CARETECH HOLDINGS PLC For immediate release | 16 June 2016 |
CareTech Holdings PLC
('CareTech' or the 'Company')
Interim Results for the six months ended 31 March 2016
CareTech Holdings PLC (AIM: CTH), a pioneering provider of specialist social care services in the UK, is pleased to announce its interim results for the six months ended 31 March 2016.
Financial Highlights
· Revenue increased by 16.6% to £70.8m (H12015:£60.7m)
· Underlying EBITDA increased by 16.5% to £16.9m (H12015: £14.5m)
· Underlying profit before tax increased by 22.3% to £11.5m (H12015: £9.4m)
· Underlying diluted earnings per share increased by 5% to 14.75p (H12015: 14.05p)
· Strong operating cash inflow before non-underlying items of £15.6m (H12015: £12.9m) with net debt of £156.4m at 31 March 2016 (31 March 2015: £147.2m) (iii)
· Interim dividend increased by 7.1% to 3.00p (2015: 2.80p) per share
· Net assets have grown by 7.7% to £140.9m (H12015: £130.8m)
· EBITDA increased by 54% to £20.3m (H12015: £13.2m)
· Cash inflows from operating activities were £13.8m (H12015: £11.5m)
Strategic Highlights
· Ground rent transaction raised £29m for investment
· Acquisition of ROC North West in December 2015
· Acquisition of Oakleaf in March 2016
· Overall capacity increased since the year end by 176 places 8.3% to 2,292 (FY2015: 2,116)
(i) Underlying EBITDA is operating profit stated before depreciation, share-based payments charge and non-underlying items (explained in note 3).
(ii) Underlying profit before tax and underlying diluted earnings per share are stated before non-underlying items (explained in note 3).
(iii) Net debt is as defined by the Group's banking facilities and comprises Cash and cash equivalents net of Loans and borrowings
(iv) EBITDA is operating profit stated before depreciation, share-based payments charge and amortisation of intangible assets.
Commenting on the results, Farouq Sheikh, Executive Chairman of CareTech, said:
'We are delighted to report a strong performance for the first half of 2016 delivering year on year growth in Revenue, Underlying EBITDA, Profit before Tax and EPS.
'Having raised £29m net from the ground rent transaction in February, the Group purchased Oakleaf in March and has a number of consolidation opportunities under consideration. In addition it has a strong pipeline of organic additional beds in reconfigured services and in new services. This will lead to a growth in capacity and revenues which will generate additional EBITDA and cash so the Group can achieve its target of double digit growth in underlying diluted earnings per share.
'The continued provision of first-class social care which represents good value and is focused on successful client outcomes will remain the main market driver for CareTech's continuing growth.'
For further information, please contact:
CareTech Holdings PLC Farouq Sheikh, Executive Chairman Michael Hill, Group Finance Director | 01707 601 800 |
Buchanan (PR Adviser) Mark Court Sophie Cowles Stephanie Watson | 020 7466 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 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 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 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 190 properties.
For further information please visit:www.caretech-uk.com.
Chairman's Statement
A solid platform to continue to deliver strong growth both organically and by acquisitions
I am pleased to report a solid performance in the six months ended 31 March 2016. CareTech has delivered an impressive performance increasing Revenue, underlying EBITDA, and Profit before Tax compared with the comparable period in 2015. This further demonstrates the benefits of the Board's strategy over recent years where it has actively sought to:-
· Create complementary care pathways focused on outcomes for service users
· Reconfigure existing property portfolio to meet market demand
· Invest in people and I.T. systems
· Strengthen the Balance Sheet through a combination of Share Placement, improved Banking facilities and the Ground rent transaction
· Accelerate organic growth and bolt-on acquisitions
The growth going forward is underpinned by the strong foundation that we have built over the past few years. We continue to extend both our geographic coverage and our outcome based care pathway range of services organically and through the purchase and sale of properties to meet the needs of our marketplace, specifically the requirement for greater acuity service provision. This ensures that CareTech is in a very strong position to address the demands of our evolving marketplace and the Board remains confident of the Group's performance for the remainder of the year.
Following the recent fund raise through the ground rent transaction and the work to further strengthen the management team, the Group is ideally placed to make further bolt-on acquisitions to our existing care pathways in a market that remains very fragmented and to give greater geographical spread. We are also currently making good progress on a number of organic projects adding beds in reconfigured services and in new services where we have acquired properties in the North West, Yorkshire and Scotland.
Our current initiatives and acquisition strategy give the Group the ability to achieve double digit growth in underlying diluted earnings per share going forwards.
