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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Caretech Holdings Plc | LSE:CTH | London | Ordinary Share | GB00B0KWHQ09 | ORD 0.5P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 750.00 | 749.00 | 750.00 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
TIDMCTH
RNS Number : 6346Y
CareTech Holdings PLC
07 December 2017
For immediate release 7 December 2017
CareTech Holdings PLC
("CareTech" or "the Group")
Preliminary Results for the year ended 30 September 2017
CareTech Holdings PLC (AIM: CTH), a pioneering provider of specialist social care services in the UK, is pleased to announce its unaudited preliminary results for the year ended 30 September 2017.
Highlights
Hot Features
Premium
-- Revenue increased by 11.4% to GBP166.0m
(2016: GBP149.0m)
-- Underlying EBITDA(i) increased by 7.5% to
GBP39.9m (2016: GBP37.1m)
-- Underlying profit before tax(ii) increased
by 12.6% to GBP29.4m (2016: GBP26.1m)
-- Underlying basic EPS remained at 38.03p
per share(ii) (2016: 38.03p) following the
share placement.
-- Cash inflows from operating activities before
non-underlying items of GBP32.7m (2016:
GBP34.2m) with net debt (iii) of GBP147.1m
(2016: GBP156.4m)
-- Overall capacity increased by 215 places(v)
to 2,534 (2016: 2,319)
-- Property portfolio valued at GBP329m
-- Established the CareTech Charitable Foundation
Statutory Financial Highlights
-- Share Placement raised GBP37.4m for acquisitions
-- Acquisition of Selborne Care completed in
the year
-- EBITDA(iv) decreased by 13.8% to GBP35.6m
(2016: GBP41.3m)
-- Net Assets increased by 34.6% to GBP204.2m
(2016: GBP151.7m)
-- Operating profit decreased by 25.6% to GBP22.7m
(2016: GBP30.5m)
(i) Underlying EBITDA is operating profit stated before depreciation, share-based payments charge and non-underlying items
(ii) Underlying profit before tax and underlying diluted earnings per share are stated before non-underlying items
(iii) Net Debt as defined by the Group's Banking facilities and comprises cash and cash equivalents net of all Loans and Borrowings due to the Group's Bankers
(iv) EBITDA is operating profit stated before depreciation, share-based payments charge and amortisation of intangible assets
(v) Overall capacity has increased by 215 reflecting the net increase of 161 beds in reconfigured services and new services, 87 beds from Acquisition of Selborne Care, less 36 beds withdrawn for reconfiguration and 3 places in small supported living packages
Commenting on the results, Farouq Sheikh, Executive Chairman, said:
"This has been another exceptionally busy year with one of the highlights being a very over-subscribed share placement which raised GBP37.4m for acquisitions.
"We utilised some of these funds to acquire Selborne Care in June 2017 whilst we have also accelerated our organic initiatives including property purchases and reconfigurations. One of the properties is Beacon Reach which is a substantial Education and Residential facility for ROC NW who recently won the Laing and Buisson Award in Social Care for Children's Services. Post year-end, for all staff we have launched a second employee Sharesave Scheme. We enter the current financial year with strong underlying cash flow, solid organic growth and a sizeable pipeline of opportunities, which together give us confidence in continue to deliver our exciting growth strategy.
"CareTech joined AIM in 2005 and we are therefore celebrating our 12th year in the public markets. During this time, the business has transformed from being very focused on supporting adults with a learning disability through residential and day care settings to one where today we also cater for young people and children with complex needs across a range of settings, be it residential, supported living or community support. We focus on the most complex and vulnerable young people and the market for this client group stands at over GBP10bn. There is currently an undersupply of specialist beds in this niche area and the market is growing by almost 3% per annum.
"On joining AIM, the Group had a capacity of 435 places, an underlying EBITDA of GBP2.4m with an underlying diluted EPS of 4.1p. Today our capacity has increased almost six fold to 2,534, our underlying EBITDA has grown significantly to GBP39.9m today whilst underlying diluted EPS has risen to 38.02p pence per share. Underlying EBITDA and diluted EPS have grown by an impressive compound annual growth rate of 26% and 20% respectively since IPO.
"With the money raised from shareholders, solid free cash flow generated from the business plus access to bank funding, we have major investment plans for 2018 and beyond with key new organic developments and bolt-on acquisitions. Importantly, we have also, and continue to, further strengthen our management team, offering a forceful blend of experience, commercial wisdom and dedication to care. I have no doubt that the next few years will see continuing growth and care excellence which will help deliver our target of double digit growth in underlying EPS."
For further information, please contact:
CareTech Holdings PLC 01707 601 800 Farouq Sheikh, Executive Chairman Michael Hill, Group Finance Director Buchanan 0207 466 5000 Mark Court Sophie Wills Stephanie Watson Panmure Gordon (NOMAD and Joint Broker) 020 7886 2500 Freddy Crossley Peter Steel Charles Leigh-Pemberton WH Ireland (Joint Broker) 020 7220 1666 Adrian Hadden Jessica Cave Alex Bond
"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 services, supporting adults and children with a wide range of complex needs in more than 260 specialist services around the UK.
Committed to the highest standards of care and care governance, CareTech provides its innovative care pathways through five divisions covering adult learning disabilities, specialist services, young people residential services, foster care and learning services which come under the two outcome-based sectors of Adult Services and Young People Services.
CareTech, which was founded in 1993, began trading on the AIM market of the London Stock Exchange in October 2005 under the ticker symbol CTH. Its property portfolio comprises more than 200 properties.
For further information, please visit: www.caretech-uk.com
Chairman's Statement
A successful 2017 creating a platform for further expansion
I am pleased to present our results for the year ended 30 September 2017. This has been another successful and exceptionally busy year, with the key highlights being:
-- Share placement raised GBP37.4m for acquisitions (net of expenses) -- Accelerated organic initiatives including property purchases and reconfigurations
-- Completion of the acquisition of Selborne Care during the year which added to our geographic and Adults Service offering
-- Further strengthening of our management team and investment in IT systems -- Benefit from the improved terms of the banking facilities
-- Established the CareTech Charitable Foundation and its registration with the Charity Commission
It is really pleasing to note that we have continued to maintain our position as a leading care provider with our improved quality ratings across the Group. Moreover, we have extended our care pathways through successful outcomes for the people we support. As a result, we have improved our capacity during the year which has led to an increase in key financial KPIs and our underlying EBITDA.
Set out below is a summary of our financial results where:
-- Revenue has increased by 11.4% to GBP166.0m -- Underlying EBITDA has increased by 7.5% to GBP39.9m -- Underlying PBT has increased by 12.6% to GBP29.4m -- Underlying basic EPS remained at 38.03p -- Net Assets increased by 34.6% to GBP204.2m (2016: GBP151.7m) -- Cash inflows from operating activities reduced by 4.4% to GBP32.7m -- Full year dividend increased by 7.0% to 9.90p
All of the above mentioned initiatives demonstrate a solid performance on delivery of both the key financial and non-financial metrics and put the Group in a strong position to target further underlying EPS growth going forward.
