FIGURE 9: SPECIALIST CARE COSTS & PROFITABILITY


Payroll costs % %


10 20 35 40 50 60


0


H2 03


H1 04


H2 04


H1 05


H2 05


H1 06


H2 06


H2 07


H1 08


H2 08


H1 09


H2 09


H1 10


H2 10


H1 11


H2 11


H1 12


H2 12


H1 13


H2 13


H1 14


H2 14


H1 15


H2 15


H1 16


H2 16


H1 17


Non-payroll costs % EBITDAR %


PAYROLL AND NON-PAYROLL COSTS


Over the last ten years, payroll costs have been generally rising from lows of 45.0% to a peak of 56.5%. Over the last year, wage costs have risen 0.3 percentage points to stand at 56.0%. This is consistent with the elderly market, with all sectors seeing an increase over the last year.


Non-payroll costs have seen a modest increase, rising 0.1 percentage points to 14.9%. This follows a 1.0 percentage point fall the previous year and is counter to the stable picture or small falls seen in elderly care (Figure 9).


EBITDAR (PROFIT MARGIN)


Profit margins in the specialist sector have fallen by 0.5 percentage points over the year to 29.1%, reversing the small recovery seen in 2016. They have now remained sub 30% for the last five periods, since dropping below this level for the first time in our data set in H1 2015 (Figure 9).


Over the last five years, profit levels have fallen over six percentage points, largely as a result of rising wage costs, showing the continued challenges faced by the sector.


OUR KPI DATA FOR THE YEAR SHOWS THAT THE NURSING SECTOR HAS SEEN GOOD LEVELS OF FEE GROWTH; HOWEVER THERE WAS NO SIGNIFICANT CHANGE IN THE PERSONAL CARE SECTOR.


THE CHANCELLOR’S BUDGET ANNOUNCEMENT OF AN ADDITIONAL £1BN OF SOCIAL CARE FUNDING FOR 2017–18 IS OBVIOUSLY WELCOME NEWS. HOWEVER, WITH VARIED DEMAND FOR THIS MONEY, IT REMAINS TO BE SEEN HOW MUCH OF IT WILL FIND ITS WAY TO INCREASES IN ELDERLY CARE FUNDING.


THE RISES IN NURSING FEES SEEN IN OUR DATA ARE LIKELY TO HAVE BEEN BE IMPACTED BY THE RECENT INCREASE TO FNC CONTRIBUTIONS, WHICH HAD THE BENEFIT OF BEING PAID DIRECTLY TO NURSING HOMES.


WITH A VERY REAL DIVISION BETWEEN HOMES WHICH ARE RELIANT MAINLY ON LOCAL AUTHORITY OR PRIVATELY FUNDED CLIENTS, IT IS ESSENTIAL THAT THE FUNDING OF THE SECTOR REMAINS THE SUBJECT OF FOCUS.


ADRIAN ILOTT DIRECTOR | HEALTHCARE


COLLIERS INTERNATIONAL | HEALTHCARE MARKET REVIEW 2017


09


Source: Colliers International


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