TIDMCTH
RNS Number : 9884V
CareTech Holdings PLC
22 April 2016
For immediate release 22 April 2016
CareTech Holdings PLC
("CareTech" or "the Group")
Half Year Trading Update
CareTech Holdings PLC (AIM: CTH), a pioneering provider of
specialist social care services in the UK, is pleased to announce
its pre-close trading update ahead of its results for the half year
ended 31 March 2016.
The Board confirms that trading for the half year is in line
with its expectations. This performance has been underpinned by the
strategic initiatives undertaken over recent years which have
delivered a stronger performance compared with the same period last
year on all of the key financial metrics.
CareTech's care pathways continue to be a key foundation to
delivering positive outcomes for our service users. By helping our
service users to live more independently, we are working in
partnership with local authorities by providing them with greater
value for money.
CareTech completed two acquisitions during the half year, both
of which are trading in line with the Board's expectations.
On 1 December 2015, CareTech announced that it had acquired the
entire issued share capital of ROC North West Limited and all of
the children's residential and school properties from which it
operates ("ROC"). ROC is a North West England based provider of
residential care and education services for young people with
complex needs and had a capacity of 41 residential places in 7
homes and 25 education places in its school. The acquisition was
immediately earnings enhancing and ROC is now looking to acquire
further properties in the North West.
On 15 March 2016, CareTech announced that it had acquired the
entire issued share capital of Oakleaf Care (Hartwell) Limited and
of all of the residential properties from which it operates
("Oakleaf"). Oakleaf is a Northampton based specialist in the care
and rehabilitation of men with acquired brain injury. It operates
across nine freehold sites with 102 residential beds and includes a
new purpose built facility comprising 22 beds, which opened in
March this year. At 31 March 2016 the new facility had already
filled six beds with both internal transfers and new service users,
with two further admissions planned this month. Oakleaf has also
been immediately earnings enhancing.
The Group's net capacity at the half year was 2,292 places
(2015: 2,116 places), a net increase of 176 residential and
fostering places. Of this total 32 additional beds in reconfigured
services and in new services have been brought into capacity. They
have a higher contribution than the beds in pre-configuration and
are part of an ongoing strategy to enhance margins. There were no
new beds withdrawn for reconfiguration in the half year. There was
a net increase of one in capacity in fostering. There is an
additional residential capacity with ROC of 41 places and with
Oakleaf of 102 places in the half year.
Compared with 30 September 2015, occupancy levels in the mature
estate are unchanged at 93% and the blended occupancy is also
unchanged at approximately 86%.
The Group expects to continue to achieve further growth by a
combination of reconfiguring services and extending facilities in
partnership with local authorities and through organic developments
and bolt on acquisitions. These initiatives together underpin
strong underlying future earnings growth.
Care commissioners continue to demand flexible high quality care
solutions and favour operators able to deliver across the care
pathway. Pleasingly, some of the 2015 reconfigured services that
have opened are already experiencing strong levels of demand from
the local authorities for referrals, validating our strategy of
reconfiguration focusing upon greater acuity service provision.
Annual fee rate negotiations with local authorities remain at an
early stage and this year are against the backdrop of the Living
Wage, which was introduced on 1 April 2016. The Board anticipates
that a more positive outcome will be achieved than in recent years
and that the Living Wage costs will be covered by fee
increases.
Net debt reduced to GBP156.6m at 31 March 2016 from GBP158.5m at
30 September 2015. CareTech raised GBP30m in cash from the ground
rent transaction announced on 19 February 2016 and spent money on
the two acquisitions of ROC and Oakleaf, these three transactions
after costs netted each other out.
The ground rent agreement, with the funds managed by Alpha Real
Capital LLP ("Alpha") at a net initial yield of 3.4%, is innovative
in the healthcare sector. It released GBP30m gross for reinvestment
in growth opportunities whilst maintaining a virtual freehold
interest in the properties, which are located mainly in the South
East and represent less than a quarter of the Company's freehold
portfolio.
As part of the transaction the property portfolio valuation was
updated, which, post transaction, now stands at GBP282m. This gives
a loan to value ratio, before application of the proceeds for
growth, of less than 50% and a Net Debt to EBITDA ratio of less
than 4x.The transaction also highlights the extent to which the
valuation of our freehold portfolio is in excess of our book
cost.
Cash from trading was invested in further properties to be
reconfigured to services, as well as completing reconfigurations
from 2015. For example two properties were purchased in Scotland
for GBP1m for Spark of Genius Limited to provide 10 further
residential care beds which will open shortly.
In the Learning Division the Group launched the CareTech Aspire
Programme last year. It ensures that all of CareTech's care staff
receive all mandatory and statutory training to the highest
standard whilst also being offered the opportunity to complete a
Level 2 or Level 3 apprenticeship which has been carefully tailored
to suit individual roles.
The first 28 CareTech staff learners are now finishing their
Care Apprenticeships through EQL Solutions, part of the Group's
Learning Division. Also in the Learning Division is Dawn Hodge
Associates which has recently won the Skills for Care Accolades
2015/16 award for best provider of learning and development. It
also has just had an Ofsted outcome of "Outstanding" as an
independent learning provider.
Farouq Sheikh, Executive Chairman, commented:
"I am pleased to report another solid performance in the six
months ended 31 March 2016, highlighting the growth trajectory that
our strategy is delivering. We are pleased with the two
acquisitions made during the half year, which are trading in line
with our expectations. We were also pleased to announce in February
the innovative and non-dilutive ground rent transaction which
raised GBP30m to further strengthen our balance sheet.
"We have considerable headroom for further acquisitions with the
ground rent monies, money from our existing bank facilities and
from our strong underlying cash flow. We intend to continue to
deliver our exciting growth strategy, both organically and through
bolt on acquisitions."
For further information, please contact:
CareTech Holdings PLC
Farouq Sheikh, Executive
Chairman
Michael Hill, Group Finance
Director 01707 601800
Buchanan (PR Adviser)
Mark Court
Sophie Cowles
Stephanie Watson 0207 466 5000
Panmure Gordon (Nomad and
Joint Broker)
Fred Walsh
Peter Steel
Charles Leigh-Pemberton 020 7886 2500
WH Ireland (Joint Broker)
Adrian Hadden
James Bavister 020 7220 1666
About CareTech
CareTech is a leading provider of specialist social care
services, supporting adults and children with a wide range of
complex needs in more than 250 specialist services around the
UK.
Committed to the highest standards of care and care governance,
CareTech provides its innovative care pathways through five
divisions covering adult learning disabilities, mental health,
young people residential services, foster care and learning
services.
CareTech, which was founded in 1993, began trading on the AIM
market of the London Stock Exchange in October 2005 under the
ticker symbol CTH. Its freehold portfolio comprises more than 190
properties.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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