For several years Revolution Consulting has been studying the published financial statements of the largest providers of children’s social care services in the UK, with results published by the Local Government Association and others. We’ve recently been revisiting all of the new information filed at Companies House since the Competition and Markets Authority reported on their 2021/22 study of the sector. The picture emerging is increasingly informative for policy makers, commissioners, and the new pilot Regional Care Cooperatives.

Amongst a wealth of detail are some examples that will be of interest to those concerned with the sustainability of provider organisations that also report high debt levels. One example that caught our eye comes from the Aspris Holdco Limited accounts for the year ended 31 August 2022. Aspris is the relatively newly named group that was formed by the consolidation of the Priory Group’s children’s care and education operations with those of Sandcastle homes under the direction of their common Waterland Private Equity owners.

Amongst the details provided in the accounts is information about the loans carried by this new Aspris group of £165million:

“The Group’s Loan facilities are subject to a single financial covenant test which is assessed quarterly. This covenant assesses the total gross Leverage of the Group as a ratio to pro forma LTM EBITDA of the consolidated group at each quarterly test date. At the balance sheet date the covenant threshold was 7.4x, as at 31 August 2022 the ratio level was materially below this threshold at a level of 4.9x. This equates to £11.6m of headroom expressed in terms of pro forma LTM EBITDA.”

Commissioners and policy makers need to have access to the technical ability to decode this sort of statement. What does it mean? How is it important to assessment of sustainability? What should commissioners make of it? How could it be used to inform the sort of financial oversight imagined by the Care Review and in the Department for Education’s Stable Homes consultation? How could it be used to inform smart strategic commissioning?

The Aspris disclosure of bank covenant information is rare and voluntary, but is in keeping with the DfE’s intent to start with a voluntary regime of oversight.

We will be running a seminar on 15 June (11am) as more information emerges from our wider profit and debt study, including the following topics:

Profit and Debt: An extract of some key findings from the review of accounts filed in the last year.

Financial ratios, bank covenants and risk monitoring. A simple introduction.

What does the financial information mean for commissioners? What can local authorities do in the short term via commercial terms with providers?: Can commissioning change the way that local authorities and providers interact? 

Directors of Children’s Services, Commissioners, Finance officers and policy makers who would like to join the debate around this information should contact us via our contact page to reserve a place.