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Similaire à HEALTHCARE market Review 2015
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HEALTHCARE market Review 2015
- 2. CONTENTS 03 Key Results 04 Nursing and Personal Care Sectors 10 Specialist Care Sector 12 Conclusion 13 Investment Market Commentary and Operator’s View 14 Research Methodology 15 Colliers International foreword This is the twenty-first in a regular series of research papers which provide an in-depth analysis of the healthcare property and business sector, focusing on long-term personal care and nursing care for both the elderly and specialist markets. Our analysis is based on actual performance data confidentially sourced for valuations, due diligence, consultancy work and transactions undertaken by the Colliers International Healthcare team. The sample of care homes varies in each six month period analysed but typically has a corporate bias. This paper provides commentary on indicative trends in the healthcare market for the second half of 2014 and the first half of 2015. For further information please contact us or visit our website: www.colliers.com/uk/healthcare.
- 3. Key Results Our research focuses on the key drivers of the care home industry, covering occupancy rates, average weekly fees, payroll costs, non-payroll costs and EBITDAR (profit margins). These five measures have been adopted as the Colliers International Key Performance Indicators. KEY RESULTS NOTE: The trend arrows look at the movement over the year from H1 14 to H1 15 eBITDAR (profit margin) Profit margins increased in the nursing sector and more markedly in the personal care sector. The specialist sector saw EBITDAR levels fall below 30% for the first time in the dataset. % of total revenue PC NH SP 2015 H1 32.0 28.9 29.3 2014 H2 31.1 28.7 30.2 2014 H1 31.1 28.7 31.5 2013 H2 31.7 28.7 32.7 Occupancy Rates Occupancy rates have risen in all three sectors and now exceed 91.0% % of available beds PC NH SP 2015 H1 91.5 91.1 91.9 2014 H2 90.6 90.0 91.8 2014 H1 90.3 90.2 91.1 2013 H2 89.6 90.0 91.1 3 Payroll Costs There were minor movements in wage costs in personal care and nursing sectors, whilst the specialist sector saw significant increases. % of total revenue PC NH SP 2015 H1 50.8 56.1 55.0 2014 H2 51.7 56.2 53.8 2014 H1 51.2 56.0 52.9 2013 H2 50.9 56.3 52.1 non-payroll costs Non-payroll costs in the specialist sector saw an increase over H1 2014, continuing the recent trend. The nursing and personal care sectors saw relatively little movement. % of total revenue PC NH SP 2015 H1 17.2 15.1 15.8 2014 H2 17.1 15.0 15.9 2014 H1 17.5 15.1 15.0 2013 H2 17.3 14.8 14.7 Average Weekly Fees Average weekly fees increased in both the nursing and personal care sectors, almost reaching the peak levels of 2012. The fees in the specialist sector are at the highest levels seen. £s per week PC NH SP 2015 H1 524 656 1,497 2014 H2 514 641 1,477 2014 H1 518 637 1,409 2013 H2 518 648 1,490 £
- 4. Key Performance Indicators The occupancy rate is calculated by the total number of service users at the time of valuation/transaction, divided by the number of available beds. The data shows that both personal care and nursing homes continue to improve occupancy levels since the falls noted between 2006 and 2012 and have now returned to levels in line with the 10 year average (see Figure 1). Personal care homes saw increases of 1.2 percentage points over the year since H1 2014, with nursing homes being close behind at 0.9 percentage points. Both sectors have remained above 90% for the past three periods. Nursing and Personal care sectors occupancy rates Figure 1 94 86 87 88 89 90 91 92 93 95 H203 H104 H204 H105 H205 H106 H206 H107 H207 H108 H208 H109 H209 H110 H210 H111 H211 H112 H212 H113 H213 H114 H214 H115 Source: Colliers International Occupancy % PC NH 10 year Data Period Average 4 Colliers View Occupancy rates for both personal care and nursing care increased in the 12 months to June 2015. Whilst this upward trend has continued since the relative lows of 2011 to 2013, in practice we are seeing significant variations in occupancy levels with sub-80% occupancy being experienced in many struggling homes, through to capacity or near capacity at an increasing number of the better performing homes. These fluctuations can be due to a range of factors to include location and general demand, but the standard of care and accommodation is by far the most important. Chris Saberton Director | Healthcare Personal care rose 1.2 Nursing care increased by 0.9 Both sectors remained above 90% since H1 2014 since H1 2014 for the past three periods Occupancy Rates percentage points percentage points
