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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Cambian Group | LSE:CMBN | London | Ordinary Share | GB00BKXNB024 | ORD 1P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 192.40 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMCMBN
RNS Number : 3991I
Cambian Group PLC
21 March 2018
21 March 2018
Cambian Group plc
("Cambian" or "the Group" or "the Company")
Audited results for the year ended 31 December 2017
Summary financials 2017 FY 2016 FY ------------------------------------------------- --------- ---------- Revenue GBP196.0m GBP182.1m Adjusted EBITDA(1) GBP18.7m GBP16.2m Adjusted EBITDA margin 9.5% 8.9% Operating profit/(loss) before exceptional GBP2.4m GBP(0.2)m items(2) Operating (loss) GBP(8.8)m GBP(7.6)m Profit/(loss) before tax, exceptional and GBP2.2m GBP(0.4)m extinguished items(3) (Loss) before tax GBP(9.0)m GBP(37.4)m Net cash(4) GBP82.8m GBP116.1m Adjusted basic earnings per share(5) 3.6p 2.4p Statutory basic (loss) per share (4.3)p (17.2)p Statutory basic (loss) per share - discontinued (2.0)p (85.6)p Dividend per share - special dividend 27.1p nil Full year ordinary dividend per share 0.39p nil ------------------------------------------------- --------- ----------
(1) Adjusted EBITDA is earnings before net finance costs, tax, depreciation, amortisation, profit or loss on disposal of assets, merger and
acquisition (M&A) costs, IPO share option charges and exceptional items (note 3).
(2) Exceptional items are defined in the accounting policies (note 1 and note 5).
(3) Extinguished items relate to finance costs on the bank debt that were settled on sale of the Adult Services business (note 7).
(4) Cash and cash equivalents, including service user monies, net of obligations under finance leases (note 17).
(5) Adjusted basic earnings per share is defined as statutory basic earnings per share before amortisation of acquired intangible assets,
M&A costs, IPO share option charges and exceptional and extinguished items, net of the tax effect of these adjustments (note 10).
Operational highlights
Hot Features
Premium
* Established foundations of a children's services
platform to change lives and create value for the
future.
* High quality regulatory ratings with 80% of
facilities rated as "Good" or "Outstanding" at 31
December 2017 (31 December 2016: 83%).
* Average occupancy held at 1,286 places (2016: 1,294),
whilst continued re-positioning to higher severity,
with average utilisation increasing to 78% (2016:
74%) following a planned reduction in operational
capacity to 1,643 places (2016: 1,744)(6) .
* Average fostering placements of 634 (2016: 645) with
fill rate 1.41 (2016: 1.37) and ending the year at
649(6) .
* Completed the transitional services agreement in June
2017 following the sale of the Adult Services
business.
* Good progress in reducing head office costs and
identification of further operational efficiencies
underway.
* Strengthened executive management team.
(6) 2016 operational KPIs re-presented to reflect calculation based on average daily rather than monthly occupancy levels.
Financial highlights
* Revenue growth of 8% to GBP196.0m (2016: GBP182.1m)
from an increase in average fee levels, due to a move
to higher severity services, as well as GBP2.4m
one-off other income from the transitional services
agreement. Underlying revenue growth excluding other
income was 6%.
* Adjusted EBITDA growth of 15% to GBP18.7m (2016:
GBP16.2m) reflecting revenue growth as well as cost
savings at head office, offset by one-off impacts
following the sale of Adult Services business and
provision for "sleep-ins".
* Margin improvement of 60bps with adjusted EBITDA
margin of 9.5% (2016: 8.9%).
* Underlying business has performed in line with the
Board's expectations while managing the complex
separation issues and continued re-positioning of
services to higher severity.
* Loss before tax of GBP9.0m (2016: GBP37.4m loss)
after reduction in finance costs.
* Strong balance sheet with net cash of GBP82.8m (2016:
GBP116.1m) following the special dividend of GBP50m
returned to shareholders in September 2017 and before
a further special dividend of GBP15m returned in
February 2018.
* Full year dividend of 0.39 pence per share (2016: nil
pence). Final dividend announced of 0.25 pence per
share (2016: nil pence), in line with commitment to
resume a progressive dividend policy outlined in
December 2016, and following the reinstated dividend
at half year with the interim payment of 0.14 pence
per share (2016 H1: nil pence).
Saleem Asaria, Chief Executive Officer, commented:
"2018 will be a year of consolidation and we will continue to invest in the systems and support for our staff necessary to deliver on our plans to return, in a measured fashion, to capacity led growth.
The year has started broadly in line with the Board's expectations taking into account the temporary setback following the current affairs television programme, in December 2017, and further investment in quality and workforce capability. Our focus this year is to continue to improve quality whilst re-positioning services to higher severity with corresponding fee increases.
We remain confident for the medium-term outlook and the Group's longer-term potential, while in the short-term we expect to continue to make progress in 2018 and look forward to the future with confidence."
Enquiries: Cambian Group plc +44 (0) CNC +44 (0) 203 755 1600 208 735 6150 Saleem Asaria, Chief Executive Richard Campbell +44 (0) Officer 777 578 4933 Anoop Kang, Chief Financial Katherine Fennell +44 (0) Officer 797 182 8445
A results presentation will be held for analysts at 9.00am today at the offices of Investec Bank Plc, 2 Gresham Street, London EC2V 7QP. If you would like to attend, please confirm your attendance to katherine.fennell@cnc-communications.com.
For those unable to attend, conference call dial-in details are available below. The presentation to be given by management will be made available ahead of time at: http://www.cambiangroup.com/cambiangroup/investor/home.aspx
Conference Call:
Conference ID 43261606# UK FreeCall Dial-In 0800 358 9473 Std International Dial-In +44 (0) 333 300 0804
Conference Call Replay (accessible for 90 days):
Conference ID 301223354# UK FreeCall 0800 358 2049 Std International +44 (0) 333 300 0819
About Cambian:
Cambian Group is one of the UK's leading children's specialist education and behavioural health service providers. Founded in 2004, it has grown to become a significant partner to the UK public sector. The Group's services have a specific focus on children who present high severity needs with challenging behaviours and complex care requirements. Cambian looks after almost 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.
Chairman's statement
Overview
Following the sale of our Adult Services business to Cygnet Health Care Limited (Cygnet), a wholly owned subsidiary of the US company Universal Health Services, Inc. at the end of 2016, Cambian became a pure children's specialist education and behavioural health services business, offering a full range of essential services from therapeutic fostering through to specialist schools and residential care. As at the end of 2017, we managed 222 facilities and employed over 4,500 staff, looking after 1,920 children and young people.
2017 has been a year of transition as we established our platform to achieve modest growth and become the leading provider in children's services. As part of the conditions of the sale of our Adult Services business to Cygnet, we undertook to support these activities through a transitional services agreement (TSA) on commercial terms with Cygnet, which required significant management and staff resources until the TSA completed at the end of June. We were not therefore able to right size all our cost base until the second half of last year. However, since then we have undertaken a significant cost-cutting exercise. This will result in approximately GBP8.5 million of cost reductions on an annualised basis, half of which have been reflected in 2017.
We have also spent 2017 repositioning the business towards a differentiated integrated recovery model incorporating care, education and therapy for children with the highest needs, which is where we believe there is a significant shortage of care and education facilities. This transformation has led us to review all of our facilities and where appropriate we have closed certain facilities that cannot be re-positioned cost-effectively. We have largely completed this process with one facility likely to be closed or sold in 2018. This transformation has also led us to review the strength of our management team and its ability to deliver more acute services, as a result of which we have made a number of senior hires, comprising Head of Special Educational Needs, Head of Fostering, Director of Quality and Director of People. We are confident that we now have the right senior management team to successfully manage and grow the business.
Our focus during the year has been to fill existing capacity, increase fee levels from higher acuity services and reduce the cost base to increase margins. Good progress has been made on increasing average fee levels and average occupancy levels have been maintained whilst re-positioning services.
Financial results and position
Revenue increased by 8% to GBP196.0 million (2016: GBP182.1 million), after the inclusion of GBP2.4 million TSA income, with 6% underlying growth in revenue from operations, while adjusted EBITDA was GBP18.7 million (2016: GBP16.2 million). Operating profits before exceptional items were GBP2.4 million (2016: GBP0.2 million loss). Adjusted earnings per share were 3.6 pence (2016: 2.4 pence).
On a statutory basis, we are reporting an operating loss of GBP8.8 million (2016: GBP7.6 million loss), pre-tax loss of GBP9.0 million (2016: GBP37.4 million loss) and loss for the year from continuing operations of GBP7.8 million (2016: GBP31.2 million). The loss for the year from discontinued operations was GBP3.6 million (2016: GBP155.0 million profit) and the total loss for the year was GBP11.4 million (2016: GBP123.8 million profit). The statutory basic loss per share from continuing operations was 4.3 pence (2016: 17.2 pence loss).
The Group's closing capacity was 1,643 places, a decrease of 6% over prior year end places of 1,744 in line with the plan, with average utilisation of 78% (2016: 74%).
