SME focus — Demand is up, so the Cardiff-based care homes specialist is heading beyond the M62
Castleoak Care Partnerships is about to step out of its comfort zone. With its headquarters in Cardiff, the specialist care contractor has always focused its operations in the south of the UK.
However, the demands of existing clients and the growth of the care home market have forced executive chairman Melville Knight and his management team to rethink their strategy to include work north of Liverpool.
“We always had an informal dividing line at the M62 as we thought it was too far away. But we’ve found that line harder to maintain as a specialist contractor,” says Knight.
Castleoak, which designs and builds care homes and associated accommodation, is now looking for a home in the North.
“It’s still early days but we are thinking about Durham or Newcastle,” says Knight.
The North-east is uppermost in Knight’s mind as Castleoak has recently been awarded a £28m care scheme by registered social landlord Joseph Rowntree Housing Trust. Elsewhere in the North, it is due to start work on developments in Leeds, Bolton and Rotherham.
Other new projects on the go include a £15m care home village in Northampton for retirement home manager Richmond Villages and a £7m care scheme in Oxford for housing association BPHA.
Castleoak’s decision to expand northwards followed its latest set of results. Earlier this year, it announced a 34% rise in pre-tax profit to £4.7m while turnover grew 32% to £30.7m.
Knight is of course pleased with the results, which he attributes in part to the boom in the care home sector.
“Demographics has a part to play and the demand for care homes is strong. But projects are also getting bigger. Land costs are high so clients are looking to build bigger units,” he explains.
Competition in this market is fierce, although Knight believes there are few companies of Castleoak’s size that specialise in care homes.
“Our competitors are quite diverse. It includes large regional contractors like Kier, which operate in this market but also small local companies,” he says.
The demand forcare homes isstrong. But theprojects are alsogetting bigger
“We don’t have many direct competitors because the specialist knowledge is quite a high barrier to entry,” he adds.
Castleoak has been in Knight’s family since it was founded but its business was not always care homes.
Established in 1984 by Knight’s father, Castleoak started life as a small contractor, “doing house extensions and that sort of thing”. It was only in 1992 that the group decided to focus its attention on this sector.
“I came into the business in 1992 and we had to grow the business to support me. We had worked on a number of care homes and we saw the potential to exploit our expertise in this area.”
Knight is not the only member of his family in the business – his brother Colwyn is managing director.
And Knight believes the family values that pervade the company have contributed to its success. Last year Castleoak came fourth in The Sunday Times’ list of best small and medium-sized enterprises to work for.
Policies for staff include a profit-sharing scheme where the payout last year was £235,000 divided between the 80-strong workforce. The company also sets aside 2.5% of net profit for charitable causes through its community support programme.
It is not just the shop floor that has seen innovations. Last year, management brought in three non-executive directors, an unusual move for a company of Castleoak’s size.
“We wanted to get an external perspective on the business,” Knight reveals.
As for the future, Knight wants Castleoak to get even bigger and the head count is set to hit 90 by the end of 2006.
However, acquisitions are not on the cards just yet. “We have considered acquisitions but it’s preferable for us to grow organically,” he says.