CareTech Holdings PLC Half Year Trading Update (9884V)

TIDMCTH

RNS Number : 9884V

CareTech Holdings PLC

22 April 2016

 
 For immediate release     22 April 2016 
 

CareTech Holdings PLC

("CareTech" or "the Group")

Half Year Trading Update

CareTech Holdings PLC (AIM: CTH), a pioneering provider of specialist social care services in the UK, is pleased to announce its pre-close trading update ahead of its results for the half year ended 31 March 2016.

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

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

CareTech completed two acquisitions during the half year, both of which are trading in line with the Board's expectations.

On 1 December 2015, CareTech announced that it had acquired the entire issued share capital of ROC North West Limited and all of the children's residential and school properties from which it operates ("ROC"). ROC is a North West England based provider of residential care and education services for young people with complex needs and had a capacity of 41 residential places in 7 homes and 25 education places in its school. The acquisition was immediately earnings enhancing and ROC is now looking to acquire further properties in the North West.

On 15 March 2016, CareTech announced that it had acquired the entire issued share capital of Oakleaf Care (Hartwell) Limited and of all of the residential properties from which it operates ("Oakleaf"). Oakleaf is a Northampton based specialist in the care and rehabilitation of men with acquired brain injury. It operates across nine freehold sites with 102 residential beds and includes a new purpose built facility comprising 22 beds, which opened in March this year. At 31 March 2016 the new facility had already filled six beds with both internal transfers and new service users, with two further admissions planned this month. Oakleaf has also been immediately earnings enhancing.

The Group's net capacity at the half year was 2,292 places (2015: 2,116 places), a net increase of 176 residential and fostering places. Of this total 32 additional beds in reconfigured services and in new services have been brought into capacity. They have a higher contribution than the beds in pre-configuration and are part of an ongoing strategy to enhance margins. There were no new beds withdrawn for reconfiguration in the half year. There was a net increase of one in capacity in fostering. There is an additional residential capacity with ROC of 41 places and with Oakleaf of 102 places in the half year.

Compared with 30 September 2015, occupancy levels in the mature estate are unchanged at 93% and the blended occupancy is also unchanged at approximately 86%.

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

Care commissioners continue to demand flexible high quality care solutions and favour operators able to deliver across the care pathway. Pleasingly, some of the 2015 reconfigured services that have opened are already experiencing strong levels of demand from the local authorities for referrals, validating our strategy of reconfiguration focusing upon greater acuity service provision.

Annual fee rate negotiations with local authorities remain at an early stage and this year are against the backdrop of the Living Wage, which was introduced on 1 April 2016. The Board anticipates that a more positive outcome will be achieved than in recent years and that the Living Wage costs will be covered by fee increases.

Net debt reduced to GBP156.6m at 31 March 2016 from GBP158.5m at 30 September 2015. CareTech raised GBP30m in cash from the ground rent transaction announced on 19 February 2016 and spent money on the two acquisitions of ROC and Oakleaf, these three transactions after costs netted each other out.

The ground rent agreement, with the funds managed by Alpha Real Capital LLP ("Alpha") at a net initial yield of 3.4%, is innovative in the healthcare sector. It released GBP30m gross for reinvestment in growth opportunities whilst maintaining a virtual freehold interest in the properties, which are located mainly in the South East and represent less than a quarter of the Company's freehold portfolio.

As part of the transaction the property portfolio valuation was updated, which, post transaction, now stands at GBP282m. This gives a loan to value ratio, before application of the proceeds for growth, of less than 50% and a Net Debt to EBITDA ratio of less than 4x.The transaction also highlights the extent to which the valuation of our freehold portfolio is in excess of our book cost.

Cash from trading was invested in further properties to be reconfigured to services, as well as completing reconfigurations from 2015. For example two properties were purchased in Scotland for GBP1m for Spark of Genius Limited to provide 10 further residential care beds which will open shortly.

In the Learning Division the Group launched the CareTech Aspire Programme last year. It ensures that all of CareTech's care staff receive all mandatory and statutory training to the highest standard whilst also being offered the opportunity to complete a Level 2 or Level 3 apprenticeship which has been carefully tailored to suit individual roles.

The first 28 CareTech staff learners are now finishing their Care Apprenticeships through EQL Solutions, part of the Group's Learning Division. Also in the Learning Division is Dawn Hodge Associates which has recently won the Skills for Care Accolades 2015/16 award for best provider of learning and development. It also has just had an Ofsted outcome of "Outstanding" as an independent learning provider.

Farouq Sheikh, Executive Chairman, commented:

"I am pleased to report another solid performance in the six months ended 31 March 2016, highlighting the growth trajectory that our strategy is delivering. We are pleased with the two acquisitions made during the half year, which are trading in line with our expectations. We were also pleased to announce in February the innovative and non-dilutive ground rent transaction which raised GBP30m to further strengthen our balance sheet.

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

For further information, please contact:

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

About CareTech

CareTech is a leading provider of specialist social care services, supporting adults and children with a wide range of complex needs in more than 250 specialist services around the UK.

Committed to the highest standards of care and care governance, CareTech provides its innovative care pathways through five divisions covering adult learning disabilities, mental health, young people residential services, foster care and learning services.

CareTech, which was founded in 1993, began trading on the AIM market of the London Stock Exchange in October 2005 under the ticker symbol CTH. Its freehold portfolio comprises more than 190 properties.

This information is provided by RNS

The company news service from the London Stock Exchange

END

TSTUASNRNNASUAR

(END) Dow Jones Newswires

April 22, 2016 02:00 ET (06:00 GMT)