

David Montague, chief CM

executive of the L&Q Group said: 'Through L&Q Living we will combine our social purpose and commercial drive to deliver a new deal for older and vulnerable residents. As a large housing association, with ambitious new development plans, we want to be sure that the homes and neighbourhoods we’re creating are suitable for everyone, even the most vulnerable in our society.

‘And we’ll go beyond simply providing the homes. Our supported residents will benefit from the full breadth of our services, including our investment in a new community foundation and academy.’

Yvonne Arrowsmith, chief executive of East Thames, added: ‘We believe that everyone should have a qual-ity home and that extends to people who may need help to live independently. The UK’s population is ageing and the number of vulner-able adults is growing. It’s vital, therefore, that we grow our care and support servic-es, invest in new supported housing and give older and vulnerable people choice.'

A slowdown in the property market after the EU Referendum in June led to McCarthy & Stone’s revenues dropping by 5% to £238.2m in the six months ended 28 February 2017, compared to £250.2m in the same period in 2016.

Operating profit fell 23% from £30.1m to £23.1m and pre-tax profits dropped by 25% from £29m in the com-parable period last year to £21.8m. The directors reported an underlying oper-ating profit margin of 10% compared to 16% the previous year. Net debt stood at £30.4m (2016: £23.9m) and Mc-Carthy & Stone achieved a 14% return on capital employed, down on the 18%

recorded in the same period in 2016.Chief executive Clive Fenton said: ‘After

a pause following the outcome of the EU referendum, trading conditions remained stable throughout the period, supported by the continuing structural imbalance between supply and demand within the housing market. There remains a signif-icant and growing shortage of housing supply in the UK and this imbalance is particularly acute in the market for retire-ment housing, where 3.5m people over the age of 60 have expressed particular interest in buying a retirement property, and yet only c141,000 specialist retire-ment properties for homeowners have ever been built.’

Brexit pause hits McCarthy & Stone's revenues

Clive Fenton, chief executive, McCarthy & Stone

44 | APRIL 2017 | CM - LaingBuisson - LaingBuisson

Operator Care Homes

Care Home beds

Year end

Revenue £m

PBT £m

EBITDAR £m

EBITDAR as % of revenue

Total net assets £m

NOTES (1) EXCLUDES INVESTMENT PROPERTIES LEASED TO ANOTHER OPERATOR, EXCLUDES ALL OTHER HEALTHCARE FACILITIES SUCH AS HOSPITALS, CHILDREN’S HOMES AND SUPPORTED LIVING ACCOMMODATION. N/A = NOT AVAILABLE / UNDISCLOSED (2) £119.8M FOR RESIDENTIAL CARE (3) £100.8M FOR OLDER PEOPLE AND SPECIALISED SERVICES