Results
Group revenue in the half year has grown by 16.6% to £70.8m (H12015: £60.7m) has delivered an underlying EBITDA (i) of £16.9m (H12015: £14.5m), representing growth of 16.6%. Without the effect of reconfigurations and acquisitions Group Revenue and EBITDA would have grown on a like for like basis by 5.9% and 8.1% respectively; this constitutes an investment for the future and allows the Group to meet Commissioner demands whilst expanding our care pathways and geography.
The underlying EBITDA (i) margin was maintained at 23.8% (H12015: 23.8%) despite having further invested in the management team and the change of mix in margins for some of the acquired businesses. Underlying margins continue to improve through reconfigurations and operational efficiencies and have grown from 20.9% in HI2013 and 22.6% in H12014.
Underlying profit before tax (ii) increased by 22.3% to £11.5m (H12015: £9.4m) and underlying diluted earnings per share (ii) was 14.75p (2015: 14.05p) This increase of 5.0% is due to the growth in underlying earnings arising from the improved EBITDA and lower financial expenses partially offset by an increase in the number of shares issued in March 2015 as a result of the placing.
During this period, we also maintained our strategic focus towards taking the Group's operational platform forward to the next stage of development in what is a growing market. As a consequence, we have further invested in our property estate, our systems and operating structure in order to provide the appropriate quality and resource to drive medium term growth organically, investing £6.1m in the period (H12015: £3.6m). Additionally, following our analysis in the past two years of demand trends, new services and new properties are being developed including a school and homes in Scotland, and further homes in North West England and Yorkshire. Homes are being reconfigured to meet new demand and service requirements of Care Commissioners in the West Midlands and South East England and these are planned to be completed in the coming months.
The Board continues with its strategy to make acquisitions after two bolt-on acquisitions were made to enhance the geographic spread of services and improve the Care Pathways in the half year with Childrens residential and education services acquired in North West England and Adult Acquired Brain Injury Services acquired in Northamptonshire.
The Group announced a ground rent agreement with the funds managed by Alpha Real Capital LLP ('Alpha') at a net yield of 3.4% and it released £29m net 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.
A key feature of this business is its strong cash generation. Operating cash inflow before non-underlying items of £15.6m represents a 92% cash conversion of underlying EBITDA(i), which demonstrates the continued strong quality of our earnings. As a result of this and the focus on organic growth as well as the ground rent monies and acquisitions, net debt as defined by the Group's bank facilities was £156.4m at 31 March 2016. This was £2.1m lower than the year end position at 30 September 2015 of £158.5m.
Net Assets have increased by £10.1m in the half year to 31 March 2016 which is an increase of 7.7% compared to March 2015.
In the trading update issued on 22 April 2016, CareTech announced that, whilst fee rate negotiations with Local Authorities were at an early stage, the Board believed based on feedback received that a positive position would again be achieved. Since then negotiations have progressed well and the final outcome still remains more positive than recent years.
Dividend
Our policy continues to be to increase the dividend broadly in line with the movement in underlying diluted earnings per share. Given the consistent earnings growth and cash generation the Board is therefore declaring an interim dividend of 3.00p (H12015: 2.80p) per share, to be paid on 25 November 2016 to shareholders on the Register of Members on 27 October 2016 with an associated record date of 28 October 2016. The full year dividend will be reviewed at the year end.
Service user capacity and occupancy
During the half year there was a total net increase of 176 residential and fostering places. There were 32 additional beds in reconfigured services and new services have been brought into capacity. These generate a higher contribution than the beds pre-configuration and are part of an ongoing strategy to enhance margins. The Group's net capacity at the half year was 2,292 places (2,116 places as at 30 September 2015). Once the services have been reconfigured, we expect them to contribute a higher profit margin than previously. There is an additional residential capacity with ROC of 41 places and with Oakleaf of 102 places in the half year. During the period, there was a net increase of 1 in capacity within fostering, reflecting an increase in the numbers on our register of carers who were able to foster children currently.
Occupancy levels in the mature estate have remained at 93% and the blended occupancy is at approximately 86%, which is unchanged from 30 September 2015.
Acquisitions and ground rent transaction
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 properties from which it operates ('ROC'). ROC is a North West based provider of residential care and education services for young people with complex needs. The total consideration for ROC is up to £11.425m, comprising a net initial cash payment of £8.725m and an earn-out of up to £2.7m.ROC provides residential care and education for challenging and vulnerable young people with complex needs. It has established a model of therapeutic care and education which has generated a history of high regulatory grades across its services over the past few years.
The acquisition of ROC was financed from the existing resources of the Group and utilised the remainder of the net proceeds from the Group's Share Placement in March 2015. ROC has also been immediately earnings enhancing.