- 5. Nursing and Personal care sectors AVERAGE WEEKLY FEES Key Performance Indicators We have seen average fees improve in both the personal care and nursing sectors over the last 12 months, in both nominal and real terms (average weekly fees with inflation taken into account). This is a welcome improvement after a generally downward trend of fees in recent years. Nursing fees increased by 2.9% in nominal terms and 1.9% in real terms over the year. However, when viewed across a two year period, the sector has seen declines in both nominal and real terms. Since the start of our index in 2003, the sector has seen real fee increases of only 3.7%, which are unlikely to compensate for the pressures of increased regulation and growing levels of acuity (see Figure 2). Over the last year, the personal care sector has fared less well, showing an increase of only 1.1% in nominal terms and 0.1% in real terms. However, when looking at the last two years, whilst there has been a fall of fees in real terms, as with the nursing sector, this has been at a lower level and there has actually been a small increase in nominal fees. Since the start of the dataset, personal care fees have increased by 61.8% in nominal terms and 14.6% in real terms. Whilst this increase is higher than seen in the nursing sector, personal care homes have also seen levels of acuity dramatically increase. Considering both occupancy levels and fees together, the peak period for ‘total income’ was H1 2012. Recent increases have resulted in personal care homes recording the highest level of total income during H1 2015, with nursing home levels almost returning to the levels seen in 2012. Figure 2 200 250 300 350 400 450 500 550 600 650 700 H203 H104 H204 H105 H205 H106 H206 H107 H207 H108 H208 H109 H209 H110 H210 H111 H211 H112 H212 H113 H213 H114 H214 H115 £s NH Average Weekly Fees NH Real Fees PC Average Weekly Fees PC Real Fees Source: Colliers International Colliers View The gradual, albeit slight, reduction in ‘real’ fees over the last four to five years now appears to have bottomed out in the personal care and nursing sectors. We are now seeing slightly higher increases in Local Authority funded fees in many areas of the UK and this, coupled with sometimes higher than inflationary increases in self-funded fees, are likely to be principal factors. Chris Saberton Director | Healthcare average weekly fees Personal care rose 1.1% Nursing care increased by 2.9% Both sectors recorded fee increases in real terms over the year since H1 2014 since H1 2014 5
- 6. Payroll costs including wages and NIC costs are taken from accounts at the time of valuation/transaction. Payroll costs, as a proportion of total revenue, have remained flat in the nursing sector but have fallen marginally in the personal care sector over the past year (see Figure 3). In personal care, payroll costs currently stand at 50.8%. Levels have fluctuated in recent periods, increasing from 51.2% in H1 2014 to 51.7% in H2 2014, before falling back in the last half. Overall, levels have generally been falling since a peak of over 53.5% during 2010. The nursing sector has seen little change, with costs increasing only 0.1 percentage points over the year. Figures have again fallen from a peak in 2011, when levels were c. 57.5%. As can be seen, the trend lines for the two sectors generally track each other. Both sectors saw sharp increases in wage costs from historic lows in 2005 – 2006 to peaks in 2010 – 2011, although they have responded well to challenges in recent years and have managed to gradually reduce payroll costs. Key Performance Indicators Figure 3 35 40 45 50 55 60 65 H203 H104 H204 H105 H205 H106 H206 H107 H207 H108 H208 H109 H209 H110 H210 H111 H211 H112 H212 H113 H213 H114 H214 H115 Source: Colliers International % of total revenue PC Payroll costs NH Payroll costs 6 Nursing and Personal care sectors payroll costs Colliers View The payroll costs seen as a percentage of revenue in H1 2015 are fairly consistent with 2013 and 2014, suggesting operators are continuing to meet the well documented challenges in the sector. The nationwide shortage of nurses continues to be an issue and, as a result, it increasingly appears to be the norm for larger operators to employ agency staff to help address this and maintain levels of care. The next challenge will come from the introduction of the National Living Wage in April 2016, which will apply to workers aged over 25. Whilst it has been welcomed by many corporate operators, early reports are that this could cost the care sector £1bn by 2020 without further intervention by the government to address the ‘funding gap’. Rachel McCarthy Director | Healthcare Personal care fell 0.4 Nursing care rose 0.1 Both sectors have seen generally falling costs since 2010 – 2011 since H1 2014 since H1 2014 payroll costs percentage points percentage points
