Switch of focus leaves Alpha fighting fit and in good health
Published 28/01/2010 | 05:00
AN "optimist by nature", Alpha Healthcare boss John Nagle was arguably one of the last business owners in Ireland to admit the recession had dawned. "We started into 2009 with an aggressive plan," he says spiritedly, adding that cutbacks weren't on the agenda for a company that was "growing and expanding in every direction".
It wasn't until the summer of 2009, when the recession had already claimed more than 600 Irish businesses, that Nagle was forced to re-evaluate his firm's relationship with the overall economic chaos.
Having begun life offering practice management solutions to GPs, Alpha had developed a "projects" division to work with developers, doctors and the HSE in order to create the primary care centres that are the cornerstone of much of Ireland's healthcare strategy.
Heading into 2009 those projects were expected to account for more than half of Alpha's total business, generating an even higher percentage of profits since they commanded higher margins than the traditional GP work.
Then, in the middle of 2009, Nagle noticed that his multi-million euro project pipeline wasn't shaping up as planned. "Projects I expected to be on stream by then were taking a lot longer," he says, reflecting on the impact of the credit crunch.
Alpha's project partners were also demanding more work from Nagle's people and were taking longer and longer to pay their bills, pushing credit periods out to as long as five months.
"We had to take action," says Nagle, who spent decades in multinationals before striking out on his own in 2004.
The project side of the business came in for the harshest scrutiny. Nagle decided to focus on "key projects", dropping anything with a low probability of success. Stagnating projects that were more advanced came in for similar treatment with Alpha scaling back labour, resulting in fewer hours for some projects workers.
Nagle also enforced even stricter credit checks on prospective developers, demanding letters of guarantees from their banks to ensure finance would be available to complete out the projects.
Across the wider company, management took pay cuts of up to 10pc while bonuses were wiped out across the 12-man staff. Alpha also eliminated all expenditure that wasn't completely necessary -- a planned move to purpose-built offices was aborted and the company continues to operate from an annex of Nagle's family home.
"We took 30pc out of our overhead in the four-month period from October," says Nagle, proving that while Alpha was a late-comer to the cost-cutting party it has since embraced the theme with vigour.
As well as hitting the projects business hard, the recession also had a serious knock on for Alpha's 2009 plans to expand into the UK.
Having always vowed to "stay as far away as possible" from bank debt and venture capital, Nagle was relying on private investors to support the UK launch.
"They put in the first tranche and they haven't got the money for the second," Nagle says frankly. "We were looking for €300,000 to €500,000. Now we're going to do it on a shoe string, for €150,000 to €200,000." While the recession has clipped Nagle's expansionary wings and slowed the onward march of Alpha's projects division, the Corkman is adamant that there have been upsides too.
"We can now acquire sites much more cheaply," says Nagle, referring to the work that is going on in projects. "Or you can find finished buildings that someone wants to convert into a primary care centre, that's very attractive, you can almost name your price."
Alpha and its primary care centre partners are also benefiting from a 30pc to 40pc fall in building costs. And while the projects still cost between €5m and €25m to build out, Nagle says banks are looking favourably on proposals.
"The business model is really good," he argues. "I describe it as three storeys. On the top storey you've the HSE, that's a guaranteed government tenant and we won't go anywhere unless we've got them signed up.
"On the next floor you've got GPs, owner-occupiers, and we won't go anywhere unless we have them signed either.
Then down on the ground floor you've ancillary services like physios and opticians, and we'd have a lot of those signed as well."
As we speak, Alpha is sitting on a €75m pipeline of projects work. It's Nagle's belief in the business model of these private-care centres that makes him confident that his pipeline will come to fruition, eventually.
In the meantime, Alpha has the GP side of the business to nurture.
In Ireland, Alpha's "practice management" skills have been used by more than 300 GPs. Nagle sees ample room to grow this further, and is particularly keen to extend beyond his Munster heartland and into the midlands, the west, and the greater Dublin area.
Alpha has also began to rejig its GP offering. It began offering complete practice management support, targeting surgeries with between two and four doctors who would first get an assessment from Alpha and then, ideally, bring an Alpha "practice support manager" on to their team for at least a year.
Nagle boasts considerable success from this strategy, having helped some surgeries boost their revenues by as much as 30pc by bringing knowledge and practices he's learned in some of the world's biggest companies to bear on their much-smaller practices.
But while the full-service approach is the one Alpha prefers, Nagle says doctors are increasingly asking for solutions to specific problems -- which is something Alpha now offers.
Nagle has also developed a product for "single-handed" GPs and one that looks at how changes to the medical card scheme will affect individual GP practice's future revenue.
The UK is also a key plank of Alpha's plans to expand its "practice" business and Nagle spends half his time there working with one senior manager, and he's just advertised for another team member to work out of the Manchester office.
The UK ambitions benefit from an Enterprise Ireland "accelerator" pairing with a senior expert, and Nagle talks confidently of the "substantial" potential Alpha can exploit by offering to support practices rather than take over their running as existing UK outfits do.
Further out, Alpha also plans to add a third string to its bow by branching into medical centre development. All in, Nagle expects his €1m turnover in 2008 to grow to €15m within five years.
"As a country we've a very tough 18 months ahead of us," he says, "but there's actually great opportunity for Alpha."