ROC currently has a capacity of 41 residential places in 7 residential homes in Lancashire and 25 education places in its school in Preston.
On 19 February 2016, CareTech announced that it had raised £29m net in cash from a ground rent transaction. As part of the transaction the property portfolio valuation was updated, which, post transaction, then stood at £282m.
A number of organic growth projects and potential bolt-on acquisitions have been identified and the intention is that the proceeds will be deployed within approximately 12 months.
On 15 March 2016, CareTech announced that it had acquired the entire issued share capital of Oakleaf Care (Hartwell) Limited and all of the residential properties from which it operates ('Oakleaf'). The total consideration for Oakleaf is £20.3m in cash, comprising an initial payment of £18.3m (including £11.4m for the properties) and an earnout of £2.0m. 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. Oakleaf has also been immediately earnings enhancing.
Operating review
The Group now continues to realise the benefit of organisational improvements that were put in place over the past few years. In the half year, we have continued to strengthen the management structure and improve the efficiency of our processes following further investment in new systems which will continue through the second half of the year. Our recent appointments have put us in a strong position to benefit from a number of commissioning opportunities by working in partnership with the NHS and Local Authorities especially in light of Joint Commissioning currently being developed.
The Time and Attendance system had been implemented across residential services before the half year provides margin improvements at homes level and it further progresses our back office centralisation.
A summary outline of each of our divisions and sectors are as follows:
For the time being we continue to report the five operating divisions with their individual statistics and we report Adult Services which is the total of Adult Learning Disabilities and Mental Health, and Young People Services which is the total of Young People Residential, Fostering and Learning Services.
Adult Services
The Adult Services capacity is 1,743 with Revenue growing by 3.2% to £42.1m (H12015: £40.8m) and EBITDA by 8.7% to £12.4m (H12015: £11.4m). The sector's margin has improved to 29.5% (HI2015 28.0%) as a result of the reconfiguration investment and systems investment.
Adult Learning Disabilities - with a client capacity at 31 March 2016 of 1,527 places and first half revenue of £38.7m, this division represents just under 55% of the Group's activities. We continue to offer a flexible, person-centred approach with support being offered on an individual planned basis. Demand remains high for the support of people with learning disabilities and we recognise an increasing complexity of need for referrals to our specialist services. We have identified a small number of additional learning disability residential services to reconfigure into services that provide a greater level of acuity and these are being developed. The focus on quality continues with the Care Quality Commission new ratings for the Group's services being rated better than the national averages.
Mental Health - our care pathway for mental health includes a small community based 'open' hospital, residential care homes, independent supported living and community outreach. We also include certain specialised services in this portfolio and Oakleaf with its care and rehabilitation of men with acquired brain injury is included in this Division. At 31 March 2016 the division had a capacity of 216 places and generated revenue of £3.4m in the first half of our financial year up 3% on March 2015 principally due to services reconfigured and support discharge into the community, enabling the Commissioners to work more efficiently and providing a route back to community life for people who have suffered a debilitating mental illness or injury.
Young People Services
The Young People Services capacity is 549 with Revenues growing by 43.9% to £28.7m (H12015: £20.0m) and EBITDA by 30.4% to £7.5m (H12015: £5.7m). The underlying focus of providing a complete care pathway for Young People is now coming through with much more strength and the sector also reflects the acquisition of Spark of Genius in July 2015 and ROC.
Young People Residential Services - providing care, support and education to young people with complex behavioural problems, physical impairments, learning disabilities and emotional behavioural disorders ('EBD'). This division generated revenue of £17.7m and had a capacity at 31 March 2016 of 247 places. We operate services that cater for local needs but also manage certain highly specialised services that have a national catchment. Since 2012 the Group gained a foothold in Scotland and this is now being further extended through the acquisition of Spark of Genius and with the opening of additional services in Fife and Paisley. The division focuses increasingly on those children with the most complex needs and those who require our sophisticated clinical input.
Foster Care - with a capacity of 302 children we have established ourselves as one of the largest independent fostering agencies in England and Wales. The division had turnover of £5.2m in the six months to 31 March 2016. We have observed a significantly increased demand for foster care for children who might otherwise have entered the residential care system. Foster care represents much better value for commissioners but the complexity of children being referred will often make the matching process quite complex, favouring larger agencies like CareTech with a greater range of well supported foster carers.