- 7. Key Performance Indicators Figure 4 12 13 14 15 16 17 18 19 20 21 H203 H104 H204 H105 H205 H106 H206 H107 H207 H108 H208 H109 H209 H110 H210 H111 H211 H112 H212 H113 H213 H114 H214 H115 Source: Colliers International % of total revenue PC Nursing Non-payroll costs are calculated by dividing total costs excluding payroll costs, by total revenue. Figure 4 illustrates the proportion of total revenue apportioned to non-payroll costs from 2003 to date. Non-payroll costs, as a percentage of income, have generally been increasing in recent years in both the personal care and nursing sectors, which may in part be reflective of generally declining ‘total income’ levels. Despite these general increases, over the past year nursing care has remained static at 15.1% and personal care has decreased slightly by 0.3 percentage points to 17.2% in H1 2015. When measuring cost pressures in the long-term elderly sectors, we take a mean of the average food and energy costs for our base year (2003), which has been adjusted in relation to the relevant CPI Indices. To clarify, CPI represents a broader population than RPI and produces weights for items in the shopping basket using a breakdown of household expenditure taken from the national accounts. Colliers View Non-payroll costs continue to be squeezed upwards primarily due to increasing food and energy costs. Whilst we have seen homes manage to successfully control wage costs, non-payroll costs have proved harder to control. The cost of ensuring service users are ‘warm and well fed’ appears to be falling on operators. Adrian Ilott Director | Healthcare 7 Nursing and Personal care sectors non-payroll costs
- 8. Average food costs per person per week have increased across both personal care and nursing care since 2014 (Figure 5). The average food cost across the elderly care sectors stood at £28.20 pppw in H1 2015, up from £25.60 pppw in 2014. This increase is contrary to the CPI Food Index, which actually fell slightly over the same period. Generally food costs have increased above the CPI Index. This may be reflective of care homes generally sourcing ‘ingredients’ from wholesalers, from which they prepare their meals, whereas CPI Indices reflect a typical domestic consumer’s basket of goods, which is likely to include more ready prepared foods sourced from supermarkets where there has recently been strong competition and price discounting. Energy costs, across both the personal and nursing sectors, fell from 2014 to H1 2015 (Figure 6). Generally, energy costs seen in homes have increased above the CPI Energy Index due to the greater need to maintain heating levels in elderly care homes. The CPI Energy Index has fallen by 25% since 2012 and whilst we have seen a decline in energy costs in the data for the period to H1 2015, it remains to be seen whether this trend can be maintained. Figure 5 0 5 10 15 20 25 30 35 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 H12015 Source: Colliers International, Haver Analytics £s NH Actual PC Actual CPI Food and Non-Alcoholic Beverage Index 8 Key Performance Indicators Nursing and Personal care sectors non-payroll costs Personal care fell 0.3 Food costs increased across both sectors Energy costs decreased across both sectors non-payroll costs since H1 2014 percentage points The CPI index shows the trend based on average food costs in 2002 (base year) Figure 6 0 2 4 6 8 10 12 14 16 18 20 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 H12015 Source: Colliers International, Haver Analytics £s NH Actual PC Actual CPI Energy The CPI index shows the trend based on energy costs in 2002 (base year)
- 9. Key Performance Indicators Figure 7 20 22 24 26 28 30 32 34 36 % of total revenue PC PC 10 yr average Nursing NH 10 yr average H203 H104 H204 H105 H205 H106 H206 H107 H207 H108 H208 H109 H209 H110 H210 H111 H211 H112 H212 H113 H213 H114 H214 H115 Source: Colliers International Profit margin is calculated at the EBITDAR level (Earnings Before Interest Tax Depreciation, Amortisation and Rent), having taken the data at the time of valuation/transaction. Profit margin levels have been relatively static since 2012 and the data, whilst showing some increases, remains largely unaltered over the last year (Figure 7). Profitability in the personal care sector has generally been below the 10 year average of 31.6% since H1 2011, breaking through only in H2 2013 and again now, standing at 32.0% in H1 2015. This represents a 0.9 percentage points increase from H1 2014. Nursing profit margins fell below the 10 year average of 29.6% in H1 2012 and have yet to recover. The current level stands at 28.9%, up 0.2 percentage points on H1 2014. 9 Nursing and Personal care sectors ebitdar Colliers View Our two year rolling average indicates that operators have largely been able to maintain levels of EBITDAR. Going forward it is possible that more recent increases in costs and minimal uplifts in publically funded fees will start taking more of an effect, with the shadow of the National Living Wage also adding pressure. Operators will need to consider how they deal with these pressures and, if necessary, make adjustments. For instance, some operators are considering not paying staff for breaks. We would expect that those operators that have focused on the self-funding market and have economies of scale may be less affected and, as ever, the quality of the local manager will be key. Nicolaus White Senior Surveyor | Healthcare Personal care profit margins increased 0.9 Nursing care increased 0.2 Profit margins in both sectors generally static since 2012 since H1 2014 since H1 2014 EBITDAR percentage points percentage points
