Goodwill bounces back, but NHS practice values start to lag
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- Published: Thursday, 14 April 2022 07:42
- Written by Peter Ingle
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The latest version of the NASDAL Goodwill Survey for dental practice values has just landed.
NASDAL, the National Association of Specialist Dental Accountants and Lawyers, is a group of specialists, who between them provide accountancy and legal services to many dentists, including practice owners and associates. By pooling the data from their members they are able to provide a well-informed insight into trends in dental earnings and practice values, through their profits benchmarking and goodwill surveys. The benchmarking results released last month showed that profits generally recovered in the year ending April 5th 2021, at the time describing it as, “a year like no other.” Goodwill figures would show if there was also a recovery in practice values.
The goodwill survey covers the quarter ending 31st January 2022 and is based on valuations as well as completed deals for practices bought or sold by clients of NASDAL members. The figures show a continuing pattern of increased goodwill values across the board. Looking further, in what may be a turning point, there is now less enthusiasm for NHS practices than before the pandemic.
Overall there was an increase in goodwill as a percentage of fee income for all types of practice. Deals averaged 166% of gross fees, showing a steady improvement over the 152% and 144% of the preceding quarters. Looking into practice type the biggest percentage jump was for private practices (up to 155% from 132%) with mixed practices increasing by 10% to 189%. After a big drop in the previous quarter NHS values staged a modest increase from 138% to 141%.
Alan Suggett, a specialist dental accountant who compiles the survey, summed up. He noted that the practice market was continuing its upturn, and hoped it was leaving the worst of the pandemic behind. He went on, “In the many conversations that I have with professional advisors, banks, agents and so on, it is becoming clear - at least anecdotally - that there is less enthusiasm for NHS practices at this time. Whilst the reason for this is uncertain, my view is that it arises as a consequence of a combination of factors” These were, in his opinion, “uncertainty about the financial basis of NHS contracts post 31 March 2022, particularly as the current 85% threshold is proving impossible for many practices to achieve, the drift of NHS patients into the private sector during the pandemic, and increasing recruitment problems made worse by reducing enthusiasm for associates to carry out NHS work.”
Since Alan spoke there has been the post-dated revision of the UDA target to 75%. While this might appear to auger well for NHS practice values, the controversial 95% target for the current first quarter, will not have inspired confidence. In a quarter that has a reduction in working days due to bank holidays the implied 5% ‘gift’ from the CDO and NHS England, vanishes.
For many years practices with large NHS contracts enjoyed strong valuations and were in heavy demand, but we may be witnessing a permanent shift. If this is more than a blip the implications for many of the larger and less agile corporates could be serious, and in turn put more pressure on the provision of NHS dentistry.
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