We ended the year with a strong balance sheet. Net assets were GBP311.4 million, with net cash of GBP82.8 million and no debt. We also entered into a three year GBP30 million revolving credit facility agreement in May with a fixed margin of 2.0% over LIBOR payable on the amounts drawn. This facility is currently undrawn.
Board changes
We were delighted to welcome Anoop Kang who joined the Board as Chief Financial Officer on 12 July 2017. Anoop's most recent role was as Group Financial Controller at Kier Group plc, having previously held senior positions in the construction industry. Martin Hopcroft, who joined the Group in late 2015, stepped down as Chief Financial Officer on this date. We now have a strong triumvirate running the business with Saleem Asaria as CEO, Anne Marie Carrie as COO and Anoop Kang as CFO.
At the conclusion of the Company's Annual General Meeting on 5 June 2017, both Alison Halsey, Chair of the Audit Committee, and Christopher Brinsmead, Senior Independent Director and Chair of the Remuneration Committee, stepped down from the Board.
At the same date, Dr Graham Rich became Senior Independent Director in addition to his role as Chair of the Quality and Safeguarding Committee. Mike Butterworth took over as Chair of the Audit Committee on 1 January 2017 and Donald Muir took over as Chair of the Remuneration Committee on 5 June 2017.
We would like to thank Martin, Alison and Christopher for the extremely valuable contribution they made to Cambian during a time of significant transition.
We also appointed Catherine Apthorpe as our new Company Secretary on 1 March 2017.
Following an independent Board review undertaken by The People Stuff towards the end of last year, we have decided to appoint an additional non-executive director with significant experience in children's services. We expect to make the appointment during 2018.
Standards of care
We rightly judge ourselves on the high quality care and successful outcomes which we achieve for children placed under our care. Although this is not the only standard, 80% of our services were rated "Good" or "Outstanding" by our regulators at year end (2016: 83%). One of our Key Performance Indicators is to increase this percentage in the medium term to over 85% and to have no facilities rated as "Inadequate".
Dividends and dividend policy
Following the sale of the Adult Services business, the Board reviewed the future cash requirements of the business and decided to return an element to shareholders. Accordingly, on 15 September 2017, a special dividend of GBP50 million (27.1 pence per share) was paid to shareholders.
In addition following a review of the Company's capital requirements for the next three years, on 30 January 2018 the Board declared a further special dividend of GBP15 million (8.2 pence per share). This was paid on 28 February 2018.
The Board intends to maintain a progressive dividend policy. Following the reinstatement of the dividend at the 2017 half year (0.14 pence per share paid on 31 October 2017) and the Board's commitment to resume a progressive dividend policy, the Board is recommending a full year dividend, for the year ended 31 December 2017, of 0.39 pence per share (2016: nil pence). Subject to shareholder approval, the final dividend of 0.25 pence per share (2016: nil pence) will be paid on 31 July 2018 to shareholders on the register at the close of business on 6 July 2018.
Our people
Nothing of what we do to improve the lives of the children placed in our care would be achievable without the hard work and dedication of the front-line staff and managers throughout our organisation. We are, first and foremost, a care business and the quality of our work and outcomes has been, and will always be, our priority.
With the appointment of a new and highly experienced Director of People at the end of last year, we are reviewing our recruitment, training and induction processes to ensure that we offer rewarding and satisfying career prospects to all members of our staff, thus ensuring a stable, skilled and contented workforce.
Future strategy
Our aim is to be the highest quality provider of specialist education and behavioural health services for children. We are concentrating on those areas that have a high severity of need, covering the full range of services from residential care and education to day education and therapeutic fostering. Our focus is on those with autism, learning difficulties, emotional and social difficulties, mental health needs, and those suffering as a result of sexual abuse or exploitation. We estimate our target market to be 88,000 children. We intend to achieve this by building the industry's best leadership and workforce, installing robust processes and systems, improving quality levels and occupancy, and driving capacity led but measured growth.
Christopher Kemball
Chairman
Chief Executive's strategic review
Overview
The clear focus in 2017 was to navigate our Group towards becoming the highest quality provider of specialist education and behavioural health services for children and young people. To that end, I am pleased to report that we made significant progress across the following key objectives:
* Maintained focus on quality.
* Completed the Transitional Services Agreement (TSA)
with Cygnet in June 2017, allowing us to focus purely
on our Children's Services business.
* Began right-sizing our cost base to align our
business with its sole focus on Children's Services.
We continue to identify further operational
efficiencies.
* Strengthened our executive management team.
* Identified four detailed execution components to
deliver our medium-term plan alongside KPIs against
which to be measured.
Business performance
During what has been a year of significant change following the sale of the Adult Services business I am pleased to report that the underlying business has performed in line with our expectations. This is a huge credit to all the teams across the Group. At the same time, we are proud to have improved the lives of the children in our care with 80% of our services rated "Good" or "Outstanding" with our regulators at year end (2016: 83%).
Revenue increased by 8% to GBP196.0 million (2016: GBP182.1 million) including GBP2.4 million one-off other income during the period from the TSA. Underlying growth in revenue was 6% driven by an increase in average fee levels, which reflected a planned shift to focusing on higher severity services.
Our adjusted EBITDA increased by 15%, to GBP18.7 million (2016: GBP16.2 million) with adjusted EBITDA margins of 9.5% (2016: 8.9%) reflecting the growth in revenue as well as cost savings made in our head office functions. These positives were offset by one-off impacts resulting from the sale of the Adult Services business and a provision made for changes to legislation regarding staff "sleep-ins" at our facilities.
Operating profit before exceptional items was GBP2.4 million (2016: GBP0.2 million loss) with a statutory operating loss of GBP8.8 million (2016: GBP7.6 million loss). The loss from discontinued operations following the sale of the Adult Services business was GBP3.6 million (2016: GBP155.0 million profit).
Average occupancy was broadly level at 1,286 places (2016: 1,294) with an underlying transition towards higher severity cases during the year. Average utilisation increased to 78% (2016: 74%) following a planned reduction in operational capacity to 1,643 (2016: 1,744).
Average occupancy in the fostering division was 634 (2016: 645) with 649 placements at the end of the year.
Creating a strong Children's Services platform
The completion of the TSA allowed us to focus on reducing our central costs to align our business with its new scale and focus on Children's Services with an efficient overhead structure. We reduced our cost base in the second half of the year and are continuing to identify further operational efficiencies that will be delivered during 2018 and 2019.
During the period, I am pleased to report that we have significantly strengthened our management team to ensure we are able to execute on our strategy. Our key appointments include the following experienced leaders:
* Anoop Kang, formerly at Kier Group and Balfour Beatty,
joined us as CFO.
* Rob Walker, previously at Mencap, joined us as People
Director.
* Dr Sharon Menghini, formerly Director of Children's
Services at a number of local authorities, joined us
as Quality Director.
* Tommy McDonald-Milner, previously Chief Executive of
Minerva Education and Options Group, joined us as
Managing Director of Special Educational Needs.
* Lynn Webb, formerly Chief Operating Officer at Foster
Care Associates, joined as us Managing Director of
Fostering.
I am delighted to reiterate the strategic intent for the Group, announced in January 2018, which outlines our ambition over the medium-term:
* Highest quality - aligned to our vision to be highest
quality provider of specialist education and
behavioural health services to children and young
people in the UK
* Focus on higher severity children - a continuation of
the strategy that we started in 2016. We currently
hold a market leading position with consistent and
robust demand for our services. Average fee levels
are higher than the industry average and commensurate
with the higher severity needs of our children and
young people
* Building a platform to change lives and create value
- consisting of the following factors:
o A specialist focus on higher severity children
o Established quality and safeguarding protocols
o The in-house skills and expertise necessary to operate the
platform
o Defined models for care and therapeutic intervention
o Real time data and measurable outcomes for the children we
look after
o Value for money for the customers who refer children to us
o A defined strategy for recruitment, training and development
o A national footprint
o Fully operational real estate and sales & marketing functions
o A strong brand backed by a culture of innovation
o Robust business information and systems
o A strong balance sheet
We also defined our aspirations for the Group by outlining our medium-term KPIs. Our ambition is to increase revenue by a compound annual growth rate of more than 5% with an adjusted EBITDA margin in excess of 16%. We have also set targets to increase our average scores with our regulators to over 85% "Good" or "Outstanding", increase occupancy levels to more than 85% and to continue to increase our average daily fee through re-positioning to higher severity services.
Our capital expenditure plan targets investment of GBP50 million on growth and capacity increases, GBP15 million to GBP20 million to enhance and upgrade our existing facilities and GBP15 million to GBP20 million on systems and IT investment by 2020. Our ambition is to deliver a return on capital employed on new projects in excess of 20% and over 85% operating cash conversion.
This plan is targeted while maintaining a strong balance sheet, net debt to adjusted EBITDA of less than 1.5x and a progressive dividend policy backed by consistent EPS growth.
Execution components and 2018
We have defined four components to execute our strategy.
