How private equity plunders children's services (thread):
In 2017 Orbis Education & Care (children's homes and schools) was sold by the businessman Andrew McCarthy to August Equity insidermedia.com/news/wales/aut…
In 2017 Orbis Education & Care (children's homes and schools) was sold by the businessman Andrew McCarthy to August Equity insidermedia.com/news/wales/aut…
Accounts for the company in the year after the takeover show that Orbis borrowings jumped to almost £40m from an already high £16.5m. You can find the accounts via beta.companieshouse.gov.uk/company/055213…
Orbis enjoyed a good year: fees from local authorities for the care of vulnerable children and young people rose to alost £12m from £8m. But the company itself barely broke even.
This is because of a huge increase in interest and finance charges to £1.4m from £424,060.
Why did borrowings increase? It isn't obvious. There are no big acquisitions and total equity was unchanged at £7.2m.
Why did borrowings increase? It isn't obvious. There are no big acquisitions and total equity was unchanged at £7.2m.
But borrowings were refinanced at the time of the takeover by August. The company now effectively borrows from through the private equity firm (which probably also benefits from arranging the finance) rather than from a commercial bank.
This matters because these finance charges are being paid out of fees charged to local authorities for care and education. The higher the interest charge, the less there is to spend on children.
August Equity is a limited liability partnership owned by its members. Last year 8 members shared £6 million in remuneration.
The LLP is not subject to taxation. Each member is liable for their own tax liabilities. Who knows how much tax they pay.
The LLP is not subject to taxation. Each member is liable for their own tax liabilities. Who knows how much tax they pay.
August has also owned Esland, another children's home company, since last year.
And repeat...
And repeat...
To be clear, these companies are always at the top table when government discusses children's services. For example, their lobby group, the ICHA, is currently influencing proposed changes to unregulated accommodation for young people in care. cypnow.co.uk/news/article/g…
Much of which is provided by them, at substantial profit, of course...
Apologies for the long and complex thread. Essentially, load children's homes with debt, charge a fee for doing so, get the taxpayer to pay the interest, take out as much cost as possible, sell after 5 years at a massive profit. Bingo.