The Group has stood out from its peers as a company that can successfully combine quality, integrity and sound financial acumen and has consistently achieved good care quality ratings. Our credibility as the provider of choice has never been stronger and we continue our successful growth strategy with a confident outlook.
On 23 March 2017 the Company announced an oversubscribed placing which raised GBP37.4m (net of expenses) through the issue of 11,000,000 new ordinary shares. I am extremely grateful for the support from our existing Shareholders and take the opportunity to also welcome new Shareholders. A number of organic growth projects and potential bolt-on acquisitions had been identified prior to the placing.
In June 2017 the Company announced the acquisition of Selborne Care Limited for a total consideration of GBP16.6m in cash. Selborne Care is a high quality provider of specialist residential care, supported living and day care services for adults with learning disabilities and challenging behaviours. It has 57 residential beds in eight freehold sites and supported living services are provided to 30 service users.
In additional, the Group has purchased a number of properties including Beacon Reach, a Childrens Residential and Education facility near Preston for GBP4m, which is a substantial Education and Residential facility for ROC NW who recently won the Laing and Buisson Award in Social Care for Children's Services.
The Group continue to look at a number of other acquisition opportunities and are confident that the remainder of the share placement proceeds will be deployed in a timely manner and on earnings enhancing businesses or projects.
During 2017, we again closed several services for reconfiguration which impacted the growth in revenue. Offsetting this, there are better fees following reconfiguration plus the impact of cost saving initiatives and the time and attendance system has further improved underlying EBITDA. The Group's organic development programme will continue with further reconfigurations and, for 2018 we have a strong pipeline of development opportunities with two property purchases registered soon after the year end.
On 28 March 2017, 344,305 new ordinary shares were issued as part of the arrangements for full and final settlement of the earn-out agreed with the vendors of ROC North West which was acquired in 2015.
In the 12 years since joining AIM, the business has transformed from being very focused on supporting adults with a learning disability through residential and day care settings to one where today we cater for young people and children with complex needs across a range of settings, be it residential, supported living or community support. We focus on the most complex and vulnerable young people and the market for this client group stands at over GBP10bn. There is currently an undersupply of specialist beds in this niche area and the market is growing by almost 3% per annum.
Over the years we have developed a range of care pathways and helped many that we support to live more independently. This is a fantastic outcome for both us and the individuals that we support and it also helps local authorities meet the ever increasing cost of social care provision.
Even with the significant growth we have achieved to date we still have less than 2% of this very large and fragmented market. With the increasing regulatory burden, the opportunity for further consolidation is even more attractive.
Dividend
The Group policy has been to increase the total dividend per year broadly in line with the movement in underlying diluted earnings per share.
In 2017 there was a slight reduction in underlying diluted earnings per share of (0.01p) mainly due to the share placement in March 2017. The Board has proposed a final dividend of 6.60p (2016: 6.25p) per share bringing the total dividend for the year to 9.90p (2016: 9.25p) per share. This represents a full year increase of 7.0% year on year. The final dividend will be paid, subject to shareholder approval, on 8 May 2018, with an ex-dividend date of 8 March 2018 and an associated record date of 9 March 2018.
Our Board
There have been no changes to the Board during the year. Providing the foundation for further growth, the Senior Executive Team at CareTech has been further strengthened by a number of senior appointments during the year.
During the year the Remuneration Committee, the Audit Committee and the Care Governance and Safeguarding Committee were unchanged.
Our people
We have completed our planned evolution into two well defined operating divisions, Children Services and Adult Services, and this has generated organisational efficiencies. Simplifying the structure has also supported planning and service delivery with a more powerful approach to development.
Our continuing growth, measurable success and forward-looking approach are a reflection of the hard work and dedication of staff and managers throughout the organisation. I am always drawn to the achievements of our excellent front line staff, which is inevitable as we are first and foremost a care organisation. Their care and commitment would be much less without the dedicated support of our administrators and support teams whose hard work and energy is critical to the success of our Company and the care we provide.
In March 2016, the Company announced the creation of the CareTech Sharesave Scheme, a Government supported method for any of our staff to have the opportunity to participate in the Company's equity. In October 2017, we announced a second CareTech Sharesave Scheme and 259 members of staff chose to join this new saving scheme. We plan to introduce another CareTech Sharesave Scheme in 2018 as this is one part of our staff retention strategy.
With the launch of the CareTech Charitable Foundation in May 2017 I am pleased that we will be able to support members of the CareTech family even more. The Foundation has ambitious and clear sighted objectives to deliver meaningful impact to communities in the UK and overseas about which the staff of the Group and its service users feel proud and strongly-engaged, providing a unique contribution to the charitable marketplace consistent with the Group's values and approach.
Outlook and Prospects
We operate in a growing social care market worth over GBP10 billion per annum and we are well positioned to meet market demand. We have developed outcome based care pathways which deliver value based services for our Local Authority partners.
With the money raised from shareholders, solid free cash flow generated from the business plus access to bank funding, we have major investment plans for 2018 and beyond with key new organic developments and bolt-on acquisitions. Importantly, we have also, and continue to, further strengthen our management team, offering a forceful blend of experience, commercial wisdom and dedication to care. I have no doubt that the next few years will see continuing growth and care excellence which will help deliver our target of double digit growth in underlying EPS.
Farouq Sheikh
Chairman
7 December 2017
Chief Executive's Statement and Performance Review
A strong basis for advancement
Overview
It gives me considerable satisfaction to report again on a successful year that reflects the hard work of our management team, the enthusiasm of our staff and the support of our Board.
The Group has continued to build upon its solid foundations and remains in a strong position to continue as a leading provider of high quality specialist social care services in a large and growing UK market which remains fragmented.
The Group has continued to develop through organic growth and reconfigurations and, with the acquisition of Selborne Care Limited in June 2017 and it has gained an experienced management team with skilled leaders. The new business has integrated and settled well, and our focus on organic growth also remains strong.
In 2017, I am extremely proud of the establishment of the CareTech Charitable Foundation which is devoted to supporting the social care sector.
There have also been a number of staff initiatives to aid retention including the second Sharesave Scheme and a Level 5 in Care Management training scheme for Managers.
Consolidation and creating new opportunities
CareTech remains at the forefront of social care outsourcing in the UK across both Children and Adult services and, in the year, there has been a further increase in working closely with commissioners and regulators.
National public policy continues to be a significant driver of local authority commissioning intentions and behaviour. For a number of years, public policy has encouraged greater personalisation of health and social care for adults. Commissioners and leading providers are driving change that will mean offering people more choice and control over the care, treatment and support they receive while at the same time maintaining the quality and safety of those services.
