Business Clinic
Ambitious plans for Malhotra

Not solely a care provider, the Malhotra Group has a diverse and interesting portfolio. Based in the North East, bringing together corporate ethics and family values, it operates across care, leisure and property and has just become a public limited company with a strong future vision.

Founded by Meenu Malhotra, The Malhotra Group was set up in 1991 in the North East. The care division – operating under the banner of Prestwick Care – was established in 1986. The Group now includes a second generation family member on the Board and is part of Malhotra Family Holdings which has interests in both the UK and in India.

Diverse and interesting

The company grew from a modest start, with the current Managing Director, Meenu Malhotra first setting up a number of drapery shops in the region before embarking on a rapid programme of growth.

The Newcastle-based Group’s portfolio is made up of 26 care, leisure and property companies and partnerships which have recently been brought together as one. The Group acquired its first care home in 1991 as the second business it acquired – it also acquired an old department store in Newcastle – turning the upper floors into student accommodation in 1996. Aside from the department store, the core of the business from the outset was North East-based care homes. It acquired its second home in 1996, followed by another in 1998 and then developed a purpose-built home in 1999.

From 1999 to 2005, the company diversified its portfolio in the region. It moved into property and leisure acquiring commercial properties, including prestigious properties in Newcastle city centre, developing arcades, a backpackers’ hostel and purchasing a public house.

Bunty Malhotra, Chief Executive Officer of Prestwick Care, explained the company’s original vision; ‘Although the Malhotra Group has a diverse range of business interests, the ethos of all of them is very similar – to provide the very best services and attention to detail for their clients and customers. This is particularly true in the award-winning care division where the commitment has always been the comfort, safety and wellbeing of residents, whilst preserving their dignity.’

Prestwick Care

The Malhotra Group, under the Prestwick Care brand, acquired its first care home 29 years ago, which was a small, 16-bed unit in Newcastle. The company soon recognised that this was a side of the business that could be developed alongside the company’s other interests and it has grown over the decades, though the company has had to adapt its offering to meet the changing demands of its clients.

Bunty continued, ‘Prestwick Care’s mission is to provide excellent, dedicated care with the help of a professional team to ensure the highest standards are maintained for our residents’ lives, all provided with a caring attitude and supported by our continuous effort to improve.

‘When the Malhotra Group first became involved in the care home industry it was to cater to a very different market than the one that exists today.’

With the growing acuity of individuals coming to its care homes Prestwick Care has evolved to provide a mix of both nursing and residential care. Bunty added, ‘Our speciality has become offering first class accommodation and the highest standard of living to people with a wide range of often extremely complex needs. This is all provided while having to constantly maintain the highest standards in the face of continuing cuts to care budgets by local authorities.’

The Prestwick Care homes have a broad remit, covering all registered care categories across both residential and nursing care. The long-term plan is to develop more homes with a goal of ultimately providing 2,000 beds across the North East. Future plans include the development of two new homes, one at Melton Park, Gosforth, Newcastle which is due to open in August 2015 with 67 beds and an 88 bed care facility on the site of the former Alnwick Bus Depot in Northumberland.

Recent business developments

The Group has seen turnover grow year-on-year, recent figures saw turnover increase from £19.5m in 2013 to £22m in 2014 and it is forecast to reach £25m in 2015. The Group currently employs around 1,000 people. However given the diversity of its portfolio the company decided to undertake a rationalisation process three years ago. This process has culminated in it becoming a public limited company (PLC) in February 2015. This consolidation of the business and re-registration as a PLC is part of the Group’s major five year expansion plan which should see staff numbers double by 2020. Although there are no immediate plans to float the company, the aim is for shares to be offered to the public in the future.

Bunty explained, ‘The Malhotra Group had 26 different companies and partnerships and it was agreed that it made sound commercial sense to rationalise these and bring them under one umbrella company. Becoming a PLC puts the company in a strong position going forward for future development. There are plans for the company to grow across all divisions, with the launch this year of a five year plan which should see it double in size and then be in a position to be floated on the stock market.’

Over to the experts…

The Malhotra Group has grown to a substantial size since 1991, becoming a key player in the North East. It now has ambitious plans for the future. Is there market appetite for Malhotra’s care offering with Prestwick Care to meet its ambitious growth plans? With plans to double in size in five years, with a view to floating on the stock market, could this be the beginning of another slew of listed social care companies similar to those seen in the mid-2000s with CareTech and Southern Cross? Or is the mixed portfolio the crucial aspect of Malhotra’s public offering plans? Will we see the Group become one of the sector’s major providers?