Learning Services - Revenue to 31 March 2016 was £5.8m in the first half of the financial year and includes Dawn Hodge Associates (DHA) acquired in July 2015. DHA has just had an Ofsted outcome of 'outstanding' as an independent learning provider. The Group has expanded the new CareTech Aspire Programme in this half year; it will ensure 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 Aspire programme aims to empower every member of staff to deliver high quality, personalised care and ensure there is a development pathway available to all. From November 2014, all newly hired support workers have been offered an apprenticeship as part of their induction to CareTech. To date 57 CareTech care staff have completed their apprenticeship programme and 564 are still undergoing their apprenticeship. There are also 72 CareTech managers on the Level 5 Health and Social Care Diploma which is offered, provided and supported by EQL.
This programme is one of a number of initiatives being taken on staff development and retention. There is also good progress on Pre-Employment Training Courses for Young People which are being introduced into some of our Young People Residential Services.
Strategy
The specialist social care market continues to benefit from strong demographic trends and higher acuity levels across the UK. Local Authorities are faced with increasing demands and financial pressures that have led to a greater focus on value for money. CareTech's experience has been that service commissioners recognise that the most complex people require continuing support which focuses on outcome based care pathways.
For those able to transition we provide clear outcome based pathways from residential care, principally into various forms of supported housing or foster care for children, while residential options continue to be in demand for those with the greatest need. However, we anticipate further shifts toward more sophisticated supported living packages linked to new personalised payment methodologies.
Our diversification policy means that we are now offering the full spectrum of social care services with the exception of traditional elderly care. We believe that our strategic position is now very strong, backed by an effective organisational structure, first class quality control and developing clinical infrastructure. In the medium term we are focusing on organic growth that builds on our successful base position. However, we will undertake further strategic acquisitions that meet our key criteria by offering new expertise, geographical presence or consolidation opportunities.
People
There have been no changes to the Board, the Remuneration Committee, Care Governance and Safeguarding Committee or the Audit Committee in the half year.
In March 2016 the Group granted options to over 200 staff in a Sharesave Scheme which is exercisable in 3 years time with the intention to launch a further Sharesave Scheme within the next 12 months.
As a foundation for growth the Senior Executive Team at CareTech is being further strengthened to take forward the exciting developments of the last year.
Outlook and prospects
The continued provision of first-class social care which represents good value and is focused on successful client outcomes will remain the main market driver for CareTech's continuing growth.
The strategy of taking the Group from a single division to now supporting five complementary divisions has given the Group a strong foundation with a proven track record.
With a strengthened management team and having raised £29m net from the ground rent transaction in February, the Group has a number of consolidation opportunities and property projects which are currently being worked on. This will lead to a growth in capacity and revenues which will generate additional EBITDA and cash to continue organic and infrastructure improvements so the Group can achieve its target of double digit growth in underlying diluted earnings per share.
CareTech will continue to work in partnership with Local Authorities to deliver innovative services focused on delivering positive outcomes for individuals.
Farouq Sheikh
Chairman
16 June 2016
(i) Underlying EBITDA is operating profit before depreciation, share-based payments charge
and non underlying items (explained in note 3);
(ii) Underlying profit before tax and underlying diluted earnings per share are stated before non underlying items (explained in note 3).
Condensed Consolidated Statement of Comprehensive Income
for the six months ended 31 March 2016
Six months ended | Six months ended | Year ended | |||||
31 March 2016 | 31 March 2015 | 30 September 2015 | |||||
unaudited | unaudited | audited | |||||
Before non | Before non | Before non | |||||
underlying | Total | underlying | Total | underlying | Total | ||
items(i) | unaudited | items(i) | unaudited | items(i) | audited | ||
Note | £000 | £000 | £000 | £000 | £000 | £000 | |
Revenue | 70,825 | 70,825 | 60,733 | 60,733 | 124,271 | 124,271 | |
Cost of sales | (45,661) | (45,661) | (38,691) | (38,691) | (76,571) | (76,571) | |
Gross profit | 25,164 | 25,164 | 22,042 | 22,042 | 47,700 | 47,700 | |
Administrative expenses | (10,683) | (10,134) | (9,111) | (12,811) | (18,947) | (29,885) | |
Operating profit | 14,481 | 15,030 | 12,931 | 9,231 | 28,753 | 17,815 | |
EBITDA | 3 | 16,850 | 16,850 | 14,473 | 14,473 | 32,496 | 32,496 |
Depreciation | (2,344) | (2,344) | (1,512) | (1,512) | (3,683) | (3,683) | |
Amortisation of intangible assets | 3 | - | (2,865) | - | (2,409) | - | (5,231) |
Share-based payments charge | (25) | (25) | (30) | (30) | (60) | (60) | |
Profit on sale of fixed assets | 3 | - | 5,623 | - | - | - | - |
Acquisition expenses | 3 | - | (1,505) | - | - | - | (1,000) |
Onerous lease provisions | 3 | - | - | - | - | - | (304) |
Exceptional costs | 3 | - | (704) | - | (1,291) | - | (4,403) |
Operating profit | 14,481 | 15,030 | 12,931 | 9,231 | 28,753 | 17,815 | |
Financial expenses | 4 | (3,003) | (3,834) | (3,526) | (5,101) | (6,797) | (8,418) |
Profit before tax(ii) | 11,478 | 11,196 | 9,405 | 4,130 | 21,596 | 9,397 | |
Taxation | 5 | (2,295) | (2,477) | (1,924) | (974) | (3,623) | (1,439) |
Comprehensive income | 9,183 | 8,719 | 7,481 | 3,156 | 18,333 | 7,958 | |
Earnings per Share | |||||||
Basic (ii) | 6 | 14.75p | 14.00p | 14.05p | 5.93p | 31.80p | 13.80p |
Diluted (ii) | 6 | 14.75p | 14.00p | 14.05p | 5.93p | 31.79p | 13.80p |
(i) Non underlying items are explained in note 3.
