CareTech Holdings PLC Half Year Trading Update (4674D)

TIDMCTH

RNS Number : 4674D

CareTech Holdings PLC

27 April 2017

 
 For immediate release     27 April 2017 
 

CareTech Holdings PLC

("CareTech" or "the Group")

Half Year Trading Update

CareTech Holdings PLC (AIM: CTH), a pioneering provider of specialist social care services in the UK, is pleased to announce its pre-close trading update ahead of its results for the half year ended 31 March 2017.

The Board confirms that trading for the half year is in line with market expectations. This performance has been underpinned by the strategic initiatives undertaken over recent years which have delivered a stronger performance compared with the same period last year on all of the key financial metrics.

CareTech's care pathways continue to be a key foundation to delivering positive outcomes for our service users. By helping our service users to live more independently, we are working in partnership with local authorities by providing them with greater value for money.

The Group's net capacity at the half year was 2,359 places (2016: 2,319 places), a net increase of 40 residential and supported living places. Of this total 13 additional beds were in reconfigured services; in new services there were 20 new beds in Adults and 20 new beds in Children's. The new and reconfigured services have a higher contribution than the beds in pre-configuration and are part of an ongoing strategy to enhance margins. There were 13 new beds withdrawn for reconfiguration in the half year. There was no change of capacity in fostering.

Compared with 30 September 2016, occupancy levels in the mature estate are unchanged at 93% and the blended occupancy is also unchanged at approximately 86%.

On 23 March 2017, CareTech announced a placing which raised approximately GBP39 million (before expenses) for the Company. A number of organic growth projects and potential bolt-on acquisitions have been identified and the intention is that the placing proceeds be deployed within approximately twelve months.

We continue to make good progress with a number of these opportunities. We undertake a thorough review process of new potential targets with a small senior team involved and have a strong pre- and post-implementation focus. The success of recent acquisitions and their transition to our core business is the template for future projects.

On 28 March 2017, 344,305 new ordinary shares were issued as part of the arrangements for full and final settlement of the earn-out agreed with the vendors of ROC North West Limited ("ROC"), acquired by the Company in December 2015. The new Ordinary Shares were issued at a deemed price of 365 pence per share. The new shares were listed on AIM on 3 April 2017.

The Group expects to continue to achieve further growth by a combination of reconfiguring services and extending facilities in partnership with local authorities and through organic developments and bolt on acquisitions. These initiatives together underpin strong underlying future earnings growth.

Care commissioners continue to demand flexible high quality care solutions and favour operators able to deliver across the care pathway. Pleasingly, some of the 2016 reconfigured services that have opened are already experiencing strong levels of demand from local authorities for referrals, validating our strategy of reconfiguration focusing upon greater acuity service provision.

Annual fee rate negotiations with local authorities remain at an early stage and this year are against the backdrop of an increase in the Living Wage to GBP7.50 per hour from 1 April 2017. The Board anticipates that a more positive outcome will be achieved than in recent years and that the Living Wage costs will be covered by fee increases.

Net debt reduced to GBP123.0m at 31 March 2017 from GBP156.9m at 30 September 2016. The Company raised GBP39m gross from the share placement and spent money on the expenses of the placement and on additional capital expenditure. There was investment in new properties purchased, to open later in the year as residential services when refurbished, and further investment in IT systems.

The four banks in the Group's banking syndicate agreed on 28 March 2017 to defer repayment of the loan instalments due on 1 April 2017 and on 1 October 2017 until January 2019. The Company plans to make these additional funds available of GBP11.55m for the purchase of more properties and bolt-on acquisitions.

Following the launch of the CareTech Aspire Programme in 2015 our Learning Division continues to ensure that all of CareTech's care staff receive high quality mandatory and statutory training whilst also being offered the opportunity to complete a Level 2 or Level 3 apprenticeship. We have extended this offer to our CareTech managers who have the opportunity to complete a Level 5 in care management. Due to its Ofsted "Outstanding" rating Dawn Hodge Associates is well placed in the Care Sector to start offering these Apprenticeships to other Care providers.

We are pleased that 178 of our support staff have completed a level 2/3 apprenticeship and 393 are currently taking the qualification. A further 58 are benefiting from Level 5, Team Leader, Business Administration or Customer Services delivered by the Learning Division.

As an employer, CareTech is a registered apprenticeship training provider in its own right and the Board is convinced of the benefits that our apprenticeship programme has had for both our own staff and for the users of our services. The apprenticeship levy is an opportunity to continue to deliver excellence in the care sector and is a tangible example of the Group's commitment to training and retaining its workforce.The Group is also fully committed to Disability Confident and is in the process of completing the employer scheme accreditation.

To facilitate growth the management team has been further strengthened in the half year and we will continue to bring senior executives into the business to help build a strong foundation from which to drive growth and quality. The Adults LD Division is now managed by two managing directors having been split into two regions to enable geographic focus, and a new Children's MD has been appointed. A further appointment will be a Specialist Services MD to manage Oakleaf and the mental health services to reflect the broadening of acuity. The Learning Division and compliance teams are also being strengthened.

CareTech will announce its interim results in June 2017.

Farouq Sheikh, Executive Chairman, commented:

"I am pleased to report another solid performance in the six months ended 31 March 2017, highlighting the growth trajectory that our strategy is delivering. We are delighted by the support we received in the oversubscribed fundraising announced on the 23 March 2017. The additional funds will allow us to accelerate our growth strategy through organic initiatives and bolt-on acquisitions.

"We have considerable headroom for further investment with the share placement monies, money from our loan deferrals and existing bank facilities, and also from our strong underlying cash flow. We intend to continue to deliver our exciting growth strategy, both organically and through bolt-on acquisitions."

For further information, please contact:

 
 CareTech Holdings PLC 
  Farouq Sheikh, Executive 
  Chairman 
  Michael Hill, Group Finance 
  Director                       01707 601800 
 Buchanan (PR Adviser) 
  Mark Court 
  Sophie Cowles 
  Stephanie Watson               0207 466 5000 
 Panmure Gordon (Nomad and 
  Joint Broker) 
  Freddy Crossley 
  Peter Steel 
  Charles Leigh-Pemberton        020 7886 2500 
 WH Ireland (Joint Broker) 
  Adrian Hadden 
  Nick Prowting                  020 7220 1666 
 

This announcement contains inside information for the purposes of Article 7 of Regulation (EU) No 596/2014.

About CareTech

CareTech is a leading provider of specialist social care services, supporting adults and children with a wide range of complex needs in more than 260 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.

CareTech, which was founded in 1993, began trading on the AIM market of the London Stock Exchange in October 2005 under the ticker symbol CTH. Its freehold portfolio comprises more than 200 properties.

For further information please visit: www.caretech-uk.com

This information is provided by RNS

The company news service from the London Stock Exchange

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April 27, 2017 02:00 ET (06:00 GMT)