Clare Connell Managing Director, Connell Consulting

Essential that care division is managed separately

Success in the elderly care sector requires a tireless focus on quality and attention to detail. The margin pressures, recruitment challenges and high expectations of the Care Quality Commission regulator make the elderly care sector challenging for operators.

With the experience of Southern Cross fresh in people’s memories, I am not convinced that elderly care home groups should be publicly listed.

The greater reporting requirements of public companies results in a focus on short-term financial results rather than long-term investment in high quality services and caring staff.

I am also not convinced of the synergies between the diverse range of different businesses that form part of the Malhotra portfolio ranging from hostels to pubs. It is, therefore, essential that the care business is managed as a separate entity from the rest of the group.

I would also be extremely reticent about expanding any elderly care home business in the North East. The market is over-supplied with residential care homes which results in poor occupancy even in new-build services.

The only sector where I think there is demand, is for specialist dementia services as there is a growing need for these services and it isn’t possible to care for people with advanced dementia at home without 24-hour care. The care of those with dementia has attracted much media attention of late, and it is widely assumed that this market is ripe with new opportunities.

Demand for dementia services also tends to be higher in less affluent parts of the country where greater levels of smoking and poor diet can result in more cases.

Paul Birley Head of Public Sector and Healthcare, Barclays

Sensible and logical growth in current market

The Group has built up a variety of successful businesses, based on providing the very best services and attention to detail for their clients and customers. In the care homes they have focused on maintaining the highest standards. The combination of quality care and attention to detail are characteristics of a number of successful care home operators.

The market over the next couple of years will throw up a number of challenges and uncertainties for operators including staffing, the new inspection regime, the Care Act, further austerity measures plus the prospect of changes in central policy following the upcoming election.

Importantly, however, I also expect that operators who deliver quality care with an attention to detail and who don’t over-stretch their resources, will benefit over time, as quality care facilities will be needed in the future. Therefore Mahotra’s growth strategy seems sensible and logical in light of current market conditions.

However, I haven’t seen too many successful care home operators who run other businesses in their portfolio unless they are completely separate and run independently of the care home group. Too often, the other businesses can become a distraction stretching management to cover all the different companies which can result in a loss of focus. I also wonder about a market listing for a care home group.

There are only a couple of specialist care operators on the market and I still have doubts as to whether investors understand the dynamics of the elderly care sector which has been more ‘steady as she goes’ than fast expansion. It is also a sector that isn’t particularly well covered by the market analysts plus its track record over the last few years hasn’t been great – looking back there were many more quoted companies than there are today.

Tom Harrison Associate, Carterwood

Care strategy will strengthen its position

It is extremely impressive how Meenu Malhotra has driven the business from its small beginnings in 1991 to a group with a £22m turnover today.

In reference to Prestwick Care, the care home market has seen an increase in transactional activity over the last 18 or so months, with a number of new entrants to the market, particularly investment from USA REITs. This has had a positive impact on the market, which has been good for existing operators, who are benefiting from the more acquisitive market. Prestwick Care comprises a number of high quality purpose-built homes that meet the market’s ever-increasing expectations for quality accommodation, and appear to be well-placed in this regard. The only caveat is that the majority of overseas investment has been primarily in southern England; however, investors are starting to look outside the South East.

The Malhotra Group has plans to float on the stock market after the next phase of its five-year strategy. CareTech and more recently Cambian, both operating in specialist care, are good examples of successfully floated companies in the sector. The success of the Cambian flotation highlights that there is interest in the specialist market from investors; however, Cambian is one of the UK’s largest mental health providers and it remains to be seen whether a company of Malhotra’s size and business interests would be attractive to the market.

Going forward, Prestwick Care has a strategy of focusing on the development of high quality care homes, with the development of a new 67-bed care home at Melton Park, Gosport underway. If the Malhotra Group continues with its focus on new care home developments, this can only help to strengthen its position as a key provider in the North East.

Do you agree with the panel? What are your thoughts on Malhotra’s future vision? Add to the debate in the comments below. Subscription required.

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