EBITDAR (PROFIT MARGIN)


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


Profit margins declined in both sectors in our last report and whilst the trend continues this year for personal care, nursing care has seen a significant increase over the year to H1 2018 (Figure 7).


The personal care sector saw profit levels fall in both periods covered by this review, dropping 0.7 percentage points over the year to stand at 30.1% in H1 2018. EBITDAR levels have been below their 10-year average for the last three periods and are now matching their previous low seen in 2011. Whilst it is clear the sector is still seeing a challenging trading environment, in


actual ‘cash’ terms - over the last year at least - there has been an increase in apparent profitability when we apply profit levels to the ‘total income’ suggested by the KPIs.


The nursing sector has reversed the small fall noted last year in the six-month period to H2 2017 and has showed a marked improvement in H1 2018; over the year, EBITDAR levels increased 1.3 percentage points to 29.3%. Whilst profit levels are still below their 10-year average, the gap has now closed to 0.2 percentage points. Applying profit levels to ‘total income’ again, the nursing sector has achieved increases in ‘cash terms’ over both a one and two-year timeframe.


Despite the apparent increases notionally seen in cash terms, the elderly care sector still faces challenges in terms of percentage profitability. Despite the recent uptick in performance noted in the nursing sector, both datasets are below their respective 10-year averages and have fallen between 3.3 and 3.6 percentage points from the 10-year highs noted in 2009.


FIGURE 7: EBITDAR PC


22.0 24.0 26.0 28.0 30.0 32.0 34.0 36.0


PC 10 yr average


NC


NH 10 yr average


The CPI Index shows the trend based on average food costs in 2002 (base year) Source: Colliers International, Haver International


KEY POINTS NURSING CARE


HAS RISEN 1.3 PERCENTAGE POINTS SINCE H1 2017


PERSONAL CARE


HAS FALLEN 0.7 PERCENTAGE POINTS SINCE H1 2017


BOTH SECTORS REMAIN BELOW THEIR RESPECTIVE 10-YEAR AVERAGES


14


HEALTHCARE MARKET REVIEW 2018


%


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 H2 17 H1 18


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