LONDON (Reuters) - Mitie (MTO.L) spent 111 million pounds ($178 million) on home care firm Enara on Tuesday, marking its first move into Britain’s expanding outsourced health and social care sector.
Mitie said it aimed to benefit from the UK’s ageing population and cost pressures forcing a shift from hospitals and residential care homes towards greater care in the community.
The provision of this care was increasingly being outsourced by councils and health authorities to private firms, it said.
“We’ve come to the conclusion over the last two years that we needed to do something which gave us the platform for more growth and the home care market is a very good place to start,” Mitie Chief Executive Ruby McGregor-Smith told Reuters.
“We have a very rapidly ageing UK population and the care market is highly fragmented. We think the opportunities coming out will get much bigger in scale in the next few years with maybe some adjacent services, for example looking after community care as a whole for a local authority.”
According to healthcare market intelligence firm Laing & Buisson, the domiciliary care market is worth around 8 billion pounds and is continuing to grow.
Enara, the UK’s fourth largest provider of home care services based mainly in southern England, is expected to have revenue of 93 million pounds for the year to March 31 2013. The group made a small loss before tax in its last fiscal year.
Around 14 percent of its work comes from private paying patients, with the rest from local authorities and the NHS. Mitie bought the firm from August Equity LLP and Enara’s senior management team.
Investec analyst Andrew Gibb described Mitie’s move as a very sensible and an important first step in building a broader healthcare business.
“While initial focus will be on integration and organic growth within domiciliary care, longer term, there is scope to expand into the nascent community care market. These markets combined could offer significant growth opportunities,” Gibb said.
McGregor-Smith did not rule out more acquisitions in health care and adjacent markets, but said this would not happen soon.
Shares in Mitie, which provides catering, cleaning and maintenance services for clients like Vodafone (VOD.L), Tesco (TSCO.L), and the UK government, were down 1 percent at 0925 GMT, having opened the day 33 percent up on a year ago.
McGregor-Smith added that along with health, the justice market remained its key focus in the public sector. Mitie is bidding to run nine British prisons in a joint partnership with the Prison Service.
Decisions on these deals are not expected until after mid-October. ($1 = 0.6240 British pounds)
Editing by Paul Sandle