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Caretech Holdings Plc NEX:CTH.GB NEX Ordinary Share GB00B0KWHQ09
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CareTech Holdings PLC Half Year Trading Update and Board Appointments

01/05/2019 7:01am

UK Regulatory (RNS & others)


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RNS Number : 6985X

CareTech Holdings PLC

01 May 2019

 
 For immediate release     1 May 2019 
 

CareTech Holdings PLC

("CareTech" or "the Group")

Half Year Trading Update and Board Appointments

CareTech Holdings PLC (AIM: CTH), a pioneering provider of specialist social care and education services to adults and children in the UK, is pleased to announce its pre-close trading update ahead of its results for the half year ended 31 March 2019 ("the interim results"). The interim results will be announced on Thursday 20 June 2019.

Today's announcement is the first half year trading update to be issued by CareTech following the unconditional regulatory clearance in February 2019 for the Group's transformational acquisition of Cambian Group plc ("Cambian"), which completed in October 2018. This trading update includes presentational changes that reflect the on-going integration of the two businesses.

Operating segments

The interim results will report segmental information on the Group's three operating divisions:

-- Adults Services, comprising the core CareTech Adults business as well as the much smaller Specialist Services business;

   --      Children's Services, comprising CareTech's and Cambian's children's services; and 
   --      Foster Care, comprising CareTech's and Cambian's fostering services. 

For the current financial year ending 30 September 2019, the Group will also provide the segmental data for the historic CareTech and Cambian businesses to enable a like for like analysis in the first year following the acquisition. For subsequent financial years, the results of the Group will be combined on the basis of the operating segments described above.

Capacity

Analysis of the Group's capacity by segment and business as at 31 March 2019 is as follows:

 
                                      CareTech                  Cambian                     Group 
  Adults Services                        1,971                        -                     1,971 
  Children's Services                      356                    1,578                     1,934 
  Foster Care                              301                      866                     1,167 
  Total places                           2,628                    2,444                     5,072 
 ---------------------  ----------------------  -----------------------  ------------------------ 
 
  Blended occupancy                        87%                      78%                       83% 
  Mature occupancy                         93%                      79%                       87% 
 

Since September 2018, CareTech's organic developments have continued with the addition of 39 new beds whilst reconfigurations reduced capacity by 13 beds. A further 20 supported living contracts came to an end, resulting in a net increase of 6 places for CareTech. The reconfigured beds, together with the 6 additional places and the additional capacity which came online towards the end of the 2018 financial year end, underpins growth in revenues going forwards. Blended and mature occupancy of 87% and 93% compares favourably to the last trading update (30 September 2018: 86% and 93% respectively). There has been no net change in the number of places at Cambian from the date of acquisition by the Group.

Trading performance and integration

The Board confirms that trading for the half year was in line with market expectations.

The Group's performance reflects the acquisition of Cambian and represents a substantial increase in revenue and EBITDA compared with the same period last year.

Like for like, the performance of the CareTech business was stronger when compared with the same period last year. The EBITDA margins of the CareTech business are in line with market expectations and the EBITDA margins of the Cambian business, before synergies, show considerable improvement when compared with their historic announced margins (which, in June 2018, were announced as 11%).

The integration plan for the combined business is well underway following the unconditional clearance issued by the Competition and Markets Authority on 8 February 2019. The Group confirms that synergies of at least GBP3m of profit before tax, in the first full year since acquisition, are on track to being delivered.

During the half year, the Group also completed the ground rent transaction with Alpha Capital which raised GBP32.6m in cash on attractive terms providing further capital for investment.

At 31 March 2019, Net Debt was GBP297.5m, compared with GBP147.0m at 30 September 2018, the change reflecting the cash consideration and the associated financing necessary for the Cambian acquisition together with the receipt from the ground rent transaction. The Group's property portfolio valuation of GBP774m was undertaken on 19 September 2018 establishing a loan to value at approximately 40%, whilst the net debt to proforma EBITDA of the Group is expected to be under 4.0x.

From June 2019, CareTech's COO, John Ivers, who has been with the business for four years, is taking the operational lead across the Group, becoming Group COO. This will drive a cohesive approach to the adoption of a Group wide business model, which will deliver the best possible outcomes for the people in the Group's care. John will continue to report to the Group CEO, Haroon Sheikh.

Across the Group, CQC quality ratings are 94% Good or Outstanding in adults services, this compares favourably to the market average of 82% and against our last update report. The OFSTED ratings for the CareTech services are 89% Good or Outstanding and 77% for the Cambian services resulting in a blended 78% Good and Outstanding ratings for children's services across the Group.

In terms of staff retention, the Group's annualised retention rate sits at 74% (which is analysed as 77% for CareTech employees and 71% for Cambian employees) which when compared with the industry average of 70% remains favourable.

The Group's commitment to the development of its 10,000 staff remains steadfast. The Group's internal training department delivered over 60,000 learning interventions last year of which 26,000 were classroom based. This commitment to training and development leads to staff being trained to deliver the highest quality care for the individuals supported by the Group.

The Group has a number of SAYE schemes in place as well as share schemes for its senior executives and operational staff. Several hundred colleagues took advantage of the 2016 SAYE scheme at a share price of 194p and will see real value now that the scheme has matured.

