TIDMCTH
RNS Number : 6466J
CareTech Holdings PLC
06 December 2018
For immediate release 6 December 2018
CareTech Holdings PLC
("CareTech" or "the Group")
Preliminary Results for the year ended 30 September 2018
CareTech Holdings PLC (AIM: CTH), a pioneering provider of
specialist social care services in the UK, is pleased to announce
its unaudited preliminary results for the year ended 30 September
2018.
Highlights
-- Revenue increased by 11.9% to GBP185.7m (2017: GBP166.0m)
-- Underlying EBITDA(i) increased by 10.0% to GBP43.9m (2017:
GBP39.9m)
-- Underlying profit before tax(ii) increased by 11.9% to
GBP32.9m (2017: GBP29.4m)
-- Underlying basic EPS at 35.07p per share(ii) (2017: 38.03p).
-- Cash inflows from operating activities of GBP30.9m (2017:
GBP22.1m) with net debt (iii) of GBP147.0m (2017: GBP147.1m)
-- Overall capacity increased by 88 places(v) to 2,622 (2017:
2,534)
-- Proposed full year dividend increase by 11.1% to 11p (2017:
9.90p)
-- Independent property portfolio valued at GBP424m
-- Acquisition of Cambian Group plc in October 2018
Statutory Financial Highlights
-- EBITDA(iv) increased by 10.4% to GBP40.2m (2017: GBP36.4m)
-- Operating profit decreased by 11.0% to GBP20.2m (2017:
GBP22.7m)
(i) Underlying EBITDA is operating profit stated before
depreciation, share-based payments charge and non-underlying
items
(ii) Underlying profit before tax and underlying basic earnings
per share are stated before non-underlying items
(iii) Net Debt as defined by the Group's Banking facilities and
comprises cash and cash equivalents net of all Loans and Borrowings
due to the Group's Bankers
(iv) EBITDA is operating profit stated before depreciation,
share-based payments charge and amortisation of intangible
assets
(v) Overall capacity has increased by 88 with 69 additional beds
in reconfigured services and new services, 69 new beds in
Children's and 50 beds were withdrawn for reconfiguration.
(vi) In 2018 the Selborne Care Limited Acquired Intangibles were
independently valued and are currently being verified by the
Group's Auditors. A bargain purchase credit will only be recognised
when the verification is complete, and will, if material, be booked
in the audited 2018 statutory accounts in due course.
Commenting on the results, Farouq Sheikh, Executive Chairman,
said:
"I am truly privileged to present our results for the period
ended 30 September 2018 being our 25(th) year in business. This is
a real milestone for CareTech and has proven to be another
exceptionally busy and successful year with one of the highlights
being the purchase of Cambian Group plc in the early weeks of
October 2018.
"Cambian is a leading Children's specialist education and
behavioural health service provider. The Cambian Group's services
have a specific focus on Children who present high severity needs
with challenging behaviours and complex care requirements. Cambian
currently looks after over 2,000 children and employs over 4,500
people across a portfolio of 222 residential facilities, specialist
schools and fostering offices located in England and Wales. On 19
October 2018 the recommended acquisition of Cambian by the Group
was completed. I welcome both Anne Marie Carrie as Chief Operating
Officer of the Cambian operations, and the whole Cambian team, as
well as the 2,000 children who use their services, to the CareTech
Group. I strongly believe that the CareTech offerings in learning
difficulties and specialist services for adults and residential
services and fostering for young people, is highly complementary to
Cambian's services in Children's residential care, specialist
education and therapeutic fostering. Furthermore the geographic
reach of the services has been broadened, now providing a
nationwide network.
"This is a special year for CareTech in achieving a memorable
milestone of 25 years in business and also celebrating the 13(th)
year in the public markets. During this time, the business has
transformed from being very focused on supporting adults with a
learning disability through residential and day care settings to
one where today we also cater for young people and children with
complex needs across a range of settings, be it residential,
supported living or community support. We focus on the most complex
and vulnerable young people and the market for this client group
stands at over GBP10bn. There is currently an undersupply of
specialist beds in this niche area and the market is growing by
almost 3% per annum.
"On joining AIM, the Group had a capacity of 435 places, an
underlying EBITDA of GBP2.4m with an underlying diluted EPS of
4.1p. Today our capacity has increased over six fold to 2,622, our
underlying EBITDA has grown significantly to GBP43.9m today whilst
underlying diluted EPS is 35.06 pence per share. Underlying EBITDA
and diluted EPS have grown by an impressive compound annual growth
rate of 26% and 20% respectively since IPO.
"Having just completed the Cambian acquisition post year end, we
now have a national presence with over 450 homes and schools in the
UK with around 10,000 staff supporting some 4,500 vulnerable young
people and adults. This has been an incredible journey that has
only been possible due to the hard work and dedication of each and
everyone one of our staff that make up the CareTech family!
"When we set up CareTech all those years ago our underlying
vision was very simple.
"We wanted to build the very best designed homes, furnish them
to the highest of standards and match this with an innovative
person centric care and support package. We wanted to be different
and create a feeling that parents, carers, care managers felt so
overwhelmed with our unique offering that they instantly wanted to
move in themselves! We saw this reaction over many of the homes we
opened and this created a buzz in the sector!
"We have major investment plans for 2019 and beyond with key new
organic developments and bolt-on acquisitions. Importantly we also
continue to see how we can enhance further, the use of technology
as a validation of our work as well as for diagnostic and
assessment purposes whilst exploring opportunities abroad in the
international market particularly the GCC. We will further
strengthen our management team offering a forceful blend of
experience, commercial wisdom and dedication to care. I have no
doubt that the next few years will see continuing growth and care
excellence which will help deliver our target of double digit
growth in underlying EPS."
For further information, please contact:
CareTech Holdings PLC 01707 601 800
Farouq Sheikh, Executive Chairman
Michael Hill, Group Finance
Director
Buchanan 0207 466 5000
Mark Court
Sophie Wills
Tilly Abraham
Panmure Gordon (NOMAD and Joint
Broker) 020 7886 2500
Emma Earl
Freddy Crossley
Charles Leigh-Pemberton
WH Ireland (Joint Broker) 020 7220 1666
Adrian Hadden
Jessica Cave
Alex Bond
This announcement contains inside information for the purposes
of Article 7 of Regulation (EU) No 596/2014.
About CareTech
CareTech Holdings plc is a leading provider of specialist social
care services, supporting adults and children with a wide range of
complex needs in more than 330 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, specialist
services, young people residential services, foster care and
learning services which come under the two outcome-based sectors of
Adult Services and Young People 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 property portfolio comprises more than 200
properties.
For further information, please visit: www.caretech-uk.com
Group Chairman's Statement
Celebrating 25 years in business
Another successful year creating a transformational platform for
further expansion
I am privileged to present our results for the period ended 30
September 2018 being our 25(th) year in business. This is a real
milestone for CareTech and has proven to be another exceptionally
busy and successful year, with the key highlights being:
-- Accelerated organic initiatives including property purchases and reconfigurations
-- Further strengthening of our management team and investment in IT systems
-- Strengthening of our Care Pathways and outcomes for our service users
-- Improvement on CQC and OFSTED Quality Ratings across the Group
-- Exciting initiatives and partnerships launched by the CareTech Charitable Foundation
-- Agreed highly complementary and significantly accretive acquisition of Cambian Group plc
It is really pleasing to note that, over these years, we
continue to maintain our position as a leading care provider with
our improved quality ratings across the Group.
I am personally reminded of our very humble beginnings all the
way back in 1993, from our very first home in 44 The Avenue,
Watford. Having just completed the Cambian acquisition post year
end, we now have a national presence with over 450 homes and
schools in the UK with around 10,000 staff supporting some 4,500
vulnerable young people and adults. This has been an incredible
journey that has only been possible due to the hard work and
dedication of each and everyone one of our staff that make up the
CareTech family!
As we celebrated our 4(th) year of our National Care Awards on
the 23(rd) of November many of our staff were there and received
acknowledgement and thanks for their hard work. Personally it was
so touching to have one of the parents, whose son was placed in our
second home known as Morven Park back in 1994, pay tribute to the
company for the care and support provided to her son for the 17
years he was with us. We are pleased that we still have an active
engagement with her after her son sadly passed away. It is a
testament to the relationship we build with the nearest and dearest
of those we support.
When we set up CareTech all those years ago our underlying
vision was very simple.
We wanted to build the very best designed homes, furnish them to
the highest of standards and match this with an innovative person
centric care and support package. We wanted to be different and
create a feeling that parents, carers, care managers felt so
overwhelmed with our unique offering that they instantly wanted to
move in themselves! We saw this reaction over many of the homes we
opened and this created a buzz in the sector!
And so 25 years on, our underlying vision remains the same. We
will endeavor to develop the best designed and furnished homes -
ones that we would be happy to live in ourselves. Coupled with this
we will provide the bespoke support for our service users as we
would want to provide for our nearest and dearest. If we sincerely
stick to these simple principles we will always be at the forefront
of our industry and, as a result, the financial metrics will take
care of themselves.
