There is an old saying; if you want something done well, do it yourself.
At Phoenix, while we are strong proponents of ‘buy and build’ – growing our companies through acquisition - we took a different tack with the care home operator we backed, Porthaven, founded in 2010 by chief executive John Storey.
In the six years we supported the business, Porthaven’s care homes grew five-fold, from three to 15. But every new opening was the result of painstaking work, building each one from scratch rather than acquiring an existing operation that would have to be integrated to fit the Porthaven model.
Growing via acquisition might have been faster than organic expansion. However, by building new homes, John and his team were better able to uphold high standards across their facilities.
When we first backed John, in 2011, he had just opened Porthaven’s third home. He was keen to step up the expansion of his business, sensing a gap in the market among privately funded patients for premium quality residential care homes. Growth was more easily talked about than achieved. “Developing the homes is an extraordinarily long and protracted process,” says John. “It’s a big barrier for many people to enter the sector.”
To open any new home, the first step is site identification. The company reviews hundreds of possibilities every year. It has developed a sophisticated screening process, reviewing factors including local demographics, the expected demand for private beds, and the amount and quality of existing provision.
Securing a site can take a year or two, with construction taking another 12 to 18 months. Then the home must be CQC (Care Quality Commission) registered. And once the care home is open, it can take two or three years to reach full occupancy. This largely stems from Porthaven’s position at the premium end of the market and its fees, which are higher than average. Nevertheless, the sales conversion rate of prospective purchasers is high – more than half of visitors go on to become customers.
In part, this success may owe something to the investment the company has made in its marketing. When we first backed Porthaven, the marketing department consisted of just John. We were able to help him develop this function, increasing marketing spend and expanding the team - today, there are two full-time marketing executives at the head office in Windsor, while every home has its own sales manager.
More importantly, sales conversion success owes a good deal to Porthaven providing a markedly different offering from the vast majority of the approximately 400,000 care beds in the UK. Residents have their own bedroom with an en-suite shower, and use of facilities such as a cinema, private dining rooms, gyms for rehabilitation and hair salon, for example.
Above all, however, Porthaven is committed to providing the highest quality of care. “It’s about pretty buildings, but more importantly, it’s about the care inside those buildings,” says John. “Phoenix understood from day one that this is not a business where you can cut costs.”
At the end of last year, having presided over a significant expansion of the business, we sold our stake in Porthaven to real estate investment firm Fremont Realty Capital. Even with new backers on board, there is unlikely to be a change in strategy any time soon. “It’s exactly as it was in 2011,” says John. “We’re not going to grow by ten homes a year; two or three homes – stable, organic growth – is the way we are going to continue for the next few years.”