20200323 Cairneagle LaingBuisson UK Childcare Market ... · 3/23/2020 · CAIRNEAGLE LAINGBUISSON...

This report is solely for the use of client personnel. No part of it may be distributed, quoted, or reproduced without the prior written approval of Cairneagle Associates. This material was prepared by Cairneagle Associates for use during an oral presentation ; it is not a complete record of the discussion.

Cairneagle LaingBuisson UK Childcare Market Report Launch

23rd March 2020

Arun Kanwar, Partner

2019 UK nursery market volume and value by region

2

CAIRNEAGLE LAINGBUISSON UK CHILDCARE MARKET REPORT LAUNCH

A £6.7bn market with 610k FTEs

ValueVolume

£6.7bn100%

610k FTEs

London

South East

East Midlands

East of England

North West

West Midlands

South West

Yorkshire & Humberside

Scotland

North East

Wales

Northern Ireland

Private, for-profit operators dominate the market

3


Sin

gle

site

Not-for-profitC

hai

nPrivate for-profit

Vo

lun

tary

Sch

oo

l b

ased

2019 UK nursery market value by operator typeEstimated no. of UK childcare settings in 2019

Over half of the private childcare settings in the UK are still independent

The private sector accounts for over 80% of total market value

Not-for-profitPrivate for-profit

Sin

gle

site

Ch

ain

Vo

lun

tary

Sch

oo

l b

ased

England

4

The regulatory and funding picture

Scotland

Wales

NorthernIreland

EYSFF: 15/30 hours funding for 2- and

3-year-olds

Parents

Local Authority

Government OtherNursery

An overview of funding in EnglandUK childcare regulatory bodies


Volume growth has been strong despite rising fees …

5


20

13

20

09

20

08

20

11

20

10

20

12

20

17

20

14

20

15

20

16

20

18

20

19

Estimated average weekly private rate per FTE in the UK 2009-19

Historic full day-care FTEs in the UK

20

12

20

09

20

14

20

13

20

10

20

11

20

16

20

15

20

17

20

18

20

19

UK 0-2 fees UK 3-4 fees

… but key market drivers are slightly less positive than historically …

6


DriverImpact

Past Future

Market (Demand)

Driver 1Driver 1 a = -ve

Driver 1 b = +ve

Driver 2 =/+ve +ve

Driver 3

Driver 3 a +ve =/+ve

Driver 3 b = -ve

Driver 3 c -ve -ve

Driver 4 +ve +ve

Market (Supply)

Driver 5 =/+ve =

Driver 6 +ve +ve

Regulation & policy

Driver 7 = =

Driver 8 = =/+ve

Staffing

Driver 9 =/-ve -ve

Driver 10 -ve +ve

Driver 11 = =

Driver 12 = =/-ve

What you expect for 2020How your enrolment has changed

7

… and this is backed up by operators’ experiences


29%

6%

29%

28%

24%

24%

17%

2019 enrolment2016-18 enrolment

43%

2%

> 10%

5 - 10%

1 - 5%

Flat

Decline1 - 5%

Decline 5 - 10%

18%

32%

13%

5 - 10%

> 10%

38%

2020F enrolment

1 - 5%

Flat

“We added additional capacity”

“A decline in birth rates and high competition”

“The addition of two new sites”

“We took on a new marketing company to help, especially

through social media”

“Better management of occupancy and bookings”

“Getting staff is the constraint”

“Recruitment issues meant holding back

on registrations”

“Saturation of nurseries opening

locally”

These judgements do not take into account the impact the coronavirus pandemic is having on the key drivers of the UK nursery market

8

The investment thesis for the UK nursery sector remains strong


Strong growth fundamentals

Socially responsible Internationalisation potential

Ability to raise funds & multiple arbitrage on exit

Commercial decision-making & economies of scale

Fragmentation of the market

Fragmentation of comparable marketsBreakdown of private full daycare settings by

groups and places

9


The market remains incredibly fragmented

SettingsProviders/Groups

11 to 20 settings

Places

Over 50 settings

21 to 50 settings

7 to 10 settings

5 to 6 settings

Single site

3 to 4 settings

2 settings

100% 100% 100% Market maturity

Time

Nurseries

VetsDental surgeries

Funeral

How important are the following issues?