Accordingly below is a summary of our financial results for this
year are where:-
-- Revenue has increased by 11.9% to GBP185.7m
-- Underlying EBITDA has increased by 10.0% to GBP43.9m
-- Underlying profit before tax has increased by 11.9% to GBP32.9m
-- Underlying basic EPS at 35.07p per share
-- Net Assets increased by 2.0% to GBP208.2m (2017: GBP204.2m)
-- Cash inflows from operating activities before non-underlying
items of GBP39.1m (2017: GBP32.7m) with net debt (iii) of GBP147.0m
(2017: GBP147.1m)
-- Full year dividend increased by 13.6% to 7.5p
All of the above mentioned initiatives demonstrate a solid
performance on delivery of both the key financial and non-financial
metrics and put the Group in a strong position to target further
underlying EPS growth going forward.
The results are especially pleasing as management have had an
extremely busy year producing solid financial year on year metrics
whilst
-- continuing with a significant number of organic and reconfiguration initiatives
-- improving care quality ratings across all service segments
-- maintaining strong occupancy across the portfolio of homes
-- achieving industry leading staff retention rates
-- completing post year end, the transformational and highly
complementary and accretive acquisition of Cambian Group plc
-- enlarged Group property portfolio valuation updated as part of the transaction at GBP774m
Management have done extremely well to manage these various work
streams whilst ensuring the core business moves forward on all
fronts.
The Group has stood out from its peers as a company that can
successfully combine quality, integrity and sound financial acumen
and has consistently achieved good care quality ratings. Our
credibility as the provider of choice has never been stronger and
we continue our successful growth strategy with a confident
outlook.
Continuing with our strong organic growth, once again the Group
has purchased a number of properties including Red Rock,
Thorngarth, and Oaklea. Further investment has also been made
during the year on previous purchases with over GBP1.2m invested in
Beacon Reach, a school run by ROC Northwest, and GBP1.1m on Hidelow
school in Shropshire. All of these projects will deliver
incremental earnings are they reach mature occupancy. Pleasingly,
ROC Northwest has won the coveted Laing and Buisson Award in Social
Care for Children's Services.
During 2018, we again closed several services for
reconfiguration which impacted the growth in revenue. Offsetting
this, there are improved fees following reconfiguration plus the
impact of cost saving initiatives and the time and attendance
system has further improved underlying EBITDA. The Group's organic
development programme will continue with further reconfigurations
and, for 2019 we have a strong pipeline of development
opportunities with one property purchased soon after the year
end.
The Group continue to look at a number of other acquisition
opportunities and are confident that there will be further
opportunities in the coming year.
In the 13 years since joining AIM, the business has transformed
from being very focused on supporting adults with a learning
disability through residential and day care settings to one where
today we cater for young people and children with complex needs
across a range of settings, be it residential, supported living or
community support. We focus on the most complex and vulnerable
young people and the market for this client group stands at over
GBP10bn. There is currently an undersupply of specialist beds in
this niche area and the market is growing by almost 3% per
annum.
Over the years we have developed a range of care pathways and
helped many that we support to live more independently. This is a
fantastic outcome for both us and the individuals that we support
and it also helps local authorities meet the ever increasing cost
of social care provision.
Shortly after the year end the Acquisition of Cambian Group plc
was completed.
Cambian is a leading Children's specialist education and
behavioural health service provider. The Cambian Group's services
have a specific focus on Children who present high severity needs
with challenging behaviours and complex care requirements. Cambian
currently looks after over 2,000 children and employs over 4,500
people across a portfolio of 222 residential facilities, specialist
schools and fostering offices located in England and Wales.
Even with the significant growth we have achieved to date, and
also with the Cambian acquisition post year end, we still have less
than 5% of this very large and fragmented market. With the
increasing regulatory burden, the opportunity for further
consolidation is even more attractive.
Dividend
The Group policy has been to increase the total dividend per
year broadly in line with the movement in underlying diluted
earnings per share.
In 2018 there was a slight reduction in underlying diluted
earnings per share of (2.96p) mainly due to the share placement in
March 2017, which increased the number of shares in issue. The
Board has proposed a final dividend of 7.5p (2017: 6.60p) per share
bringing the total dividend for the year to 11.0p (2017: 9.90p) per
share. This represents a full year increase of 11.1% year on year.
The final dividend will be paid, subject to shareholder approval,
on 8 May 2019, with an ex-dividend date of 7 March 2019 and an
associated record date of 8 March 2019.
Our Board
There have been no changes to the Board during the year.
Providing the foundation for further growth, the Senior Executive
Team at CareTech has been strengthened by a number of senior
appointments during the year.
During the year the Remuneration Committee, the Audit Committee
and the Care Governance and Safeguarding Committee were
unchanged.
As stated in the prospectus accompanying the Cambian acquisition
it is our intention to add two additional independent non-executive
directors to the Board within three months of Completion of this
acquisition. Alongside additional non-executive appointments it is
expected that, following our acquisition of Purple Zest, Mike Adams
will become an executive director of the Group.
Our people
We have completed our planned evolution into two well defined
operating divisions, Children Services and Adult Services, and this
has generated organisational efficiencies. Simplifying the
structure has also supported planning and service delivery with a
more powerful approach to development.
Our continuing growth, measurable success and forward-looking
approach are a reflection of the hard work and dedication of staff
and managers throughout the organisation. I am always drawn to the
achievements of our excellent front line staff, which is inevitable
as we are first and foremost a care organisation. Their care and
commitment would be much less without the dedicated support of our
administrators and support teams whose hard work and energy is
critical to the success of our Company and the care we provide.
In March 2016, the Company announced the creation of the
CareTech Sharesave Scheme, a Government supported method for any of
our staff to have the opportunity to participate in the Company's
equity. In October 2017, we announced a second CareTech Sharesave
Scheme and 259 members of staff chose to join this new saving
scheme. We plan to introduce another CareTech Sharesave Scheme
early in 2019 as this is one part of our staff retention
strategy.
With the launch of the CareTech Charitable Foundation in May
2017 I am pleased that we were able to support members of the
CareTech family even more. The Foundation has ambitious and clear
sighted objectives to deliver meaningful impact to communities in
the UK and overseas about which the staff of the Group and its
service users feel proud and strongly-engaged, providing a unique
contribution to the charitable marketplace consistent with the
Group's values and approach.
Post Balance Sheet Events - Acquisition of Cambian Group plc and
new Banking facilities
As mentioned in my report above, I am extremely pleased to
report that we completed the Acquisition of Cambian Group plc on 19
October 2018 following the Rule 2.7 Offer on 16 August 2018 and the
Prospectus on 19 September 2018.
Work began on this Project at the beginning of the year and
after several approaches and considerable due diligence it was
pleasing to issue the Rule 2.7 Offer in August.
This offer could only be made with Shareholder Support, Banking
Support and the agreement of the Cambian Board of Directors.
Shareholder support through Rule 2.4 Irrevocable Undertakings in
July to the revised possible offer was important to being able to
make a Recommended Offer for Cambian Group plc in August. The Rule
2.7 Offer was made with 9 Irrevocable Undertakings from Cambian plc
Shareholders plus the Directors and 2 CareTech Holdings PLC
Shareholders plus the Directors. I am very grateful for the support
of our shareholders during this acquisition. I also welcome to the
enlarged Group the new CareTech Shareholders who were Cambian
Shareholders that took the Headline Offer.
Financing support was provided by Lloyds Bank PLC and National
Westminster Bank PLC as Mandated Lead Arrangers who provided a Term
and Revolving Facilities Agreement with total commitments of
GBP438.7m in support to the Rule 2.7 Offer. Subsequently this was
successfully syndicated and the final Bank draw down was GBP427.1m.
I am grateful to the Banks for their backing.
The Board of Cambian Group plc played a key role in
professionally dealing with our approaches and working well with
the CareTech team during the due diligence process.
Now that the acquisition has completed we are working with the
Competition and Markets Authority and planning I.T. integration.
This is an exciting phase post acquisition and in the coming months
I look forward to meeting more members of the Cambian team when I
visit services.
Outlook and Prospects
We operate in a growing social care market worth over GBP10
billion per annum and we are well positioned to meet market demand.
We have developed outcome based care pathways which deliver value
based services for our Local Authority partners.
With the new long term Banking facilities and solid free cash
flow generated from the enlarged Group, we look forward to the
integration of Cambian during 2019.
Their focus on children who present high severity needs with
challenging behaviours and complex care requirements is an
excellent fit alongside the CareTech Children's services, and this
extension of current care pathways and geographic presence is a
major opportunity to the enlarged Group.
