Benchmarking report compares business performance, debt capacity and M&A activity
Shaw & Co, the specialist corporate finance advisory firm, has launched the latest of its in-depth annual reports that provides business leaders a powerful sector overview and benchmarking tool to aid decision-making and assist in their investment planning.
The survey covers the Healthcare & Life Sciences (H&LS) industry and segments 1,027 H&LS businesses with earnings of over £1m across four sub-sectors – Funeral Services; Pharmaceuticals; Healthcare; and Nursing Homes / Hospitals – to track their performance, profitability, debt levels, borrowing capacity and M&A activity. The report’s key findings include:
- Scale: The industry is highly concentrated, with just 7% of the 1,027 companies analysed achieving an Ebitda over £30m and accounting for 71% of total turnover in the sector. Nevertheless, the industry has proven its resilience in the face of the pandemic lockdowns. In a tumultuous year, delivering steady turnover should be considered a good foundation for a return to growth. Organic revenue growth can be developed through product innovation, better online presence, and efficient stocktaking to shore up working capital, which are all fundable options.
- Profitability: All sub-sectors across the H&LS industry have seen an increase in average Ebitda margins over the past 12 months varying from 1%-3%. HLS businesses should be aiming to achieve a 16%-20% Ebitda margin and, regardless of company size, gross margins in the range of 34%-42%.
- Borrowing: Over the last 12 months, with the exception of companies with an Ebitda of £3m-£4m, all businesses across the H&LS industry have been deleveraging – ie carrying less debt compared to their earnings. Also, just over 71% of the total industry debt is carried by the Pharmaceuticals sub-sector. Regardless of size, leverage has been brought down to very manageable levels, broadly between 2x and 3x earnings. Given marginal change in absolute borrowing amounts, this effect is largely a result of earnings recovery.
- Mergers & Acquisitions: 102 M&A deals were delivered during the past 12 months, of which 77% were completed by UK buyers. However, a number of headwinds (rising inflation, higher interest rates and the worsening geopolitical situation) mean that the level of M&A activity seen over this period may not continue. Confidence is key to dealmaking, and uncertain economic conditions can cause buyers to ‘pull the plug’.
Rick Martignetti, Manager – Business Funding at Shaw & Co, and editor of the report, said: “We are delighted to launch our latest annual report into the Healthcare and Life Sciences industry. We hope it will help SME business owners benchmark their own and their peers’ performance in the sector and aid their decision-making processes. Our aim is to provide small business leaders with free access to the same market intelligence as larger blue-chip corporates, which benefit from investment banking advisors. The report will also provide SMEs with valuable insight in terms of their relative creditworthiness and attractiveness from an M&A point of view.”
A full copy of the report is available via here: The Shaw Report – Healthcare Life Sciences Annual Review – December 2022
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About Shaw & Co
Shaw & Co is a leading corporate finance advisory firm that helps business leaders and SME owners across the UK to buy, sell, or fund the growth of a business. The Bristol-based firm, which was founded by Jim Shaw in 2011, has one of the largest advisory teams in the South West, specialising in a range of services from developing acquisition and exit strategies, business valuations and funding readiness advice, to trade sales, mergers, management buy-outs, and securing finance for growth projects, acquisitions and MBOs.
Shaw & Co has led a number of notable deals including the sale of Pukka Herbs to Unilever, the purchase of VoucherCloud from Vodafone and its subsequent sale to Groupon, and the sale of GoProposal to Sage.