Build industry's best leadership and workforce. We will continue to build our leadership teams, ensuring we have the right people in place across the Group to manage our facilities and also mentor and develop all Cambian staff to ensure high quality standards of care. This will require investment in training and quality assurance. We will strengthen our procedures and recruitment resources to build a leading workforce capacity with highly qualified and experienced staff running our teams across the Group. We will also focus on our employee engagement, producing measurable improvements in their engagement in the business with the aim of reducing staff turnover to less than 20%, minimising reliance on agency staff to less than 3% of our total employee cost and improving our employee net promoter score to +45%.
Put in enabling systems and data. As important to the future will be the need to capture high quality data - not only to monitor both the performance and development of our staff, and to manage the performance of our business, but also to give high quality clinical evidence of the quality of the outcomes that we offer our children. We will invest over the next three years in integrated systems and IT that will allow us to achieve these important, and differentiating, back and front office capabilities across finance, HR and IT as well as the therapeutic interventions and outcomes of our service users.
Optimise cost and operations. We will continue to optimise our cost base and identify further operational efficiencies across the Group. In addition, we will maintain our relentless focus on the quality of service delivery across the Group and industry leading regulatory scores.
Drive capacity led growth. Finally, we will deploy GBP15 million to GBP20 million over the next three years to enhance and upgrade existing facilities as we improve the environments of those in our care as well as completing the re-positioning of our facilities to higher severity services. We shall also begin a measured return to increasing capacity by developing new facilities organically, using our experienced in-house property team, as well as continuing to evaluate targeted bolt-on acquisitions as we begin to deploy GBP50 million with a targeted return on capital employed in excess of 20%. These investments combined have led us to a comprehensive plan for investing GBP85 million in capital expenditure by 2020.
Quality and regulatory
Our aim is to be the highest quality provider of specialist education and behavioural health services for our children and young people.
At year end 80% of our services were rated "Good" or "Outstanding" with Ofsted or the Care Quality Commission (CQC) (2016: 83%). This performance is against a backdrop of the continued raising of quality standards in the sector reflected in an increasingly stringent regulatory environment and an enhanced rigour of inspections. We welcome this evolution in the drive to improve the focus on quality of care and appropriate outcomes for our children. Our success in achieving our targeted regulatory ratings, and occupancy levels, is directly aligned to our ambition of building the industry's best leadership and workforce over the medium-term. This journey may not be linear, with some areas of outstanding practice and others where additional focus may be required. The percentage of our facilities rated "Good" and "Outstanding" may fluctuate in the short-term as we continue to re-position to higher severity and improve the capability of our workforce.
Our independent Quality & Safeguarding Committee, chaired by Dr Graham Rich, provides rigorous oversight of our regulatory and safeguarding performance and has been strengthened by the appointment of Dr Sharon Menghini as Director of Quality.
We are continually examining ways in which we can improve our standards of care and are investing significantly in better selection, training and induction of staff. It was therefore particularly disappointing that Cambian was featured in a current affairs television programme broadcast in December 2017, which included undercover video footage taken, without notice or permission, at a number of care facilities managed by independent providers; three of which are operated by Cambian. Since then, we have identified areas where we believe we can improve our service and discussed these in detail with our regulator, Ofsted, prior to implementing them.
Summary and outlook
2018 will be a year of consolidation and we will continue to invest in the systems and support for our staff necessary to deliver on our plans to return, in a measured fashion, to capacity led growth.
The year has started broadly in line with the Board's expectations taking into account the temporary setback following the current affairs television programme, in December 2017, and further investment in quality and workforce capability. Our focus this year is to continue to improve quality whilst re-positioning services to higher severity with corresponding fee increases.
We remain confident for the medium-term outlook and the Group's longer-term potential, while in the short-term we expect to continue to make progress in 2018 and look forward to the future with confidence.
Saleem Asaria
Chief Executive Officer
Chief Financial Officer's review
Capacity and occupancy
2017 FY(1) 2016 FY(2)
--------------------------------- ---------- ----------
Average operational capacity 1,641 1,751
Average occupancy 1,286 1,294
Average utilisation 78% 74%
--------------------------------- ---------- ----------
Closing operational capacity 1,643 1,744
Closing occupancy 1,271 1,270
Closing utilisation 77% 73%
--------------------------------- ---------- ----------
Average fostering placements(3) 634 645
Fill rate(4) 1.41 1.37
--------------------------------- ---------- ----------
(1) Includes five assets owned by Cygnet Health Care Ltd on 1 January 2017 but transferred to Cambian during the period (Stranded Assets)
(2) Re-presented to reflect calculation based on average daily rather than monthly occupancy levels (continuing operations).
(3) Fostering is excluded from the capacity and occupancy numbers and disclosed separately.
(4) Ratio of foster placements to foster parents.
Average occupancy remained broadly flat during the year whilst the Group continues to re-position its services. Average utilisation increased to 78% (2016: 74%) reflecting sustained conversion of service user referrals as well as the planned reduction in capacity. Operational capacity was reduced by a net 101 places in the year predominantly within the Specialist Education division in the first half. Excluding the impact of reduced capacity from re-positioning, average occupancy was 73%. Fostering placements were down 2% at 634 although finished the year at 649 placements.
Fees
(GBP) 2017 FY(1) 2016 FY(2) -------------------------------------------- ---------- ---------- Average daily fee (excluding Fostering)(3) 348 320 -------------------------------------------- ---------- ---------- Fostering average daily fee(3) 132 129 -------------------------------------------- ---------- ----------
(1) Includes Stranded Assets owned by Cygnet Health Care Ltd on 1 January 2017 but transferred to Cambian during the period.
(2) Re-presented to reflect calculation based on average daily rather than monthly occupancy levels (continuing operations).
(3) Average daily fee from placement revenue (excluding GBP2.4m of TSA income) and total number of occupied 'bed days' or foster
placement days during the period.
The average daily fee increased by 9% to GBP348 reflecting improved fee levels from higher severity services as the Group continued its strategy to re-position services to higher severity. Fostering average daily fee increased 2% to GBP132 per day.
Summary income statement (continuing operations)
(GBP million) 2017 FY 2016 FY Variance % ------------------------------------ ------- ------- ---------- Revenue 196.0 182.1 +8% Adjusted EBITDA(1) 18.7 16.2 +15% Depreciation (11.1) (9.9) Amortisation (4.2) (4.2) IPO Share option charge (1.1) (2.2) Profit/(loss) on disposal of PPE 0.1 (0.1) Operating profit/(loss) before exceptional items 2.4 (0.2) Exceptional items (11.2) (7.4) Operating loss (8.8) (7.6) Net finance costs (0.2) (29.8) Loss before tax (9.0) (37.4) +76% Adjusted EBITDA margin (%) 9.5% 8.9% Adjusted basic earnings per share (p)(2) 3.6p 2.4p +50% Statutory basic (loss) per share (p) (4.3)p (17.2)p Full year ordinary dividend per 0.39p nil p share (p) ------------------------------------ ------- ------- ----------
(1) Adjusted EBITDA is earnings from continuing operations before net finance costs, tax, depreciation, amortisation, profit or loss on
disposal of assets, merger and acquisition costs, IPO share option charges and exceptional items (note 3).
(2) Adjusted basic earnings per share is defined as statutory basic earnings per share before amortisation of acquired intangible assets,
M&A costs, IPO share option charges and exceptional and extinguished items, net of the tax effect of these adjustments (note 10).
Revenue
Group revenue increased by 8% to GBP196.0 million (2016: GBP182.1 million) reflecting the re-positioning to higher severity services and increases in fees. This also included GBP2.4 million of other income in connection with the disposal of the Adult Services business. Underlying revenue growth, excluding other income, was 6%. As part of the sale, the Group entered into a TSA to provide services relating to IT, finance, procurement and estates to the purchasers. These services ended on 28 June 2017 allowing the Group to focus on its core operations. Fostering revenue remained flat at GBP30.6 million (2016: GBP30.5 million) with improvements in fees being offset by the number of placements.
Adjusted EBITDA
Adjusted EBITDA increased by 15% to GBP18.7 million (2016: GBP16.2 million). This reflects the growth in revenue from improved fee levels as well as benefiting from central cost reduction initiatives. Administrative expenses increased by 3% from GBP44.8 million to GBP46.2 million. The adjusted EBITDA was partially impacted by delays in transferring back to the Group five assets temporarily stranded following the sale of the Adult Services business (Stranded Assets). All of these assets were successfully transferred back to the Group by 30 June 2017. Despite the Group also incurring additional costs to accelerate the completion of the TSA, the adjusted EBITDA margin percentage improved from 8.9% to 9.5% in the year.
Operating profit/(loss)
Operating profit before exceptional items increased by GBP2.6 million to GBP2.4 million (2016: GBP0.2 million operating loss), which reflect the benefits of the operational efficiencies and focus on the Children's Services business. Depreciation for the year was GBP11.1 million (2016: GBP9.9 million). Amortisation of acquired intangibles remained flat at GBP4.2 million.