We have major investment plans for 2019 and beyond with key new
organic developments and bolt-on acquisitions. Importantly, we also
continue to see how we can enhance further, the use of technology
as a validation of our work as well as for diagnostic and
assessment purposes, whilst exploring international market
opportunities and in particular the GCC. We will further strengthen
our management team offering a forceful blend of experience,
commercial wisdom and dedication to care. I have no doubt that the
next few years will see continuing growth and care excellence which
will help deliver our target of double digit growth in underlying
EPS.
Farouq Sheikh
Group Executive Chairman
6 December 2018
Group Chief Executive's Statement and Performance Review
A strong foundation built over 25 years
Overview
I am pleased to report again on a successful year that reflects
the hard work of our management team, the enthusiasm of our staff
and the support of our Board.
The Group has continued to build upon its solid foundations and
remains in a strong position to continue as a leading provider of
high quality specialist social care services in a large and growing
UK market which remains fragmented.
The Group has also continued to develop through organic growth
and reconfigurations and has further strengthened an experienced
management team with skilled leaders.
In 2017, I was extremely proud with the establishment of the
CareTech Charitable Foundation which is devoted to supporting the
social care sector. There have been a number of key long term
projects started in the year both in the UK and abroad. This is
further discussed in the Corporate Social Responsibility section of
the report.
There have been a number of staff initiatives to aid retention
including the second Sharesave Scheme and a Level 5 in Care
Management training scheme for Managers.
On 19 October 2018 the recommended acquisition of Cambian by the
Group was completed. I would like to take this opportunity to
welcome Anne Marie Carrie as Chief Operating Officer, and the whole
Cambian staff team, as well as the 2,000 children who use their
services, to the CareTech Group.
I strongly believe that the CareTech offerings in learning
difficulties and specialist services for adults including
residential services and fostering for young people, is highly
complementary to Cambian's positions in children's residential
care, specialist education and therapeutic fostering. Furthermore
the geographic reach of the services has been broadened, now
providing a nationwide network.
We are now ideally positioned to better serve local authority
partners and communities with an integrated care offering, to
provide best value to purchasers and successful outcomes for our
service users.
Consolidation and creating new opportunities
CareTech remains at the forefront of social care outsourcing in
the UK across both Children and Adult services and, in the year,
there has been a further increase in working closely with
commissioners and regulators.
National public policy continues to be a significant driver of
local authority commissioning intentions and behaviour. For a
number of years, public policy has encouraged greater
personalisation of health and social care for adults. Commissioners
and leading providers are driving change that will mean offering
people more choice and control over the care, treatment and support
they receive while at the same time maintaining the quality and
safety of those services.
Our care priorities drive successful outcomes for our service
users and follow closely the guidance from central Government.
Our key focus for delivering quality services and positive
outcomes is supported by the following key factors:
Communication
-- We have open and frank dialogue with our service users, their
families and social workers, as well as the Regulators.
Independence
-- In our social care and health contracts we aim to help our
service users to return to an ordinary independent life. It may be
children who can return to their birth families or live
independently. It may be adults who we can help on the pathway to
recovery following a specialist services breakdown, or acquired
brain injury or people with learning disability who we can support
towards independent living.
Housing care and support
-- We know that most people aspire to have a place of their own,
employment and ongoing support. We have structured our services,
developing new provision and creative partnerships with housing
providers to enable these aspirations to be achieved whenever
possible and we are tailoring training to assist young people and
adults leaving our services to gain employment.
Self-directed support
-- It is pivotal to government policy that adults and children
receiving social care are fully engaged in the support that they
require. With some adults this extends to the provision of a cash
sum enabling them to purchase their care and support directly.
CareTech managers have been further reviewing our systems and
delivering training throughout the organisation to ensure that we
are able to deliver the requirements of self-directed support.
Quality and dignity
-- CareTech has always delivered high quality care in well
maintained premises. However, we have never been complacent about
this and have undertaken reviews to ensure that we deliver the
right quality at a reasonable price. We have also learned a great
deal from the experience of our NHS colleagues and developed a
Dignity Test to ensure that our front line and administrative staff
treat all our clients in ways that promote dignity.
Progress in the year
The year has seen continued progress as the Group concentrates
on the introduction of innovative new services developed in
partnership with local authority commissioners reconfigured from
within our existing portfolio of properties or through new
properties either purchased or rented for service users for
supported living.
Adult Services have added a net 43 beds in additional capacity,
being 7 in Supported Living and 36 in Residential.
Children Services have added 69 beds in the year principally in
9 services.
The Group also continues to realise the benefit of
organisational improvements put in place over the past few years.
We have continued to strengthen our management structure with
further senior appointments planned and to improve the efficiency
of our processes following further investment in new systems which
have gone live or we are working on now. We are seeing the benefits
of new executive appointments which continue to have a positive
impact across the services.
New systems were procured during the year for the Group's
recruitment and training solutions including e-learning with
standard automated reports as well as for maintenance, hosting,
data analytics and e-compliance in order to benefit from cutting
edge technology.
These improvements have put us in a strong position to benefit
from a number of the commissioning opportunities by working in
partnership with the NHS and Local Authorities.
Care Pathway Range and Services
The Group's focus remains the provision of specialist social
care through its five divisions. This is underpinned by a
well-defined range of provisions which meet the commissioner
requirements. These services are now even more extensive and
focused on providing high quality care and positive outcomes for
all of our service users.
The Group has continued to develop and grow its existing five
operating divisions, which come under the two outcome-based sectors
of Adult Services and Children Services. We continue to extend both
our geographic coverage and our outcome-based Care Pathway range of
services organically through the purchase of properties to meet the
needs of our marketplace, specifically the requirement for greater
acuity service provision for both Children and Young People and
Adults. This ensures that CareTech is in a very strong position to
address the demands of our evolving marketplace.
We remain committed to the growth of residential care solutions
for adults and children with the most complex needs and the Group
has embraced the development of home based solutions including
foster care where demand for more specialist services remains
strong. Our residential care services for children cater for young
people with particularly difficult issues and offer a national
service; with strong growth seen in the North of England with ROC
Northwest which has expanded both in care and educational services.
In the year we have purchased properties in Scotland and North West
England for both Spark of Genius and ROC Northwest to develop into
new services. Our adult services offer a solid and reliable
provision across the whole spectrum of service offerings which now
includes acquired brain injuries and we see a particular volume
demand in the area of supported living, balanced by renewed demand
for more specialised residential care solutions.
Our strategy is to offer a bespoke range of options so that we
can maintain the Care Pathways that distinguish us from other
providers.
Overview of progress
Our focus during the past year has continued to be further
building on the businesses which established the Care Pathways
whilst introducing innovative new solutions to meet the challenges
faced by care commissioners and then adding newly acquired
businesses with complementary offerings.
Capacity has increased by 88 places principally because we have
continued to reconfigure services and added new beds through
acquiring properties. Occupancy levels within our mature services
remain at a creditable 93%, or 86% when taking into account our
services under development and transition.
Much has been written about personalisation and I felt it would
be useful to set out our own understanding and commitment to
personalisation.
Personalisation to us means recognising people as individuals
who have strengths and preferences and putting them at the centre
of their own care and support.
The traditional service-led approach has often meant that people
have not been able to procure the kind of support they need, or
receive tailored care assistance. Personalised approaches such as
self-directed support and personal budgets involve enabling people
to identify their own needs and make choices about how and when
they are supported to live their lives.
Our two business divisions of Adult Services and Children
Services comprise the following four Care Pathways and our Learning
Services division.
1. Adult Learning Disabilities
Year to 30 September 2018
Revenue GBP101.0m (2017: GBP87.7m)
Contribution to Group Revenue 54.4% (2017: 52.9%)
---------------------------
Underlying EBITDA before unallocated GBP27.0m (2017: GBP26.3m)
costs
-------------------------------------- ---------------------------
Capacity 1,754 (2017: 1,735)
-------------------------------------- ---------------------------
Adult Learning Disabilities provides individually tailor-made
solutions for people living in their own homes, residential care or
independent supported living schemes. We can work with clients to
deliver self-directed support packages.
For some people residential care will continue as the preferred
option and we increasingly offer several types of supported living
and packages of individualised self-directed support to people in
their own homes.
This includes adult residential care homes, independent
supported living and community support services.
We have continued to work closely with Local Authority and NHS
commissioners and this has helped us to achieve our growth through
the past year. We take a long-term view, recognising that change
will continue and with this in mind I am pleased to report that
redevelopment of some of our long stay residential provision has
been a great success over the past year and will continue to meet
the changing requirements of commissioners and families.
The market for high acuity care and the support of people with
learning disability is growing year on year. Demand for lower
acuity support has been impacted by the cuts in local authority
expenditure but this is not an area of activity in which CareTech
operates. Conversely, resources for those with the highest level of
need are being maintained and increased in some local
authorities.
During the past year we have withdrawn 50 places in services for
reconfiguration into new care models and have developed 26 beds
through reconfiguration plus an additional 43 beds have been
brought into service.
