Care sector seeks injection of executive talent

14th January 2021

By John Wakeford

The fast growing residential care sector is seeking an injection of executive talent as it tackles huge challenges including the ageing population, high staff turnover and the upgrading of its estate.

The boards of larger providers looking to further consolidate a fragmented market are now eyeing struggling sectors like hospitality and retail, which have been forced to shed senior posts in recent months, for the vision, ideas and drive they need to upskill the quality of their management.

The UK’s £16bn a year residential care sector serves 410,000 residents in 11,300 care homes. With 5,500 independent providers accounting for 84 per cent of the market, there is huge potential for consolidation.

The sector has attracted significant private equity investment in recent years, with more than £1.8bn spent in 64 retirement and nursing home deals according to PitchBook. Healthcare advisory company LaingBuisson says PE firms and funds now own 13 per cent of UK nursing and residential homes, with 56,700 beds. They include HC-One with 271 homes, Four Seasons with 203 homes and Care UK with 113 homes. But many of the independent operators who dominate the market run only one or a small number of homes.

Funding for care is split between those who self-fund (41 per cent), local authority funded (49 per cent) and the NHS (10 per cent). The average life expectancy of a resident requiring specialist nursing care is 12 months, with a weekly cost of around £900. For a residential care home resident supported by care assistants, average life expectancy is two years, with a weekly cost of around £650. Total residential care costs therefore range on average from around £50,000 to £70,000. The benchmark for self-funding is having assets above £23,250, and many people are forced to sell their family homes to pay for their care.

Like most industry sectors, residential care has had a difficult year. Two in five care homes have suffered a Covid outbreak over the past ten months, with the resulting doubling in deaths reducing occupancy rates. Costs associated with infection control including procurement of PPE, and staff sickness increasing the sick pay and agency staffing bills, have also contributed to declining margins.

But the longer term outlook for the residential care sector is healthy, with a massive projected increase in demand.

The sector has grown by 4.5 per cent since 2015 and the ageing population will undoubtedly continue to drive increasing demand for care home services. As life expectancy rises, the 65+ population in England is projected to increase by 34 per cent between 2020 and 2035 from 10.5m to 14.1m people. The Office for National Statistics has predicted a 36 per cent growth in the 85+ population alone in the decade to 2025, from 1.5m to 2m.

A report by Skills for Care published in October 2020 estimated up to 520,000 extra jobs would be needed in the adult social care sector by 2035 – an increase in staffing of 32 per cent.

But the sector faces major challenges meeting this ever increasing demand. In 2019/20 staff turnover rates topped 30 per cent and 7.3 per cent of the roles in adult social care were vacant, around 112,000 vacancies at any one time.

Almost a quarter of staff are on zero hours contracts, and with average pay for care workers in the independent sector at just £8.50 per hour the industry’s low pay reputation has traditionally hampered recruitment.

The current economic downturn has, however, seen an upturn in interest from people from a variety of employment backgrounds, many of whom who have found themselves out of work for the first time.

Whilst the number of care home beds is currently increasing, a beds crisis is looming with thousands of smaller, outdated care homes at risk of closure over the next five years according to research by Knight Frank. An estimated 70 per cent of care home facilities were built prior to 2000 and will need upgrading and refurbishment.

All this amid increasing scrutiny from both regulators such as the Care Quality Commission, which grades and issues reports on care homes, and the media, which has turned its spotlight on residential care in the wake of the Covid outbreaks.

Seeking to address all these challenges, the larger providers are now looking outside the highly regulated sector to attract new executive talent. Senior managers in industries where customer service expertise and commercial acumen are both key, are being encouraged to consider newly created executive positions in residential care.

Working on a national basis, recent executive search assignments in residential care we have fulfilled include numerous General Manager roles as well as Chief Financial Officer positions, and we have a number of similar opportunities in the pipeline.

I am keen to talk to both residential care providers looking to upskill the quality of their management, and executives who are interested in joining this vitally important and fast growing sector at such an exciting time. Please contact me for an informal, confidential discussion to find out more.

John Wakeford is a founding director of HW Global Talent Partner. With a specific focus on Financial Services, CFO, Business Transformation, Care and Hospitality, he heads the Interim business. Contact him at johnw@hwglobalpartner.com or +44 (0) 113 243 2004.

New appointments at Mars Inc

7th December 2020

Mars Inc. have announced the hiring of James Cummings as the Global VP Data, Analytics and Insights, and Sonny Dalal as Director of Business Intelligence and Analytics for Mars Wrigley.

James will join Mars in Q4 and will lead the strategy, build and execution for the new Data, Analytics and Insights organisation. James will report into Cathryn Sleight, Chief Growth Officer, Mars Wrigley.

Once again HW Global are delighted to have been able to deliver successful appointments as a trusted partner.