Our care priorities drive successful outcomes for our service users and follow closely the guidance from central Government.
Our key focus for delivering quality services and positive outcomes is supported by the following key factors:
Communication
-- We have open and frank dialogue with our service users, their families and social workers, as well as the Regulators.
Independence
-- In our social care and health contracts we aim to help our service users to return to an ordinary independent life. It may be children who can return to their birth families or live independently. It may be adults who we can help on the pathway to recovery following a specialist services breakdown, or acquired brain injury or people with learning disability who we can support towards independent living.
Housing care and support
-- We know that most people aspire to have a place of their own, employment and ongoing support. We have structured our services, developing new provision and creative partnerships with housing providers to enable these aspirations to be achieved whenever possible and we are tailoring training to assist young people and adults leaving our services to gain employment.
Self-directed support
-- It is pivotal to government policy that adults and children receiving social care are fully engaged in the support that they require. With some adults this extends to the provision of a cash sum enabling them to purchase their care and support directly. CareTech managers have been further reviewing our systems and delivering training throughout the organisation to ensure that we are able to deliver the requirements of self-directed support.
Quality and dignity
-- CareTech has always delivered high quality care in well maintained premises. However, we have never been complacent about this and have undertaken reviews to ensure that we deliver the right quality at a reasonable price. We have also learned a great deal from the experience of our NHS colleagues and developed a Dignity Test to ensure that our front line and administrative staff treat all our clients in ways that promote dignity.
Progress in the year
The year has seen continued progress as the Group concentrates on the introduction of innovative new services developed in partnership with local authority commissioners reconfigured from within our existing portfolio of properties or through new properties either purchased or rented for service users for supported living.
In June 2017 the Group acquired Selborne Care Limited for a total consideration of GBP16.6m in cash. Selborne is a high quality provider of specialist residential care, supported living and day care services for adults with learning disabilities and challenging behaviours. It had at acquisition 57 residential beds and 30 Supported Living Service Users.
Excluding Selborne Care our Adult Services have added a net 81 beds in the year, being 75 in Supported Living and 6 in Residential.
Children Services have added 49 beds in the year principally in 8 services.
The Group also continues to realise the benefit of organisational improvements put in place over the past few years. We have continued to strengthen our management structure with further senior appointments planned and to improve the efficiency of our processes following further investment in new systems which have gone live or we are working on now. We are seeing the benefits of new executive appointments which continue to have a positive impact across the services.
New systems were procured during the year for the Group's recruitment and training solutions including e-learning with standard automated reports as well as for maintenance, hosting, data analytics and e-compliance in order to benefit from cutting edge technology.
These improvements have put us in a strong position to benefit from a number of the commissioning opportunities by working in partnership with the NHS and Local Authorities.
Care Pathway Range and Services
The Group's focus remains the provision of specialist social care through its five divisions. This is underpinned by a well-defined range of provisions which meet the commissioner requirements. These services are now even more extensive and focused on providing high quality care and positive outcomes for all of our service users.
The Group has continued to develop and grow its existing five operating divisions, which come under the two outcome-based sectors of Adult Services and Children Services. We continue to extend both our geographic coverage and our outcome-based Care Pathway range of services organically by acquisition and through the purchase of properties to meet the needs of our marketplace, specifically the requirement for greater acuity service provision for both Children and Young People and Adults. This ensures that CareTech is in a very strong position to address the demands of our evolving marketplace.
We remain committed to the growth of residential care solutions for adults and children with the most complex needs and the Group has embraced the development of home based solutions including foster care where demand for more specialist services remains strong. Our residential care services for children cater for young people with particularly difficult issues and offer a national service; with strong growth seen in the North of England with ROC Northwest which has expanded both in care and educational services. In the year we have purchased properties in Scotland and North West England for both Spark of Genius and ROC Northwest to develop into new services. Our adult services offer a solid and reliable provision across the whole spectrum of service offerings which now includes acquired brain injuries and we see a particular volume demand in the area of supported living, balanced by renewed demand for more specialised residential care solutions.
Our strategy is to offer a bespoke range of options so that we can maintain the Care Pathways that distinguish us from other providers.
Overview of progress
Our focus during the past year has continued to be further building on the businesses which established the Care Pathways whilst introducing innovative new solutions to meet the challenges faced by care commissioners and then adding newly acquired businesses with complementary skills.
Capacity has increased by 215 places principally because we have continued to reconfigure services and acquired Selborne Care Limited with its 87 places. Occupancy levels within our mature services remain at a creditable 93%, or 86% when taking into account our services under development and transition.
Much has been written about personalisation and I felt it would be useful to set out our own understanding and commitment to personalisation.
Personalisation to us means recognising people as individuals who have strengths and preferences and putting them at the centre of their own care and support.
The traditional service-led approach has often meant that people have not been able to procure the kind of support they need, or receive tailored care assistance. Personalised approaches such as self-directed support and personal budgets involve enabling people to identify their own needs and make choices about how and when they are supported to live their lives.
Our two business divisions of Adult Services and Children Services comprise the following four Care Pathways and our Learning Services division.
1. Adult Learning Disabilities
Year to 30 September 2017
Revenue GBP87.7m (2016: GBP79.4m) Contribution to Group 52.9% (2016: 53.3%) Revenue -------------------------- -------------------------- Underlying EBITDA before GBP26.3m (2016: GBP25.4m) unallocated costs -------------------------- -------------------------- Capacity 1,735 (2016: 1,567) -------------------------- --------------------------
Adult Learning Disabilities provides individually tailor-made solutions for people living in their own homes, residential care or independent supported living schemes. We can work with clients to deliver self-directed support packages.
For some people residential care will continue as the preferred option and we increasingly offer several types of supported living and packages of individualised self-directed support to people in their own homes.
This includes adult residential care homes, independent supported living and community support services.
We have continued to work closely with Local Authority and NHS commissioners and this has helped us to achieve our growth through the past year. We take a long-term view, recognising that change will continue and with this in mind I am pleased to report that redevelopment of some of our long stay residential provision has been a great success over the past year and will continue to meet the changing requirements of commissioners and families.
The market for high acuity care and the support of people with learning disability is growing year on year. Demand for lower acuity support has been impacted by the cuts in local authority expenditure but this is not an area of activity in which CareTech operates. Conversely, resources for those with the highest level of need are being maintained and increased in some local authorities.
During the past year we have withdrawn 36 places in services for reconfiguration into new care models and have developed 47 beds through reconfiguration plus an additional 70 beds have been brought into service.
Further new provision is under development.