Bupa Care Homes 286 20,930 N/A N/A N/A N/A N/A N/A

Four Seasons Health Care 393 20,486 31 Dec 15 688.1 -373.9 92.6 13.5 -439.5

Barchester Healthcare Ltd 196 12,669 31 Dec 15 535.6 3.0 156.0 29.1 110.1

HC-One Ltd 233 12,586 30 Sept 16 298.1 3.5 56.5 19.0 30.7

Care UK 112 7,470 30 Sept 16 594.2 -25.8 71.3 12.0 7.7

Anchor 121 6,068 31 March 16 367.3 10.9 86.3 23.5 298.6

Methodist Homes 90 4,744 31 March 16 191.5 7.3 24.1 12.6 244.2

Runwood Homes Ltd 70 4,663 30 Sept 16 105.9 15.6 24.1 22.7 172.3

Priory Group 262 4,599 31 Dec 15 571.2 -58.7 151.3 26.5 196.1

Orchard Care Homes 75 4,595 31 March 15 123.4 2.1 14.5 11.7 1.8

Sanctuary Care Ltd 90 3,808 31 March 16 90.0 9.8 9.8 10.9 .0

Caring Homes 122 3,569 31 March 16 161.5 1.4 34.8 21.5 111.7

Orders of St John Care Trust 68 3,497 31 March 16 110.6 5.0 12.4 11.2 46.1

Maria Mallaband & Countrywide Group 65 3,433 N/A N/A N/A N/A N/A N/A

Avery Healthcare 44 3,301 31 March 16 126.0 -18.8 42.5 33.7 -15.0

Larchwood Care 57 2,981 N/A N/A N/A N/A N/A N/A

Minster Care Group 92 2,975 31 March 16 27.9 3.5 6.2 22.4 11.9

Sunrise Senior Living 25 2,539 N/A N/A N/A N/A N/A N/A

Embrace Group Ltd 60 2,408 31 June 16 107.5 -22.4 10.3 9.5 -19.5

Abbeyfield Society Ltd 75 2,281 31 March 16 43.1 2.3 3.4 8.0 142.4

Excelcare 33 2,187 31 March 15 19.6 1.8 4.8 24.4 -9.5

Voyage Care 268 2,137 31 March 16 203.9 -42.3 42.6 20.9 -39.7

Shaw healthcare (Group) Ltd 52 2,113 31 March 16 93.0 1.9 11.3 12.1 11.2

Leonard Cheshire Disability 103 1,981 31 March 16 159.2 2.6 -1.3 -.8 114.2

Akari Care 36 1,897 31 Oct 15 44.3 -22.5 2.3 5.1 -202.6

Healthcare Homes 35 1,845 30 Sept 16 47.6 -.1 7.4 15.5 10.7

Prime Life Ltd 50 1,766 31 March 16 49.2 7.1 14.9 30.4 49.1

Quantum Care Ltd 28 1,721 31 March 16 53.5 .5 6.0 11.3 1.8

Somerset Care Group 29 1,507 31 March 16 72.7 1.1 7.6 10.5 13.2

Community Integrated Care 79 1,366 31 March 16 107.0 1.1 5.4 5.0 48.1

Abbey Healthcare 16 1,269 N/A N/A N/A N/A N/A N/A

New Century Care 25 1,228 31 Dec 15 40.1 -.3 2.6 6.4 .9

Executive Care 27 1,217 31 March 16 36.6 -7.6 -2.7 -7.3 -5.4

Gracewell Healthcare Ltd 18 1,215 N/A N/A N/A N/A N/A N/A

B & M Care Group Ltd 23 1,193 30 Sept 16 36.2 8.8 9.3 25.6 66.7

Select Healthcare Group 30 1,191 31 March 16 20.7 38.8 71.5 345.7 36.7

St Cloud Care plc 19 1,139 N/A N/A N/A N/A N/A N/A

Country Court Care Homes Ltd 24 1,124 31 March 16 9.6 -.6 .5 4.9 7.4

Hallmark Care Homes 15 1,116 31 March 16 52.8 7.1 12.0 22.7 38.6

Royal Masonic Benevolent Institution 18 1,111 31 March 16 46.4 -.5 -2.8 -6.1 120.7

Major operators of long term careNumber of registered care homes and beds owned/leased (1) by independent sector care home operators with 1,100 beds or more at April 2017

sponsored by

Intelligence tables

laingbuissonnews.com | MARCH 2017 | 45

You deserve the level of care that you give to othersLike you, we really care about our customers. That’s why we have Relationship Managers and a dedicated healthcare underwriting team, to help you run and finance your business.

To find out how we can help, please contact Jeremy Huband, Head of Healthcare, NatWest.

07767 382 282

[email protected]

ANY PROPERTY USED AS SECURITY, WHICH MAY INCLUDE YOUR HOME, MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR OTHER DEBT SECURED ON IT.

NAT00388_HealthCareAd_210x297_AW_JR.indd 1 16/12/2016 10:42


Care servicesinvestor activity

Equity The most significant event in the UK re-

cently has been the IPO of Impact Health-care REIT, the first of any size since that of Spire Healthcare in 2014. In March it issued 160.2m shares at 100 pence per share, raising £160m through Winterflood Securities (part of Close Brothers) and with legal advice from Travers Smith.

The company first announced its plans to list on the specialist fund segment of London's Main Market in January, and at the time it had already agreed to buy a portfolio of up to 58 residential care homes with a total of 2,558 beds.