(ii) The movement in Profit before tax and Earnings per share relates to non-cash revaluation movements of derivative financial instruments associated with the Group's interest rate swaps.
Condensed Consolidated Statement of Changes in Equity at 31 March 2016
Six months ended | Six months ended | Year ended | |
31 March 2016 | 31 March 2015 | 30 September 2015 | |
unaudited | unaudited | audited | |
£000 | £000 | £000 | |
Balance at start of period | 133,699 | 109,159 | 109,159 |
Total comprehensive income | 8,719 | 3,156 | 7,958 |
Transactions with owners recorded directly in equity: | |||
Issue of ordinary shares Reduction in shares held | 214 (43) | 19,797 - | 20,065 610 |
Equity settled share-based payments charge | 25 | 30 | 60 |
Dividends | (1,739) | (1,350) | (4,153) |
Balance at end of period | 140,875 | 130,792 | 133,699 |
Condensed Consolidated Balance Sheet at 31 March 2016
31 March 2016 | 31 March 2015 | 30 September 2015 | |
unaudited | unaudited | audited | |
£000 | £000 | £000 | |
Non-current assets | |||
Property, plant and equipment | 263,432 | 248,487 | 256,552 |
Other intangible assets | 44,628 | 29,590 | 34,251 |
Goodwill | 43,049 | 36,037 | 38,651 |
351,109 | 314,114 | 329,454 | |
Current assets | |||
Inventories | 562 | 515 | 515 |
Trade and other receivables | 14,736 | 8,330 | 12,981 |
Cash and cash equivalents | 4,103 | 2,000 | 3,702 |
19,401 | 10,845 | 17,198 | |
Total assets | 370,510 | 324,959 | 346,652 |
Current liabilities | |||
Loans and borrowings | 1,646 | 12,637 | 1,927 |
Trade and other payables Deferred and contingent consideration payable | 18,742 3,925 | 13,027 - | 16,920 1,500 |
Ground rent liabilities arising under IAS17 | 59 | - | - |
Deferred income | 2,114 | 1,771 | 2,142 |
Corporate Tax | 9,512 | 8,556 | 8,306 |
Derivative financial instruments | 425 | 959 | 562 |
Onerous lease provision | - | 32 | - |
36,423 | 36,982 | 31,357 | |
Non-current liabilities | |||
Loans and borrowings | 158,590 | 137,274 | 160,303 |
Deferred and contingent consideration payable | 2,025 | - | - |
Ground rent liabilities arising under IAS17 | 7,359 | - | - |
Deferred tax liabilities Derivative financial instruments | 24,386 852 | 19,911 - | 21,066 227 |
193,212 | 157,185 | 181,596 | |
Total liabilities | 229,635 | 194,167 | 212,953 |
Net assets | 140,875 | 130,792 | 133,699 |
Equity attributable to equity shareholders of the parent | |||
Share capital | 321 | 310 | 311 |
Share premium | 81,664 | 76,967 | 76,985 |
Shares held by Employee Benefit Trust | (6,072) | (1,890) | (1,280) |
Merger reserve | 9,022 | 8,498 | 8,748 |
Retained earnings | 55,940 | 46,907 | 48,935 |
Total equity attributable to equity shareholders of the parent | 140,875 | 130,792 | 133,699 |
Consolidated Cash Flow Statement for the six months ended 31 March 2016
Six months ended | Six months ended | Year ended | |
31 March 2016 | 31 March 2015 | 30 September 2015 | |
unaudited | unaudited | audited | |
£000 | £000 | £000 | |
Cash flows from operating activities | |||
Profit before tax | 11,196 | 4,130 | 9,397 |
Financial expenses | 3,834 | 5,101 | 8,418 |
Onerous lease provision charge | - | - | 304 |
Depreciation | 2,344 | 1,512 | 3,683 |
Amortisation of intangible assets | 2,865 | 2,409 | 5,231 |
Share-based payments charge | 25 | 30 | 60 |
Acquisition transaction costs | 1,505 | - | 1,000 |
Exceptional costs | 704 | 1,290 | 4,403 |
(Profit) on disposal of property, plant and equipment | (5,623) | (138) | (134) |
Operating cash flows before movement in working | |||
capital and non- underlying items | 16,850 | 14,334 | 32,362 |
(Increase) in trade and other receivables (Decrease)/Increase in trade and other payables | (342) (863) | (414) (1,013) | (3,669) 1,985 |
Operating cash flows before non-underlying items | 15,645 | 12,907 | 30,678 |
Exceptional costs paid Payments under onerous contracts | (709) - | (1,021) (388) | (1,604) (725) |
