A way to play the ageing population

By Annunziata Rees-Mogg Dec 12, 2005

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The UK population is getting older and more of us are needing full-time care in nursing homes.

That’s bad news for the Government, as it has to pay for more care, but it’s good for Care UK (CUK, 453p), one of the firms the Government pays to provide it.

Earlier this week, Care UK reported annual pre-tax profits up from £10.7m to £12.5m on the back of 20% higher sales. This was no doubt helped by winning £23m worth of public-sector business last year. Care UK wants to be at the forefront of the part-privatisation of the health service – and “a forward order book of nearly £800m shows it’s no slouch”, says Philip Alldrick in The Daily Telegraph. The group has won 15% of the current first round of contracts, worth £500m, and “it is hankering after a similar amount at the next round of funding in the summer”.

State-funded provision accounts for 75% of Care’s 2,567 beds. These are long-term contracts, providing a good income, says Ian Forrest on Hemscott.com. The firm has been able to announce an occupancy rate of 98% for the second year running. It is also building two new homes in London, with a total of over 150 beds, which should be open by Christmas.

With Government demand set to grow, and on an undemanding p/e of 20 (given the 20% growth), the Care story looks good, even though the shares have had a strong run since April 2003. They’re still not too expensive for individual investors – “buy”, says Alldrick.

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Published in Tips & advice | More articles by Annunziata Rees-Mogg

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