This Seed Portfolio was acquired for £152.8m and leased to its initial tenants, Minster Care Management Limited and Croftwood Care Limited for a total rent of £11.7m (a 7.7% yield), in each case for an initial term of 20 years with an option to extend for two further ten year periods. Minster Group acquired its first care home in December 2004 and the Croftwood Group acquired its first care home in 2009, and both the Minster and Croftwood Groups are overseen

LaingBuisson continues to develop its monthly analysis of the healthcare services (HCS) sector, and has launched a regular valuation table of the listed companies operating in care markets This is focused not just on UK companies, but also on foreign HCS companies listed on the London Stock Exchange and companies listed on foreign exchanges that have an exposure to the UK market, as well as the largest relevant European companies. It is not a large universe, but the index it creates is a useful tool for informing the sector on the direction of travel of valuations, relative to the broader market and individual stocks, and in the UK covers just seven companies with a market cap of just over £6bn

Organisation Sub-sector Description Market cap £m

Cambian Children's services

One of the largest providers of specialist behavioural health services for children in the UK. Its services comprise specialist mental health, acquired brain injury, learning disability and specialist residential care.

267

Capita Business process outsourcing and professional services

The largest BPO and professional services company in the UK, with clients in central government, local government and the private sector. It has a property and infrastructure consultancy division which is the fourth largest multidisciplinary consultancy in the UK. 6% of 2016 revenues (£294m) was from healthcare and social care which grew with contract wins with a 7 to 10-year primary care support services contract with NHS England and an £80m, 10-year strategic partnership with the Central London Community Healthcare NHS Trust

3,640

CareTech Adult specialist care and children’s services

One of the largest providers of specialist behavioural health services for adults in the UK. Its services comprise specialist mental health, acquired brain injury, learning disability and specialist residential care and housing support services. It also provides both residential services (including education) and foster care and family services for children and young people

239

Impact Healthcare REIT

Care home real estate

Recently IPO’ed with a seed portfolio of up to 58 care homes yielding 7.7%, it aims to acquire, own, lease, renovate, extend and redevelop high quality healthcare real estate assets in the UK and lease those assets primarily to healthcare operators providing residential healthcare services under full repairing and insuring leases.

151

Mears Homecare A leading provider of services to social housing and the #4 provider of homecare with high quality and flexible care for older and disabled people who want to avoid costly nursing homes and would like to continue living in their own homes.

523

Serco Business process outsourcing and professional services

Provides outsourcing services to governments, international agencies, and corporations located throughout the world. The company manages facilities, projects, and information technology systems. Serco runs scientific establishments, provides critical information to manage traffic, maintains buildings, and operates railways. 10% 2016 revenue was from healthcare (£355m) from non-clinical support services and patient administrations and contact

1,230

Target Healthcare REIT

Care home real estate

A specialist investor in UK care homes and other healthcare assets with a portfolio of 31 assets, all purpose built, best-in-class facilities with single occupancy and en-suite facilities. The company's investment objective is to provide shareholders with an attractive level of income together with the potential for capital and income growth from investing in a diversified portfolio of freehold and long-leasehold care homes.

289

TOTAL MARKET CAPITALISATION 6,339

Care LISTED COMPANY VALUATIONS

Despite an uncertain geopolitical backdrop, in healthcare M&A activity is increasing and valuations are on the

up. Henry Elphick, LaingBuisson's CEO, looks at the deals that have changed the landscape in the last 12 months.

Henry Elphick, CEO, LaingBuisson

Investing


by Mahesh Patel and a management team which has an average tenure of 18 years. The assets and the current CQC ratings of care homes managed by the Minster and Croftwood Groups are above the national average.

The listed company is managed by Mahesh Patel and Andrew Cowley through the company’s investment advisor, Impact Partners LLP.

M&A

In M&A, activity has been driven more by opportunistic buyers and forced sellers, with the sale of Mitie’s homecare to Apposite Capital being the most extreme example of this - the price was just £2 and Mitie will also pay an additional £9.45m to Apposite to fund trading losses and the cost of the turnround.

Mitie acquired what was then Enara Group for £112m in 2012 from August Equity, who had backed a roll-up of the sector led by Stephen Booty, the former CEO of Nestor. At the time, Lady McGre-gor-Smith, Mitie’s now departed chief executive, called it a “significant strate-gic opportunity” that would capitalise on Britain’s ageing population and the need to reduce the time patients spent in hospital. In what in retrospect looks more like corporate hubris, Enara was rebranded MiHomecare, the original management team replaced, and a new strategy implemented. The total write-off amounted to £128m.