Cash inflows from operating activities | 14,936 | 11,498 | 28,349 |
Tax paid | (1,087) | (143) | (1,339) |
Net cash from operating activities | 13,849 | 11,355 | 27,010 |
Cash flows from investing activities | |||
Proceeds from sale of property, plant and equipment | 29,726 | 644 | 1,051 |
Payments for business combinations net of cash acquired | (27,603) | - | (6,591) |
Acquisition of intangible items | (1,348) | (1,173) | (3,893) |
Acquisition of property, plant and equipment | (4,766) | (2,416) | (5,976) |
Payment of acquisition and ground rent transaction costs | (2,303) | - | (1,182) |
Net cash used in investing activities | (6,294) | (2,945) | (16,591) |
Cash flows from financing activities | |||
Proceeds arising from the issue of share capital (net of costs) | 75 | 19,824 | 19,815 |
Proceeds from new loan (net of costs) | 27,950 | - | 158,525 |
Interest paid | (3,311) | (3,641) | (6,694) |
Cash outflow arising from derivative financial instruments Bank fees on refinancing | (321) (443) | (177) - | (675) (1,169) |
Repayment of borrowings | (28,377) | (24,072) | (173,556) |
Payment of finance lease liabilities | (988) | (894) | (2,710) |
Dividends paid | (1,739) | (1,350) | (4,153) |
Net cash used in financing activities | (7,154) | (10,310) | (10,617) |
Net change in cash and cash equivalents | 401 | (1,900) | (198) |
Cash and cash equivalents at start of the period | 3,702 | 3,900 | 3,900 |
Cash and cash equivalents at end of the period | 4,103 | 2,000 | 3,702 |
Net debt as defined by the Group's banking facilities comprises:
31 March 2016 | 31 March 2015 | 30 September 2015 | |
unaudited | unaudited | audited | |
£000 | £000 | £000 | |
Cash and cash equivalents | 4,103 | 2,000 | 3,702 |
Bank loans and borrowings | (160,488) | (149,238) | (162,230) |
Net debt at end of the period | (156,385) | (147,238) | (158,528) |
Notes
1. Accounting policies
This interim report has been prepared on the basis of the accounting policies expected to be adopted for the year ending 30 September 2016. These are anticipated to be in accordance with the Group's accounting policies as set out in the latest annual financial statements for the year ended 30 September 2015.
All International Financial Reporting Standards ('IFRS'), International Accounting Standards ('IAS'') and interpretations currently endorsed by the International Accounting Standards Board ('IASB') and its committees as adopted by the EU and as required to be adopted by AIM-listed companies have been applied. AIM-listed companies are not required to comply with IAS 34 'Interim Financial Reporting' and accordingly the Company has taken advantage of this exemption.
The financial information in this interim report does not constitute statutory accounts for the six months ended 31 March 2016 and should be read in conjunction with the Group's annual financial statements for the year ended 30 September 2015. Financial information for the year ended 30 September 2015 has been derived from the consolidated audited accounts for that period which were unqualified.
The condensed consolidated interim financial statements for the six months to 31 March 2016 have not been audited or reviewed by auditors pursuant to the Auditing Practices Board guidance on Review of Interim Financial Information.
This unaudited interim report was approved by the Board on 13 June 2016.
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 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 turnover between the operating segments is not material.
The Group has five segments. Our two key segments are Adult Services (Adult) and Children Services (Children). Adult Services comprises the Adult Learning Disabilities (ALD) and Mental Health (MH) divisions and the Children Services comprises Young People Residential Services (YPR), Foster Care (FC) and Learning Services (Learning).
