FIGURE 6: LONG-TERM ELDERLY ENERGY COSTS £s


10 12 14 16 18 20


0 2 4 6 8


The CPI Index shows the trend based on average energy costs in 2002 (base year). 02 03 04 05 06 07 08 09 10


11 YEAR 12 13 14 15 16 H1 17 NH actual PC actual CPI Energy Index


Energy costs as a whole for the combined personal care and nursing sectors continued to show pressure. Costs increased from £13.80 pppw in 2015 to £14.70 pppw in 2016, before rising again in H1 2017 to £15.40 pppw.


Whilst the variance between personal care and nursing care was relatively small in previous periods, there was a wide divergence in 2017, although when viewed on a combined basis the overall trend is more in line with expectations (Figure 6).


Since 2012, our data shows energy costs have increased slightly, however the CPI Energy Index has fallen significantly over this period, demonstrating again that care facilities are not able to make the savings that may be expected.


KEY POINTS


> Personal care has fallen 1.5 percentage points since H1 2016


> Nursing care has fallen 0.2 percentage points since H1 2016


> Both sectors below 10 year averages in H1 2017


FIGURE 7: EBITDAR %


24 26 28 30 32 34 36


22


H2 03


H1 04


H2 04


H1 05


H2 05


H1 06


H2 06


H1 07


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


PC NH


PC 10 year average NH 10 year average


EBITDAR (PROFIT MARGIN)


Profit margin is calculated at the EBITDAR level (Earnings Before Interest Tax Depreciation, Amortisation and Rent), having taken the data at the time of inspection.


Profit margins have declined in both sectors over the last year, most noticeably in the personal care sector (Figure 7).


The personal care sector saw profit levels remain static in the six-month period to H2 2016 but then showed a marked fall of 1.5 percentage points in H1 2017 to 30.8%. EBITDAR levels in the sector fell below the 10-year average in the first half of 2017 and are towards the lowest level seen over the past 10 years of 30.1%, recorded in 2011. Whilst it is too early to predict if this swing will become a longer term trend, this will be a KPI to monitor.


Nursing care saw only a small fall in profitability of 0.2 percentage points over the year to H1 2017, to a level of 28.0%. However, this follows a fall of 0.7 percentage points noted last year. Over the last 10 years, EBITDAR levels have ranged from 27.4% to 32.9% and as with the care sector, the current level noted is towards the lower end of this range.


When these profit levels are applied to the ‘total income’ suggested by the KPIs, the picture is mixed. Profit levels in the personal care sector have fallen but in the nursing sector we have seen rises in profitability. Given the broadly static level of FNC contributions in 2017, profit levels may see more pressure in the nursing sector in the future.


COLLIERS INTERNATIONAL | HEALTHCARE MARKET REVIEW 2017


07


Source: Colliers International


Source: Colliers International, Haver Analytics


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