The charge on IPO option plans of GBP1.1 million (2016: GBP2.2 million) arises on the Continuation Option Plan shares awarded as part of the IPO, the impact of which is excluded from adjusted EBITDA. The decrease reflected the vesting of the first tranche of this plan after the transfer of certain participants to the Adult Services business. Charges on future or post-IPO share-based awards are included within adjusted EBITDA. After exceptional items, the operating loss was GBP8.8 million (2016: GBP7.6 million loss) for the year.
Exceptional items
The directors have used judgement in determining those items which, individually or, if of a similar type, in aggregate, need to be disclosed separately due to their size or incidence in order to obtain a more clear and consistent presentation of the Group's underlying performance.
Exceptional items of GBP11.2 million were recorded in the year (2016: GBP7.4 million). GBP5.2 million relates to the impairment of an asset that could not be cost effectively re-positioned to higher severity. GBP3.5m relates to the potential impact of the National Minimum Wage Regulations 2015 ("sleep-ins") for 2016 and prior years. GBP1.2 million relates to costs associated with the disposal of the Adult Services business. GBP0.9 million relates to costs of Group restructuring and reorganisation and GBP0.6 million relates to costs associated with IT restructuring post the disposal of the Adult Services business.
Taxation
The tax credit for the year was GBP1.2 million (2016: GBP6.2 million tax credit), equating to an effective tax rate of 18.2% (2016: 24.9%) on an underlying basis before exceptional items. The difference between the current statutory rate and the effective tax rate is principally due to the recognition of historic tax losses that are expected to be utilised in future periods.
Earnings per share
The adjusted earnings per share increased by 50% to 3.6 pence per share (2016: 2.4 pence per share). The statutory loss per share from continuing operations was 4.3 pence per share (2016: 17.2 pence per share). Taking into account discontinued operations the total statutory loss per share was 6.3 pence per share (2016: 68.6 pence per share profit). The 2016 earnings per share principally relates to discontinued operations as a result of the profit on sale of the Adult Services business.
Return of capital
On 15 September 2017, a special dividend of GBP50 million (27.1 pence per share) was paid to shareholders in line with previous announcements on the return of capital to shareholders following the sale of the Adult Services business.
In addition, following a review of the Group's capital requirements over the medium term, the Board declared a further special dividend of GBP15 million in January 2018. This was paid on 28 February 2018.
Dividend
Following the sale of the Adult Services business, the balance sheet strength and confidence in the Group's outlook over the medium term, the Board decided to reinstate the dividend at an appropriate level during 2017. The Board is recommending a full year dividend, for the year ended 31 December 2017, of 0.39 pence per share (2016: nil pence). An interim dividend of 0.14 pence per share was paid on 31 October 2017. Subject to shareholder approval, the final dividend of 0.25 pence per share (2016: nil pence) will be paid on 31 July 2018 to shareholders on the register at the close of business on 6 July 2018.
Discontinued operations
(GBP million) 2017 FY 2016 FY -------------------------------------------------- ------- ------- Profit before tax - 10.8 Tax - (0.1) Profit from discontinued operations - 10.7 (Loss)/profit on sale of discontinued operations (3.6) 144.3 (Loss)/profit for the year from discontinued operations (3.6) 155.0 -------------------------------------------------- ------- -------
Discontinued operations relates to the disposal of the Adult Services business. The disposal took place on 28 December 2016 for an initial consideration of GBP383.0 million excluding directly attributable costs.
The Sale and Purchase Agreement ("SPA") for the disposal of the Adult Services business required agreement of a Closing Statement, as is customary in such transactions. This was concluded on 19 September 2017, after agreement was reached between the Group and the buyer, and is reflected in the results for the period. Following a net adjustment of GBP4.0 million payable to the buyer the final consideration for the Adult Services business is GBP379.0 million excluding directly attributable costs.
Cash flow
Net cash from operating activities was an inflow of GBP29.9 million (2016: GBP3.4 million), with working capital movements reflecting an excellent performance on cash collections in the second half of the year. This represents an operating cash to adjusted EBITDA conversion rate of 151%. Net cash was GBP82.8 million at the year end (2016: GBP116.1 million). This movement reflected the positive operating cash flow partially offset by the payment of dividends in the year of GBP49.7 million.
Capital expenditure
Capital expenditure was GBP10.8 million (2016: GBP6.4 million) in the year, of which GBP6.1 million (2016: GBP4.5 million) was spent on the development of new capacity and GBP4.7 million (2016: GBP1.9 million) on the maintenance of existing units. Going forward, capital expenditure will increase as the Group invests in growth and capacity increases, enhancements and upgrades to existing facilities, and systems and IT.
Financing facilities
In May 2017, the Group entered into a three year GBP30 million revolving credit facility with Barclays for general corporate purposes with a fixed margin of 2.0% over LIBOR on amounts drawn under the facility, together with customary fees, covenants, baskets and undertakings. No drawdowns have been made to date.
Anoop Kang
Chief Financial Officer
Principal risks and uncertainties
The principal risks and uncertainties facing the business are considered to be as follows:
Risk Description & Impact
----------------------- -----------------------------------------------------
Quality of Service Failure to provide a high quality and consistent
level of care for the children and young
people placed under our charge.
----------------------- -----------------------------------------------------
Regulatory Breach Loss or suspension of operating licences
due to a major statutory, regulatory or contractual
compliance breach.
----------------------- -----------------------------------------------------
Service Innovation Insufficient innovation in our business model,
service offerings or model of care reduces
our competitiveness in the market.
----------------------- -----------------------------------------------------
Incident Response Inability to effectively react and respond
to a major incident or systematic incidents
in a timely and controlled manner.
----------------------- -----------------------------------------------------
Relationships Failure to create and maintain strong relationships
with commissioners to ensure referrals and
conversions at appropriate prices.
----------------------- -----------------------------------------------------
Systems & Processes Immaturity of financial and operational systems
and processes prevents effective business
operations and sustainable future growth.
----------------------- -----------------------------------------------------
Attraction & Retention Failure to attract and maintain an effective,
high quality resource and talent base may
prevent the delivery of a high quality service
to the service users. Reduction in size and
diversification of the Group following the
disposal of the Adult Services business may
make it more difficult to attract and retain
key employees. Potential adverse impact on
recruitment in healthcare as a result of
Brexit.
----------------------- -----------------------------------------------------
Strategy & Performance Failure to develop, execute and operate a
strategic plan that ensures continued viable
growth.
----------------------- -----------------------------------------------------
Integration Failure to realise the benefits and synergies
of effectively integrating new sites and
acquisitions.
----------------------- -----------------------------------------------------
Business Change Failure to effectively deliver key business
change programmes to improve controls and
processes.
----------------------- -----------------------------------------------------
Government Action Failure to anticipate or respond to changes
in government policy or regulation.
----------------------- -----------------------------------------------------
National Living Wage Additional costs of national living wage
on "sleep-ins" could be material.
----------------------- -----------------------------------------------------
Further details on the principal risks and uncertainties, and mitigation, can be found in the Group's Annual Report and Accounts.
Statement of Directors' responsibilities
The responsibility statement below has been prepared in connection with the Group's annual report and accounts for the year ended 31 December 2017. Certain parts thereof are not included in this announcement.
Each of the directors, whose names and functions are listed in the annual report for the year ended 31 December 2017 confirm that, to the best of their knowledge:
* the Group financial statements, which have been
prepared in accordance with IFRS as adopted by the EU,
give a true and fair view of the assets, liabilities,
financial position and loss of the Company and the
undertakings included in the consolidation taken as a
whole;
* the strategic report includes a fair review of the
development and performance of the business and the
position of the Company and its subsidiary
undertakings, together with a description of the
principal risks and uncertainties that they face; and
* the annual report and financial statements, taken as
a whole, are fair, balanced and understandable and
provide the information necessary for shareholders to
assess the company's performance, business model and
strategy.
By order of the Board
Saleem Asaria Anoop Kang Chief Executive Officer Chief Financial Officer
Cautionary Statement
Certain statements in this preliminary announcement are forward-looking. Although the Group believes that the expectations reflected in these forward-looking statements are reasonable, we can give no assurance that these expectations will prove to have been correct. Because these statements contain risks and uncertainties, actual results may differ materially from those expressed or implied by these forward-looking statements. We undertake no obligation to update any forward-looking statements whether as a result of new information, future events or otherwise.
Independent Auditors' report to the shareholders of Cambian Group Plc on the preliminary announcement
We confirm that we have issued an unqualified opinion on the full financial statements of Cambian Group Plc.
Our audit report on the full financial statements sets out the following risks of material misstatement which had the greatest effect on our audit strategy; the allocation of resources in our audit; and directing the efforts of the engagement team, together with how our audit responded to those risks:
Revenue recognition
----------------------------------------------------------------------------
Key audit matter The Group recognised revenue of GBP196.0m (2016:
description GBP182.1m) over the period in which its behavioural
health services in specialist high severity care
are provided. The Group measures revenue at the
fair value of the consideration received or receivable
in respect of services rendered.
