Nursery World Webinars - Time to advanceSponsored
Monday, March 14, 2022
In partnership with Christie & Co: Nursery owners faced a bumpy year in 2021, but the months ahead bring opportunity as well as challenges. Nursery World and Christie & Co brought together a panel of experts, chaired by editor-in-chief Liz Roberts, to find out how settings are navigating the post-pandemic world.
Courteney Donaldson, managing director of Childcare & Education at Christie & Co, presented some of the findings of Christie’s recently published Business Outlook: Adjust Adapt Advance report. The nursery market is buoyant, she reported, with transactions commanding premium prices (see box). ‘Childcare and education was the standout market performer,’ she said.
Clockwise from top left: Sarah Mackenzie; Nick Brown; Ruth Pimentel; Ashwin Grover; Liz Roberts; Courteney Donaldson
2021 was a tough year operationally, but settings are now able to draw on their experience of managing pandemic-related issues, agreed the panel. ‘As the year went by we were getting to a place where it was still operationally challenging, but we were much more experienced in dealing with Covid,’ said Sarah Mackenzie, chief strategy officer at N Family Club.
The early months of 2022 continued to pose challenges, said Ruth Pimentel, chief executive at Kindred Education. ‘Settings that perhaps came off fairly lightly previously have now been hit, and we've been closing for the day, closing rooms, just to make sure that we were keeping everyone safe,’ she said.
The revised EYFS
In the middle of the pandemic came the launch of the revised Early Years Foundation Stage. In general, the panel welcomed the revisions, although there was a feeling that they did not go far enough in some areas. ‘It’s a shame that when the EYFS was revised, nobody knew that Covid was coming, because there could have been a much greater emphasis on wellbeing for children, and on personal and social development,’ said Ms Pimentel.
N Family Club had introduced its own curriculum around 18 months previously, and found this fitted well with the new framework. Ms Mackenzie said the EYFS framework was straightforward enough to ensure consistency between providers, but also gave nurseries autonomy to create their own approach.
Ofsted launched its new Early Years Inspection Framework in 2019, but with inspections put on hold during the pandemic many nurseries are only now starting to get to grips with the changes. Some settings have reported concerns that Ofsted was not taking the impact of the pandemic into account during inspections.
Ashwin Grover, managing director of Storal Learning, agreed that there was little leeway when it came to Covid-related issues such as lack of consistency in staffing, but welcomed the option to defer in extreme circumstances. ‘In terms of what was looked at during the inspections, we haven’t seen any very noticeable changes,’ he commented.
Most providers are wrestling with issues around recruitment. Storal Learning was recently forced to close a setting due to lack of quality staff. Nurseries have seen a shift to a younger age group of children over the last year, and for many this has meant a need to invest in more staff.
‘Our average age across all of our settings has dropped by about eight to 10 months compared to 2019, and this requires more staff, even if total occupancy is the same,’ reported Mr Grover.
Shifting occupancy rates and demographics have proved positive for some settings, said Nick Brown, director and head of brokerage of Childcare & Education at Christie & C. ‘We've seen nurseries that pre-Covid weren't trading that well, but suddenly their occupancy has changed dramatically, perhaps due to people’s changed working patterns.’
The recruitment challenge is driving innovation, said Ms Mackenzie. ‘It will force all of us to really innovate on how we can support, develop and engage staff - that is a positive for our thinking and for our ways of operating.’
‘Our starting point now is all about employee engagement and their happiness and motivation, and we are not alone in that,’ agreed Mr Grover. ‘The focus that's going into creating good progression tracks for all of our practitioners, educators and managers is a positive for the sector.’
Wellbeing of owners is also key, especially in single settings, and can get overlooked, added Ms Donaldson. ‘When I am speaking to individual owners they say “I’m looking after the staff” and I ask “who is looking after you?’
Recruitment difficulties are exacerbated by levels of government funding that mean nurseries struggle to offer competitive salaries. Mr Grover said he did not expect funding to increase. ‘In my experience of how government works, they're not going to react until they deem something to be a complete crisis, not just the industry crying out that it's a crisis,’ he said.
‘Where you've got nurseries with a high proportion of fully-funded children, arguably in the most deprived areas where the highest quality of childcare is urgently needed, those are the nurseries that have the greatest financial challenges,’ pointed out Ms Donaldson. ‘Other governments have recognised how important childcare is and are increasing funding for childcare, and raising the status of the workforce, but that's something this government hasn't done.’
Acquisitions and expansions
All three groups are continuing to expand - both Storal Learning and Kindred Education acquired five settings over the last year or so, while N Family Club grew its portfolio from six to 17 nurseries. In a post-pandemic world, there are extra factors to take into account when looking at a potential acquisition, said Mr Grover. ‘We are looking a lot more closely how well settings are staffed and what risk there would be if one or two staff members did leave? That was always important but I think it is getting more important now.’
N Family Club takes into account local demographics such as average income and birth rate when looking at potential acquisitions, said Ms Mackenzie, while local fee rates are an important factor for Storal Learning, said Mr Grover. Quality and a match to the organisation’s brand and ethos are also key, the panel agreed.
The panel concluded by looking forward at the challenges and opportunities of the year ahead. ‘I think one positive of all that we've been through over the last 18 months is a growing awareness of how vital early years is, with a lot of reports that have come from parents about how quickly their children have developed once they have been in a nursery,’ said Ms Pimentel. ‘I would love for there to be a groundswell of parental love for early years so that we can begin to get the recognition that this is something that is a huge value to society at large.’
Report by Charlotte Goddard
Shoot for the stars
There are plenty of reasons for confidence and optimism in the market in 2022. Buyer demand is at an all-time high, but we expect further pace to be gained. While some prices achieved for the most sought-after childcare and education businesses have been eye-watering, we do not expect any significant reduction in general pricing.
Our childcare and education team is proud to work in a sector where providers exude so much passion, dedication, drive and determination – all striving to deliver the very best outcomes for children and young people in their care. 2022 will undoubtedly bring new challenges and opportunities. For business owners and investors resolute in seeking to ‘shoot for the stars’, 2022 will be the year to advance.
What's to come in the day nursery market this year?
- Regional operators will continue to consolidate, acquiring single settings and small groups.
- Several high-profile portfolios will change hands between trade buyers and new investors.
- A two-tier market will emerge.
- Outstanding CAPEX requirements will impact prices achieved for tired assets.
- Regulatory pressures arising from inspections, if not deemed to be fair, could result in owners permanently closing sites.
- While 2022 is likely to see an increase in distressed sales, high-quality assets will continue to achieve premium prices.
- Real estate developers will increasingly seek land suitable for organic nursery developments.
- Property investment appetite will continue to grow.
- Yields are predicted to sharpen as tenant diversification prospects widen and covenant strengths improve.
For more on the childcare market, read our ‘Business Outlook 2021: Business Outlook 2022: Adjust, Adapt, Advance’ report here: https://www.christie.com/news-resources/business-outlook/2022/
Courteney Donaldson: 07831 099 985 / courteney.donaldson@ christie.com
Nick Brown: 07764 241 316 / nick.brown@ christie.com