2. Specialist Services
Year to 30 September 2018
Revenue GBP15.3m (2017: GBP15.5m)
Contribution to Group Revenue 8.2% (2017: 9.3%)
--------------------------
Underlying EBITDA before unallocated GBP4.4m (2017: GBP3.9m)
costs
-------------------------------------- --------------------------
Capacity 214 (2017: 214)
-------------------------------------- --------------------------
Specialist Services comprise the Adult Mental Health Services
and Oakleaf Care (Hartwell).
Capacity is unchanged in Specialist Services during the
year.
The principal reason for the increase in underlying EBITDA is an
improved Margin.
Specialist Services works in partnerships with the NHS to ensure
a successful transition out of acute care, delivering pathways to
independence. We have an outstanding track record for helping
people away from acute care and supporting them in their own
homes.
The adult services for this Care Pathway include a community
based hospital, adult residential care homes, independent supported
living and community outreach with some transitional services
transferred within the Group.
Community Specialist Services has always been a critical but
relatively neglected area of social care. However, this is changing
as the NHS drives to lower bed capacity and accelerated early
discharge from acute psychiatric hospital care.
The growth of social care is certain and the response by
Government to one of the key difficulties is progressing. There has
been some progress in the removal of large numbers of learning
disabled people from the controversial "Treatment and Assessment
Centres" operating at various locations throughout the UK. CareTech
has never operated any centres of this type but we understand that
the CEO of NHS England has been tasked with ensuring that these
centres are re-provided as a matter of urgency. CareTech is seeking
opportunities to support the project and to offer a comprehensive
solution within its community homes.
We are well positioned for expansion in Specialist Services and
have a sustainable infrastructure to deliver growth including plans
to provide care for women with acquired brain injury in 2019.
3. Foster Care
Year to 30 September 2018
Revenue GBP8.2m (2017: GBP8.6m)
Contribution to Group Revenue 4.4% (2017: 5.2%)
Underlying EBITDA before unallocated GBP1.9m (2017: GBP1.9m)
costs
-------------------------------------- ------------------------
Capacity 301 (2017: 301)
-------------------------------------- ------------------------
Foster Care provides for both mainstream and specialist foster
care in small supportive groups across England and Wales for
children with disabilities. We also provide foster care family
assessments in the home rather than in a residential setting.
The unchanged capacity, and fall in revenue but stable
underlying EBITDA in Foster Care is due to the competitive nature
of the market as well the change to family assessments in the home.
It is also due to capacity being reported on the basis of the
children that carers are able to look after rather than the number
that they are approved for.
This trend is driven by cost considerations, where fostering is
considerably less expensive than residential care and by perceived
quality care factors. It is generally held that fostering in an
ordinary family home delivers better quality than any residential
setting. However, the rising tide of fostering has been constrained
by the challenge of finding foster carers with the right skill and
motivation alongside preference by social workers to place within
local authority services rather than the independent sector.
In March 2016, 63,718 were looked after in foster care in the
UK. Over time independent agencies have absorbed a larger
proportion of fostering activity, as local authorities have seen
their volumes remain static and their share fall. (LaingBuisson
Children's Services Market Report Third Edition 2017).
Our Foster Care teams and Young People Residential teams are
working closely alongside each other to offer the best outcomes for
Young People.
Our market intelligence suggests that most, if not all,
independent sector fostering agencies are still experiencing some
degree of "hold back" at present. However, the consensus view is
that this will not last long and local authorities will inevitably
return to progressive outsourcing of foster care provision.
Outsourcing is well established in the culture of most local
authorities, but the current austerity measures have led a small
number of authorities to reflect on the 50% fee premium paid for
independent fostering. This disparity of cost can be attributed in
part to the fact that the most complex and therefore high cost
cases are placed in the care of independent providers. However, it
is also clear that local authorities fail to undertake a full cost
analysis of their in-house provision. Wherever this has been done,
outsourcing is demonstrably much better value.
Demand for foster care has increased overall but we have noted
an increasing trend among some local authorities to make provision
in-house for all but the most complex children. In our view this is
an expensive and unsustainable approach that exposes local
authority commissioners to risk. Our own services are being
maintained at an acceptable level.
In October 2017 the All Wales Framework for the provision of
foster care services outcome was that TLC (Wales) was ranked 1 and
was placed in the New Tier 1. Unfortunately, the benefits of this
change are taking longer to come through and turnover last year was
lower than anticipated, although the margin improved by over 1% due
to tight cost controls.
Looking forward, we are training our foster carers with the
skills required to manage more complex work and have linked the
fostering division with our residential team for children so that
we can maintain an effective care pathway.
4. Young People Residential Services
Year to 30 September 2018
Revenue GBP58.7m (2017: GBP43.8m)
Contribution to Group Revenue 31.6% (2017: 26.4%)
Underlying EBITDA before unallocated GBP17.0m (2017: GBP13.2m)
costs
-------------------------------------- --------------------------
Capacity 353 (2017: 284)
-------------------------------------- --------------------------
A number of children and young people need to live in
specialised residential services and receive education. As far as
practicable we aim to help these children move into a more
normalised family style environment.
This segment contains children residential care homes, which
includes facilities for children with learning difficulties and
emotional behavioural disorders ("EBD"), and small specialist
schools.
In December 2015 ROC Northwest was added and gave a further
geographic spread to fit between the current Children residential
services in Scotland (Spark of Genius and ACAD). North Wales
(Branas Isaf) and South Wales (Greenfield) and services in
Staffordshire and Yorkshire. It also strengthened the residential
care and education services for young people with complex needs,
especially EBD.
In the year this segment benefited from new services which have
added 69 beds to capacity with additions to Spark of Genius, ROC
Northwest and the original Childrens services.
Spark of Genius which provides significant benefits across the
division due to their well-established education facilities across
Scotland and North East England which complement the ROC Northwest
and Welsh education facilities. In the year the Education capacity
increased by 69 to close at 353 Young People.
At the Laing Buisson Awards in November 2017 the winners in
Social Care for Children's Services was ROC Northwest.
Children residential services have been growing as our
reputation for quality care and support spreads. We are currently
developing new beds and places that have been commissioned during
the past year.
5. Learning Services
Year to 30 September 2018
Revenue GBP2.5m (2017: GBP10.4m)
Contribution to Group Revenue 1.4% (2017: 6.2%)
Underlying EBITDA before unallocated GBP0.5m (2017: GBP0.9m)
costs
------------------------------------- -------------------------
Learning Services comprises Dawn Hodge Associates that is a
regional provider specialising in the social care sector and was
acquired in 2017. This division has been reconfigured and as a
result turnover has reduced and there has been an impairment to
goodwill of GBP2m. However, it is anticipated that the current year
will show an improved performance once the changes made have taken
affect.
Their intensive pre-employment, development and apprenticeship
programmes use public funds from the Skills Funding Agency to lay
the foundations for individuals to achieve their career goals while
helping to provide businesses with the vital skills they need in
their workforce.
As well as supporting the workforce, Learning Services has also
developed programmes for service users by enhancing the pathways to
independent living and employment. Young People leaving care, for
example, often do not know where to find the right job
opportunities or have the opportunity to access employer-focused
training. We can now bridge that gap by supporting young people as
they make the transition to adult life. We are also exploring how
best to help individuals return to employment after mental illness
and to give people with learning disabilities the skills and
confidence to gain employment so that they are able to live more
independently.
Progress has been made in identifying the potential for Learning
Services to add value to CareTech's attraction and recruitment of
staff and their retention, helping new employees gain the skills
and qualifications to grow a successful career in care through an
Apprenticeship.
The Aspire programme developed as a unique and innovative scheme
that will ensure all CareTech's support workers receive 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 their role
and 140 completed this apprenticeship in the last academic
year.
CareTech apprentices continue their training with 266 CareTech
support workers undertaking the apprenticeship programme.
The Team Leader programme has 22 staff members on Level 5
programmes.
In early 2016 Dawn Hodge Associates retained its Ofsted
"Outstanding" which is an achievement that we are very pleased to
have attained and provides an excellent base to build upon.
During 2017 with the introduction of the Apprenticeship Levy
there have been significant changes to the Learning sector, but we
believe that we are well placed to take advantage of the new market
conditions.
However, the Learning Service Division faced a challenging start
to the new Learning sector year. A reorganisation of the management
of the division was undertaken and the budget for the rest of 2019
is expected to show an improvement on last year.
Acquisition of Cambian
As we have outlined in the prospectus the two businesses will be
run with the CareTech and Cambian brands retained and with no
material change to CareTech's or Cambian's current operational
sites. Over the coming months a dedicated plan to review the two
businesses will be undertaken with limited disruption to the
underlying operations of each business.
Within the enlarged Group the CareTech operations come under
John Ivers, Chief Operating Officer of CareTech. Anne Marie Carrie
leads the Cambian operations as Chief Operating Officer of Cambian
and both John and Anne Marie report to me as Group Chief Executive
Officer.