A significant proportion of the Group's services
are billed in advance based on the expected services
to be provided. Where services delivered differ
from those expected, credit notes are issued
to ensure revenue is accurately recorded. Due
to the manual nature of the information on which
billings and credit notes are based a key audit
matter has been identified around the risk of
inaccurate revenue recognition.
----------------- ---------------------------------------------------------
How the scope We developed an expectation of recorded revenue
of our audit based on key metrics, including occupancy data
responded to and fee rates (a sample of which were traced
the key audit to source documentation), on a site by site basis
matter and compared this to the actual revenue recognised.
Where a reasonable expectation could not be formed,
e.g. due to new sites or changes in service conditions,
we traced a sample of transactions to invoice.
We tested the accuracy of invoicing by sampling
credit notes from after year end and confirmed
their accuracy through comparison to occupancy
data and the original invoice that had been raised.
We also assessed the recoverability of the invoices
sampled. We gained assurance over the completeness
of credit notes through ensuring credit notes
had been raised in sequential order.
----------------- ---------------------------------------------------------
Key observations We have assessed revenue on a site by site basis
to be in line with our expectations and we consider
revenue to be free from material misstatement.
----------------- ---------------------------------------------------------
Assessment of the carrying value of goodwill
----------------------------------------------------------------------------
Key audit matter The carrying value of goodwill (2017 & 2016 -
description GBP75.8m), is considered a key audit matter due
to the size of the balance and the significant
judgement involved in the annual impairment assessment.
Judgemental aspects include assumptions of future
profitability, revenue growth, margins and the
selection of appropriate discount rates, all
of which may be susceptible to management bias.
We have identified a risk of fraud in relation
to this judgement.
----------------- ---------------------------------------------------------
How the scope We have obtained management's goodwill impairment
of our audit review calculations and assessed the mechanical
responded to accuracy of the model. Furthermore, we challenged
the key audit the assumptions and inputs used in the impairment
matter model including the revenue growth rates and
margins, discount rates, long term growth rates
and the sensitivities applied and disclosed.
We have also assessed management's historical
forecasting accuracy.
Our procedures included reviewing forecast cash
flows with reference to historical trading performance
and the Board approved budgets and consulting
with our valuation specialists who benchmarked
assumptions such as the discount rate to macroeconomic
and market data.
The long term growth rate used in the cash flow
projections was assessed to check that it did
not materially differ to the average long term
growth rate for the UK.
We have also performed sensitivity analysis on
the impairment model to determine if a reasonable
possible adverse change in the key assumptions,
results in the carrying amount exceeding the
recoverable amount for any cash generating unit.
----------------- ---------------------------------------------------------
Key observations We concluded that the assumptions and judgements
set out in management's model are reasonable
and we concur with the Directors' assessment
that there is no impairment. We also considered
the disclosures within the consolidated financial
statements to be appropriate.
----------------- ---------------------------------------------------------
Provision for National Living Wage payments for 'sleep-ins'
----------------------------------------------------------------------------
Key audit matter The Group, in common with a number of mental
description health care providers in the industry, is undergoing
a National Living Wage audit by HMRC. During
2017 there have been developments relating to
other social care employers that indicate that
this matter is being pursued by HMRC and that
the outcome of cases is based on the individual
set of circumstances.
Given the complexity of applying the regulations
and judgment involved in calculating the provision
Management has identified this as a key source
of estimation uncertainty. This has been identified
as a key audit matter and a risk of fraud in
relation to this judgement has been identified.
----------------- ---------------------------------------------------------
How the scope We reviewed the Group's records of policies and
of our audit procedures with regard to compliance with the
responded to National Living Wage regulations and in particular,
the key audit the process for employees working on sleep-in
matter shifts.
We consulted with our in-house employment tax
specialists in order to challenge management's
assumptions on the application of the regulations
and implications of non-compliance.
We challenged the underlying assumptions and
adequacy of the provision through testing the
mathematical accuracy of the provision and testing
the underlying data on which the provision is
based on a sample basis.
We performed a sensitivity analysis on the provision
by flexing management's key assumptions to ascertain
a range of possible outcomes based on reasonably
possible movements in such assumptions.
----------------- ---------------------------------------------------------
Key observations We consider the judgements made by management
to be appropriate in light of the complexity
of the assessment and we concur that this is
a key source of estimation uncertainty.
----------------- ---------------------------------------------------------
These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we did not provide a separate opinion on these matters.
Our liability for this report, and for our full audit report on the financial statements is to the company's members as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for our audit report or this report, or for the opinions we have formed.
Deloitte LLP
Statutory Auditor
Statement of Comprehensive Income
For the year ended 31 December 2017
Re-presented(1)
2017 2016
Note GBP'000 GBP'000
Continuing operations
Revenue 195,952 182,055
Cost of sales (158,513) (144,841)
---------- ----------------
Gross profit 37,439 37,214
Administrative expenses (46,253) (44,837)
---------- ----------------
Operating loss (8,814) (7,623)
Operating profit/(loss) before exceptional
items 2,350 (228)
Exceptional items within administrative
expenses 5 (11,164) (7,395)
---------- ----------------
Operating loss (8,814) (7,623)
---------------------------------------------- ----- ---------- ----------------
Finance income 218 13
Finance costs 6 (399) (29,784)
---------- ----------------
Loss before tax (8,995) (37,394)
---------------------------------------------- ----- ---------- ----------------
Profit/(loss) before tax, exceptional and
extinguished items 2,169 (401)
Exceptional items within administrative
expenses 5 (11,164) (7,395)
Extinguished items within finance costs 7 - (29,598)
---------- ----------------
Loss before tax (8,995) (37,394)
---------------------------------------------- ----- ---------- ----------------
Tax 8 1,198 6,217
---------- ----------------
Loss for the year from continuing operations (7,797) (31,177)
Discontinued operations
---------- ----------------
(Loss)/profit for the year from discontinued
operations 9 (3,566) 155,003
---------- ----------------
(Loss)/profit for the year (2) (11,363) 123,826
---------- ----------------
Fair value loss from cash flow hedge (3) - (1,752)
Deferred tax relating to fair value loss
(3) - 316
Recycling of cash flow hedge - 2,353
---------- ----------------
Other comprehensive profit for the year - 917
---------- ----------------
Total comprehensive (loss)/income for the
year (2) (11,363) 124,743
========== ================
Loss per share from continuing operations
- basic & diluted 10 (4.3)p (17.2)p
(1) Re-presented cost of sales and administration expenses (see note 19).
(2) Wholly attributable to owners of the ultimate controlling party.
(3) Items that may be reclassified to profit and loss.
Consolidated Balance Sheet
As at 31 December 2017
Restated
2017 2016
(restated)
(1)
Note GBP'000 GBP'000
Goodwill 11 75,783 75,783
Other intangible assets 12 41,678 45,928
Property, plant and equipment 13 170,703 177,183
---------- ------------
Non-current assets 288,164 298,894
---------- ------------
Trade and other receivables 22,609 41,414
Cash and cash equivalents 83,056 116,657
Current tax asset - 2,771
Prepayments and accrued income 3,224 3,040
---------- ------------
Current assets 108,889 163,882
---------- ------------
Total assets 397,053 462,776
---------- ------------
Trade and other payables (22,208) (32,892)
Provisions 14 (1,603) (5,492)
Deferred revenue (28,491) (27,314)
Current tax liability (1,729) -
Obligations under finance leases (132) (273)
Current liabilities (54,163) (65,971)
---------- ------------
Net current assets 54,726 97,911
---------- ------------
Obligation under finance leases (144) (277)
Provisions 14 (9,777) -
Deferred tax liabilities (21,540) (25,221)
---------- ------------
Non-current liabilities (31,461) (25,498)
---------- ------------
Total liabilities (85,624) (91,469)
---------- ------------
Net assets 311,429 371,307
========== ============
Share capital 15 1,842 1,842
Share premium 20,499 20,499
Merger reserve 391,459 391,459
Other reserves (138,494) (139,665)
Retained earnings 36,123 97,172
---------- ------------
Total equity 311,429 371,307
========== ============
(1) Restated between share premium and merger reserve (see note 18).