One of the largest transactions was the sale of Cambian’s adult services business. Cambian had been very successful IPO led by JP Morgan and Numis, but had subsequently missed its forecasts and replaced its CFO as a re-sult. With a strong underlying business, but significant leverage, Rothschild’s were mandated to find a buyer for the adult services business to deleverage the group.

With a range of treatments across 1,193 beds throughout the UK, the process required a complex separation of the assets from the rest of the group, and in a highly competitive auction pro-cess conducted in a short time frame with trade and private equity bidders (BC Partners had recently acquired Elysium Priory/Acadia for example and was looking for scale), the sale was at a valuation that allowed Cambian to retire all it’s debt and return capital to shareholders.

Helen McArdle Acquired by HC-One 10.0x 75

Mitie - homecare business Sale to Apposite Capital n/a £2.00

Cambian Adult Services sale to UHS/Cygnet 15.6x 377

Acorn Acquired by NFA 10.0x 400

Lifestyle Care 10.1x n/a

Akari Sold by Lloyds Bank to Carlyle c20.0x 45.5

Exemplar Acquired by Agilitas c10.0x c100

Organisation Activity EBITDA multiple

Value £m

Care SELECTED HEALTHCARE MARKETS TRANSACTIONS

SOURCE S&P GLOBAL (JANUARY 2017)

ANNUAL PRO-FORMA DEBT/EBITDA RATIOS OF SPONSORED DEALS

Pharma Services 12

Specialist Care 10

Elderly Care 9

Children's Services 7

Homecare 6

Diagnostics 5

IVF 4

Mental Health 4

PRIVATE EQUITY HEALTHCARE PORTFOLIOS BY SUB-SECTOR 2016


To put this in context, the sale value of £377m compared to a market cap for the whole company before the transac-tion of £240m. The resulting business is 100% focused on children’s services, and is arguably now more of an education business.

Private Equity

After a quieter 2015, activity picked up significantly in 2016 and there have been three transactions announced so far in 2017 involving PE.

Today, the largest number of portfolio companies (12) are active in pharma services, capitalising on a sector that is

global and underpinned by an outsourc-ing trend and technology innovation combined with a cash rich customer base looking for cost savings.

Despite the expectation that asset backed providers would be out of favour with PE as a result of their exposure to government reimbursement and lower underlying market growth rates, signif-icant capital continues to be invested in this area. Combined, specialist care and elderly care account for 19 portfolio companies. The investment thesis has adapted to the market environment with a focus on private pay with less exposure to government funding (Care UK, Four Seasons), or opportunistic acquisitions

of providers struggling as a result of over-levered capital structures (Em-brace, Akari, Exemplar) or forced sellers (Acadia/Priory selling Elysian). The low interest rate environment and increasing confidence from lending banks has also allowed leverage multiples to increase as the cost of debt has fallen, although lenders continue to be highly selective of individual credits. The public bond mar-kets have also been open to this sector (Care UK, Voyage, Bupa, Four Seasons), although performance for investors has been varied and volatile at times.

Financings

Leverage is returning to the market with recent transactions seeing multiples of 5.5-7.0x net debt/EBITDA. There are a number of large financings in the market at the moment taking advantage of multi-ples and terms not seen since 2008.

However, in addition to strong markets, innovation has also appeared. CareTech recently completed a ground rent financ-ing with Alpha Real Capital, selling the ground rent on 41 properties to Alpha for a 150 year term and an RPI linked yield of 3.4%. In return, CareTech received £30m of cash and deleveraged the business from 4.5x to 3.8x net debt/EBITDA.

On the face of it, this is a very attractive deal for CareTech – in exchange for a rent obligation of £1.07m, they receive £30m in cash. In reality, this is a function of a market offering terms that are a result of a supply demand imbalance – investors are looking for low risk indexed linked yield and are prepared to pay up for income streams with that profile. More recently Elysium did a similar ground rent deal post their acquisition by BC Partners through BNP Paribas and Jefferies.