- 10. Occupancy Rates Specialist care occupancy levels reached a peak in H2 2007 of over 97% but fell by over seven percentage points to below 90% in H2 2012 (Figure 8). Since then, rates have slowly increased and have hovered around 92% for the last year. Occupancy levels now stand at 91.9%, which is higher than both the personal and nursing care sectors. Average Weekly Fees Whilst specialist sector average weekly fees have increased over the last year (currently standing at £1,497 pppw), they have generally fared poorly in comparison to the elderly care sector in the longer term (Figure 8). Since the base year, nominal fees have increased by 41.6% (the lowest of the three sectors) and are static in real terms against the positive, if modest, increases seen in the elderly care sector. There are, however, positive signs, with fees increasing in real terms over the past two years against generally falling levels in elderly care. Key Performance Indicators Colliers View The specialist sector continues to be the hardest hit of the three. Whilst fees and occupancy levels have rallied in recent periods, the overall trend remains downwards and profit levels continue to fall. The sector has been impacted by a move towards supported living for some lower dependency service users, with those who remain in traditional care settings often being of higher acuity levels. Whilst this shift in dependency levels is being seen in increasing staffing costs, it has yet to have a significant impact on the fee levels being secured from financially constrained local authorities. Adrian Ilott Director | Healthcare Figure 8 86 88 90 92 94 96 98 0 200 400 600 800 1000 1200 1400 1600 H203 H104 H204 H105 H205 H106 H206 H107 H207 H108 H208 H109 H209 H110 H210 H111 H211 H112 H212 H113 H213 H114 H214 H115 £s Source: Colliers International, Haver Analytics Specialist Occupancy Rates Specialist Nominal Fees Specialist Real Fees 10 specialist care sector This section of the paper provides analysis of the specialist care market, focusing on homes catering for adults with long-term physical and learning disabilities.
- 11. Payroll and Non-Payroll Costs Payroll costs have been rising steadily since 2006, increasing by 11 percentage points, to currently stand at 55%, the highest level we have seen. Non-payroll costs have mirrored the elderly care sector, generally increasing since 2009 to currently stand at 15.8% (Figure 9). EBITDAR (Profit Margin) Profit margins in the specialist sector continue to be under significant pressure, driven down by rising costs (Figure 9). Profit levels saw a fall of 2.2 percentage points over the past year to stand at 29.3% (H1 2015). Profit margin levels are now sub 30% for the first time in our dataset and have fallen over 11 percentage points since 2007. specialist care sector Key Performance Indicators Figure 9 £s 0 10 20 30 40 50 60 H203 H104 H204 H105 H205 H106 H206 H107 H207 H108 H208 H109 H209 H110 H210 H111 H211 H112 H212 H113 H213 H114 H214 H115 Source: Colliers International Payroll Costs as a % of Total Revenue EBITDAR as a % of Total Revenue Non-Payroll Costs as a % of Total Revenue 11 Occupancy rates continue to show signs of recoverY Fees have increased 6.2% Wage costs have increased 10.9 Non-payroll costs have increased 4.4 Profit margins have fallen sub 30% since H1 2014 for the first time in our data set percentage points since H1 2006 percentage points since H2 2008
- 12. conclusion Nursing and Personal Care Our KPIs across the elderly care sector are relatively positive. Occupancy levels have generally been increasing, although significant fee uplifts have been more elusive. Operators continue to control costs well, resulting in increasing EBITDAR levels, particularly in the personal care sector. Specialist Care The specialist care sector has seen more challenges, with significant falls in occupancy levels since the start of our dataset and fees which are static in real terms. Whilst signs are more positive in the past couple of years, the twin impact of rising payroll and non-payroll costs has pushed profits down to the lowest levels seen in our dataset. The sector appears to continue to struggle to secure fees that reflect the acuity and care needs of service users. 12 conclusion