I am looking forward to utilising fully the operational
expertise across the enlarged Group which will enable the creation
of a robust and sustainable operating model to better serve local
authority partners and service users. The combined operational
expertise will be able to deliver strong service user outcomes,
implement positive staff engagement and improve care quality. In
particular, through the combination, Cambian should be able to
leverage CareTech's highly developed recruitment and retention
functions, which have contributed to CareTech achieving staff
turnover rates of 22.5% which I believe is substantially better
than the sector average.
There is also the opportunity for CareTech's Learning Services
division, which assists young people in obtaining employment
opportunities and apprenticeships, to augment Cambian's service and
care pathway.
Outlook
The coming year shows every sign of being good for health and
social care providers and especially for those with an established
reputation for quality and innovation.
This year there has been significant policy development and we
see some indicators that local authorities have recognised the need
to maintain, or grow, their social care budgets.
May I also take this opportunity to welcome all staff who have
joined the CareTech family and also would like to thank all of the
staff teams across the Group for their hard work and commitment
during the past year.
Haroon Sheikh
Group Chief Executive Officer
6 December 2018
Group Financial Review
I am delighted that this year marks CareTech's 25(th) year in
business looking after service users.
The Group has continued to make good progress in 2018.
In October 2018 after the year end, the Group completed the
acquisition of Cambian and also has put in place new Banking
facilities to provide stability for the coming years.
These results reported are for the CareTech operations only and
in 2019 the results will reflect the Enlarged Group including the
Cambian operations.
Results
Underlying operating profit improved by 10.5% at GBP37.8m
compared with GBP34.2m last year. Until 2013 the Group had been
making strategic acquisitions to gain market share and extend the
care pathway range of services. Since 2013 the focus had been on
both organic development and cost efficiencies as well as
acquisitions. With two share placements, improved banking
facilities and a Ground Rent fund transaction the Group has raised
GBP87m which has been used for acquisitions with five completed in
the last four years.
Underlying basic earnings per share are 35.07p (2017: 38.03p).
In the year underlying profit before taxation increased by 11.9% to
GBP32.9m and underlying profit after tax has risen by 1.9% to
GBP27.1m (2017: GBP26.6m) due in part to the increase in the
effective tax rate. The weighted average number of diluted shares
rose to 75.7m (2017: 70.1m) being an increase of 8.0%. Basic
earnings per share decreased by 44.8% to 14.07p (2017: 25.48p) and
profit after tax attributable to the owners of the parent reduced
by 40.3% to GBP10.6m (2017: GBP17.8m).
Cash inflows from operating activities before tax and
non-underlying items paid were GBP39.1m (2017: GBP32.7m), an
increase of 19.6%. Net debt to the Group's bankers at the year end
of GBP147.0m has reduced by GBP0.1m for the year (2017:
GBP147.1m).
The Condensed Income Statement before non-underlying items for
the year is summarised in table 1 below.
Table 1 - Condensed Income Statement before non-underlying
items
2018 2017
GBPm GBPm Growth
Revenue 185.7 166.0 11.9%
Gross profit 65.3 59.9
Administrative expenses excluding depreciation
and share based payments (21.4) (20.0)
Underlying EBITDA 43.9 39.9 10.0%
Underlying EBITDA margin 23.6% 24.0%
Depreciation (5.9) (5.5)
Share-based payments charge (0.2) (0.2)
Underlying operating profit 37.8 34.2 10.5%
Net financial expenses (4.9) (4.8)
Underlying profit before tax 32.9 29.4 11.9%
Underlying taxation (5.8) (2.8)
Underlying effective tax rate 17.5% 9.3%
Underlying profit for the year 27.1 26.6
Non-controlling interest (0.6) -
Weighted average number of diluted shares
(millions) 75.7 70.1
Underlying basic earnings per share 35.07p 38.03p
Full year dividend per share 11.00p 9.90p
Revenue
Revenue of GBP185.7m (2017: GBP166.0m) was 11.9% higher than in
2017.
In the established Adult Learning Disabilities segment we
continued to experience high levels of occupancy and reported 86%
occupancy at 30 September 2018. When this is blended with the
facilities that are being reconfigured and so are under
development, the overall occupancy level during the second half of
the year and at 30 September 2018 was 86% of capacity (September
2017: 86%). As in recent years the demand for residential services
continues to be encouraging for high acuity users.
As set out in the Chief Executive's statement and note 2 to the
Preliminary Announcement, we are again reporting segmental
information for the financial year and last year, which includes
information on client capacity and revenue for each segment.
The continued development of our care pathways and a growing
range of service options has led to the proportion of Adult
services revenue rising from 62.2% in 2017 to 62.6% in 2018 and
underlying EBITDA before Group Costs moving from 65.3% in 2017 to
61.8% in 2018.
The Young People Residential services total revenue has risen by
34% with Specialist Services falling by 1.3%, Foster Care falling
by 4.7% and Learning Services by 76%. Their total proportion of the
EBITDA before Group costs has moved from 34.6% in 2017 to 38.2% in
2018 due mainly to the new services opening in the Young People
Residential services.
Table 2 - Revenue
2018 2018 2017 2017
Underlying Underlying
Revenue EBITDA Revenue EBITDA
GBPm GBPm GBPm GBPm
Adult Learning
Disabilities 101.0 27.0 87.7 26.3
Specialist Services 15.3 4.4 15.5 3.9
Adults Services 116.3 31.4 103.2 30.2
Young People Residential 58.7 17.0 43.8 13.2
Services
Foster Care 8.2 1.9 8.6 1.9
Learning Services 2.5 0.5 10.4 0.9
Childrens Services 69.4 19.4 62.8 16.0
Less unallocated Group
costs - (6.9) - (6.3)
185.7 43.9 166.0 39.9
Underlying EBITDA and total EBITDA
Underlying EBITDA has grown by 10% from GBP39.9m in 2017 to
GBP43.9m in 2018. Underlying EBITDA margin has decreased from 24%
to 23.6% mainly due to the margin in the total of the acquired
businesses being at a lower rate than the other businesses, and the
growth in services businesses that require little capital
expenditure like Foster Care and the Learning Division.
The Adult Learning Disabilities, Specialist Services and Young
People Residential Services segments have higher margins but
normally require considerable capital expenditure to increase
capacity, whilst Supported Living, Foster Care and Learning
Services operate at a lower margin in part because they do not
require capital expenditure to increase capacity and are not
reliant on the Group's properties.
Administrative expenses, before depreciation and share-based
payments charges were GBP21.4m (2017: GBP20.0m) and increased by
GBP1.4m during the year. In 2017 they represented 12.0% of Group
revenue and in 2018 this reduced to 11.5% of Group revenue.
There has been a further considerable effort in the year to
tighten administrative expenses with further back office systems
centralisation and procurement successes for the Group.
The reconfiguration of services is a central part of the Board's
strategy to grow organically. It enhances average fee rates and
maintains the Group's reputation as a provider of highest quality
of care.
In the year there has also been a continued focus on purchasing
properties which are then converted to new services.
The number of employees in management and administration has
reduced by 40. The Time and Attendance system has been implemented
across all of the residential services in the year which will
further our back office centralisation and ensure that staff are
paid more accurately and quickly, as well as giving reliable data
on staff rotas and attendance in each service. A new integrated
Recruitment system has been implemented in the year.
Total EBITDA has increased from GBP36.4m in 2017 to GBP40.2m in
2018.
Operating profit and profit before tax
The depreciation charge is GBP5.9m (2017: GBP5.5m) and reflects
the investment in land and buildings, motor vehicles and fixtures,
fittings and equipment.
After this charge and the share-based payments, underlying
operating profit grew 10.5% to GBP37.8m (2017: GBP34.2m).
Total operating profit reduced by GBP2.5m to GBP20.2m (2017:
GBP22.7m).
Net underlying financial expenses increased to GBP4.9m (2017:
GBP4.8m) due to additional finance leases taken out on new home
vehicles during the year.
Underlying profit for the year improved to GBP27.1m (2017:
GBP26.6m).
Total profit before tax decreased by 8.4% to GBP15.4m (2017:
GBP16.8m).
Taxation and diluted earnings per share
The effective underlying tax rate was 17.5% (2017: 9.3%) and
reflects management's expectations of future capital investment
through organic developments and reconfigurations relative to
available capital allowances and the impact of the reduction in the
main rate of corporation tax in the year, whilst last year also had
the release of a provision for tax no longer required.
The weighted average number of shares in issue rose by 8.1%
mainly due to the share placement in March 2017. The underlying
basic earnings per share fell to 35.07p in 2018 from 38.03p in
2017.
Basic earnings per share reduced by 44.8% to 14.07p (2017:
25.48p)
Dividends
Our policy has been to increase the total dividend per year
broadly in line with the movement in underlying diluted earnings
per share. The final dividend will rise in line with the increase
in underlying operating profit and increase to 7.5p per share
(2017: 6.60p), bringing the total dividend for the year to 11.00p
(2017: 9.90p), a growth of 11.1%. Dividend cover for 2018, based
upon diluted earnings per share before non-underlying items is 3.19
times (2017: 3.84 times).