Consolidated Statement of Changes in Equity
For the year ended 31 December 2017
Share capital Share premium Merger Cash flow Other reserves Retained Total equity
reserve hedging earnings
reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1
January 2016 1,842 386,653 - (917) (116,589) (26,654) 244,335
Effect of prior
year restatement
(note 18) - (366,154) 391,459 - (25,305) - -
Restated balance
at 1 January
2016 1,842 20,499 391,459 (917) (141,894) (26,654) 244,335
Profit for the
year - - - - - 123,826 123,826
Loss on effective
portion of
cash flow hedge,
net of deferred
tax - - - (1,436) - - (1,436)
Recycling of the
cash flow hedge
reserve to profit
and loss, net
of deferred tax - - - 2,353 - - 2,353
Credit for
equity-settled
share-based
payments - - - - 2,229 - 2,229
-------------- -------------- --------- ---------- --------------- ---------- -------------
Balance at 31
December 2016 1,842 20,499 391,459 - (139,665) 97,172 371,307
Loss for the year - - - - - (11,363) (11,363)
Dividends paid - - - - - (49,686) (49,686)
Credit for
equity-settled
share-based
payments - - - - 1,171 - 1,171
-------------- -------------- --------- ---------- --------------- ---------- -------------
Balance at 31
December 2017 1,842 20,499 391,459 - (138,494) 36,123 311,429
-------------- -------------- --------- ---------- --------------- ---------- -------------
Consolidated Cash Flow Statement
For the year ended 31 December 2017
2017 2016
Note GBP'000 GBP'000
Net cash inflow from operating activities 16 29,884 3,449
Proceeds on disposal of property, plant
and equipment 1,081 973
Purchase of property, plant and equipment (10,764) (12,547)
Sale of Adult Services business - discontinued
operations (3,985) 373,744
Net cash (used in)/from investing activities (13,668) 362,170
--------- ----------
Repayment of borrowings - (275,000)
New bank loans raised, net of issue costs - 10,550
Repayment of obligations under finance
leases (294) (252)
Dividends paid (49,686) -
Net cash used in financing activities (49,980) (264,702)
--------- ----------
Net (decrease)/increase in cash & cash
equivalents (33,764) 100,917
Increase/(decrease) in cash held on behalf
of clients 163 (2,307)
Cash and cash equivalents at beginning
of year 116,657 18,047
Cash and cash equivalents at end of year 83,056 116,657
========= ==========
Notes to the financial statements
For the year ended 31 December 2017
1. Accounting policies
Basis of preparation
Cambian Group plc ("Company") is incorporated in Great Britain under the Companies Act. The principal activity of the Company and its subsidiaries ("Group") is the provision of specialist behavioural healthcare services.
This preliminary announcement is based on the Group's financial statements for the year ended 31 December 2017 which are prepared in accordance with International Financial Reporting Standards (IFRS) as adopted for use in the European Union. Whilst the financial information included in this preliminary announcement has been computed in accordance with IFRS, this announcement does not itself contain sufficient information to comply with IFRS. The accounting policies applied in preparing this financial information are consistent with the Group's financial statements for the year ended 31 December 2017.
The financial information does not constitute the Company's statutory accounts for the years ended 31 December 2017 or 2016, but is derived from those accounts. Statutory accounts for 2016 have been delivered to the Registrar of Companies and those for 2017 will be delivered following the Company's Annual General Meeting. The Auditors have reported on those accounts; their reports were unqualified, did not draw attention to any matters by the way of emphasis without qualifying their report and did not contain statements under s498(2) or (3) Companies Act 2006.
Exceptional items
Exceptional and extinguished items reflect items of non-recurring expenditure that have been disclosed separately due to their size or incidence in order to obtain clear and consistent presentation of the Group's performance (see note 5).
Going concern
The directors have, at the time of approving the financial statements, a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for at least 12 months from the date of approval of these financial statements. Accordingly, they have adopted the going concern basis of accounting in preparing the financial statements.
2. Critical accounting judgements and key sources of estimation uncertainty
In the application of the Group's accounting policies, which are described in note 1, the directors are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised, if the revision affects only that period, or in the period of the revision and future periods, if the revision affects both current and future periods.
Critical judgements in applying the Group's accounting policies
The following are the critical judgements that the directors have made in the process of applying the Group's accounting policies and that have the most significant effect on the amounts recognised in the historical financial information. Those involving estimations are dealt with separately below.
Exceptional items
The directors have used judgement in determining those items which, individually or, if of a similar type, in aggregate, need to be disclosed separately due to their size or incidence in order to obtain a more clear and consistent presentation of the Group's underlying performance.
Key sources of estimation uncertainty
The key assumptions concerning the future, and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are discussed below.
Sleep-ins
A sleep-in refers to a type of work shift, commonly used in the care industry, where employees "sleep-in" and are paid an allowance for doing so. HMRC's view is that hours spent by employees performing sleep-in count as "working time" and therefore should be included when calculating whether or not someone has been paid in accordance with the National Minimum Wage Regulations 2015. In November 2017, HMRC reiterated its position and invited companies to join the Social Care Compliance Scheme, a self-reporting scheme aimed at concluding historic payments regarding sleep-ins. Cambian have opted into the scheme. Whilst a number of other care service providers have challenged HMRC's original view, if it is ultimately individually determined that Cambian had to pay each individual engaged in a sleep-in an amount by reference to the National Living Wage, the additional cost could be material. The directors have used their judgement to provide for this matter. The amount has not been separately disclosed to avoid prejudicing the dispute.
Onerous contract
Cambian is a party to an exclusive supply agreement in respect of pharmaceutical supplies at its sites. This contract did not automatically transfer with the Adult Services business. The supplier has indicated that in its view the sale is in breach of the agreement and is seeking either a novation of the agreement or compensation. Litigation has been formally threatened but not yet commenced, and the directors have used their judgement to provide for this. The amount has not been separately disclosed to avoid prejudicing the dispute.
Carrying value of property, plant and equipment
Determining whether property, plant and equipment is impaired requires an estimation of the value in use, and if required, estimation of the fair value less costs of disposal. The value in use calculation requires the entity to estimate the future cash flows expected to arise from the property, plant and equipment, and a suitable discount rate in order to calculate present value.
3. Segmental analysis
On 28 December 2016, the Group made a substantial disposal with the sale of the Adult Services business. As required by accounting standards, Children's Services are reported as "continuing operations" and Adult Services are reported as "discontinued operations", however they are presented together in order to provide a fuller understanding of the overall trading performance over the last two years.
The Group assesses performance using adjusted EBITDA as its primary measure. This reflects the underlying performance of the business and provides an additional useful comparison of how the business is managed and measured on a day to day basis. Our KPIs are aligned to our strategy and together are used to measure the performance of our business and form the basis of the performance measures for remuneration.
Notes to the financial statements
For the year ended 31 December 2017
3. Segmental analysis (continued)
Continuing Discontinued 2017
GBP'000 GBP'000 GBP'000
Revenue 195,952 - 195,952
Cost of sales (158,513) - (158,513)
----------- ------------- ----------
Gross profit 37,439 - 37,439
Administrative expenses before adjustments
and exceptional items (18,752) - (18,752)
----------- ------------- ----------
Adjusted EBITDA 18,687 - 18,687
Depreciation (11,124) - (11,124)
Amortisation (4,250) - (4,250)
Loss on disposal of property, plant
and equipment 137 - 137
IPO share option charges (1,100) - (1,100)
----------- ------------- ----------
Operating profit/(loss) before exceptional
items 2,350 - 2,350
Exceptional items (11,164) - (11,164)
----------- ------------- ----------
Operating (loss)/profit (8,814) - (8,814)
Finance income 218 - 218
Finance costs (399) - (399)
----------- ------------- ----------
(Loss)/profit before tax (8,995) - (8,995)
Tax 1,198 - 1,198
----------- ------------- ----------
(Loss)/profit before sale of discontinued
operations (7,797) - (7,797)
(Loss)/profit on sale of discontinued
operations - (3,566) (3,566)
----------- ------------- ----------
(Loss)/profit for the year (7,797) (3,566) (11,363)
=========== ============= ==========
Continuing Discontinued 2016
GBP'000 GBP'000 GBP'000
Revenue 182,055 142,086 324,141
Cost of sales (144,841) (86,883) (231,724)
----------- ------------- ----------
Gross profit 37,214 55,203 92,417
Administrative expenses before adjustments
and exceptional items (20,987) (26,444) (47,431)
----------- ------------- ----------
Adjusted EBITDA 16,227 28,759 44,986
Depreciation (9,831) (6,647) (16,478)
Amortisation (4,263) (1,505) (5,768)
Loss on disposal of property, plant
and equipment (131) 8 (123)
IPO share option charges (2,230) - (2,230)
----------- ------------- ----------
Operating (loss)/profit before exceptional
items (228) 20,615 20,387
Exceptional items (7,395) (9,740) (17,135)
----------- ------------- ----------
Operating (loss)/profit (7,623) 10,875 3,252
Finance income 13 1 14
Finance costs (29,784) (46) (29,830)
----------- ------------- ----------
(Loss)/profit before tax (37,394) 10,830 (26,564)
Tax 6,217 (105) 6,112
----------- ------------- ----------
(Loss)/profit before sale of discontinued
operations (31,177) 10,725 (20,452)
Profit on sale of discontinued operations - 144,278 144,278
----------- ------------- ----------
(Loss)/profit for the year (31,177) 155,003 123,826
=========== ============= ==========
Notes to the financial statements
For the year ended 31 December 2017
4. Staff costs
2017 2016
GBP'000 GBP'000
Wages and salaries 98,811 95,231
Social security costs 8,638 7,814
Other pension costs 1,384 1,252
Share-based payment expense 1,520 2,229
Staff costs 110,353 106,526
======== ========
2017 2016
Number Number
Nursing, care and support staff 3,965 6,361
Estates, sales and marketing, quality,
management and administration 574 880
Average number of employees & directors 4,539 7,241
======= =======
The 2016 staff numbers are represented by continuing and discontinued
operations per the table below:
Continuing Discontinued 2016
Number Number Number
Nursing, care and support staff 3,880 2,481 6,361
Estates, sales and marketing, quality,
management and administration 537 343 880
Average number of employees & directors 4,417 2,824 7,241
=========== ============= =======
Notes to the financial statements
For the year ended 31 December 2017
5. Exceptional items
2017 2016
GBP'000 GBP'000
Impairment of property, plant and 5,177 -
equipment (note 13)
Sleep-ins 3,460 1,922
Costs associated with the disposal
of Adult Services business 1,245 1,041
Post disposal restructuring and 888 -
reorganisation costs
IT systems costs 642 -
Reversal of prior period exceptional (248) -
provision
Refinancing costs - 2,446
Capitalised finance costs written
off - 1,854
IT project costs written off - 132
Exceptional items 11,164 7,395
======== ========
Impairment of property, plant and equipment relates to an impairment charge relating to of one of Cambian's sites. Sleep-ins is the provision for 2016 and prior years relating to the potential impact of National Minimum Wage Regulations 2015. Costs associated with the disposal of the Adult Services business relates to costs related specifically to the disposal and largely consist of professional fees associated with the completion process and staff retention incentives incurred during the transitional services agreement. Post disposal restructuring and reorganisation costs relate to costs incurred in restructuring the central functions. IT systems costs relate predominantly to professional fees incurred in connection with process simplification and system costs following the sale of the Adult Services business. Reversal of prior period exceptional provision relates to a tax liability provided for relating to the acquisition of By the Bridge Holdings Limited.