Sonny joined Mars on 2nd November 2020 and leads the ongoing development and transformation of the CMI function from a  BI and Analytics perspective, reporting in to the Global VP Data, Analytics and Insights, based out of the Chicago HQ.  Sonny is an energetic and inspirational leader with deep analytical and business intelligence expertise.

HW Global are very proud of the continued global search partnership with Mars Inc. and it has been a pleasure to support both James and Sonny throughout the process.

James said: “Working with HW Global was smooth and professional; the support I received through the process was first rate.”

Sonny added: “The team at HW Global was incredibly professional and transparent throughout the entire process. Very helpful and always available.’’

The HW team would like to wish James and Sonny all the very best of luck in their new roles, and we look forward to remaining in touch as they progress their careers within Mars Wrigley.

Global crisis to increase focus on executive pay

12th November 2020

By Adrian Hitchenor

The global crisis will lead to an increased focus on how executives increase shareholder value, with reward being consistently aligned to performance.

That is one of the key findings of KPMG’s newly published report ‘Directors’ remuneration in FTSE Small Cap companies’ which you can read here.

It found business impact response to COVID-19 has been varied, with many companies adjusting their executive pay downwards, cancelling bonuses/dividends and amending LTIP grants to manage costs. The report says firms now need to turn their attention to planning for the future and longer term remuneration strategy

Executives making tough decisions around salaries, jobs, furlough and the future of their staff has led to increased public scrutiny on executive pay and concern that any reductions in remuneration packages this year are just temporary or superficial gestures, it found.

With wider questions being raised around the ‘fairness’ of pay, KPMG says it expects calls for companies to look more broadly at how all their people are valued and rewarded – both those in the FTSE 350 as well as FTSE Small Cap and AIM listed companies.

The report says: “From an investor perspective, there will be sharp focus on how executives are going to rebuild and then further increase shareholder value. Guidance from institutional investors has been clear that reward must consistently align to performance. The role of the Remuneration Committee Chair, in terms of applying discretionary judgement to outcomes, will become ever more important.

“With…2020 being the year that many companies will be required to renew their remuneration policies, we believe that there is a unique opportunity to look more inwardly at how executive pay has been set and critically analyse if this remains appropriate for the recovery period ahead, in particular as businesses prepare for the next challenge on the horizon in the shape of Brexit.”

Current executive pay levels detailed in the report are based on pre-COVID-19 data published by FTSE Small Cap companies for the 2019 calendar year.

Key findings included:

  • Median basic salary increases continue to be moderate for the majority of Small Cap companies at around 3%.
  • More than 35%   of directors did not receive an annual bonus, with a higher proportion than in previous years receiving less than 50%  of the maximum bonus entitlement.
  • A heavier weighting on fixed pay vs variable pay for Small Cap companies – 54%   fixed and 46%   variable compared to 39%   fixed and 61%   variable for FTSE 350 firms.
  • Performance conditions for annual bonuses continue to focus on the financial, with the EPS and TSR continuing to dominate both annual bonuses and long-term incentives.
  • The prevalence of Performance Share Plans continues to rise, as Stock Option Plans fall further out of favour.

The executive pay breakdown showed basic salary rates for chief executives ranged from £336,000 to £471,000, with total earnings between £498,000 and £1.28m.

For finance directors basic salaries ranged from £216,000 to £323,000 and total earnings were between £301,000 and £757,000. Other executive directors, including operational directors, functional directors and chief operating officers, were paid £185,000 to £296,000 basic and £317,000 to £776,000 in total.

Non-Executive Directors

Fees paid to Non-Executive Directors ranged from £44,000 to £53,000 for NEDs and £126,000 to £196,000 for Chairs.

Diversity

The report also looked at diversity, concluding “there is still significant work to do in this area” for Small Cap companies. Only 2%   of CEOs, 4%  of Finance Directors and other Executive Directors, and 3%   of Board members were female.

Reading the report I was in full agreement about the need for Boards to focus on how executives will add value. A key factor in HW Global’s success is that for us it is not just about filling positions; it’s about increasing shareholder value by introducing individuals who are fit for purpose and culturally aligned.

We particularly enjoy acquiring a thorough understanding of the values and strategic ambitions of the company we are engaged with; this helps us find the perfect fit.

Echoing KPMG’s findings, we always urge clients to carefully consider diversity during an executive search assignment; research shows that firms whose leadership teams best reflect their customer base outperform their competitors on profitability.

In part due to the pandemic, and generally as companies look to be more efficient and lean, there will be more executives looking for fewer available positions and selecting the right individual for a role will be ever important.

Adrian Hitchenor is a Founding Partner at HW Global Talent Partner with a specific focus on CFO, consumer and private equity. Contact him at adrianh@hwglobalpartner.com or on +44 (0) 7711 771 059.