Non-underlying items
As fully explained on the face of the Consolidated Statement of
Comprehensive Income and in note 3 to the Preliminary Announcement,
the Directors have separately disclosed a number of non-underlying
items in order to improve understanding of the underlying trading
performance achieved by the Group. Total non-underlying items
represent a net charge of GBP17.6m at operating level (2017:
GBP11.5m) and the principal items are the amortisation of
intangible assets and integration and reorganisation costs plus
costs of the acquisition. In 2018 the Selborne Care Limited
Acquired Intangibles were independently valued and are currently
being verified by the Group's Auditors. A bargain purchase credit
will only be recognised when the verification is complete, and
will, if material, be booked in the audited 2018 statutory accounts
in due course.
Cash flow and net debt
The cash flow statement and movement in net debt to the Group's
bankers for the year is summarised below:
2018 2017
GBPm GBPm
Underlying EBITDA 43.9 39.9
(Increase) in working capital (4.8) (7.2)
Cash inflows from operating activities
before non-underlying items 39.1 32.7
Tax paid (4.1) (6.3)
Interest paid (4.7) (5.0)
Dividends paid (7.5) (5.9)
Acquisitions and capital expenditure (17.1) (36.4)
Share Placement - 37.4
Cash flow before adjustments 5.7 16.5
Non-underlying cashflows including
derivative financial instruments (5.6) (7.2)
Movement in net debt to the Group's
bankers 0.1 9.3
Opening net debt to the Group's
bankers (147.1) (156.4)
Closing net debt to the Group's
bankers (147.0) (147.1)
Net debt to the Group's bankers at 30 September 2018 of
GBP147.0m (2017: GBP147.1m) has decreased by GBP0.1m during the
financial year, with an investment of GBP17.1m in acquisitions and
capital improvements during the year.
Operating cash flows before non-underlying items
The GBP39.1m (2017: GBP32.7m) cash inflow from operating
activities, before non-underlying items, represents 89% (2017: 82%)
underlying EBITDA cash conversion ratio.
Interest and dividend cash flows
Interest paid of GBP4.7m (2017: GBP5.0m) is reflective of the
financial expenses per the Consolidated Statement of Comprehensive
Income, whilst dividends paid are consistent with the relevant
section earlier in the review.
Acquisitions and capital expenditure
During the year we invested total funds of GBP17.1m (2017:
GBP36.4m) on capital expenditure. The Group acquired Purple Zest
Limited in July 2018 for a total consideration of GBP0.1m in
cash.
Further details of the acquisitions are explained in the Group
Chief Executive's Statement and Performance Review as well as in
the notes to the financial statements.
Capital expenditure of GBP15.9m (2017: GBP19.8m) includes
GBP10.9m to update our portfolio of assets.
Banking arrangements for the Group for the year
The Group had entered into new Banking facilities with Lloyds
Bank plc and National Westminster Bank plc for committed financing
by way of term loans of between 3.5 to 5 years up to GBP334m and a
short term bridge loan of approx. GBP80m. The short bridge loan was
repaid in November 2018 following completion using principally
Cambian's significant cash position.
In addition to the Term Loans and Bridge Loan, a GBP25m
revolving credit facility is available to provide working capital
for the Enlarged Group and an uncommitted accordion facility of up
to GBP30m for general Corporate and Working Capital purposes
(including acquisitions).
The new facilities of the Term Loans and Bridge Loan with an
aggregate size up to GBP414m have been utilised for the cash
consideration of the acquisition, following the repayment of the
Group's existing bank debt facilities of approx. GBP150m and the
payment of debt financing fees of up to approx. GBP6m. The amount
available for the draw down under the Term Loans was reduced in the
event that the actual cash consideration payable under the
transaction was less than GBP253m.
As part of the Acquisition, in September 2018 the Group's
property portfolio was revalued by Cushman and Wakefield and the
market value was GBP424m. The Cambian Group plc property portfolio
was revalued by Knight Frank and the market value was GBP350m.
Following completion of the Acquisition, Lloyds Bank plc and Nat
West Markets plc, who had underwritten the funding, completed the
syndication of the Term Loans and revolving credit facility
successfully. The syndication was significantly oversubscribed
showing strong support for both the Group and the acquisition.
The final facility is a term loan of GBP322m and revolving
credit facility of GBP25m to a group of banks comprising Barclays
Bank PLC, HSBC UK Banks plc, Santander UK plc, AIB Group (UK) plc,
Clydesdale Bank PLC and Credit Suisse AG, in addition to Lloyds
Bank plc and National Westminster Bank plc.
The Enlarged Group loan to value based only on the property
valuations is c42% whilst the proforma net debt to EBITDA of the
Enlarged Group is 4.3x which is expected to reduce to under 4x in
the short term.
Post Balance Sheet Events
In October 2018 there were a group of related Post Balance Sheet
Events.
There was the Acquisition effected by way of a Court Sanctioned
Scheme under Part 26 of the Companies Act whereby the Group became
the holder of the entire issued and to be issued share capital of
Cambian Group plc. The Acquisition completed following the
Admission of the Enlarged Share Capital to trading on AIM on 19
October 2018. The Headline Offer for each Cambian share was 100p in
cash and 0.267 of a new CareTech Share; alternatively the Full Cash
Alternative for each Cambian share was 190p in cash.
The majority of the Cambian Shareholders took the Headline Offer
and so became shareholders in the Enlarged Group with 33.2m new
shares in the Group being issued. There was also the financing of
the acquisition which is discussed above.
Outlook
The Group is now in a better position than ever before to
continue its growth as a pioneering provider of specialist social
care services in a UK market which is continuing to grow yet
remains fragmented.
Michael Hill
Group Finance Director
6 December 2018
Unaudited Consolidated Statement of Comprehensive Income
for the year ended 30 September 2018
2018 2017
Non- underlying Non- underlying
Underlying (i) Total Underlying (i) Total
Note GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Revenue 2 185,689 - 185,689 166,018 - 166,018
Cost of sales (120,387) - (120,387) (106,110) - (106,110)
Gross profit 65,302 - 65,302 59,908 - 59,908
Administrative
expenses 3 (27,543) (17,573) (45,116) (25,758) (11,483) (37,241)
Operating profit 37,759 (17,573) 20,186 34,150 (11,483) 22,667
EBITDA (ii) 43,862 (3,620) 40,242 39,885 (3,487) 36,398
Depreciation (5,906) - (5,906) (5,525) - (5,525)
Amortisation of
intangible assets 3 - (7,428) (7,428) - (7,190) (7,190)
Acquisition cost - (4,062) (4,062) - (806) (806)
Acquisition
adjustments - (2,463) (2,463) - - -
Share-based payments
charge (197) - (197) (210) - (210)
Operating profit 37,759 (17,573) 20,186 34,150 (11,483) 22,667
Financial expenses (4,867) 51 (4,816) (4,770) (1,118) (5,888)
Profit before tax 32,892 (17,522) 15,370 29,380 (12,601) 16,779
Taxation 3,4 (5,751) 1,625 (4,126) (2,744) 3,814 1,070
Profit for the year 27,141 (15,897) 11,244 26,636 (8,787) 17,849
Non-controlling
interest (596) - (596) - - -
Profit and
comprehensive
income for the year
attributable to
owners of the parent 26,545 (15,897) 10,648 26,636 (8,787) 17,849
Earnings per share
Basic 6 35.07p 14.07p 38.03p 25.48p
Diluted 6 35.06p 14.06p 38.02p 25.48p
(i) Non-underlying items comprise: amortisation of intangibles,
acquisition expenses, fair value adjustments on acquisitions,
changes in value and additional finance payments in respect of
derivative financial instruments, integration, reorganisation and
redundancy costs and provision for onerous leases. See note 3.
(ii) EBITDA is operating profit stated before depreciation and share-based payments charge.
.
