Since summer 2001, when we first compiled our league table of the 20 largest nursery chains in the UK and Ireland, each new issue of the unique Nursery Chains directory has revealed dramatic changes. Some groups have disappeared, swallowed up by other providers; there have been new entrants and rapid growth, with the overall number of places provided by the top 20 growing from around 33,000 places to just under 44,000 in summer 2003 - an increase of more than 10,000 places in just two years.
However, this issue's league table reveals a break with precedent. There are no new entries; every single chain listed also appeared in the table in November 2002, although some have switched places. The ranking within the top ten is broadly unchanged and Asquith Court, Leapfrog, Jigsaw and Busy Bees continue to top the list. Growth has not been dramatic, either; market leader Asquith Court, for example, grew from 5,998 to 6,066. Still, the overall number of places has risen, up by about 2,000 from just under 42,000 in November 2002.
The summer 2003 league table reflects a period of organic growth, rather than the exponential expansion facilitated by consolidation within the market. This suggests that the past six months have been a period of relative stability, when chains have tended to pull in their reins and focus on maintaining quality and profitability in their existing provision rather than opening new nurseries at the rate of one a month.
This more cautious approach has coincided with a slump in the stock market and a period of economic uncertainty and pessimism. To some extent, this suggests that the emerging nursery market has a characteristic that will stand it in good stead over the coming decades; it is fairly resilient. As yet, none of the major chains has gone under; they have retained the support of their investors, although some investors may well have wanted to see a steadying of growth and a focus on turning a profit.
Groups that have tended to grow through acquiring going concerns, such as Busy Bees, and groups that have grown through opening new, purpose-built settings such as Leapfrog and Jigsaw, have all been relatively static over the past six months. This stands to reason, for both approaches may require periods of focusing on the nurseries in hand rather than adding to the ones in the pipeline - particularly at a time of soaring property prices and plunging stock markets.
New-build nurseries may be profitable once they are up and running, but there may be an initial period during which occupancy rates are not high enough to break even. Similarly, going concerns will need to be incorporated into the company that has bought them; there will be new management systems, a new infrastructure, possibly new branding. The past six months has been as good a time as any for the leading chains to ensure that they have got their houses in order.
In this issue of Nursery Chains we have also, for the first time, listed the nursery groups by the number of nurseries they own and manage, excluding creche provision, which is included in the table of total places. Once again, Asquith Court is way out in front, followed by the leading provider of employer-supported childcare, Bright Horizons Family Solutions, and Busy Bees, which also operates many workplace nurseries. Several of the groups are very close in size using this measure, with Nord Anglia, Just Learning, Kidsunlimited, Jigsaw, Teddies and Leapfrog all owning or managing around 30 to 40 nurseries.
Where stated, the chains' future plans give an intriguing insight into the ways the market will develop over the next few years. The most striking expansion plan is put forward by this issue's most high-profile new entrant, Primary Steps, which became the first nursery chain to float on the stock market when it began trading on the Alternative Investment Market - the London Stock Exchange for smaller, growing companies - in April this year.
Primary Steps opened its first nursery in September 2001 and now has eight nurseries up and running. It plans to expand to 50 nurseries by 2005 - a meteoric rate of growth comparable to the first five years of Leapfrog, which, launched in 1998, lists 39 nurseries providing for just over 4,000 children in this issue. Since Primary Steps seeks to open nurseries for up to 50 children, this would see it providing around 2,500 places by 2005, which would place it among the ten largest of today's nursery groups.
Primary Steps will have the funding generated from its flotation to bankroll its expansion plans, and its management team includes property and finance professionals who will be choosing appropriate businesses. The group has already established itself as one to watch and its progress will be of great interest both to other nursery groups and investors in the City.
A number of other groups are also planning to grow significantly next year.
