Charterhouse lost half its equity in Tunstall debt refinancing–Sunday Times report (updated)

[grow_thumb image=”http://telecareaware.com/wp-content/uploads/2014/07/Big-T-thumb-480×294-55535.gif” thumb_width=”150″ /]Breaking News, even though it happened in March! See updates below. The Sunday Times (UK–sign up for limited access) broke news over the weekend that Charterhouse Capital Partners, the main investor in Tunstall Healthcare, along with other shareholders, have been forced to relinquish nearly half the equity in the company to senior lenders and management. According to their annual report on page 65, section 31**, this happened on 17 March after the close of the FY, but only now has come to light through the Sunday Times report.

The article is light on details, but our Readers who’ve followed Tunstall’s history since the Charterhouse purchase in 2008 for £530 million will not be surprised, only that this development took so long. The cold facts are that the company has been wrestling with a stunning debt burden that grew from £1.2bn in 2015 [TTA 15 Apr 16] to the Times report of £1.7bn at the end of last September, with £300m owed to lenders and £1.2bn to investors. Debt service drove their financials to a £391m pre-tax loss last year. 

The highlights of the deal as reported in the Sunday Times:

  • Senior lenders (not disclosed) received 24.9 percent of Tunstall’s shares. Management received 25 percent.
  • Charterhouse with other shareholders now have a razor-thin controlling balance of 50.1 percent. Prior to this, Charterhouse alone had 61 percent of Tunstall’s shares.
  • In return, the lenders agreed to relax covenants on their debt, termed a ‘covenant reset’.
  • Tunstall also spent £18.5m last year on an abortive attempt to sell itself for up to £700m. We noted reports in April 2016 that they rejected a £300 million (US$425 million at the time) buyout offer from private equity investment firm Triton Partners.

**For those who wish to dig deeper, Tunstall’s hard-to-find annual report through last September (but not filed until 29 March 2017)  is available through Companies House. Go to their index here and select the “Group of companies’ accounts made up to 30 September 2016” which currently is the first listing.

This will be updated as other sourced reports come in, if they do–for now, it appears that the Sunday Times has the exclusive ‘dig’. It is unfortunate since Tunstall is responsible for millions of customers and employs thousands worldwide, and has been aggressively investing in the company and technology while having a fair amount of churn in executive and director positions. Regrettably, they never capitalized on a established position in a big market when they bought AMAC in 2011, then estimated as the US’ third largest PERS company. But as this Editor closed her 2016 article, the whole category of healthcare tech, while becoming more accepted and with a few exceptions, regrettably is still mired in ‘too many players, too many segments with too many names, all chasing not enough money whether private or government.’ I will add to that equation ‘too few users’–still true among older adults and the disabled–and ‘technology that moves too fast’ to make it even more confusing and unsettled for potential buyers (obsolescence on steroids!). And ‘gadgets’, to use the Times’ wording, are among the worst culprits and victims of these factors.

Updated: Equity capital. A cautionary tale was Editor Emeritus and Founder Steve Hards’ prescient analysis of the risks that Tunstall and Charterhouse undertook in acquiring so much debt. After you read it, note the year it was published. More recent commentary on Tunstall’s financial deteriorata dating back to 2013 can be found here.

Tunstall Americas introducing Vi+ telecare home monitoring

[grow_thumb image=”http://telecareaware.com/wp-content/uploads/2014/07/Big-T-thumb-480×294-55535.gif” thumb_width=”150″ /]We don’t hear much from Tunstall Healthcare in the US other than their traditional/mobile PERS business (formerly AMAC‘s). That may be changing with their introduction (finally) of the Vi+ telecare home unit. It has medical alert, fall detection (via ‘intelligent pendant’) and integrates with home monitoring an array of what they call ‘Virtual Sensors’–motion and other sensors to monitor activity in the home, including wireless sensors for fire, flood and gas leaks. They do make a point of having an integral ambient temperature sensor which will alert their response center if an unsafe high or low temperature is detected.

Other than the press release, no information on Vi+ is on the Americas website yet, including pricing. (Vi without the sensor array has been sold for some time.) Vi+ is marketed in most Tunstall countries in Europe, Australia and New Zealand. The fact sheet from Ireland is representative of Vi+ in most markets.

It’s interesting that Tunstall Americas has chosen to enhance their PERS/call center services with sensors, versus entering the hotter telehealth area. Sensor-based activity/danger monitoring is hardly new. (more…)

Tunstall and Boots go High Street with retail PERS (UK)

[grow_thumb image=”http://telecareaware.com/wp-content/uploads/2016/03/Boots-Main-Logo.jpg” thumb_width=”150″ /]Boots has entered the direct-to-consumer PERS business with Home Assist, supplied by Tunstall Healthcare. It’s a conventional (non-mobile) base unit and pendant with 24/7 response to Tunstall’s call center and a temperature sensor that will alarm at cold temperatures. The basic PERS is priced at £34.79 ($49) inclusive of VAT for the unit and a £19.99 ($28) monthly charge. Adding fall detection, the prices rise to £46.79 and £25.19. The most expensive option adds a smoke detector, reassurance calls and a bogus caller alarm for £58.79 and £31.19. Some end users may qualify for VAT-free pricing due to a qualifying disability or long-term illness, which lowers rates by £7-9. According to our former Editor and occasional contributor Mike Burton, this is a first for any High Street chemist and ups the game for all PERS and alert systems. It’s also a natural move, given that the US outpost of the Walgreens Boots Alliance has direct sold Tunstall (and earlier, AMAC) PERS units for 10 years. (Walgreens’ base monthly rate is about the same at $29.99 monthly for the same unit, but no unit cost on an annual contract.)  Home Assist website (Tunstall UK/Boots). The in-store leaflet link on the Boots website features Boots locations in London and Leeds only, along with a full application.