Unaudited Consolidated Statement of Financial Position
as at 30 September 2018
Note 2018 2017
GBP000 GBP000
Non-current assets
Property, plant and equipment 301,109 297,170
Other intangible assets 41,475 40,954
Goodwill 42,342 43,098
384,926 381,222
Current assets
Inventories 898 835
Trade and other receivables 31,747 23,519
Cash and cash equivalents 9,421 6,402
42,066 30,756
Total assets 426,992 411,978
Equity
Share capital 379 379
Share premium 120,820 120,778
Shares held by Executive Shared Ownership
Plan (4,750) (4,750)
Merger reserve 9,023 9,023
Non-controlling interest 639 -
Retained earnings 82,122 78,771
Total equity 208,233 204,201
Liabilities
Non-current liabilities
Loans and borrowings 2,580 145,872
Ground rent liabilities arising under IAS17 7,244 7,294
Deferred tax liabilities 18,854 17,843
Deferred and contingent consideration payable - 1,133
Derivative financial instruments - 172
28,678 172,314
Current liabilities
Loans and borrowings 153,830 7,662
Trade and other payables 24,875 15,709
Ground rent liabilities arising under IAS17 50 50
Deferred and contingent consideration payable 966 2,420
Deferred income 3,372 1,762
Corporation tax 6,836 7,092
Derivative financial instruments 152 768
190,081 35,463
Total liabilities 218,759 207,777
Total equity and liabilities 426,992 411,978
Unaudited Consolidated Statement of Changes in Equity
as at 30 September 2018
Share Share Shares held Retained Merger Total Non-controlling Total
capital premium by Executive earnings reserve Attributable Interest Equity
Shared to owners
Ownership of the parent
Plan
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
At 1 October
2016 321 81,750 (6,072) 66,645 9,023 151,667 - 151,667
Profit for
the year - - - 17,849 - 17,849 - 17,849
Total
comprehensive
income - - - 17,849 - 17,849 - 17,849
Issue of
ordinary
shares 58 39,028 1,322 - - 40,408 - 40,408
Equity settled
share based
payments
charge - - - 210 - 210 - 210
Dividends - - - (5,933) - (5,933) - (5,933)
Transactions
with owners
recorded
directly
in equity 58 39,028 1,322 (5,723) - 34,685 - 34,685
At 30
September
2017 379 120,778 (4,750) 78,771 9,023 204,201 - 204,201
At 1 October
2017 379 120,778 (4,750) 78,771 9,023 204,201 - 204,201
Profit for
the year - - - 10,648 - 10,648 - 10,648
Total
comprehensive
income - - - 10,648 - 10,648 - 10,648
Issue of
ordinary
shares - 42 - - - 42 - 42
Equity settled
share based
payments
charge - - - 197 - 197 - 197
Dividends - - - (7,494) - (7,494) - (7,494)
Minority
interest - - - - - - 639 639
Transactions
with owners
recorded
directly
in equity - 42 - (7,297) - (7,255) 639 (6,616)
At 30
September
2018 379 120,820 (4,750) 82,122 9,023 207,594 639 208,233
Unaudited Consolidated Statement of Cash Flow
for the year ended 30 September 2018
Note 2018 2017
GBP000 GBP000
Cash flows from operating activities
Profit before tax 15,370 16,779
Adjustments for:
Financial expenses 4,816 5,888
Onerous lease provision charge - 287
Depreciation 5,906 5,525
Amortisation 7,428 7,190
Charitable foundation donation 380 -
Share-based payments charge 197 210
Acquisition transaction cost 4,062 806
Costs arising from placement of shares - 348
Integration and restructuring costs 2,863 2,852
Release of deferred consideration (1,095) -
Termination of onerous contracts 378 -
Impairment of goodwill 2,000 -
Adjustments relating to prior acquisitions 1,557 -
Operating cash flows before movement in
working capital 43,862 39,885
Increase in Inventory (63) (20)
Increase in trade and other receivables (8,228) (2,641)
Increase/ (decrease) in trade and other
payables 3,498 (4,519)
Operating cash flows before adjustment items 39,069 32,705
Integration and restructuring costs (3,652) (4,006)
Payment of Charitable donations (380) (287)
Cash inflows from operating activities 35,037 28,412
Tax paid (4,135) (6,295)
Net cash from operating activities 30,902 22,117
Cash flows from investing activities
Proceeds from sale of property, plant and
equipment 1,200 200
Payments for business combinations (72) (16,586)
Acquisition of property, plant and equipment (14,519) (15,888)
Acquisition of software (2,537) (3,867)
Payment of acquisition costs (839) (1,419)
------------ ------------
Net cash used in investing activities (16,767) (37,560)
------------ ------------
Unaudited Consolidated Statement of Cash
Flow (continued)
for the year ended 30 September 2018
Cash flows from financing activities
Note 2018 2017
GBP000 GBP000
Proceeds from the issue of share capital 42 37,829
Interest paid (4,650) (4,955)
Cash outflow arising from derivative financial
instruments (649) (776)
Bank Loans drawdown 11,035 30,911
Loan arrangement fees (1,436) -
Repayment of borrowings (5,775) (37,400)
Payment of finance lease liabilities (2,189) (2,139)
Dividends paid (7,494) (5,933)
Net cash arising (used in)/ from financing
activities (11,116) 17,537
Net increase in cash and cash equivalents 3,019 2,094
Cash and cash equivalents at 1 October 6,402 4,308
Cash and cash equivalents at 30 September 9,421 6,402
Notes to the Financial Statements
1 Background and basis of preparation
CareTech Holdings PLC (the 'Company') is a company registered
and domiciled in England and Wales. The consolidated financial
statements of the Company for the year ended 30 September 2018
comprise the Company and its subsidiaries (together referred to as
the 'Group').
The unaudited summary financial information set out in this
announcement does not constitute the Company's consolidated
statutory accounts for the years ended 30 September 2018 or 30
September 2017. The results for the year ended 30 September 2018
are unaudited. The statutory accounts for the year ended 30
September 2018 will be finalised on the basis of the financial
information presented by the Directors in this preliminary
announcement, and will be delivered to the Registrar of Companies
in due course. The statutory accounts are subject to completion of
the audit and may change should a significant adjusting event occur
before the approval of the Annual Report.
The statutory accounts for the year ended 30 September 2017 have
been reported on by the Company's auditors and delivered to the
Registrar of Companies. The auditors report on those accounts was
unqualified and did not include references to any matter which the
auditors drew attention by way of emphasis without qualifying their
report and did not contain statements under section 498(2) or (3)
of the Companies Act 2006.
The preliminary announcement for the year ended 30 September
2018 was approved by the Board for release on 6 December 2018.
2 Segmental information
IFRS 8 requires operating segments to be determined based on the
Group's internal reporting to the Chief Operating Decision Maker
("CODM"). The CODM has been determined to be the Chief Executive
Officer as he is primarily responsible for the allocation of
resources to segments and the assessment of the performance of each
of the segments.
The CODM uses underlying EBITDA as reviewed at monthly Executive
Committee and Performance meetings as the key measure of the
segments' results as it reflects the segments' underlying trading
performance for the period under evaluation. Underlying EBITDA is a
consistent measure within the Group.
Inter-segment revenue between the operating segments is not
material.
Our two key segments are Adult Services (Adult) and Children
Services (Children). Adult Services comprises the Adult Learning
Disabilities (ALD) and Specialist Services (SS) divisions and the
Children Services comprises Young People Residential Services
(YPR), Foster Care (FC) and Learning Services (Learning).
There has been no aggregation of the operating segments in
arriving at these reportable segments.
The segment results for the year ended 30 September 2018, for
the year ended 30 September 2017 and the reconciliation of the
segment measures to the respective statutory items included in the
consolidated financial information are as follows:
Year ended 30 September 2018
Continuing Operations ALD SS Adult YPR FC Learning Children Total
Client Capacity 1,754 214 1,968 353 301 0 654 2,622
Revenue (GBP'000) 100,965 15,316 116,281 58,707 8,246 2,455 69,408 185,689
Underlying EBITDA 26,995 4,442 31,437 17,024 1,898 448 19,370 50,807
before allocated cost
(GBP'000)
Year ended 30 September
2017
Continuing Operations ALD SS Adult YPR FC Learning Children Total
Client Capacity 1,735 214 1,949 284 301 - 585 2,534
Revenue GBP'000) 87,752 15,486 103,238 43,798 8,626 10,356 62,780 166,018
Underlying EBITDA
before allocated cost
(GBP'000) 26,331 3,862 30,193 13,205 1,870 960 16,035 46,228
Reconciliation of EBITDA to profit after tax: 2018 2017
GBP000 GBP000
Underlying EBITDA before unallocated costs 50,807 46,228
Unallocated costs (6,945) (6,343)
--------------------------------------------------------------- ------ -------------------- -----------------
Underlying EBITDA 43,862 39,885
Depreciation (5,906) (5,525)
Amortisation (7,428) (7,190)
Share based payments charge (197) (210)
Non-underlying items (10,145) (4,293)
--------------------------------------------------------------- ------ -------------------- -----------------
Operating profit 20,186 22,667
Financial expenses (4,816) (5,888)
--------------------------------------------------------------- ------ -------------------- -----------------
Profit before tax 15,370 16,779
Taxation (4,126) 1,070
Non-controlling interest (596) -
Profit after tax 10,648 17,849
All operations of the Group are carried out in the UK, the
Company's country of domicile. All revenues therefore arise within
the UK and all non-current assets are likewise located in the UK.
No single external customer amounts to 10% or more of the Group's
revenues.
No asset and liability information is presented above as this
information is not allocated to operating segments in the regular
reporting to the Group's Chief Operating Decision Maker and is not
a measure used by the CODM to assess performance and to make
resource allocation decisions.