- 13. INVESTMENT MARKET COMMENTARY and OPERATOR’S VIEW INVESTMENT market COMMENTARY and OPERATOR’S VIEW Investment Market Commentary Healthcare assets like other ‘alternative’ asset classes remain on the radar for yield hungry investors, both domestic and international. In fact, over the last several years, interest in commercial residential classes as a whole (care homes, student accommodation, hotels) has seen an extraordinary increase. From 2005 to 2010 this group comprised less than 5% of all UK direct property investment. Since 2010 it has ranged between 6% and 8% and if year-to- date figures are extrapolated to year end, 2015 may see this percentage move into double digits possibly reaching 15% of the total direct property investment. As in the mid-2000s, interest is driven in part by investors unable or unwilling to compete for assets in the traditional commercial sectors (industrial, office and retail) as well as a by a desire for higher yields. However, prime care home yields, like other related assets, are now moving in tandem with other prime segments with a diminished differential. Deals this year have ranged from 4.75% to 5.5% for the best assets. This is due in part to the ‘weight of money’, but interestingly, it suggests that the prime parts of the care home sector may be simply more familiar to investors who have over the years developed a deeper understanding of the operational characteristics of the sector as well as a better proportioned view on the risks. The sector as a whole now finds itself buffeted suddenly by the new ‘living wage’, but for stronger operators, this may be a cost that can be accommodated and give fresh impetus to further consolidation and modernisation of the sector as a whole. National Living Wage An Operator’s View Kingsley, like most other well run operators, have payroll costs of c. 50% of income. The staff are our biggest asset; investment in training and development, along with a good pay package is very important for our partnership with staff. It keeps them in the jobs, motivates them and you are able to retain them for the longer term. At Kingsley, we don’t spend too much on agency staff as it is costly and there is little or no commitment from them to the employers. Our pay rates are well above the industry pay rates and the effect of the National Living Wage is likely to be minimal. As a group, our annual exposure is estimated to be about 3.8% more on our existing payroll cost. In my view, the homes most at risk are the smaller ones which are predominantly local authority funded and only pay staff minimum wage at present. Daya Thayan CEO | Kingsley Healthcare Dr Walter Boettcher Director | Research and Forecasting 13
- 14. RESEARCH METHODOLOGY Colliers International specialises in all aspects of the healthcare property and business sector. The team of experienced professionals provide a wide range of valuation, transactional, investment, consultancy and litigation related services to a variety of clients, from multi-national healthcare and finance corporations to individual operators. This research is based on data drawn from both formal accounts and unaudited management accounts submitted to support valuations and transactional activity. The data is treated confidentially and there are safeguards in place to protect the records of individual clients. Accordingly, this research paper differs from most other published data which typically relies on informal surveys and informal comments. All data used in this research report has in addition been diligently checked by the Colliers International Healthcare team in the course of our valuation and transactional activity. The research results, therefore, are indicative of real trends in the market. The data for this paper covers over 5,000 records across a range of different care providers, including corporates and single home operators and consists of nursing and personal care homes in the long-term, elderly and specialist sectors. The data covers the whole of Great Britain and is therefore representative of the country as a whole. Unless otherwise stated, the data covers a moving two data period average, so for the most recent period ending June 2015 (H1 2015) the data covers the period from H2 2013 – H1 2015. This two year rolling average has been adopted to help smooth fluctuations caused by the wide variety of actual businesses we analyse in any one period. We also remove ‘outliers’ and weight each of the KPIs by the number of beds. RESEARCH METHODOLOGY Disclaimer: This report gives information based primarily on Colliers International data, which may be helpful in anticipating trends in the healthcare property sector. However, no warranty is given as to the accuracy of and no liability for negligence is accepted in relation to, the forecasts, figures or conclusions contained in this report and they must not be relied on for investment or any other purposes. This report does not constitute and must not be treated as investment or valuation advice or any offer to buy or sell property. October 2015 © 14 Number of Sites 0 to 10 10 to 15 15 to 20 20 to 25 25 to 30 30 to 40 40
- 15. 502 OFFICES IN 67 COUNTRIES ON 6 CONTINENTS 199 Asia Pacific 24 Latin America 108 EMEA 140 USA 31 Canada Colliers International 15
- 16. Colliers International 50 George Street London W1U 7GA Tel: +44 20 7935 4499 Healthcare Adam Lenton Head of Healthcare +44 20 7487 1994 adam.lenton@colliers.com Adrian Ilott Director | Healthcare +44 20 7487 1616 adrian.ilott@colliers.com