2. Specialist Services
Year to 30 September 2017
Revenue GBP15.5m (2016: GBP10.7m) Contribution to Group 9.3% (2016: 7.2%) Revenue -------------------------- -------------------------- Underlying EBITDA before GBP3.9m (2016: GBP2.7m) unallocated costs -------------------------- -------------------------- Capacity 214 (2016: 216) -------------------------- --------------------------
In March 2016, Oakleaf Care (Hartwell) was acquired and added its range of pathways from rehabilitation through to long-term and end of life care for men with acquired brain injury. This acquisition builds on the Group's existing neurological services and represents a further regional growth platform for the Group. It has been put alongside the Mental Health Services to form the Specialist Services.
The reduction in capacity in Specialist Services arises because there have been a small number of beds reconfigured and transferred to Adult Learning Disabilities.
The principal reason for the increase in underlying EBITDA of GBP1.2m was due to Oakleaf Care (Hartwell) being included for the whole of 2017.
Specialist Services works in partnerships with the NHS to ensure a successful transition out of acute care, delivering pathways to independence. We have an outstanding track record for helping people away from acute care and supporting them in their own homes.
The adult services for this Care Pathway include a community based hospital, adult residential care homes, independent supported living and community outreach with some transitional services transferred within the Group.
Community Specialist Services has always been a critical but relatively neglected area of social care. However, this is changing as the NHS drives to lower bed capacity and accelerated early discharge from acute psychiatric hospital care.
The growth of social care is certain and the response by Government to one of the key difficulties is progressing. There has been some progress in the removal of large numbers of learning disabled people from the controversial "Treatment and Assessment Centres" operating at various locations throughout the UK. CareTech has never operated any centres of this type but we understand that the CEO of NHS England has been tasked with ensuring that these centres are re-provided as a matter of urgency. CareTech is seeking opportunities to support the project and to offer a comprehensive solution within its community homes.
We are well positioned for expansion in Specialist Services and have a sustainable infrastructure to deliver growth including plans to provide care for women with acquired brain injury in 2018.
3. Foster Care
Year to 30 September 2017
Revenue GBP8.6m (2016: GBP8.7m) Contribution to Group 5.2% (2016: 5.8%) Revenue -------------------------- ------------------------ Underlying EBITDA before GBP1.9m (2016: GBP2.2m) unallocated costs -------------------------- ------------------------ Capacity 301 (2016: 301) -------------------------- ------------------------
Foster Care provides for both mainstream and specialist foster care in small supportive groups across England and Wales for children with disabilities. We also provide foster care family assessments in the home rather than in a residential setting.
The unchanged capacity, and fall in revenue and underlying EBITDA in Foster Care is due to the competitive nature of the market as well the change to family assessments in the home. It is also due to capacity being reported on the basis of the children that carers are able to look after rather than the number that they are approved for.
"Foster Care is on a rising trend in terms of both numbers placed in foster care and expenditure by local authorities." Laing and Buisson 2013.
This trend is driven by cost considerations, where fostering is considerably less expensive than residential care and by perceived quality care factors. It is generally held that fostering in an ordinary family home delivers better quality than any residential setting. However, the rising tide of fostering has been constrained by the challenge of finding foster carers with the right skill and motivation alongside preference by social workers to place within local authority services rather than the independent sector.
In 2013, 46% of children placed in foster homes were outsourced to the independent sector. This compares with 67% placed in residential homes operated by independent providers.
Our Foster Care teams and Young People Residential teams are working closing alongside each other to offer the best outcomes for Young People.
Our market intelligence suggests that most, if not all, independent sector fostering agencies are still experiencing some degree of "hold back" at present. However, the consensus view is that this will not last long and local authorities will inevitably return to progressive outsourcing of foster care provision.
Outsourcing is well established in the culture of most local authorities, but the current austerity measures have led a small number of authorities to reflect on the 50% fee premium paid for independent fostering. This disparity of cost can be attributed in part to the fact that the most complex and therefore high cost cases are placed in the care of independent providers. However, it is also clear that local authorities fail to undertake a full cost analysis of their in-house provision. Wherever this has been done, outsourcing is demonstrably much better value.
Demand for foster care has increased overall but we have noted an increasing trend among some local authorities to make provision in-house for all but the most complex children. In our view this is an expensive and unsustainable approach that exposes local authority commissioners to risk. Our own services are being maintained at an acceptable level.
In October 2017 the All Wales Framework for the provision of foster care services outcome was that TLC (Wales) was ranked 1 and was placed in the New Tier 1. This should really assist in the growth of TLC (Wales) due to the level of referrals now being received.
Looking forward we are training our foster carers with the skills required to manage more complex work and have linked the fostering division with our residential team for children so that we can maintain an effective care pathway.
4. Young People Residential Services
Year to 30 September 2017
Revenue GBP43.8m (2016: GBP39.0m) Contribution to Group 26.4% (2016: 26.2%) Revenue -------------------------- -------------------------- Underlying EBITDA before GBP13.2m (2016: GBP11.8m) unallocated costs -------------------------- -------------------------- Capacity 284 (2016: 235) -------------------------- --------------------------
A number of children and young people need to live in specialised residential services and receive education. As far as practicable we aim to help these children move into a more normalised family style environment.
This segment contains children residential care homes, which includes facilities for children with learning difficulties and emotional behavioural disorders ("EBD"), and small specialist schools.
In December 2015 ROC Northwest was added and gave a further geographic spread to fit between the current Children residential services in Scotland (Spark of Genius and ACAD) and North Wales (Branas Isaf) and services in Staffordshire and Yorkshire. It also strengthened the residential care and education services for young people with complex needs, especially EBD.
In the year this segment benefited from new services which have added 49 beds to capacity with additions to Spark of Genius, ROC Northwest and the original Childrens services.
Spark of Genius which provides significant benefits across the division due to their well-established education facilities across Scotland and North East England which complement the ROC Northwest and Welsh education facilities. In the year the Education capacity increased by 46 to close at 312 Young People.
At the Laing Buisson Awards in November 2017 the winners in Social Care for Children's Services was ROC Northwest.
Children residential services have been growing as our reputation for quality care and support spreads. We are currently developing new beds and places that have been commissioned during the past year.
5. Learning Services
Year to 30 September 2017
Revenue GBP10.4m (2016: GBP11.2m) Contribution to Group 6.2% (2016: 7.5%) Revenue ------------------------- -------------------------- Underlying EBITDA before GBP0.9m (2016:GBP1.0m) unallocated costs ------------------------- --------------------------
Learning Services comprises EQL Solutions which was acquired in 2013 and is a national provider specialising in employment and training services to young people and adults and Dawn Hodge Associates, a regional provider specialising in the social care sector, was acquired in 2016.
Their intensive pre-employment, development and apprenticeship programmes use public funds from the Skills Funding Agency to lay the foundations for individuals to achieve their career goals while helping to provide businesses with the vital skills they need in their workforce.