Outlook

2017 has the uncertainty of Trump and Brexit, but the backdrop remains one of continuing low interest rates, plenty of dry powder for private equity funds and an economy that continues to perform strongly. All that points to a strong second half to the year, with a number of assets publicly in the market such as Bupa’s care home portfolio through Bank of America Merrill Lynch and further ground rent deals to come.

CARETECH AND ALPHA DEAL FEBRUARY 2016

Investing

Care Markets London Stock Exchange Watch7 April 2016 - 4 April 2017

Shar

e pr

ice

(GB£

pen

ce)

LaingBuisson Index

LOCAL CURRENCY GB£P

Company TickerStock

Exch.

Share Price

52-Week Range

change from

52-Week high

Market Cap m

EBITDA m

Share PriceMarket Cap

mEBITDA

mPE ratio

Dividend Yield

PEG

Cambian Group cmbn.l LSE 147.0 48.3 - 160.0 (7.8%) 266.7 30.2 147.0 266.7 30.2 N/A N/A 0.0x

Capita cpi.l LSE 546.0 431.3 - 1,101.0 (50.4%) 3,640.0 629.3 546.0 3,640.0 629.3 97.5x 729.0% 38.7x

CareTech Holdings cth.l LSE 372.5 228.0 - 388.0 (4.0%) 239.1 40.6 372.5 239.1 40.6 10.3x N/A 0.0x

Impact Healthcare REIT ihr.l LSE 103.5 0.98 - 102.2 1.2% 151.3 0.0 103.5 151.3 0.0 N/A N/A 0.0x

Mears Group mer.l LSE 511.0 346.7 - 540.0 (5.4%) 523.0 50.2 511.0 523.0 50.2 24.5x N/A 0.0x

Serco srp.l LSE 113.0 90.2 - 151.1 (25.2%) 1,230.0 95.0 113.0 1,230.0 95.0 N/A 0.0% (5.7x)

Target Healthcare REIT thrl.l LSE 114.5 0.98 - 116.0 (1.3%) 288.7 13.2 114.5 288.7 13.2 1,789.1x N/A 0.0x

Acadia Healthcare achc NMS 44.0 32.5 - 65.0 (32.3%) 3,850.0 580.2 35.6 3,117.6 465.0 635.0x N/A 1.2x

Universal Health Services uhs NYQ 123.5 99.7 - 139.8 (11.6%) 11,930.0 1,700.0 100.7 9,721.5 1,400.0 17.6x 32.0% 1.8x

Korian kori.pa PAR 28.4 23.8 - 33.2 (14.6%) 2,274.6 401.0 24.2 2,133.8 372.4 17.4x 2.1% 0.0x

Le Nobel Age lna.pa PAR 44.5 26.0 - 45.5 (2.2%) 398.4 46.8 41.7 368.1 43.9 34.0x N/A 0.0x

Orpea orp.pa PAR 89.3 67.2 - 90.2 (0.9%) 5,390.3 476.3 83.8 5,056.6 446.8 36.7x 1.0% 1.9x

Attendo att.st STO 87.5 72.0 - 92.0 (5.0%) 13,970.0 1,130.0 7.8 1,246.7 100.8 21.7x N/A 1.4x

Healthcare MarketsAssura agr.l LSE 59.1 48.1 - 61.0 (3.2%) 974.2 86.8 59.1 974.2 86.8 28.1x N/A 9.1x

Circle Holdings circ.l LSE 29.5 14.0 - 30.0 (1.7%) 73.1 (6.4) 29.5 73.1 (6.4) N/A N/A 0.0x

Craneware crw.l LSE 1,185.0 742.0 - 1,379.7 (14.1%) 319.4 16.3 1,185.0 319.4 16.3 28.0x N/A 0.0x

EMIS emis.l LSE 890.0 787.0 - 1,070.0 (16.8%) 559.3 41.3 890.0 559.3 41.3 29.4x N/A 0.0x

Georgia Healthcare Group ghg.l LSE 360.0 166.0 - 388.0 (7.2%) 460.6 26.2 360.0 460.6 26.2 N/A N/A 0.0x