10

They key challenges have been the same for the last two years …

Recruitment of staff

Sustainability of parent demand

Schoolification of nurseries

Increasing staff wages

Low funding rates

Sustainability of price

increases

Curriculum/inspection framework

changes

2019 survey

2020 survey


Cairneagle has observed many “under occupied” nurseries not due to a lack of demand but a lack of staff

11

Overheadsynergies/ specialisms

Procurement

BalanceSheetandcashflow

DifferentiateOffering

Sales & Marketing

Staff retention & recruitment

Bank staffing

Intelligentpricing

… group operators can navigate these challenges better than others


Navigateregulatoryenv’t

Underpinned by KPI tracking

315

60 1732

379

52

Examples of acquisitions made by some of the largest operators (by no. of settings) since 2017

12

Acquisitions have increased dramatically since 2017


Other groups consolidating the market

Source: Nursery World and Cairneagle research

Cu

rren

t n

o. o

f se

ttin

gs

Illustrative acquisition multiples, 2012-2021F

13

Is pricing overheated?


201920172012 2013 20182014 2015 2016 2020F 2021F

Large

Small

Misunderstood multiples

Bright Horizons acquires Asquith

Busy Bees acquires Treetops

“FORECAST”


Plans for the future Expansion priorities

14

Looking to the future: expansion is the flavour of 2020

Change proposition

22%

Exit sector

Expansion

0%

Business as usual

Close

Sell

Family succession

Not sure

63%

6%

4%

4%

0%

1%

UK site acquisitions

48%

UK site new openings

Capacity expansion of existing

settings

International expansion

(acquisition, joint venture

etc.)

73%

Franchising the

business

59%

27%

16%

Cairneagle Associates – About the Authors

15

Arun Kanwar, PartnerArun leads Cairneagle’s childcare practice. He joined Cairneagle from

Bright Horizons, one of the world’s leading nursery chains – where as

Head of UK Acquisitions he bought over 120 nurseries and defined the

strategy to drive synergies from scale, as well as having responsibilities for

UK and global strategy development. Arun also has experience at LEK and

PwC Consulting. Arun has an MChem in Chemistry from the University of

Oxford.

Ina TodorovaIna has a BA in Business Management and holds a Masters from the

University of Cambridge. Prior to Cairneagle, she had experience as both a

Management Consultant and a Global Strategy Analyst.

Pierce HickeyPierce holds a Management Masters from LSE and a BEng in Biomedical

Engineering from Imperial College. Prior to Cairneagle he held positions at

a training agency, two strategy consultancies, and worked as a private

tutor.


Cairneagle Associates

16

Rupert BarclayManaging PartnerE mail: [email protected]: +44 (0) 20 7036 9401Mobile: +44 (0) 7909 963 666

Arun KanwarPartnerE mail: [email protected]: +44 (0) 20 7036 9413Mobile: +44 (0) 7850 501 625

17YEARS FOCUSSED ON QUALITY AND DELIVERING

VALUE FOR MONEY

200+PROJECTS IN EDUCATION OVER THE LAST 5 YEARS

50%INTERNATIONAL WORK

Jorge AmirolaPartnerE mail: [email protected]: +44 (0) 20 7036 9422Mobile: +44 (0) 7975 882 095

3THREE TIMES WINNERS OF EDUCATION INVESTOR AWARD

Julie MercerPartner E mail: [email protected]: +44 (0) 20 7036 9405Mobile: +44 (0) 7770 936521


Cairneagle Associates LLP | Bewlay House, 2 Swallow Place, London, W1B 2AE | Telephone: +44 (0) 20 7036 9400 | www.cairneagle.com

WINNERWINNER WINNER

http://www.cairneagle.com/

20200323 Cairneagle LaingBuisson UK Childcare Market ... · 3/23/2020 · CAIRNEAGLE LAINGBUISSON...

Documents

Transcript of 20200323 Cairneagle LaingBuisson UK Childcare Market ... · 3/23/2020 · CAIRNEAGLE LAINGBUISSON...