Nursery Chains 2021: Overview - Carrying on
By Charlotte Goddard
Tuesday, March 2, 2021
Some chains have carried on expanding during the pandemic, and while many owners have felt the impact of the crisis, there remains hope for the future. By Charlotte Goddard
The pandemic has impacted every aspect of early education, from finances, occupancy and funding to staff well-being and child development.
In some cases, Covid-19 has speeded up trends and developments that were already in progress, such as meeting an increasing demand for flexibility from parents. In others, the virus has been a catalyst for lasting change: nursery groups that have moved some training online, improved communication with parents and adopted new technology, hope these changes will continue to be effective even after restrictions have been lifted.
‘We won’t allow communication to stop just because we don’t have to do video calls any more,’ says Andy Morris, executive chairman of the Family First group. Meanwhile, Stuart Graham, operations director at Monkey Puzzle Day Nurseries, says that while some face-to-face training will resume when possible, the lessons learned from online provision will feed into future training, as it is often more convenient for practitioners.
There is no doubt that many nursery groups are taking a hit financially, as parents keep children at home for the duration, or remove them for good due to job losses. There is confusion over whether nurseries are allowed to claim funding for children on their books who are not currently attending due to parents’ concerns or other issues.
‘We are not sure about funding from local authorities – will they pay for children if parents choose to keep them at home?’ says Linda Mills, head of childcare at Welcome Nurseries [speaking prior to the recent census]. ‘This is still a grey area and not all local authorities are paying if parents choose to keep children at home.’
THE CHILDCARE MARKET
As a widely shared quote has it, we are all in the same storm, but we are weathering it in different boats. And while individual settings in some nursery chains may be struggling, others may be doing better, with contributing factors including location, local demographics and access to technology.
Groups such as N Family Club, MiChild, Family First and Welcome Nurseries are still expanding, opening and purchasing new settings throughout the pandemic. MiChild, for example, which grew from zero to 18 settings in around 18 months, made its most recent acquisition in October 2020, while Welcome Nurseries had acquired 28 nurseries by the end of January. The group has more acquisitions in the pipeline and wants to grow to 85 nurseries by the end of this year.
Ms Mills says the pandemic did not affect acquisition plans. ‘In March  when the Government announced full lockdown, we had a short period where we thought this will impact negatively on what we want to achieve, but we are finding it has not had a detrimental impact on purchasing the settings,’ she says.
The childcare market remains robust, says Andrew Steen, sales and marketing director at Redwoods Dowling Kerr (RDK), especially when compared with other sectors. ‘Private-equity firms who might be exiting hospitality are looking at childcare and saying “this is a pretty Covid-resistant area”,’ he says. ‘They see that some settings are making small profits or at least breaking even, during a very challenging once-in-a-lifetime situation.’
RDK transacted 60 nursery settings last year. ‘Demand is still there, and we continue to book ten to 15 virtual viewings a day, progressing deals via Zoom,’ says Mr Steen. The market is not entirely driven by large chains, he adds. ‘There are still good-quality single- and double-site owners looking to expand as well.’
‘The nursery sector remains investable,’ agrees Arun Kanwar, partner at Cairneagle Associates. ‘The sector has shown a level of resilience that others have not. Among others, infrastructure firms are investing in childcare, when in the past infrastructure has been seen as telecoms, transport and so on – they see [childcare] as social infrastructure, getting people back to work.’
There will be a particular flurry of activity in the first months of 2021, as sellers attempt to avoid mooted changes to Capital Gains Tax, although this may be deferred until next year.
After campaigning from business owners, nurseries were included in business rates exemptions during the pandemic, and a business rates holiday was granted for one year from 1 April 2020. However, nursery owners such as Cheeky Monkeys proprietor Debbie Moliterno are concerned about whether or not this will be extended.
Overall occupancy is still down, with a snapshot National Day Nurseries Association poll finding nurseries had a third fewer children in January 2021 compared to this time last year.
However, it is a mixed picture and depends strongly on local demographics. Tiggers Nurseries, with settings in Cirencester and Tetbury, found that even when looking only at key workers, occupancy was 80 per cent. ‘Therefore, the Government’s decision to keep nurseries open for all does not have that much of an impact on us,’ says Theresa Lang, managing director.
With 65 settings across the country – three of which opened during the pandemic – Monkey Puzzle Day Nurseries has a good overview of the factors that can help nurseries survive and thrive through challenging periods. ‘Geography has a part to play,’ says Mr Graham. ‘Not just the overall location but the specific demographics within a mile or so of your setting. We have found the nurseries that are most resilient are those close to centres of housing, while those centred around business parks and commercial areas have been impacted.