Medica Group mgp.l LSE 188.0 135.0 - 202.0 (6.9%) 209.0 105.2 188.0 209.0 105.2 73.3x N/A N/A

Mediclinic International mdc.l LSE 679.0 674.7 - 1,125.0 (39.6%) 5,000.0 449.0 679.0 5,000.0 449.0 24.7x N/A 0.0x

NMC Health nmc.l LSE 1,786.0 996.9 - 1,885.0 (5.3%) 3,650.0 245.3 1,786.0 3,650.0 245.3 25.3x N/A 0.0x

PHP php.l LSE 111.5 0.8 - 111.6 (0.5%) 667.0 59.2 111.5 667.0 59.2 1,527.4x N/A 0.0x

Spire Healthcare Group spi.l LSE 325.4 295.0 - 411.0 (20.8%) 1,300.0 162.5 325.4 1,300.0 162.5 24.5x N/A 0.0x

Ramsay Health Care rhc.ax ASX 68.8 60.6 - 84.1 (18.1%) 13,880.0 1,240.0 52.2 10,516.5 939.5 29.8x 270.0% 2.3x

Rhoen-Klinikum rhkg.f FRA 25.74 22.9 - 28.7 (18.2%) 1,723.3 154.2 22.0 1,475.6 132.0 17.0x 3.1% N/A

Fresenius Medical Care fme.de GER 78.0 70.0 - 85.6 (9.0%) 23,880.0 3,350.0 73.1 22,401.6 3,142.6 19.2x N/A 0.0x

Fresenius SE & Co fre.de GER 74.4 60.0 - 77.4 (3.9%) 40,730.0 5,450.0 69.8 38,208.4 5,112.6 25.7x N/A 0.0x

Capio capio.st STO 49.2 41.3 - 54.0 (8.9%) 6,950.0 1,070.0 4.4 62.0 9.5 17.2x N/A 1.1x

FTSE 250 ^FTmc FGI 19,069.3 14,951.6 - 19,183.9 (0.6%) N/A N/A 19,063.0 N/A N/A N/A N/A 0.0x

UK FTSE All Share ^FTAS FSI 3,996.5 3,168.5 - 4,047.8 (1.3%) N/A N/A 4,000.6 N/A N/A N/A N/A 0.0x

FTSE 100 ^FTSE FSI 7,331.7 5,788.7 - 7,447.0 (1.6%) N/A N/A 7,341.1 N/A N/A N/A N/A 0.0x

Care Markets

0

200

400

600

800

1,000

1,200

Cambian

Capita

CareTech

Impact

Mears

Serco

Target

SOURCE LAINGBUISSON

Intelligence

Inpost


Almond CareComplex care provider Almond Care has appointed Karen Jackson as operations director. Previously head of live-in care at Helping Hands, Jackson has also been project manager at Lifeways.

She has worked in the health and social care sector for more than 17 years and her expertise ranges from front line care work to man-agement of services, tender-ing and procurement.

Judith Malan has also joined Almond Care as clin-ical nurse specialist. She has experience of covering gener-al intensive care, community complex care, nursing homes and healthcare management.

Jackson said: 'I am delight-ed to be joining Almond

Knight Frank Property consultants Knight Frank has appointed Bela Chauhan as an associate in its healthcare valuations team.

She previously worked at GVA where she was involved in the specialist sector of trading related properties with a particular focus on healthcare and has expe-rience in providing formal valuation advice as well as healthcare transactions, working with a range of cli-ents including major lenders and private operators.

Head of healthcare at Knight Frank Julian Evans said: ‘Bela brings terrific healthcare experience to complement our mar-ket-leading team servicing the burgeoning UK health-care arena.’

Care. I know I also speak for Judith when I say this is an exciting company with an innovative approach that is making a real difference to the lives of its clients.

Julia Senah, managing director at Almond Care, added: 'It is wonderful to be able to welcome Judith and Karen to the team. They each bring a wealth of experience that will directly benefit our clients.'

West Midlands-based Almond Care is a provider of nurse-led complex care in the home and works with clients with conditions including spinal injuries, cerebral palsy, multiple sclerosis and muscu-lar dystrophy.