 

Tunstall adds services for Australian veterans, upgrades US call centers

[grow_thumb image=”http://telecareaware.com/wp-content/uploads/2014/07/Big-T-thumb-480×294-55535.gif” thumb_width=”150″ /]Tunstall has been quiet on the newsfront lately, so these two items from Australia and the US are to be noted. In Australia, the Department of Veterans Affairs (DVA) rehabilitation appliances program (RAP), which provides subsidized personal response systems to veterans, now includes Tunstall’s PERS, iVi fall detector pendant, PIR movement sensor and GPS watch. The program requires that veterans be evaluated for need by a qualified health provider. Tunstall has participated in the RAP program since 2002. Pulse+IT (Australasia) In the US, a significant part of Tunstall’s purchase of AMAC were medical answering service operations in Long Island City, NY, Pawtucket, RI, and Newington, CT. A $10 million upgrade of their 24/7 service includes CRM for healthcare providers for after-hours, overflow support, appointment reminders, insurance verification and help desk services. Release

Tunstall’s 2013 fiscal report: debt service makes short term gloomier

[grow_thumb image=”http://telecareaware.com/wp-content/uploads/2014/07/Big-T-thumb-480×294-55535.gif” thumb_width=”150″ /]Updated…Released on this ‘getaway day’ (in the US), and surprisingly only covered by the local Yorkshire Post, is the report of Tunstall Healthcare Group’s year-end closing (30 Sept 2013) results. The short term news is positive: 21 percent revenue growth to £221 million in its 2013 statutory accounts. However, this adds in the acquisition of Spanish monitoring provider Televida for £27.4m in January 2013 and the 2012 purchases of AMAC in the US and STT Condigi in Sweden. The official posture of the company, expressed by CEO Paul Stobart, is that “with continuing Government austerity measures and a fragile global economy, the business does face challenges in the short term.” And one of those challenges making for a gloomy picture is debt service. We’ll let the YP speak: “The group, which is owned by private equity house Charterhouse Capital Partners (CCP) paid £13.7m of interest in cash on its senior and mezzanine debt of £265m, as well as a total of £114.4m non-cash interest on long-dated shareholder loan notes and other loans. This results in a statutory reported loss for the group of £127.8m.” That change of nearly £350 million, which includes operating costs and other expenses, illustrates the critical consequences of debt service on the bottom line, indeed [TTA 22 May]. Many thanks to one of our reliable sources for picking up this report.

New: Founder Steve reminds us of his related (and oh, so prescient) analysis from 2010 about Tunstall’s earnings versus debt service balancing act in Telecare Soapbox: Equity capital. A cautionary tale. (Thank you Steve for adding)

It is worth a detailed read because the 2009 numbers were also ‘challenging’. Steve dug through 2009 publicly filed (in UK) numbers to reach his conclusions. In sum, “The important question is whether their underlying position is sound and reliable, or whether they are shaky. They also tell me that the robustness of a company’s cashflow is the most important survival factor.”  If I am reading the report on CompanyCheck correctly, the eye-watering negative net worth of the Group and the low cash positions of both the Group and UK are oddly reminiscent of airline financial statements when this Editor was still in that business. Do remember the object examples of Texas Air Corporation (once the world’s largest airline holding company), Pan Am and TWA!  You also have to have some sympathy for the management which was not part of getting into this ‘pickle’ now tasked with getting the company out of the barrel.

Tunstall’s unhappy lenders and the consequences of debt service

A ‘slipped under the radar’ story (in this Editor’s judgement, based on the lack of news references) is Bloomberg News’ exclusive on last week’s (12 May) meetings between Tunstall Group Ltd and its creditors over the company’s recent performance. According to Bloomberg’s sources, the meeting was called “after income plunged and management changed following a refinancing in September.” In a statement from Charterhouse that cleverly tap-danced past the reason for the meeting, “Tunstall continues to be a successful, profitable, cash-generating business and comparable to many other organizations, experiences short-term fluctuations in performance.” and “The group has been impacted by a number of factors including specific market factors and the continued strength of sterling against the major-trading currencies.” The business has also been hurt by delays in awarding major contracts, according to the statement.

From the Bloomberg article:

As Tunstall’s profits have declined, its ratio of debt to earnings before interest, taxes, depreciation and amortization increased to 5.6 times as of March, from 4.7 times in September, the people said. The loan terms in the March test dictated that the leverage ratio shouldn’t exceed 6.3 times, they said.

Lenders are expecting the company to give a new profit forecast today for the 12 months to September 2014, according to the people. The company didn’t comment on earnings targets or leverage in its statement.

AND: Its 350 million pounds ($590 million) of loans dropped to as little as 77 pence on the pound, according to broker quotes, from 99 pence in September. (Ed. note: these loans are publicly traded and a lowered value is highly significant as to the debt quality.)

The outcome of the meeting is not yet known.

As our readers know, private equity firm Charterhouse Capital Partners LLP acquired Tunstall Group in 2008 from Bridgepoint Capital  for £514 million (US$ 1 billion), funded in part with over £242 million in debt and with Bridgepoint and management retaining small shares (FT.com). The September 2013 refinancing was for £350 million ($590 million). This paints a picture of a highly leveraged company beholden to many beyond its owners and its contractors in local authorities and housing associations. Tunstall and Charterhouse also received negative publicity when the Guardian did an exposé on their use of the (wholly legal) ‘Quoted Eurobond Exemption’, where they pay loan interest at high rates to their parent companies through a mechanism via the Channel Islands Stock Exchange.

Management changes over the past six months have also rocked the top layers of the company. (more…)