As well as supporting the workforce, Learning Services has also developed programmes for service users by enhancing the pathways to independent living and employment. Young People leaving care, for example, often do not know where to find the right job opportunities or have the opportunity to access employer-focused training. We can now bridge that gap by supporting young people as they make the transition to adult life. We are also exploring how best to help individuals return to employment after mental illness and to give people with learning disabilities the skills and confidence to gain employment so that they are able to live more independently.
Good progress has been made in identifying the potential for Learning Services to add value to CareTech's attraction and recruitment of staff and their retention, helping new employees gain the skills and qualifications to grow a successful career in care through an Apprenticeship.
The Aspire programme developed as a unique and innovative scheme that will ensure all CareTech's support workers receive mandatory and statutory training to the highest standard whilst also being offered the opportunity to complete a Level 2 or Level 3 Apprenticeship which has been carefully tailored to suit their role and 140 completed this apprenticeship in the last academic year.
CareTech apprentices continue their training with 321 CareTech support workers undertaking the apprenticeship programme.
The Team Leader programme has 47 staff members on Level 5 programmes.
In early 2016 Dawn Hodge Associates retained its Ofsted "Outstanding" which is an achievement that we are very pleased to have attained and provides an excellent base to build upon.
During 2017 with the introduction of the Apprenticeship Levy there have been significant changes to the Learning sector, but we believe that we are well placed to take advantage of the new market conditions.
However, both EQL Solutions and Dawn Hodge Associates faced a challenging start to the new Learning sector year. A reorganisation of the management of the division was undertaken and the budget for the rest of 2018 show an improvement on last year.
Haroon Sheikh
Chief Executive Officer
7 December 2017
Financial Review
The Group has continued to make good progress in 2017, and has raised additional funds through a share placement for further acquisitions. Having made one acquisition in the year, the Group is well placed to make further acquisitions and continue the growth in 2018.
Results
Underlying operating profit improved by 6.9% at GBP34.2m compared with GBP32.0m last year. Until 2013 the Group had been making strategic acquisitions to gain market share and extend the care pathway range of services. Since 2013 the focus had been on both organic development and cost efficiencies as well as acquisitions. With two share placements, improved banking facilities and a Ground Rent fund transaction the Group has raised GBP87m which has been used for acquisitions with four completed in the last two years and one more during 2017.
Underlying basic earnings per share remained at 38.03p (2016: 38.03p). In the year underlying profit before taxation increased by 12.6% and underlying profit after tax has risen by 10.8% to GBP26.6m (2016: GBP24.0m) due in part to the increase in the effective tax rate. The placing on 23 March 2017, which raised GBP37.4m (net of expenses) for acquisitions increased the number of shares by 11.0m so the weighted average number of diluted shares rose to 70.1m (2016: 63.2m) being an increase of 10.9%. Basic and diluted earnings per share decreased by 29.55% to 25.48p (2016: 36.17p) and profit after tax reduced by 22.3% to GBP17.8m (2016: GBP22.9m).
Cash inflows from operating activities before tax and non-underlying items paid were GBP32.7m (2016: GBP34.2m), a reduction of 4.4%. Net debt to the Group's bankers (as defined on page 1) at the year end of GBP147.1m has reduced by GBP9.3m for the year (2016: GBP156.4m).
The Condensed Income Statement before non-underlying items for the year is summarised in table 1 below.
Table 1 -Condensed Income Statement before non-underlying items
2017 2016
GBPm GBPm Growth
Revenue 166.0 149.0 11.4%
Gross profit 59.9 54.3
Administrative expenses excluding
depreciation and share based
payments (20.0) (17.2)
Underlying EBITDA 39.9 37.1 7.5%
Underlying EBITDA margin 24.0% 24.9%
Depreciation (5.5) (5.0)
Share-based payments charge (0.2) (0.1)
Underlying operating profit 34.2 32.0 6.9%
Net financial expenses (4.8) (5.9)
Underlying profit before tax 29.4 26.1 12.6%
Underlying taxation (2.8) (2.1)
Underlying effective tax rate 9.3% 7.8%
Underlying profit for the year 26.6 24.0
Weighted average number of diluted
shares (millions) 70.1 63.2
Underlying basic earnings per
share 38.03p 38.03p
Full year dividend per share 9.90p 9.25p
Revenue
Revenue of GBP166.0m (2016: GBP149.0m) was 11.4% higher than in 2016.
In the year there was the acquisition of Selborne and revenue includes GBP3.9m from this acquisition.
In the established Adult Learning Disabilities segment we continued to experience high levels of occupancy and reported 93% occupancy at 30 September 2017. When this is blended with the facilities that are being reconfigured and so are under development, the overall occupancy level during the second half of the year and at 30 September 2017 was 86% of capacity (September 2016: 86%). As in recent years the demand for residential services continues to be encouraging for high acuity users.
As set out in the Chief Executive's statement and note 2 to the Preliminary Announcement, we are again reporting segmental information for the financial year and last year which includes information on client capacity and revenue for each segment. Specialist Services has been created from the old Mental Health Services plus the ABI business Oakleaf Care acquired in March 2016, Adult numbers have been restated.
The continued development of our care pathways and a growing range of service options has led to the proportion of Adult services revenue rising from 60.5% in 2016 to 62.2% in 2017 and underlying EBITDA before Group Costs moving from 65.2% in 2016 to 65.4% in 2017.
The Young People Residential services total revenue has risen by 12.3% with Specialist Services growing by 44.9%, Foster Care falling by 1.1% and Learning Services by 7.1%. Their total proportion of the EBITDA before Group costs has moved from 34.8% in 2016 to 34.6% in 2017 due mainly to the acquisitions in the Adult Division Services.
Table 2 - Revenue
2017 2017 2016 2016
Underlying Underlying
Revenue EBITDA Revenue EBITDA
GBPm GBPm GBPm GBPm
Adult Learning
Disabilities 87.7 26.3 79.4 25.4
Specialist Services 15.5 3.9 10.7 2.7
Adults Services 103.2 30.2 90.1 28.1
Young People Residential 43.8 13.2 39.0 11.8
Services
Foster Care 8.6 1.9 8.7 2.2
Learning Services 10.4 0.9 11.2 1.0
Childrens Services 62.8 16.0 58.9 15.0
Less unallocated
Group costs - (6.3) - (6.0)
166.0 39.9 149.0 37.1
Underlying EBITDA and total EBITDA
Underlying EBITDA has grown by 7.5% from GBP37.1m in 2016 to GBP39.9m in 2017. Underlying EBITDA includes GBP0.5m from the acquisition of Selborne Care Limited. Underlying EBITDA margin has decreased from 24.9% to 24.0% mainly due to the margin in the total of the acquired businesses being at a lower rate than the other businesses, and the growth in services businesses that require little capital expenditure like Foster Care and the Learning Division.