Refinancing costs include the engagement of legal and financial specialists to assist in the financial restructuring in April 2016. Capitalised finance costs written off relate to the previously capitalised finance fees included in the carrying value of the borrowings prior to the financial restructuring in April 2016. IT project costs written off relate to a decision taken in late 2015 to cancel a project to integrate Finance, HR and CRM systems.
A cash outflow of GBP12.4m (2016: GBP5.3m) occurred as a result of exceptional items, and is included as part of net cash inflow from operating activities.
6. Finance costs
2017 2016
GBP'000 GBP'000
Interest on bank loans - 19,280
Bank loan charges 380 135
Amortised loan issue costs - 8,160
Settlement costs of financial instruments - 2,158
Interest on obligations under finance
leases 19 51
Finance costs 399 29,784
======== ========
Notes to the financial statements
For the year ended 31 December 2017
7. Extinguished items
2017 2016
GBP'000 GBP'000
Interest on bank loans - 19,280
Amortised loan issue costs - 8,160
Settlement costs of financial instruments - 2,158
Extinguished items - 29,598
======== ========
All bank debt was settled on the sale of the Adult Services business, so all costs of the financing facilities are reported as extinguished items within continuing operations.
8. Tax
2017 2016
GBP'000 GBP'000
Current tax 2,483 (4,762)
Deferred tax (3,681) (1,455)
-------- --------
Tax credit (1,198) (6,217)
======== ========
Corporation tax is calculated at 19.3% (2016: 20.0%) of the estimated taxable profit for the year.
The charge for the year can be reconciled to the profit in the income statement as follows:
2017 2016
GBP'000 GBP'000
Loss before tax (8,995) (37,394)
Tax at the UK corporation tax rate of 19.3%
(2016: 20.0%) (1,731) (7,479)
Expenses not deductible for tax purposes 1,907 3,831
Short term timing differences (1,301) 678
Difference in tax rates (31) (49)
Unrecognised temporary differences 1 (687)
Adjustments to prior years (43) (2,464)
Effect of rate change on deferred tax - (2,108)
Discontinued operations - 2,061
-------- ---------
Tax credit for the year (1,198) (6,217)
======== =========
Some exceptional costs are capital in nature and therefore not tax deductible, and it is estimated that GBP5.3m (2016: GBP8.2m) of the exceptional costs will be deductible, which has reduced the tax charge by GBP1.0m (2016: GBP1.6m). The Group has also released historic exceptional tax provisions, which has reduced the tax charge by GBP0.6m (2016: nil).
Notes to the financial statements
For the year ended 31 December 2017
9. Sale of discontinued operations
On 5 December 2016, the Group entered into a sale agreement to dispose of Cambian Healthcare Limited and its subsidiaries, Care Aspirations Developments Limited and its subsidiaries, and Cambian Care Services, ("the Adult Services business"), which carried out all of the Group's Adult Services operations. The disposal was completed on 28 December 2016, on which date control of the Adult Services business passed to the acquirer, Cygnet Health Care Limited ("Cygnet").
A profit of GBP144.3m was reported in the year ended 31 December 2016 on the disposal of the Adult Services business, being the difference between the proceeds of disposal and the carrying amount of the subsidiaries' net assets sold. Under the terms of the Share Purchase Agreement, Cambian delivered a Closing Statement on 24 April 2017 to Cygnet. The Closing Statement was agreed between the Company and Cygnet on 19 September 2017 resulting in a reduction in the purchase price of GBP4.0m to GBP379.0m (excluding directly attributable costs). The final consideration after directly attributable costs of GBP3.6m was GBP375.4m.
2017 2016
GBP'000 GBP'000
Total consideration received in cash and
equivalents - 383,026
Purchase price adjustment (4,015) -
Directly attributable costs 449 (3,999)
-------- ----------
Consideration (3,566) 379,027
Net assets sold - (234,749)
-------- ----------
(Loss)/profit on sale (3,566) 144,278
Profit before sale of discontinued operations - 10,725
-------- ----------
Total (loss)/profit after tax for the year (3,566) 155,003
======== ==========
The below table provides a breakdown of the final profit on sale of the Adult Services business:
GBP'000
Total consideration received in cash and
equivalents 383,026
Purchase price adjustment (4,015)
Directly attributable costs (3,550)
Consideration 375,461
Net assets sold (234,749)
----------
Profit on sale 140,712
Notes to the financial statements
For the year ended 31 December 2017
10. (Loss)/earnings per share
2017 2016
GBP'000 GBP'000
Continuing operations
Loss (7,797) (31,177)
Exceptional items - net of tax credit GBP1.0m
(2016: GBP1.1m) 10,162 6,301
Amortisation of intangibles - net of tax credit
GBP0.8m (2016: GBP0.8m) 3,435 3,413
Charge on IPO option plans - net of tax credit
GBP0.3m (2016: GBP0.1m) 800 2,105
Extinguished items - net of tax credit GBPnil
(2016: GBP5.9m) - 23,678
--------- ----------
Adjusted earnings 6,600 4,320
--------- ----------
Discontinued operations
(Loss)/profit (3,566) 155,003
Exceptional items - net of tax credit GBPnil
(2016: GBP0.1m) - 9,597
Amortisation of intangibles - net of tax credit
GBPnil (2016: GBP0.3m) - 1,199
Loss/(profit) on sale of investment - net
of tax charge GBPnil (2016: GBPnil) 3,566 (144,278)
--------- ----------
Adjusted earnings - 21,521
--------- ----------
Total operations
(Loss)/profit (11,363) 123,826
Exceptional items - net of tax credit GBP1.0m
(2016: GBP1.2m) 10,162 15,898
Amortisation of intangibles - net of tax credit
GBP0.8m (2016: GBP1.1m) 3,435 4,612
Charge on IPO option plans - net of tax credit
GBP0.3m (2016: GBP0.1m) 800 2,105
Loss/(profit) on sale of investment - net
of tax charge GBPnil (2016: GBPnil) 3,566 (144,278)
Extinguished items - 23,678
--------- ----------
Adjusted earnings 6,600 25,841
========= ==========
Notes to the financial statements
For the year ended 31 December 2017
10. (Loss)/earnings per share (continued)
2017 2016
pence pence
Continuing operations
EPS from continuing operations(1) (4.3) (17.2)
Exceptional items 5.6 3.5
Amortisation of intangibles 1.9 1.9
Charge on IPO option plans 0.4 1.2
Extinguished items - 13.0
------ -------
Adjusted EPS 3.6 2.4
====== =======
Discontinued operations
EPS from discontinued operations(1) (2.0) 85.6
Exceptional items - 5.3
Amortisation of intangibles - 0.7
(Loss)/profit on sale of investment 2.0 (79.7)
------ -------
Adjusted EPS - 11.9
====== =======
Total operations
EPS for total Group(1) (6.3) 68.4
Exceptional items 5.6 8.8
Amortisation of intangibles 1.9 2.6
Charge on IPO option plans 0.4 1.2
(Loss)/profit on sale of investment 2.0 (79.7)
Extinguished items - 13.0
------ -------
Adjusted EPS 3.6 14.3
====== =======
1 Basic and diluted
2017 2016
Weighted average number of shares Number Number
Number of ordinary shares for the purpose of
basic EPS 182,402,674 180,977,198
Dilutive effect of share options - -
------------ ------------
Number of ordinary shares for the purpose of
diluted EPS 182,402,674 180,977,198
============ ============
11. Goodwill
2017 2016
GBP'000 GBP'000
Cost
As at 1 January 76,102 114,591
Disposals - (38,489)
-------- ---------
As at 31 December 76,102 76,102
-------- ---------
Impairment
As at 1 January (319) (319)
Charge for the year - -
-------- ---------
As at 31 December (319) (319)
-------- ---------
Net book value
As at 31 December 75,783 75,783
======== =========
Notes to the financial statements
For the year ended 31 December 2017
12. Other intangible assets
Customer Non-compete Total
Relationships Agreements
GBP'000 GBP'000 GBP'000
Cost
As at 1 January 2016 83,803 681 84,484
Disposals (23,504) (340) (23,844)
--------------- ------------ ---------
As at 31 December 2016 60,299 341 60,640
--------------- ------------ ---------
As at 31 December 2017 60,299 341 60,640
=============== ============ =========
Amortisation
As at 1 January 2016 (12,074) (223) (12,297)
Charge for the year (5,586) (182) (5,768)
Disposals 3,013 340 3,353
As at 31 December 2016 (14,647) (65) (14,712)
Charge for the year (4,223) (27) (4,250)
--------------- ------------ ---------
As at 31 December 2017 (18,870) (92) (18,962)
=============== ============ =========
Net book value
As at 31 December 2016 45,652 276 45,928
--------------- ------------ ---------
As at 31 December 2017 41,429 249 41,678