2. Segmental information continued
The segmental results for the six months ended 31 March 2016, six months ended 31 March 2015 and year ended 30 September 2015 and the reconciliation of the segment measures to the respective statutory items included in the consolidated financial information are as follows:
Six months ended 31 March 2016 | ||||||||
Continuing Operations | ALD | MH | Adults | YPR | FC | Learning | Children | Total |
Client Capacity | 1,527 | 216 | 1,743 | 247 | 302 | - | 549 | 2,292 |
Revenue (£'000) | 38,695 | 3,385 | 42,080 | 17,705 | 5,211 | 5,829 | 28,745 | 70,825 |
EBITDA (£'000) | 11,315 | 1,090 | 12,405 | 5,617 | 1,328 | 536 | 7,481 | 19,886 |
Six months ended 31 March 2015 | ||||||||
Continuing Operations | ALD | MH | Adults | YPR | FC | Learning | Children | Total |
Client Capacity | 1,482 | 114 | 1,596 | 154 | 302 | - | 456 | 2,052 |
Revenue (£'000) | 37,477 | 3,286 | 40,763 | 10,135 | 5,321 | 4,514 | 19,970 | 60,733 |
EBITDA (£'000) | 10,387 | 1,028 | 11,415 | 3,998 | 1,399 | 341 | 5,738 | 17,153 |
Year ended 30 September 2015 | ||||||||
Continuing Operations | ALD | MH | Adults | YPR | FC | Learning | Children | Total |
Client Capacity | 1,496 | 114 | 1,610 | 205 | 301 | - | 506 | 2,116 |
Revenue (£'000) | 75,704 | 6,436 | 82,140 | 22,364 | 9,761 | 10,006 | 42,131 | 124,271 |
EBITDA (£'000) | 24,460 | 1,890 | 26,350 | 8,230 | 2,453 | 935 | 11,618 | 37,968 |
Reconciliation of EBITDA to profit after tax;
Six months ended | Six months ended | Year ended | |
31 March 2016 | 31 March 2015 | 30 September 2015 | |
unaudited | unaudited | audited | |
£000 | £000 | £000 | |
Underlying EBITDA before unallocated costs | 19,886 | 17,153 | 37,968 |
Unallocated costs | (3,036) | (2,680) | (5,472) |
Underlying EBITDA | 16,850 | 14,473 | 32,496 |
Depreciation | (2,344) | (1,512) | (3,683) |
Amortisation | (2,865) | (2,409) | (5,231) |
Share-based payments charge | (25) | (30) | (60) |
Non underlying items | 3,414 | (1,291) | (5,707) |
Operating profit | 15,030 | 9,231 | 17,815 |
Financial expenses | (3,834) | (5,101) | (8,418) |
Profit before tax | 11,196 | 4,130 | 9,397 |
Taxation | (2,477) | (974) | (1,439) |
Profit after tax | 8,719 | 3,156 | 7,958 |
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 opposite as this information is not allocated to operating segments in the regular reporting to the group's Chief Operating Decision Maker and are not measures 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 which, in the opinion of the Directors, should be disclosed separately in order to improve the readers understanding of the trading performance of the Group. Non underlying items comprise the following:
Six months ended | Six months ended | Year ended | ||
31 March 2016 | 31 March 2015 | 30 September 2015 | ||
unaudited | unaudited | audited | ||
Note | £000 | £000 | £000 | |
Acquisition expenses | (i) | 1,505 | - | 1,000 |
Exceptional costs | (ii) | 704 | 1,291 | 4,403 |
Onerous lease provision Profit on sale of fixed assets | - (5,623) | - - | 304 - | |
Amortisation of intangible assets | 2,865 | 2,409 | 5,231 | |
Included in administrative expenses | (549) | 3,700 | 10,938 | |
Revaluation movements relating to derivative | ||||
financial instruments | (iii) | 488 | 1,115 | 946 |
Charges relating to derivative financial instruments | (iii) | 343 | 460 | 675 |
Included in financial expenses | 831 | 1,575 | 1,621 | |
Tax effect: | ||||
Current tax | (iv) | (211) | (265) | (1,320) |
Deferred tax | (v) | 393 | (685) | (864) |
Included in taxation | 182 | (950) | (2,184) | |
Total non underlying items | 464 | 4,325 | (10,375) |
(i) In accordance with IFRS 3 (as revised) items associated with business combinations have been taken to the income statement as incurred.
(ii) The Group incurred a number of costs relating to the integration of recent acquisitions and reorganisation of the internal operating and management structure.