David Baddiel has become the newest ambassador for the Alzheimer's Society. The comedian and writer has spoken widely about the disease after his father was diagnosed with dementia

Alzheimer's Society

Justin Hutchens is to become chief executive officer of HC-One on 1 June. Currently president of HCP Inc, he has also held the posts of executive vice-president and chief investment officer at the US real estate invest-ment trust, which bought £175m of Barchester Healthcare’s debt in 2013.

HC-One said once Hutch-ens joins the care home operator, current chairman and chief executive Dr Chai Patel will start a handover process which is due to end on 30 September. After this time, Patel will continue as chairman of HC-One.

Once in post, Hutchens is expected to lead HC-One ‘through the next crucial

Hutchens to swap HCP for HC-One

phase in its journey from turnaround to transformation’. His 23 years’ experience in US healthcare is expected to prove invaluable in guiding HC-One develop new services as part of an improved health and social care offering.

Patel said of Hutchens: ‘I consider him a care and investment professional of global significance with out-standing leadership qualities. He brings a wealth of expe-rience and expertise to his new role. It is obvious that he shares HC-One’s values and commitment to providing high quality kind care. I look for-ward to welcoming Justin and working with him to continue to build HC-One and develop our leading position in the UK care sector.’

Justin Hutchens will take up the role of chief executive officer on

1 June

laingbuissonnews.com | MARCH 2017 | 51

The recruitment of specialist and experienced social care staff

has never been more important for an industry that must deliver

the very best care services whilst dealing with skill shortages and

ever increasing levels of demand.

Charles Hunter Associates offers a tailored permanent solution to

our social care clients. We provide workers within children’s

services across all specialisms to include Looked After Children,

EBD, Learning Disabilities, Autism, Physical Disabilities, Mental

Health, Sexually Harmful Behaviour, CSE and more.

Typical appointments include the following –

Senior Support Workers & Team Leaders

Assistant / Deputy Managers

Registered Managers

Area / Divisional Managers

Senior / Executive Level Appointments

Our specialist permanent recruitment service benefits our clients

by removing the time taken to recruit key members of staff, and

ensuring that candidates who we pass to you meet the exact

criteria that you require.

The result of this means you hire the right person every time,

eliminating frustrating staffing issues such as retention and

commitment.

Attract / Appoint / Retain

Apply online at:

Or call us on : 0118 948 5555to discuss your job requirements

www.charecruitment.com

@charecruitment

How do we do it?

We have several methods for attracting permanent

staff to include a vast internal database, excellent

advertising resources and access to a vast network of

professionals. Our service is individually tailored to

your needs and we are flexible with our approach

however the following summarises our capabilities –

Permanent recruitment for any given job vacancy

Advertising and / or joint advertising campaigns

Direct search / headhunting

Interview and shortlisting services

What we do

Extensive compliance checks to include:

Full application and work history

ID and qualification verification

2 positive references

Telephone interview prior to any submission to a client

All candidates must meet the following minimum criteria:

Managers

QCF Level 5 completed (or currently enrolled)

Minimum 2 years managerial experience with relevant

client group

Minimum ‘Good’ latest Ofsted report

Senior Support Worker / Team Leader

NVQ Level 3 completed

Ambition to enrol and complete QCF Level 5

Minimum 2 years experience with relevant client group

Getting in touch:

Permanent Recruitment SolutionsCharles Hunter Associates provide a specialist permanent recruitment service to the social care sector

Speak to us today on: 0118 948 5555

Recruitment Solutions for the Social Care Sector

/ w: www.charecruitment.com / e: [email protected] 14, The Aquarium / 1-7 King Street / Reading RG1 2AN / t: 0118 948 5555

Registered in England No. 6830347

READY.Our strength is we provide a first class service to an outstanding healthcare base. The team are poised to rise to every challenge on behalf of our healthcare clients.

Advising on healthcare assets of over £8BN a year, we are ideally placed to help clients understand the market as it stands now and importantly how it will look in the future.

CONTACTJulian Evans FRICST: +44 20 7861 1147E: [email protected]

Knightfrank.co.uk

CT1530 Healthcare_generic_advert_FINAL.indd 3 28/09/2016 17:31

april 2017 | volume 24 | issue 1 caremarkets p7 cqc should take a role in care service...

Documents