Focus remains on attracting and retaining the best talent in the sector; the Group continuously focuses on employee engagement and will again this year look to offer the SAYE scheme to all staff as well as share options plans for Executives and management teams.

Annual fee rate negotiations with local authorities have begun and the Group anticipates a favourable response when compared with previous years. The National Minimum Wage increased from 1 April 2019, as did increases to both employer and employee pension contributions which the Group believes will have a positive impact on discussions with local authorities, who recognise that front line staff are an integral part of quality care delivery. Accordingly, the Group expects fee increases to cover the additional costs resulting from increases in front line staff pay and pension contributions.

CareTech's care pathways continue to be the key foundation for delivering positive outcomes for the Group's service users and to providing value for money for local authorities. Care commissioners continue to demand flexible high quality care solutions and favour operators able to deliver across care pathways. Following the acquisition of Cambian, the Group has become a leading and diversified operator in the higher acuity social care sector for adults and children in the UK, offering 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.

Board Appointments

The Board is pleased to announce the appointment of a new Non-Executive Director.

Professor Moira Livingston has been involved in health and social care for 32 years. Moira spent many years working initially as a Doctor in the field of older-age psychiatry and latterly as a senior clinical leader and manager in the NHS.

She has held a number of Director level leadership roles in the healthcare sector. Moira has led national programmes for the Department of Health and was a specialist advisor with the Care Quality Commission. Currently, Moira is the Managing Director of the healthcare consultancy, Dr Livingston Limited. She is also a Non-Executive Director at Leeds Teaching Hospitals NHS Trust, where she is a member of the Quality Assurance Committee, as well as a Trustee of the charity Dementia Matters where she has been Chair for the last two years and is due to step down on 30 April 2019.

Moira's appointment is effective immediately and she will Chair the Group's Care Governance and Safeguarding Committee.

The Board also announces that, alongside Moira's appointment and, as indicated at the time of the Cambian acquisition, Mike Adams OBE has become an Executive Director with immediate effect. This will enable him to pursue a strategic role within the Group and to push forward the Purple business model. Purple, where Mike acts as CEO, is a business 60% owned by CareTech. Purple's vision is to transform thinking and "change the conversation" by bringing together disabled people and business, creating sustainable solutions for the benefit of society and to add value to CareTech' growing service user base.

It is expected that an additional Non-Executive Director will be appointed later this year.

Impact of IFRS 16 - Accounting for leases

IFRS 16 "Leases" will be adopted by the Group on 1 October 2019 for the financial year ending 30 September 2020. IFRS 16 will primarily change lease accounting for lessees. Under the new standard, lease agreements will give rise to the recognition of an asset representing the right to use of the leased item and an obligation for future lease payments. Lease costs will be recognised in the form of depreciation of the right to use asset and interest on the lease liability, resulting in a higher interest expense in the earlier years of the lease term whilst the total expense recognised in the Income Statement over the life of the lease will be unaffected by the new standard.

From the work performed to date, it is anticipated that implementation of the new standard will not have an impact on overall net assets but will have an impact on the reported assets and liabilities of the Group and will have an immaterial impact on future Profit Before Tax and Earnings Per Share.

IFRS 16 will not have any impact on the underlying commercial terms of each lease and will not have any impact on the commercial performance of the Group, nor the cash flow generated in the year.

Farouq Sheikh, Executive Chairman, commented:

"I am pleased to report that CareTech's trading performance for the half year is in line with market expectations. The integration of Cambian is well underway and we are delivering all of our key objectives, including the delivery of the synergies we set out in our plan.

"I would like to place on record my appreciation to all involved during the CMA process and we were delighted to receive unconditional clearance in February. I welcome all of our new colleagues from Cambian and look forward to the future with considerable confidence.

"I take pleasure in welcoming Professor Moira Livingston to the Board. Moira is hugely experienced in clinical leadership as well in social care, and she will bring a new perspective to our Board. We are delighted that she is joining us.

"This year we have reached the special milestone of our 25(th) anniversary. CareTech has grown into a leading national provider of social care and education services to some of the most vulnerable people in our society. I would like to thank everyone who has been involved in the Group's success in delivering positive outcomes for those that we support throughout that time."

Further AIM disclosures relating to Professor Livingston's Board appointment:

Professor Moira Margaret Livingston, age 57, is currently or has been a director of the following companies within the past five years:

 
 Current directorships           Previous directorships 
 
 Dr Livingston Limited           Dementia Matters Ltd 
  The Leeds Teaching Hospitals 
  NHS Trust 
 

Professor Livingston does not currently hold any shares in CareTech.

Save as set out in this announcement, there are no further matters to be disclosed under Rule 17 or paragraph (g) of Schedule 2 of the AIM Rules for Companies in respect of Professor Livingston.

For further information, please contact:

   CareTech Holdings PLC                                               01707 601800 

Farouq Sheikh, Executive Chairman

Gareth Dufton, Interim Group Finance Director

   Buchanan (PR Adviser)                                                020 7466 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

Matthew Chan

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 and education services, supporting around 4,500 adults and children with a wide range of complex needs in more than 550 residential facilities and specialist schools around the UK and employing approximately 10,000 staff.

Committed to the highest standards of care and care governance, CareTech provides its innovative care pathways covering; Adult learning disabilities and specialist services; Children's residential and education services; and foster care.

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.

For further information please visit: 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

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