Market Update: May 2024 – Private Healthcare Sector

23 May 2024

We recently conducted an updated analysis of our data relating to the UK private healthcare market, primarily focusing on physiotherapy, osteopathy, aesthetic medicine, podiatry, and psychological services. This more extensive dataset shows some developments since our last market update in January 2024, which was focussed on primarily the Physiotherapy sector.

It is important to note that this data is still based on a relatively small dataset (110 businesses) and changes in the data are likely due to the increase and broadening of the dataset rather than indicative of a particular trend. It is also important to note that this dataset is from business owners using our business saleability and valuation calculator tools and therefore may not be reflective of the industry as a whole. Nonetheless, we will continue to share periodic updates and highlight any notable trends we observe.

Financial Performance

There is a significant increase in average turnover and profit, which may reflect the growing demand we have seen anecdotally across private healthcare in the past 12-18 months. However, the slight decrease in net profit margin indicates rising operational costs.

Operational Metrics

Owners in the sector continue to take on a significant revenue generation role in their businesses, which may impact the saleability and exit value due to high owner involvement.

Business Valuation

The above is based on estimated valuations from our valuation calculator tool. An average exit multiple of 4.4x adjusted EBITDA is broadly aligned with what we are seeing in the market for completed transactions, most of which have fallen within a range from 2.5x to 6x. This demonstrates sustained investor interest and confidence in the sector.

Technology and Staff Utilisation

While the adoption of electronic databases seems to have reduced, this statistic is more likely linked to the dataset size and the nature of those submitting data (often those close to retirement and not looking to invest in new technology). Anecdotally, we are seeing more practice owners embrace technology as a way to enhance saleability and help future exits. We are continuing to see a higher proportion of practices that choose to employ their staff rather than engage associates, which indicates a shift towards more stable employment models.

Expansion and Facilities

The increase in multi-clinic operations shows progress in scaling businesses, although the percentage of practices offering gym access remains relatively low, perhaps due to the investment required and the premium associated with space.

Contract Relationships

The percentage of practices with NHS and corporate contracts remains relatively low. Anecdotally, we are seeing a shift from reliance on private medical insurance, intermediary, and contract-based work to practices becoming more reliant on self-funding clients due to better margins and high demand.

Sector Insights

Compared to January 2024, the private healthcare sector has shown notable growth in turnover and profit. The increase in employed staff suggests a move towards more structured employment practices, aligning with the broader trend of preferring contract security. However, the decrease in net profit margin indicates rising costs and potential areas for improvement in operational efficiency.

Conclusion

The UK private healthcare market continues to demonstrate strong financial health and growth potential. The increased turnover highlights increasing demand, although there may be challenges maintaining high net profit margins and expanding facility offerings. There are significant opportunities for business owners to innovate and expand, particularly through investing in multi-clinic operations and better equipped facilities. As the sector continues to evolve, these areas represent promising avenues for both existing and new market entrants to achieve long-term success.

If you are considering your exit and want advice on boosting saleability and valuation, please reach out to the Verilo team for a free discovery session.

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