=============== ============ =========
Notes to the financial statements
For the year ended 31 December 2017
13. Property, plant and equipment
Land Fixture, Motor Assets
and fittings vehicles under
buildings and construction Total
equipment
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cost
As at 1 January 2016 398,625 44,183 1,559 17,415 461,782
Additions 2,239 8,131 - 2,177 12,547
Transfers 7,459 854 - (8,313) -
Disposals and write
offs (488) (578) (311) (300) (1,677)
Disposal of business (210,692) (18,087) (199) (4,613) (233,591)
----------- ----------- ---------- -------------- ----------
As at 31 December
2016 197,143 34,503 1,049 6,366 239,061
Additions 1,701 5,046 33 3,984 10,764
Transfers 1,389 1,249 (27) (2,611) -
Disposals (1,315) (205) (367) (2) (1,889)
As at 31 December
2017 198,918 40,593 688 7,737 247,936
=========== =========== ========== ============== ==========
Depreciation
As at 1 January 2016 (73,589) (23,501) (704) - (97,794)
Charge for the year (8,303) (8,052) (123) - (16,478)
Disposal 49 340 198 - 587
Disposal of business 40,072 11,547 188 - 51,807
----------- ----------- ---------- -------------- ----------
As at 31 December
2016 (41,771) (19,666) (441) - (61,878)
Charge for the year (4,571) (6,514) (39) - (11,124)
Impairment losses
recognised in profit
and loss (5,177) - - - (5,177)
Disposals 456 267 223 - 946
As at 31 December
2017 (51,063) (25,913) (257) - (77,233)
=========== =========== ========== ============== ==========
Net book value
As at 31 December
2016 155,372 14,837 608 6,366 177,183
=========== =========== ========== ============== ==========
As at 31 December
2017 148,309 14,226 431 7,737 170,703
=========== =========== ========== ============== ==========
Impairment losses recognised in the year
During the year the Group carried out an assessment of impairment indicators in its property, plant and equipment. A review of the recoverable amount of those assets with impairment indicators was performed. The recoverable amount, which is the higher of fair value less cost of disposal and the value in use, has been determined initially based on value in use calculations. These calculations use cash flow projections for operational assets at the balance sheet date based on financial budgets approved by the Board of Directors for the forthcoming year and forecasts for up to three years which are based on assumptions of the business, industry and economic growth. Cash flows beyond this year are extrapolated using growth rates, which do not exceed the expected long-term economic growth rate. The review has led to an impairment loss of GBP5.2m in land and buildings, which has been recognised in the statement of comprehensive income.
The key assumptions for the value in use calculations are those regarding discount rates, long-term growth rates, mature occupancy rates, asset level fill rates, patient fee rates and costs. Mature occupancy rates, asset level fill up rates, patient fee rates and direct costs are derived from bottom up, asset by asset level analysis produced as part of management's annual budget process and are not dissimilar to past experience at the point of budget production. The Group has assumed a growth rate of 2% into perpetuity when assessing its future cash flows. Management estimates discount rates using pre-tax rates that reflect the market assessment of the time value of money as at each balance sheet date, adjusted for the risks specific to the Group.
Notes to the financial statements
For the year ended 31 December 2017
13. Property, plant and equipment (continued)
Where the value in use has indicated an impairment, the Group also estimated fair value less costs of disposal of the related land and buildings, through use of external valuations, based on recent market prices of assets with similar age and obsolescence.
The discount rate used in measuring value in use was 8.5% (2016: 7.9%) per annum. An impairment assessment was performed in 2016 but there was no indication of impairment.
The impairment losses have been included in profit or loss in the administrative expenses line item.
14. Provisions
2017 2016
GBP'000 GBP'000
As at 1 January 5,492 -
Recognised 5,888 5,492
-------- --------
As at 31 December 11,380 5,492
======== ========
2017 2016
GBP'000 GBP'000
Current 1,603 5,492
Non-current 9,777 -
-------- --------
As at 31 December 11,380 5,492
======== ========
15. Share capital
Ordinary shares of 1p 2017 2016 2017 2016
each
Issued and fully paid Number Number GBP'000 GBP'000
As at 1 January 184,198,746 184,198,746 1,842 1,842
As at 31 December 184,198,746 184,198,746 1,842 1,842
============ ============ ======== ========
16. Net cash from operating activities
2017 2016
GBP'000 GBP'000
Loss for the year from continuing operations (8,995) (37,394)
Profit for the year from discontinued operations - 10,725
Tax charge on sale of discontinued operations - 105
Finance costs 399 29,830
Finance income (218) (14)
(Profit)/loss on disposal of property, plant
and equipment (138) 123
Impairment on property, plant and equipment 5,177 -
Amortisation of intangible assets 4,250 5,768
Depreciation of property, plant and equipment 11,124 16,478
Other non-cash items 1,342 4,083
-------- ---------
Operating cash flows before movements in working
capital 12,941 29,704
Decrease/(increase) in receivables 19,729 (24,712)
(Decrease)/increase in payables (4,635) 24,170
-------- ---------
Net cash inflow before interest and tax 28,035 29,162
Interest paid (123) (22,356)
Tax received/(paid) 1,972 (3,357)
Net cash inflow from operating activities 29,884 3,449
======== =========
Notes to the financial statements
For the year ended 31 December 2017
17. Net cash
2017 2016
GBP'000 GBP'000
Cash and bank balances 82,102 115,871
Cash held on behalf of clients 954 786
-------- --------
Cash and cash equivalents 83,056 116,657
Amounts due under hire purchase obligations (276) (550)
-------- --------
Net cash 82,780 116,107
======== ========
Cash and cash equivalents include cash held on behalf of clients, for which there is an equivalent liability. All interest earned is passed to clients and excluded from the Group's consolidated income statement.
18. Restatement
Cambian Group Plc acquired Cambian Capital Limited, Care Aspirations Capital Limited and Advanced Childcare Capital Limited and their underlying subsidiaries on 15 April 2014. The difference between the initial cost of Cambian Group Plc's investments in these subsidiaries (determined by reference to their fair value at the date of acquisition) and the nominal value of the shares issued in exchange was initially classified as share premium. Following further review and analysis, and as confirmed by external legal and accounting advice, it has been determined that this difference of GBP366.2m should instead have been classified as a merger reserve as required by section 612 of the Companies Act 2006. Consequently, the Company has retrospectively restated the equity classification of this GBP366.2m balance from share premium to merger reserve. There are no further adjustments required as a result.
A merger reserve created as a result of a share placement of Cambian Group Plc shares in March 2015 that was previously categorised as part of other reserves as no separate merger reserve account existed has been reclassified as merger reserve.
19. Re-presentation
The Group has reviewed its allocation of divisional and central costs between cost of sales and administrative expenses, and realigned the classification to be more representative of the business model and the environment in which the Group operates. This change results in the financial statements providing reliable and more relevant information about the effects of transactions on the entity's financial positon and performance. The resulting change is reflected below:
Pre-adjustment Re-presented
31 December 31 December
2016 Adjustment 2016
GBP'000 GBP'000 GBP'000
Revenue 182,055 - 182,055
Cost of sales (120,741) (24,100) (144,841)
Gross profit 61,314 (24,100) 37,214
Administrative expenses (68,937) 24,100 (44,837)
--------------- ----------- -------------
Operating loss (7,623) - (7,623)
--------------- ----------- -------------
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR PGUGUWUPRUMG
(END) Dow Jones Newswires
March 21, 2018 03:05 ET (07:05 GMT)
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