The Adult Learning Disabilities, Specialist Services and Young People Residential Services segments have higher margins but normally require considerable capital expenditure to increase capacity, whilst Supported Living, Foster Care and Learning Services operate at a lower margin in part because they do not require capital expenditure to increase capacity and are not reliant on the Group's properties.
Administrative expenses, before depreciation and share-based payments charges were GBP20.0m (2016: GBP17.2m) and increased by GBP2.8m during the year. In 2016 they represented 11.5% of Group revenue and in 2017 this further increased to 12.0% of Group revenue.
There has been a further considerable effort in the year to tighten administrative expenses with further back office systems centralisation and procurement successes for the Group.
The reconfiguration of services is a central part of the Board's strategy to grow organically. It enhances average fee rates and maintains the Group's reputation as a provider of highest quality of care.
In the year there has also been a greater focus on purchasing properties which are then converted to new services.
The number of employees in management and administration has increased by 17 as a result of both the acquisition in the year as well as organic growth. The Time and Attendance system has been implemented across all of the residential services in the year which will further our back office centralisation and ensure that staff are paid more accurately and quickly, as well as giving reliable data on staff rotas and attendance in each service. A new integrated Recruitment system has been implemented in the year.
Total EBITDA has reduced from GBP41.3m in 2016 to GBP35.6m in 2017.
Operating profit and profit before tax
The depreciation charge is GBP5.5m (2016: GBP5.0m) and reflects the investment in land and buildings, motor vehicles and fixtures, fittings and equipment.
After this charge and the share-based payments, underlying operating profit grew 6.9% to GBP34.2m (2016: GBP32.0m).
Total operating profit decreased by 25.6% to GBP22.7m (2016: GBP30.5m).
Net underlying financial expenses of GBP4.8m (2016: GBP5.9m) decreased again over the previous year due to the effects of the share placement monies and the new banking facilities, though there were additional finance leases taken out on new home vehicles during the year.
Underlying profit before tax was GBP29.4m (2016: GBP26.1m) which is an increase of 12.6%.
Total profit before tax decreased by 25.3% to GBP16.8m (2016: GBP22.5m).
Taxation and diluted earnings per share
The effective underlying tax rate was 9.3% (2016: 7.8%) and reflects management's expectations of future capital investment through organic developments and reconfigurations relative to available capital allowances, the impact of the reduction in the main rate of corporation tax in the year and also the release of a provision for tax no longer required.
The weighted average number of shares in issue rose by 10.8% mainly due to the share placement in March 2017. The underlying basic earnings per share remained at 38.03p in 2017 from 38.03p in 2016.
Basic and diluted earnings per share reduced by 29.6% to 25.48p (2016: 36.17p)
Dividends
Our policy has been to increase the total dividend per year broadly in line with the movement in underlying diluted earnings per share. The final dividend will therefore increase to 6.60p per share (2016: 6.25p), bringing the total dividend for the year to 9.90p (2016: 9.25p), a growth of 7.0%. Dividend cover for 2017, based upon diluted earnings per share before non-underlying items is 3.84 times (2016: 4.11 times).
Non-underlying items
As more fully explained on the face of the Consolidated Statement of Comprehensive Income and in note 3 to the Accounts, the Directors have separately disclosed a number of non-underlying items in order to improve understanding of the underlying trading performance achieved by the Group. Total non-underlying items represent a net charge of GBP11.4m at operating level (2016: GBP1.5m) and the principal items are the amortisation of intangible assets and integration and reorganisation costs plus costs of the acquisition. In 2016 non-underlying items were stated net of the IAS 17 profit of GBP5.6m arising from the ground rent transaction.
Cash flow and net debt
The cash flow statement and movement in net debt as defined on page 15 to the Group's bankers for the year is summarised below:
2017 2016
GBPm GBPm
Underlying EBITDA 39.9 37.1
(Increase) in working capital (7.2) (2.9)
Cash inflows from operating activities
before non-underlying items 32.7 34.2
Tax paid (6.3) (1.5)
Interest paid (5.0) (5.5)
Dividends paid (5.9) (5.2)
Acquisitions and capital expenditure (36.4) (41.9)
Share Placement 37.4 -
Ground rent transaction - 29.9
Cash flow before adjustments 16.5 10.0
Non-underlying cashflows
including derivative financial
instruments (7.2) (7.9)
Movement in net debt to
the Group's bankers 9.3 2.1
Opening net debt to the
Group's bankers (156.4) (158.5)
Closing net debt to the
Group's bankers (147.1) (156.4)
Net debt to the Group's bankers at 30 September 2017 of GBP147.1m (2016: GBP156.4m) has decreased by GBP9.3m during the financial year, with an investment of GBP36.4m in acquisitions and capital improvements during the year.
Operating cash flows before non-underlying items
The GBP32.7m (2016: GBP34.2m) cash inflow from operating activities, before non-underlying items, represents an 82% (2016: 92%) underlying EBITDA cash conversion ratio.
Interest and dividend cash flows
Interest paid of GBP5.0m (2016: GBP5.5m) is reflective of the financial expenses per the Consolidated Statement of Comprehensive Income, whilst dividends paid are consistent with the relevant section earlier in the review.
Acquisitions and capital expenditure
During the year we invested total funds of GBP36.4m (2016: GBP41.9m) on an acquisition and capital expenditure. The Group acquired Selborne Care Limited in June 2017 for a total consideration of GBP16.6m in cash. The acquisition utilised part of the GBP37.4m share placement monies raised in March 2017 and there are plans for further acquisitions.
Further details of the acquisitions are explained in the Chief Executive's Statement and Performance Review as well as in the notes to the financial statements.
Capital expenditure of GBP19.8m (2016: GBP14.3m) includes GBP10.9m to update our portfolio of assets.
Banking arrangements
The Group is pleased to have continued its strong relationships with Royal Bank of Scotland, Lloyds TSB, Santander and Allied Irish following the last refinancing in July 2016 when the Group agreed improvements to its banking facilities. The facility was extended to January 2019 and the cost of borrowing was reduced through a reduction in the interest rate. The four banks in the Group's banking syndicate agreed on 28 March 2017 to defer repayment of the loan instalments due on 1 April 2017 and on 10 October 2017 until January 2019. In total four loan repayments, which were due between 2016 and October 2017 amounting to GBP21.6m, have been deferred. In addition, there is an uncommitted accordion facility of up to GBP30m which, together with the deferral of loan repayments, give further support to the Group's acquisition strategy. It is planned to undertake the re-financing in the first half of 2018 when the most appropriate and cost effective types of funding will be considered.
The total of the Group's current freehold property portfolio is GBP329m as at 30 September 2017 (2016: GBP304m). There was an independent valuation by Christie & Co of the Group's property portfolio of GBP284m following the ground rent transaction in February 2016 and this increased by GBP20m in the period to September 2016 due to the cost price of the freehold properties purchased in the 2 acquisitions and other freehold properties purchased. In the year to September 2017 freehold properties increased by GBP23.2m with the cost price of the Selborne Care Limited freehold properties being GBP12.3m and other properties purchased in the year GBP10.9m.
