Bottom Line: Caring for a growth market
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Your support makes all the difference.UP 1p to 391p yesterday, shares in Westminster Health Care have forged ahead by 50 per cent since they were floated 10 months ago at 260p. Not that they were cheap to start with.
It is just that nursing homes are one of the few home-grown, rapidly expanding industries in which the best operators - Westminster is certainly one - will deliver above-average dividend growth for many years to come.
No wonder that Goldsborough, Kunick's former venture into nursing homes, is limbering up to price an offer for sale on Thursday.
Fears that the Community Care Act, which began to operate last April, would undermine the sector have proved to be overdone, at least as far as the top quoted companies are concerned.
Small, one-home operators have undoubtedly been feeling the pinch, and this is actually helping the larger companies.
The introduction of community care legislation has put some mild downward pressure on the new patient fees local authorities are prepared to pay.
At the same time a slowdown in the rate of admissions as the needs of patients are assessed by social services means that Westminster's new homes may take more than a year to fill, compared with seven months on average before.
Any potential pressure on margins is allayed at Westminster by operating efficiencies. Interim figures to 30 November do show a slip in margins, but this is attributable to post-flotation costs.
Otherwise, the rate of growth is illustrated by a 41 per cent increase in half-year turnover and a 33 per cent jump in pre-interest profits. Registered beds are expected to rise by 25 per cent in the current financial year followed by another 25 per cent next year.
This ought to take pre-tax profits from pounds 11m this year to more than pounds 13m in 1994-95, implying a p/e of 21.5 falling to 18. Given the rate of growth this is not dear, although a five-point rise in gearing to 23 per cent during the first half is a reminder that further funds will be needed, probably in 1995.
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