3 Non-underlying items
Non-underlying items are those items of financial performance
that, in the opinion of the Directors, should be disclosed
separately in order to improve a reader's understanding of the
underlying trading performance achieved by the Group as these are
one off significant costs which are not part of the ordinary course
of the business. Non-underlying items comprise the following:
2018 2017
Note GBP000 GBP000
Integration and restructuring costs (i) 2,863 2,852
Termination of onerous leases (ii) 377 287
Share placement - 348
Charitable donations 380 -
EBITDA adjustments 3,620 3,487
Amortisation 7,428 7,190
Acquisition expenses 4,062 806
Impairment of goodwill 2,000 -
Adjustment to deferred consideration (1,095) -
Adjustment relating to prior acquisitions 1,558 -
2,463 -
Included in Administrative expenses 17,573 11,483
Financial expenses
Fair value movements relating to derivative
financial instruments (iii) (787) (1,107)
Other financing cost relating to ground rent - 1,173
Charges relating to derivative financial instruments 513 829
IAS 17 lease imputed interest 223 223
Included in financial expenses (51) 1,118
Tax on non-underlying items
Current (1,004) (1,138)
Deferred tax (iv) (621) (2,676)
Included in taxation (1,625) (3,814)
Total non-underlying items 15,897 8,787
(i) The Group incurred a number of exceptional costs relating to
the integration of recent acquisitions and the reorganisation of
the internal operating and management structure and redundancy
costs totalling GBP2,863,000 (2017: GBP2,852,000). Included in the
cash flow statement are acquisition expenses of GBP4,062,000 (2017:
GBP806,000) and integration and reorganisation costs of
GBP2,863,000 (2017: GBP2,852,000), which were paid in the year. In
2018 the Selborne Care Limited Acquired Intangibles were
independently valued and are currently being verified by the
Group's Auditors. A bargain purchase of credit will only be
recognised when the verification is complete, and will, if
material, be booked in the audited 2018 statutory accounts in due
course.
(ii) The present value of the future cash flows receivable from
the operation of certain leased assets has been assessed as being
lower than the present value of the rental payments to which the
Group is committed. Therefore, the Group has provided for
GBP377,000 (2017: GBP287,000) being the present value of any
onerous element of the remaining lease life.
(iii) Non-underlying items relating to derivative financial
instruments include the movements during the year in the fair value
of the Group's interest rate swaps which are not designated as
hedging instruments and therefore do not qualify for hedge
accounting, together with the quarterly cash settlement, and
accrual thereof.
(iv) Deferred tax arises in respect of the following:
2018 2017
GBP000 GBP000
Derivative financial instruments (134) (188)
Full provision for deferred tax under IAS 12 846 (981)
Intangible assets (124) 730
Roll over relief 14
Prior year adjustment 39 3,101
Other adjustments (6) -
621 2,676
4 Taxation
(a) Recognised in the consolidation statements of comprehensive
income
2018 2017
GBP000 GBP000
Current tax expense
Current year (4,622) (4,809)
Current tax on non-underlying items 1,004 1,138
Corporation tax overprovided in previous periods (359) (80)
Total current tax (3,977) (3,751)
Deferred tax expense
Current year (873) 825
Adjustment in respect to prior year 103 1,320
Deferred tax on non-underlying items 621 2,676
Total deferred tax (149) 4,821
Total tax in the consolidated statement of comprehensive
income (4,126) 1,070
(b) Reconciliation of effective tax rate
2018 2017
GBP000 GBP000
Profit before tax for the year 15,370 16,779
Tax using the UK corporation tax rate of 19.0%
(2017: 19.5%) 2,920 3,272
Non-deductible expenses including impairment charge 1,059 636
Other tax adjustments 27 (613)
Corporation and deferred tax overprovided in previous
periods 120 (4,365)
Total tax in the consolidated statement of comprehensive
income 4,126 (1,070)
Changes to the UK corporation tax rates were substantively
enacted as part of the Finance Bill 2017 (on 7 September 2017).
This includes a reduction to the main rate to 17% from 1 April
2020. Deferred taxes at the balance sheet date have been measured
using this enacted tax rate and reflected in these financial
statements.
5 Earnings per share
2018 2017
GBP000 GBP000
Profit attributable to ordinary shareholders 10,648 17,849
Weighted number of shares in issue for basic
earnings per share 75,690,422 70,037,602
Effects of share options in issue 25,235 24,389
Weighted number of shares for diluted earnings
per share 75,715,657 70,061,991
Diluted earnings per share is the basic earnings per share
adjusted for the dilutive effect of the conversion into fully paid
shares of the weighted average number of share options outstanding
during the period.
Earnings per share (pence per share)
Basic 14.07p 25.48p
Diluted 14.06p 25.48p
6 Underlying earnings per share
A measure of underlying earnings and underlying earnings per
share has been presented in order to present the earnings of the
Group after adjusting for non-underlying items which are not
considered to reflect the underlying trading performance of the
Group.
2018 2017
GBP000 GBP000
Profit attributable to ordinary shareholders 10,648 17,849
Non-underlying items 15,897 8,787
Underlying profit attributable to ordinary shareholders 26,545 26,636
Underlying earnings per share (pence per share)
Basic 35.07p 38.03p
Diluted 35.06p 38.02p
7 Dividends
The aggregate amount of dividends comprises:
2018 2017
GBP000 GBP000
Interim dividend paid in respect of prior year
but not recognised as liabilities in that year
(3.30p per share (2017: 3.00p per share)) 2,498 1,923
Final dividend paid in respect of the prior year
(6.60p per share (2017: 6.25p per share)) 4,996 4,010
Aggregate amount of dividends paid in the financial
year (9.90p per share (2017: 9.25p per share)) 7,494 5,933
The aggregate amount of dividends proposed and not recognised as
liabilities as at the year end is 11.00p per share, GBP8,166,018
(2017: 9.90p per share, GBP7,493,075).
8 Business Combinations
(a) Acquisitions 2018
The Group acquired one company during the year and the details
of this transaction are as follows:-
On 6 July 2018, the Group acquired 60% of the share capital of
Purple Zest Limited for a total consideration of GBP0.1m with no
goodwill recognised.
The investment in Purple Zest Limited reflects CareTech's
commitment to support a deeper understanding of disability issues
and will build on Purple Conversation's innovative approach to
supporting disabled people to attain employment and to support
businesses, of all sizes and across all sectors, to have greater
awareness and understanding of disability and to increase the
number of disabled people employed.
The business has generated revenues of GBP0.3m and EBITDA of
GBPnil in the year from acquisition to 30 September 2018.
The Group incurred legal and professional costs of GBP48k in
relation to this acquisition, which were recognised in
administration expenses.
(b) Post Balance Sheet Events
Subsequent to the year end the Group acquired Cambian Group plc
and the details of this transaction are:
On 19 October 2018, the Group acquired 100% of the share capital
of Cambian Group plc for a total consideration of GBP366m.
Cambian is a leading Children's specialist education and
behavioural health service provider looking after around 2,000
children across a portfolio of 222 residential facilities,
specialist schools and fostering offices. It employs over 4,500
people.
- The acquisition of Cambian is a unique opportunity for
investors to enhance exposure to the growing UK market for social
care services for children and adults.
- Highly complementary service offering and geographical
coverage providing a nationwide integrated care pathway focused on
higher acuity social care.
- Combined operational expertise to better service local
authority partners, deliver strong user outcomes, implement
positive staff engagement and improve care quality.
- Opportunity to unlock significant value through a compelling
strategic fit, tangible near-term synergies and enhanced trading
liquidity.
A full announcement and prospectus was issued on 19 September
2018.
Given the proximity of the announcement to the completion date
of the transaction and as previously announced the requirement of
merger clearance from Competition and Market Authority under
Enterprise Act 2002, it is not possible to give preliminary
acquisition table at this time.
The Group incurred legal and professional costs of GBP3.5m in
relation to this acquisition in the year which were recognised in
administration expenses.
As a result of this acquisition the Group entered into new bank
facilities:-
On 19 October 2018, the Group had entered into new Banking
facilities with Lloyds Bank plc and National Westminster Bank plc
for committed financing by way of term loans of between 3.5 to 5
years for up to GBP322m and a short term bridge loan of approx.
GBP80m. The short term bridge loan was repaid in November 2018
following completion using principally Cambian's significant cash
position.
In addition to the Term Loans and Bridge Loan, a GBP25m
revolving credit facility is available to provide working capital
for the Enlarged Group and an uncommitted accordion facility of up
to GBP30m for general Corporate and Working Capital purposes
(including acquisitions).
9 Copies of the Annual Report and Accounts
Copies of the Annual Report and Accounts will be sent to
Shareholders in due course and will be available to members of the
public from the Company's registered office located at 5th Floor,
Metropolitan House, 3 Darkes Lane, Potters Bar, Herts, EN6 1AG and
on the Company's website: www.caretech-uk.com.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR DMMGZVVLGRZG
(END) Dow Jones Newswires
December 06, 2018 02:03 ET (07:03 GMT)
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