At 30 September 2017 the Group has available bank facilities totalling GBP195m which are sufficient, with cash flow from operating activities, to fund present commitments. The Bank loans not drawn are GBP16.1m and the GBP30.0m accordian facility has not been utilised.
Outlook
The Group is now in a better position than ever before to continue its growth as a pioneering provider of specialist social care services in a UK market which is continuing to grow yet remains fragmented.
Michael Hill
Group Finance Director
7 December 2017
Unaudited Consolidated Statement of Comprehensive Income
for the year ended 30 September 2017
2017 2016
Non- Non-
underlying underlying
Underlying (i) Total Underlying (i) Total
Note GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Revenue 2 166,018 - 166,018 148,979 - 148,979
Cost of sales (106,110) - (106,110) (94,682) - (94,682)
Gross profit 59,908 - 59,908 54,297 - 54,297
Administrative
expenses (25,758) (11,483) (37,241) (22,328) (1,510) (23,838)
Operating profit 34,150 (11,483) 22,667 31,969 (1,510) 30,459
EBITDA (ii) 39,885 (4,293) 35,592 37,056 4,233 41,289
Depreciation (5,525) - (5,525) (5,026) - (5,026)
Amortisation
of intangible
assets (7,190) (7,190) - (5,743) (5,743)
Share-based
payments charge (210) - (210) (61) - (61)
Operating profit 34,150 (11,483) 22,667 31,969 (1,510) 30,459
-------------------------- ----- ----------- ---------------- ---------- ----------- ------------ ---------
Financial expenses (4,770) (1,118) (5,888) (5,887) (2,037) (7,924)
Profit before
tax 29,380 (12,601) 16,779 26,082 (3,547) 22,535
Taxation 3,4 (2,744) 3,814 1,070 (2,035) 2,371 336
Profit and comprehensive
income for the
year attributable
to equity shareholders
of the parent 26,636 (8,787) 17,849 24,047 (1,176) 22,871
Earnings per
share
Basic 5,6 38.03p 25.48p 38.03p 36.17p
Diluted 5,6 38.02p 25.48p 38.03p 36.17p
(i) Non-underlying items comprise: amortisation of intangibles, acquisition expenses, fair value adjustments on acquisitions, changes in value and additional finance payments in respect of derivative financial instruments, integration, reorganisation and redundancy costs and provision for onerous leases. See note 3.
(ii) EBITDA is operating profit stated before depreciation, amortisation of intangible assets and share-based payments charge.
.
Unaudited Consolidated Statement of Financial Position
as at 30 September 2017
2017 2016
GBP000 GBP000
Non-current assets
Property, plant and equipment 297,170 267,667
Other intangible assets 40,954 43,982
Goodwill 43.098 43,021
381,222 354,670
Current assets
Inventories 835 815
Trade and other receivables 23,519 18,508
Cash and cash equivalents 6,402 4,308
30,756 23,631
Total assets 411,978 378,301
Equity
Share capital 379 321
Share premium 120,778 81,750
Shares held by Executive Shared
Ownership Plan (4,750) (6,072)
Merger reserve 9,023 9,023
Retained earnings 78,771 66,645
Total equity 204,201 151,667
Liabilities
Non-current liabilities
Loans and borrowings 145,872 153,742
Ground rent liabilities arising
under IAS17 7,294 7,343
Deferred tax liabilities 17,843 21,552
Deferred and contingent consideration
payable 1,133 2,025
Derivative financial instruments 172 964
172,314 185,626
Current liabilities
Loans and borrowings 7,662 6,990
Trade and other payables 15,709 17,666
Ground rent liabilities arising
under IAS17 50 50
Deferred and contingent consideration
payable 2,420 3,850
Deferred income 1,762 2,119
Corporation tax 7,092 9,250
Derivative financial instruments 768 1,083
35,463 41,008
Total liabilities 207,777 226,634
Total equity and liabilities 411,978 378,301
Unaudited Consolidated Statement of Changes in Equity
as at 30 September 2017
Shares
Share Share held by Merger Retained Total
capital premium Executive reserve earnings equity
Shared
Ownership
Plan
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
At 1 October 2015 311 76,985 (1,280) 8,748 48,935 133,699
Profit for the
year - - - - 22,871 22,871
Total comprehensive
income - - - - 22,871 22,871
---------- ---------- ----------- ---------- ----------- ---------
Issue of ordinary
shares 10 4,765 (4,792) 275 - 258
Equity settled
share-based payments
charge 61 61
Dividends - - - - (5,222) (5,222)
Transactions with
owners recorded
directly in equity 10 4,765 (4,792) 275 (5,161) (4,903)
---------- ---------- ----------- ---------- ----------- ---------
At 30 September
2016 321 81,750 (6,072) 9,023 66,645 151,667
At 1 October 2016 321 81,750 (6,072) 9,023 66,645 151,667
Profit for the
year - - - - 17,849 17,849
Total comprehensive
income - - - - 17,849 17,849
---------- ---------- ----------- ---------- ----------- ---------
Issue of ordinary
shares 58 39,028 1,322 - - 40,408
Equity settled
share-based payments
charge - - - - 210 210
Dividends - - - - (5,933) (5,933)
Transactions with
owners recorded
directly in equity 58 39,028 1,322 - (5,723) 34,685
At 30 September
2017 379 120,778 (4,750) 9,023 78,771 204,201
Unaudited Consolidated Statement of Cash Flow
for the year ended 30 September 2017
Note 2017 2016
GBP000 GBP000
Cash flows from operating activities
Profit before tax 16,779 22,535
Adjustments for:
Financial expenses 5,888 7,924
Onerous lease provision charge 287 -
Depreciation 5,525 5,026
Amortisation 7,190 5,743
Share-based payments charge 210 61
Acquisition transaction cost 806 660
Costs arising from placement of 348 -
shares
Integration and restructuring
costs 2,852 1,780
Profit on disposal of property,
plant and equipment - (5,623)
Operating cash flows before movement
in working capital 39,885 38,106
Increase in inventory (20) (253)
Increase in trade and other receivables (2,641) (3,498)
Decrease in trade and other payables (4,519) (163)
Operating cash flows before adjustment
items 32,705 34,192
Integration and restructuring
costs (4,006) (1,780)
Payments made under onerous contracts (287) -
Cash inflows from operating activities 28,412 32,412
Tax paid (6,295) (1,458)
Net cash from operating activities 22,117 30,954
Cash flows from investing activities
Proceeds from sale of property,
plant and equipment 200 29,854
Payments for business combinations
net of cash acquired (16,586) (27,603)
Acquisition of property, plant
and equipment (15,888) (10,765)
Acquisition of software (3,867) (3,580)
Payment of acquisition costs (1,419) (3,654)
------------ ---------
Net cash used in investing activities (37,560) (15,748)
------------ ---------
Unaudited Consolidated Statement of Cash Flow
(continued)
for the year ended 30 September 2017
Note 2017 2016
GBP000 GBP000
Proceeds from the issue of share
capital (net of costs) 37,829 75
Interest paid (4,955) (5,544)
Cash outflow arising from derivative
financial instruments (776) (779)
Bank loans drawdown 30,911 27,507
Repayment of borrowings (37,400) (28,377)
Payment of finance lease liabilities (2,139) (2,260)
Dividends paid 7 (5,933) (5,222)
Net cash arising from/(used in)
financing activities 17,537 (14,600)
Net increase in cash and cash
equivalents 2,094 606
Cash and cash equivalents at 1
October 4,308 3,702
Cash and cash equivalents at 30
September 6,402 4,308
Notes to the Financial Statements
1 Background and basis of preparation
CareTech Holdings PLC (the 'Company') is a company registered and domiciled in England and Wales. The consolidated financial statements of the Company for the year ended 30 September 2017 comprise the Company and its subsidiaries (together referred to as the 'Group').
