Case Study: The Rise & Fall Of the Centre for Dentistry

Covid is continuing to inflict heavy damage on the Dental Industry.

News reached us today that sadly the Sainsbury’s based, 11 surgery dental practice, ‘Centre for Dentistry’ (CfD) has entered into administration.

At closure, the practice had circa 50,000 patients on its books and around 85 employees.

CfD was set up in 2011 as a innovative new dental practice which aimed to “re-write the rules” by delivering state-of-the-art yet affordable private-only dentistry using a chain of in-supermarket clinics operating out of various Sainbury’s supermarkets.

 

CfD’s advertising highlighted the brave new world it offered its patients customers:

“Centre for Dentistry is a new kind of dentist – local, friendly and conveniently open at evenings and weekends.”

“With early and late appointments available, there’s no need to take time off work or kids out of school. ”

“Centre for Dentistry is a very different kind of dental practice. We work with Sainsbury’s to provide professional, highly convenient, friendly and complete dental services located within selected superstores around the UK.”

“This means we can offer you an alternative to expensive, privately run high street dentists or busy NHS dentists with long waiting lists.”

“With an affordable price point for each treatment and 0% finance available, Centre for Dentistry welcomes new patients to experience an easy and comfortable way to keep teeth healthy and improve your smile.”

It all sounded really good at the time, and the company starting out with 5 clinics quickly expaned to 16.

By 2013 it had ambitions to expand even more rapidly with a plan for Sainsbury’s to take a 20% equity stake in CfD in return for Sainsbury’s opening a further 75 in-store clinics. Unfortunately these plans did not come fully into fruition as Sainsbury backed-out of the investment due to a perception that CfD lacked adequate financial backing to support its ambitious expansion plans. In hindsight it seems this marked a turning-point for CfD as its relationship with Sainsbury increasingly turned sour. Rather than the project looking like something akin to a joint-venture in which Sainsburys was lending the support of its trusted brand to CfD’s clinics as a way of widening the supermarket’s customer-offer, it instead became more and more like that of a conventional Landlord and Tenant relationship in which the Landlord just wanted to maximise its rental income.

Financial performance of some of the surgeries is said to have declined.

In 2018 & 2019 the group was busy trying to entice private equity investment or a buyout of the group but no deals were forthcoming, perhaps this was because it was becoming apparent that Sainsburys was no longer interested in actively supporting the roll-out of new clinics across the rest of the supermarket’s estate.

By 2019 Sainsbury’s was becoming increasingly vocal in its demands for back rents and the supermarket firmly rejected CfD’s overtures to renegotiate its existing lease terms.

In July 2019 CfD was still operating 24 in-store clinics but it was in the process of closing unprofitable surgeries for example in summer 2019 it shut its Blackpool & Cardiff clinics and amalgamated two of its London outlets, citing excessive rents and rates as the reason. Despite this adverse backdrop one or two surgeries were actually sold off earlier in 2020 before the Covid shutdown.

With covid forcing closure of all CfD’s remaining clinics and with its existing owners unwilling or unable to inject new capital to keep it afloat during the lockdown, the company had no choice but to appoint Begbies Traynor as administrators.

Begbies are steering through a “Pre-Pack” adminstration aimed at salvaging as much of the business as possible.

The administrators took steps to market the business, sending e-shots to around 527 “interested parties”, and advertising it through Eddisons and IP-Bid.

34 potential bidders emerged and this resulted in 6 of the surgeries being sold to 6 different buyers, saving about 29 jobs. All told, the administrators managed to bring in around £380,000 from the sale of these 6 clinics with prices per clinic ranging from £50,000 to £90,000. On average each clinic sold for £76,000 or about £1.52 per patient.

Not all the sale proceeds went to the administrators – this is because much of the equipment used in the surgeries actually belonged to a third company, Propcom Ltd which we understand was in turn owned by a company called Medico-Dental Holdings Ltd (MDH) – MDH was the ultimate holding company of CfD. As MDH is not in insolvency, we thus assume that a portion of the sale proceeds may end-up back in the pockets of the original owners of CfD!

List of clinics bought out of administration:

  • Bristol- purchaser Bristol Dental Suite Ltd
  • Camberley- purchaser Sapphire Dental ltd
  • Chichester- purchaser Kry Corp Ltd
  • Welwyn Garden-  purchaser WGC Ltd
  • Fulham- purchaser PMD Ortho Ltd.

Judging from this result, with ownership of the few remaining profitable practices being split-up between 6 different buyers, we can say that Aristotle’s test of whether the whole be greater than the sum of the parts, was sadly not met, bringing into question why the commercial logic behind the enterprise was never fully realised (let it never be said that a classical education is wasted on a career in the dental industry).

As at 10 June the administrators were continuing in their efforts to negotiate the sale of the remaining 6 clinics, leaving the jobs of 42 members of staff hanging on the outcome of these continuing efforts.

It is as yet unclear what if any dividend will be paid out by the administrators to CfD’s unsecured creditors- it is understood there were substantial arrears of rent owed to Sainsburys and to other trade creditors such as labs etc.

We wish the new owners well in what is undoubtedly a difficult time to be taking over any dental practice.

Inside the Centre for Dentistry at Camberley Sainsburys – a clinic now owned by Sapphire Ltd following a deal agreed with Begbies Traynor -the adminstrators of CfD.