For some, this is part of a continuous process, such as Leapfrog, which is due to open four more nurseries this year and has identified a further eight for 2004. Others plan a rapid acceleration of growth which could lead to them doubling in size within the next few years. The Childcare Corporation, which currently owns 11 nurseries, has eight more planned for 2003-2004. Happy Child, which owns 18, will seek to open or acquire up to six nurseries per year over the next two to three years, so could double in size by 2006.
Other groups plan to forge ahead from a smaller base. Unicorn, which owns one nursery and operates three nursery franchises, plans to buy ten more nurseries over the next 18 months. Similarly, Dolphin, launched in 2000, which owns four nurseries, has funding in place to open ten more in the south-east over the next three years.
Some groups intend to expand through partnership with public sector initiatives, such as Wind in the Willows, which plans to open eight Neighbourhood Nurseries over the next 12 months, tripling its provision.
Springboard, which like Wind in the Willows presently has four nurseries, also plans to roll out a programme of Neighbourhood Nurseries during 2003-2004. Rugby-based TLC, which owns eight childcare units based mainly in hospitals, says it plans to double its nursery facilities within the next 12-18 months.
However, some providers appear to view about ten nurseries as the optimum size. Child & Co, which has 11, plans to limit further expansion of sites 'only to those areas where we can guarantee to maintain our standards', while Ravenstone House, which has ten, is planning to expand up the age range rather than geographically, by catering for children up to prep school age at a number of locations.
According to a report, Children's Nurseries - UK market sector report 2003, published by the healthcare consultancy Laing & Buisson in spring this year, the UK day nursery market was worth 2.15bn in 2002, an estimated 16.5 per cent rise on 2001. Our figures suggest this growth rate may not be matched in 2003, at least by the leading groups in the private sector.
Nevertheless, the sector is set to receive a boost from the Government's planned expansion of access to tax breaks for employer-supported childcare.
This is likely to extend to childcare vouchers, which have become increasingly popular. Busy Bees' childcare voucher scheme has been taken up by a string of major clients and the group is now the largest supplier of childcare vouchers to NHS Trusts, and Leapfrog and Kidsunlimited also provide voucher schemes.
Other aspects of Government policy could ultimately have an adverse effect on private sector growth. The Laing & Buisson report suggests that the Government is likely to encourage the creation of subsidised places for under-threes within schools - the 'greatest threat to demand within the "mature" children's nursery market'. It is possible that, within a few years, the nursery chains' principal competitor will be the state itself.
UK and Ireland's 20 largest nursery chains - June 2003.
1 (1) Asquith Court Schools 6,066
2 (2) Leapfrog Day Nurseries 4,155
3 (3) Busy Bees 3,774
4 (4) Jigsaw Day Nurseries 3,768
5 (5) Bright Horizons Family Solutions 3,407
6 (7) Just Learning 3,332
7 (6) Kidsunlimited 2,930
8 (8) Nord Anglia 2,610
9 (10) Teddies Nurseries 2,217
10 (9) Child Base 2,216
11 (12) Buffer Bear Nurseries** 1,475
12 (11) Careshare 1,417
13 (14) Ravenstone House 1,177
14 (13) Academy Childcare 1,139
15 (15) The Childcare Corporation 1,053
16 (16) Child & Co 847
17 (17) Toad Hall 775
18 (19) Happy Child 734
19 (18) Manor Tree Group 699
20 (20) Treetops Private Day Nurseries 607
UK AND IRELAND'S 12 LARGEST NURSERY CHAINS - JUNE 2003.
UK and Ireland's 12 largest nursery chains Listed by numbers of nurseries owned/managed.
1 Asquith Court Schools 100
2 Bright Horizons Family Solutions 72
3 Busy Bees 43
4 Teddies Nurseries 41
5= Leapfrog Day Nurseries 39
5= Nord Anglia 39
7= Just Learning 36
7= Jigsaw Day Nurseries 36
9 Kidsunlimited 34
10 Child Base 30
11 Buffer Bear Nurseries (previously Childcare Partners/ Buffer Bear) 26
12 Careshare 20