‘We have seen parents switching nurseries during the pandemic – you might think they would want stability, but they want to have their children closer to home.’
With occupancy still down, even though nurseries are allowed to open to everyone in this third lockdown, buyers and sellers are having to be more innovative in their approach. ‘Current and historic finances are not necessarily a representation of what will happen in the future, so buyers are having to be creative. They are saying “we will pay this now, and if you get occupancy to this level by, say June or September, we will pay you this much more”. Some sellers are more open to that,’ says Arun Kanwar.
The market dynamic has changed since 2019 and sellers can’t expect to achieve the same kind of prices as we were seeing before then, says Mr Kanwar. However, he adds, although average prices have fallen, ‘really high-performing assets that had a very good Covid are as attractive as they were, and those with sustainability, ability to perform and grow and add value can still demand very high pricing’.
Nursery groups have had to focus on a new way of working. Tiggers Nurseries (pictured right), for example, has faced extra challenges around staffing when staff family members have symptoms of Covid. ‘Nurseries must still maintain their staff:child ratios, so that in itself presents a major problem,’ says Ms Lang.
The group has introduced stringent Covid-19 risk assessments, and employs cleaning staff separate to the workforce. ‘We take staff temperatures daily and instruct staff not to mix outside of the nursery settings,’ says Ms Lang. ‘Since the new strain of the virus, [staff have] begun to use visors.’
Many chains are investing in testing equipment to keep staff and children safe. ‘We buy in tests so staff don’t have to go to the walk-in centres,’ says Cheeky Monkeys’ Ms Moliterno, who has even signed up to train as a vaccinator.
The Family First group has invested in fogging machines that allow rooms to be cleaned thoroughly every night. Every setting has testing equipment and staff are tested when they want to be, or if there is an issue with their bubble. ‘We do all our own testing because we didn’t want to rely on the Government,’ says Mr Morris.
Nursery groups are well-placed to have an overview of the impact of the pandemic on our youngest children. ‘It has definitely impacted on their well-being,’ says Welcome’s Ms Mills. ‘We track our children, and those that did not come back until September 2020 had regressed in some areas of learning, especially PSE, where they had not been interacting with their peers. Six months out of a two-year-old’s life is a long period of time.’
The group put a structure in place to ensure children not able to attend were still able to interact with practitioners. ‘We did a lot on social media, with activities and stories every day for the children which they could watch from home,’ says Ms Mills.
‘For some children there will be a learning gap, but it is a gap that can be bridged with focus, and providers will work to achieve the best possible outcome for the child,’ says Monkey Puzzle’s Mr Graham.
Outdoor spaces have become increasingly important, both to stop the spread of Covid and to support children’s development. ‘People say nurseries are cold because we are leaving the door open, but a lot of children are outdoor learners, so setting outdoor areas up correctly is vitally important, if the child is wrapped up safe and well,’ says Ms Mills.
Relationships with parents
Another factor in a setting’s resilience has been relationships with parents.
‘Those nurseries that have performed the best financially have been those that have managed communication with parents well, often using nursery software and parent communication tools,’ explains Mr Graham.
‘Parents have appreciated these regular updates,’ he adds. ‘We have seen parents more aware of the importance of early education and their part in it, more willing to engage in sharing observations, asking questions and so on.’
Nurseries have turned to technology to show potential parents around settings in virtual tours, and this may well continue as an option beyond the pandemic. ‘We may start to see parents base their decisions more on the nursery’s environment, what it looks like when it is empty, than on interactions between children and practitioners,’ says Mr Graham. ‘That would be a real shame for those settings that are not housed in the most beautiful environment but offer remarkable care.’
Chains have had to change their policies on nursery visits and settling-in periods. Some are offering virtual tours, but Welcome Nurseries is allowing parents to visit when children are not at the setting. ‘At the moment we are allowing parents to visit for ten minutes, for a quick peek around, following strict guidelines,’ says Ms Mills. ‘All discussions are then carried out through Zoom.’ Home visits have been put on hold.
Reputation has become increasingly important as a marketing tool. ‘We are finding more parents are registering children without visiting the nursery, through word of mouth,’ says Ms Mills.
‘The outlook for the sector is not without challenge. There will be a shift in employment levels – retail in particular won’t look the same post-Covid – and it could be argued that a lot of the job losses will be more heavily weighted to areas of deprivation. There will be more distress on average for nurseries not catering for dual-income professionals – those catering to affluent families who are not going to lose their jobs should fare better on average.’
