LNA Santé
The French nursing home sector is depressed
I have been a long suffering shareholder of Bastide le confort (see past articles), a French serial acquirer in the healthcare home service space.
The nursing homes sector has been slaughtered since the Orpea scandal.
Orpea is a large nursing homes company in France that was a stock growth darling. It came out that they were saving money on rationing adult diapers and other mistreatments. Some mistreatments were real and some are due to the fact that you cannot have one employee behind each resident at all times and that inevitably, old frail people will suffer. But the politicians hit hard, Orpea went bankrupt, then the stocks lost momentum, and the industry went under regulatory pressure.
A company that was affected is LNA Santé, also a French company. It operates nursing home and rehabilitation centres, as well as in home care services.
The share price started at 10 in 2006 at IPO, peaked in 2017 at 65 then drifted down in 2023 to 20 now. The value creation was good until 2017, but now it is mediocre (dividends included).
The normalised net income was stable from 2017 to 2023, so growth stalled (covid, rates), but it did not crash, while revenue grew around 50%. Operating cash flow and EBITDA were however growing, so there is maybe something good there.
Net debt to EBITDA is under 2 according to the companies powerpoint slides.
Could it be interesting to buy a stake and park it somewhere warm for the next decade or not? This is what I will try to find out.
Short History
It is a family owned company with 63% of the capital in the hands of management.
1990: First nursing home in Nantes by the founder and actual president Jean-Paul Siret. The growth since then was historically through acquisitions of nursing homes and clinics. There is also some organic growth in creating new centres.
2006: IPO in Paris.
2022: The company has realised a series of capital increases in 2022 for about 10% of the shares outstanding at 52.50 Euros (A high price versus 20xx nowadays), and also some buybacks to provide shares for the employees. The movements are also not clearly explained in the investor communication, as even as I am native French speaker, which is a downside. The goals were to increase growth and also to increase employee ownership.
The founder, Jean-Paul Siret, 71, is still running the company. I am not a fan of levering up and then pulling a capital increase, as well as having many floating rate debt outstanding. On the other hand, it is good that he managed to grow the company from one establishment to 73+ clinics and nursing homes.
The company has developed book value per share consistently, in a defensive industry, while paying a small dividend.