(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 settlements and accrual thereof.
(iv) Represents the current tax on items (ii) and (iii) above.
(v) Deferred tax arises in respect of the following:
Six months ended | Six months ended | Year ended | ||
31 March 2016 | 31 March 2015 | 30 September 2015 | ||
unaudited | unaudited | audited | ||
£000 | £000 | £000 | ||
Derivative financial instruments (note iv) | 98 | 236 | 194 | |
Roll over relief arising from property disposals | (1,124) | - | - | |
Other adjustments | 635 | 449 | 670 | |
Total | (393) | 685 | 864 |
4. Financial expenses
Six months ended | Six months ended | Year ended | |
31 March 2016 | 31 March 2015 | 30 September 2015 | |
unaudited | unaudited | audited | |
£000 | £000 | £000 | |
On bank loans and overdrafts | 2,876 | 3,415 | 6,523 |
Finance charges in respect of finance leases | 127 | 111 | 274 |
Financial expenses before adjustments | 3,003 | 3,526 | 6,797 |
Amounts relating to derivative financial | |||
instruments (note 3) | 831 | 1,575 | 1,621 |
Total financial expenses | 3,834 | 5,101 | 8,418 |
5. Taxation
Six months ended | Six months ended | Year ended | |
31 March 2016 | 31 March 2015 | 30 September 2015 | |
unaudited | unaudited | audited | |
£000 | £000 | £000 | |
Current tax expense | |||
Current period | 2,300 | 1,930 | 3,837 |
Non underlying items (note 3) | (211) | (265) | (1,320) |
Total current tax | 2,089 | 1,665 | 2,517 |
Deferred tax expense | |||
Current period | (5) | (6) | (214) |
Deferred tax on non-underlying items (note 3) | 393 | (685) | (864) |
Total deferred tax | 388 | (691) | (1,078) |
Total tax in the consolidated statement of comprehensive income | 2,477 | 974 | 1,439 |
Effective tax rate on profit before tax | 20% | 20.5% | 16.5% |
6. Earnings per share
Six months ended | Six months ended | Year ended | |
31 March 2016 | 31 March 2015 | 30 September 2015 | |
unaudited | unaudited | audited | |
£000 | £000 | £000 | |
Profit attributable to ordinary shareholders | 8,719 | 3,156 | 7,958 |
Non-underlying items (note 3) | 464 | 4,325 | 10,375 |
Profit attributable to ordinary shareholders before underlying items | 9,183 | 7,481 | 18,333 |
Weighted number of shares in issue for basic earnings per share | 62,261,789 | 53,225,283 | 57,653,019 |
Effects of share options in issue | - | 16,877 | 17,804 |
Weighted number of shares in issue for diluted earnings per share | 62,261,789 | 53,242,160 | 57,670,823 |
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 | 14.00p | 5.93p | 13.80p |
Diluted | 14.00p | 5.93p | 13.80p |
Earnings per share before non-underlying items (pence per share) | |||
Basic | 14.75p | 14.05p | 31.80p |
Diluted | 14.75p | 14.05p | 31.79p |
The movement in Profit before tax and Earnings per share relates to non-cash revaluation movements of derivative financial instruments associated with the Group's interest rate swaps.
7. Acquisitions
The Group made two acquisitions in the period which are presented as business combinations.
The following table of fair values summarises the acquisitions made during the period:
Book values £000 | Fair value adjustment £000 | Total £000 | ||
Intangible assets Property, plant and equipment | 221 15,710 | 11,673 2,373 | 11,894 18,083 | |
Other fixed assets Inventories | 655 47 | - - | 655 47 | |
Trade and other receivables | 2,579 | (750) | 1,829 | |
Cash | 933 | - | 933 | |
Trade and other payables | (735) | (321) | (1,056) | |
Corporation tax | (201) | - | (201) | |
Deferred income | (178) | (210) | (388) | |
Deferred tax | (124) | (2,809) | (2,933) | |
Net assets on acquisition | 28,863 | |||
Consideration paid | 28,536 | |||
Shares | 275 | |||
Deferred and contingent consideration | 4,450 | |||
Total consideration | 33,261 | |||
Goodwill arising on business combinations | 4,398 | |||
Reconciliation to Group Cash Flow is as follows:-
£000 | |
Cash consideration paid | 28,536 |
Cash acquired | (933) |
Per cash flow statement | 27,603 |
CareTech Holdings plc published this content on 16 June 2016 and is solely responsible for the information contained herein.
Distributed by Public, unedited and unaltered, on 16 June 2016 06:19:04 UTC.
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