Small group: Cheeky Monkeys
Cheeky Monkeys is a small nursery group with two settings in Hertfordshire and Bedfordshire. Proprietor Debbie Moliterno also owns two fashion boutiques in Bedford, so has been doubly impacted by the pandemic. She is angry at the way the Government has treated the early years sector. ‘I voted for Boris, but I wouldn’t again,’ she says. ‘I am furious with these MPs. If they were in the EYFS, they would need support around Understanding the World.’
Funding has been a particular issue. ‘Our early years adviser told us no nursery should be disadvantaged by the pandemic, but we have been,’ Ms Moliterno says. ‘For my Bedford setting, in August 2019 I had £20,000 worth of funding income. In 2020 it was £4,000. The difference is because parents of children who were supposed to start in September decided to keep them at home. Luckily, I was able to pick up a small grant or I would have had to close.’
While schools are struggling with more parents sending children in than during the first lockdown, Ms Moliterno is seeing the opposite. ‘When we first went into lockdown, the Hertfordshire nursery filled up, parents wanted to send their children, but now parents don’t want to, they are scared,’ she says.
Both settings are in areas of relative disadvantage, and this is set to get worse, with many parents losing their jobs, she adds. ‘As a small nursery we went by the book, and did not charge top-ups; we do not have spare money.
‘Wherever we look it is costing nurseries a fortune. I bought a portable sink, for example, so children could wash their hands properly.’
Her settings have also had difficulty getting enough food delivered to carry on providing meals, and have asked parents to send in packed lunches, enabling one of the cooks to be furloughed.
Large group: Monkey Puzzle Day Nurseries
For operations director Stuart Graham, the franchise structure of Monkey Puzzle Day Nurseries’ business has helped its settings through a difficult period. ‘Managers have been able to make decisions quickly, but having a support structure up above to help them make these decisions has been useful in terms of helping them understand and interpret Government guidance, and sharing their collective experience and best practice,’ he says.
‘The early years sector is particularly strong at sharing best practice, it is what makes this a great sector. However, during the pandemic, early years social media groups provided a space where a lot of uncertainty and confusion was created – we are able to offer a safe space to our nurseries to cut through some of the confusion.’
The physical environment of Monkey Puzzle settings has also been impacted, with changes to support operating with bubbles, such as the erection of walls, as well as rearrangement of furniture and resources. ‘These environment changes coupled with increased cleaning have led to a significant fall in other communicable illnesses among the children,’ says Mr Graham.
One silver lining of the pandemic has been the way it has brought the Department for Education closer to the early years sector, he adds. ‘Monkey Puzzle Day Nurseries has benefited from that closeness with the DfE, along with other large providers. There is still further to go, but this period has improved the position.’
For the near future, the well-being of practitioners has to be a focus, both for Monkey Puzzle and for the Government, Mr Graham says. ‘The Government needs to work with providers in repairing the feelings of those working in the nursery sector for the future health of the sector. The future can be successful for providers if the Government takes time to understand what they do and the challenges they face.’
Medium group: Family First
The Family First nursery group has not let the pandemic slow down its expansion, acquiring five settings in the past six months, bringing the total to ten.
‘We are in the middle of buying another nursery group of six nurseries and a standalone setting right now, and hope to be up to 20 by the end of April,’ says executive chairman Andy Morris, previously chief executive and managing director of Asquith Nurseries.
Mr Morris – who was travelling back from New Zealand at the start of the pandemic – realised the implications immediately. In response, the group grew its marketing team and invested in IT equipment. ‘I wanted our IT roll-out done by the end of February, for every nursery to have the capacity to have large screens, the ability to video-conference, and to be equipped with laptops and mobile phones,’ he says. This equipment has allowed practitioners to stay in contact with their key children over lockdown, doing activities with them when they could not come into the setting.
Keeping staff morale high has also been a key focus. Mr Morris took his camper van around the nurseries in the group, allowing him to visit the settings without having to use their facilities.
‘I had it dressed up for Christmas with Santa on the front,’ he says. ‘As a chief executive, you have got to react quickly, and you have got to be in there with staff.’
Karaoke Friday brings the group’s managers together virtually every week – a favourite track is Sweet Caroline – and there have also been crazy hat days, dress-up days, and ‘wear the uniform of your first job’ days. ‘It is about breaking the pressure,’ says Mr Morris. ‘If you are serious all the time, it will break people, you have got to have a laugh.’ It is not just about the fun things though – staff are also getting a 3 per cent salary increase.
‘Our priority is always the welfare and well-being of our staff,’ he adds. ‘We have temporarily reduced nursery operating hours (with resounding support from our parents), we provide regular Covid-19 testing within the nursery and have enrolled our staff on a new workplace incentive scheme.’