(AOF) – Korian, expert in the care and support of the elderly and frail, announces the completion of the acquisition in Spain of the operator specializing in mental health Grupo 5, after having obtained the necessary regulatory authorizations and competition law. With an expected turnover of some 330 million euros in 2023, in France, Spain and Italy, Korian is now the third largest private player in the sector in Europe.
After the acquisition of Ita Salud in 2021, Korian benefits from a network of 77 establishments specializing in psychiatry and covers 14 regions representing 95% of the Spanish population.
The Spanish mental health market is estimated at 2.5 billion euros, and is expected to grow by 4% per year in the next 5 years in a context of lack of infrastructure to meet demand.
Grupo 5 has demonstrated its ability to generate strong organic growth with annualized growth of +20% over the last 5 years, the delivery of 15 establishments over the period, and the creation of a pipeline of 24 projects. Over the next 5 years Grupo 5 should generate growth of 10% per year.
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Key points
– European number 1 in reception, care and home help for the elderly and fragile, with more than 1,000 establishments in 7 European countries, created in 20033;
– Turnover of €4.3 billion achieved by 3 businesses: long-term care for 65%, health for 24% and follow-up care clinics and home help;
– Revenues from France for 49% (number 1), Germany for 27% (number 1), Italy for 11% (number 1) and Belgium for 14% (number 1);
– Multi-local and partnership business model, with a diversified care offer in 600 living areas in Europe and, at the same time, the desire to be a real estate developer-manager (Propco), the real estate ownership rate, a value of €3.2 billion being constantly rising:
– Capital controlled by mutuals (Prédica with 24.43%, Malakoff Humanis with 7.62%, PSP with 6.48%) and employees (2.65%), Jean-Pierre Duprieu chairing the board of 12 directors and Sophie Boissard being the general manager;
– Healthy balance sheet with debt leverage at 3.4, LTV ratio at 55% and €1.4bn in cash at the end of June.
Challenges
– Strategy 2024:
– 10% annual growth in turnover excluding acquisitions,
– ramping up of the health business (target of 30% of revenues),
– opening of 3,000 beds per year,
– by 2023, increase in the value of real estate assets to €4 billion;
– Innovation strategy led by the internal digital agency “Korian Solutions”:
– industrialization of buildings with the BIM system;
– at the service of residents: multifunction, robotic or virtual equipment designed by start-ups, partnerships with universities or CEA, innovation laboratory, etc.;
– Environmental strategy 2019-2023:
– 40% reduction in CO2 emissions by 2030 (vs 2018),
– 5% reduction in waste by 2023,
– loan launches incorporating ESG criteria;
– Portfolio rotation, end of September:
– disposals: sale of 27 long-term care establishments in France,
– acquisitions of 3 high-end retirement homes in the United Kingdom,
– 9 sale-leaseback transactions secured at an average capitalization rate of 5.1%
– launch of 8 buyback operations at a capitalization rate of 6.3%,
– delivery of 1,308 new beds and pipeline of approximately 11,000 beds by 2026;
– Improvement of the social environment and use of funds linked to the 3 social obligations;
– Dynamism of Benelux and Italy;
– Barriers to entry – real estate investments, labor costs and regulatory constraints.
Challenges
– Mistrust of investors with regard to the treatment reserved for residents;
– Change in the occupancy rate of retirement homes, up to 87% at the end of September;
– Desire to become a company with a mission in 2023, employee loyalty through the 1st European employee shareholding plan and salary increases, deployment of ISO 2001 certification for half of European establishments by the end of 2022;
– After a 5.3% increase in revenues at the end of September, 2022 objective confirmed: 6% growth in revenues, erosion of the operating margin, below 13.7% and financial structure comparable to that of June.
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European research is losing ground to American and Chinese research. In twenty years, Europe’s share has fallen from 41% to 31% in global R&D. China’s share jumped from 1% to 8%. As for the United States, which supplanted Europe, in 2001 it devoted only 2 billion euros per year more than Europe to R&D, whereas now this gap has reached 25 billion! Some experts accuse the European authorities of not having deployed effective policies. The financing of pharmaceutical research should therefore have been better targeted via the “Horizon 2020” programme. France only comes in eighteenth position in European funding despite the quality of its research. Conversely, the United States concentrates funding on Boston and a few centers of excellence.