In its assessment of the childcare market it has included profiles of the leading nursery chains, based on the league table in Nursery World's supplement Nursery Chains. Key Note looked at the corporate strategy of the companies, their profitability and any recent developments such as sales, acquisitions, newly-built facilities and future plans.
The report concluded, 'It is likely that the next five years will see the closure of many of the smaller nurseries and chains, with the larger companies being able to adapt to future needs.'
At the top end of the market, Asquith Court recorded a pre-tax profit of Pounds 5.6m on a turnover of almost 33.1m in the year ending February 2003. It recently merged with Kidsunlimited which, according to the Key Note research, registered a pre-tax loss of 1.3m, compared with losses of 1.6m the previous year.
Phil Rhodes, chief executive of Asquith Court, said the losses were the result of Kidsunlimited's 'aggressive opening programme' which had seen many new nurseries starting up.
Andrew Fitzmaurice, chief executive of Nord Anglia, which recently acquired Leapfrog and the ailing Jigsaw chain, echoed the view that it was important to place a company's financial results in the context of its expansion strategy.
He said, 'If you open a nursery it is difficult to fill up straightaway.
Most people say that after three years a nursery reaches maturity. Until you reach that point, it's a bit unfair to say that is how a nursery is performing.
'If a company has a lot of new nurseries that will unnaturally depress their overall result, their overall profit. If I was going to assess whether a nursery group was profitable, I would want to know how many are mature within the portfolio.'
The Key Note report said that Nord Anglia Nurseries had reported increased turnover of 3.9m with a pre-tax loss of 682,000. The figures do not reflect the purchase of Leapfrog for 60m and Jigsaw for Pounds 13.3m.
Teddies Nurseries, which is part of BUPA Childcare and is currently up for sale, had losses of 1.6m on a turnover of 11.4m. This compared with a pre-tax loss of 229,000 on a turnover of 8.6m in the year ending December 2002.
Teddies has opened four nurseries since September last year and refurbished 15, which, together with management costs and increased insurance premiums, have contributed to its pre-tax loss.
Just Learning, which has grown both through acquisition and the building of new nurseries, recorded profits of 1.9m on a turnover of almost 11m, up from 1m the previous year. A new nursery opened in Bridgend this summer, while further openings are planned in Andover and at Maidstone Hospital in January next year.
Alan Bentley, a director of the Childcare Corporation, which does not feature in the Key Note report, said that it will take only a small change in the birth rate to produce dramatic effects on the childcare market.
While ten years ago there was a chronic shortage of childcare places, he said, the gap had now closed, and where there was over-provision the issue of quality would be crucial. 'The bottom end of the market will erode quite badly,' he predicted.
He emphasised that the spate of mergers and acquisitions meant that 'this year has produced the most extraordinary changes of all'. And he warned that the impact of Government initiatives on the private nursery sector may be most dramatically seen in shortages of trained staff.