The unaudited summary financial information set out in this announcement does not constitute the Company's consolidated statutory accounts for the years ended 30 September 2017 or 30 September 2016. The results for the year ended 30 September 2017 are unaudited. The statutory accounts for the year ended 30 September 2017 will be finalised on the basis of the financial information presented by the Directors in this preliminary announcement, and will be delivered to the Registrar of Companies in due course. The statutory accounts are subject to completion of the audit and may change should a significant adjusting event occur before the approval of the Annual Report.
The statutory accounts for the year ended 30 September 2016 have been reported on by the Company's auditors and delivered to the Registrar of Companies. The auditors report on those accounts was unqualified and did not include references to any matter which the auditors drew attention by way of emphasis without qualifying their report and did not contain statements under section 498(2) or (3) of the Companies Act 2006.
The preliminary announcement for the year ended 30 September 2017 was approved by the Board for release on 7 December 2017.
2 Segmental information
IFRS 8 requires operating segments to be determined based on the Group's internal reporting to the Chief Operating Decision Maker ("CODM"). The CODM has been determined to be the Chief Executive Officer as he is primarily responsible for the allocation of resources to segments and the assessment of the performance of each of the segments.
The CODM uses underlying EBITDA as reviewed at monthly Executive Committee and Performance meetings as the key measure of the segments' results as it reflects the segments' underlying trading performance for the period under evaluation. Underlying EBITDA is a consistent measure within the Group.
Inter-segment revenue between the operating segments is not material.
Our two key segments are Adult Services (Adult) and Children Services (Children). Adult Services comprises the Adult Learning Disabilities (ALD) and Specialist Services (SS) divisions and the Children Services comprises Young People Residential Services (YPR), Foster Care (FC) and Learning Services (Learning).
There has been no aggregation of the operating segments in arriving at these reportable segments.
The segment results for the year ended 30 September 2017, for the year ended 30 September 2016 and the reconciliation of the segment measures to the respective statutory items included in the consolidated financial information are as follows:
Year ended 30 September 2017 Continuing Operations ALD SS Adult YPR FC Learning Children Total Client Capacity 1,735 214 1,949 284 301 - 585 2,534 Revenue (GBP'000) 87,752 15,486 103,238 43,798 8,626 10,356 62,780 166,018 Underlying EBITDA (GBP'000) 26,331 3,862 30,193 13,205 1,870 960 16,035 46,228 Before allocated cost Year ended 30 September 2016 Continuing Operations ALD SS Adult YPR FC Learning Children Total Client Capacity *1,567 *216 1,783 235 301 - 536 2,319 Revenue GBP'000) 79,445 10,654 90,099 38,980 8,714 11,186 58,880 148,979 Underlying EBITDA (GBP'000) 25,383 2,676 28,059 11,806 2,187 1,013 15,006 43,065 Before allocated cost
*The segmental figures of the Specialist Services division for 2016 have been restated due to the inclusion of "ABI" (Acquired Brain Injury). This is the first full year of Oakleaf Care Limited's results and it was decided this change would give the shareholders greater clarity.
Reconciliation of EBITDA to profit 2017 2016
after tax;
GBP000 GBP000
Underlying EBITDA before unallocated
costs 46,228 43,065
Unallocated costs (6,343) (6,009)
--------------------------------------- -------- --------
Underlying EBITDA 39,885 37,056
Depreciation (5,525) (5,026)
Amortisation (7,190) (5,743)
Share based payments charge (210) (61)
Non-underlying items (4,293) 4,233
--------------------------------------- -------- --------
Operating profit 22,667 30,459
Financial expenses (5,888) (7,924)
--------------------------------------- -------- --------
Profit before tax 16,779 22,535
Taxation 1,070 336
Profit after tax 17,849 22,871
All operations of the Group are carried out in the UK, the Company's country of domicile. All revenues therefore arise within the UK and all non-current assets are likewise located in the UK. No single external customer amounts to 10% or more of the Group's revenues.
3 Non-underlying items
Non-underlying items are those items of financial performance that, in the opinion of the Directors, should be disclosed separately in order to improve a reader's understanding of the underlying trading performance achieved by the Group as these are one off significant costs which are not part of the ordinary course of the business. Non-underlying items comprise the following:
2017 2016
Note GBP000 GBP000
Acquisition expenses (i) 806 (390)
Integration and restructuring costs (i) 2,852 1,780
Profit arising from the ground rent
transaction under IAS 17 - (5,623)
Costs arising from placement of 348 -
shares
Acquisition and development costs 4,006 (4,233)
Onerous lease provision (ii) 287 -
Included in EBITDA 4,293 (4,233)
Amortisation of intangible assets 7,190 5,743
Included in administrative expenses 11,483 1,510
Fair value movements relating to
derivative financial instruments (iii) (1,107) 1,258
Other financing cost relating to 1,173 -
ground rent
Charges relating to derivative financial
instruments 829 646
IAS 17 lease imputed interest 223 133
Included in financial expenses 1,118 2,037
Tax on non-underlying items
Current (1,138) (84)
Deferred tax (iv) (2,676) (2,287)
Included in taxation (3,814) (2,371)
Total non-underlying items 8,787 1,176
(i) The Group incurred a number of exceptional costs relating to the integration of recent acquisitions and the reorganisation of the internal operating and management structure and redundancy costs totalling GBP2,852,000 (2016: GBP1,780,000). Included in the cash flow statement are acquisition expenses of GBP806,000 (2016: GBP660,000) and integration and reorganisation costs of GBP2,852,000 (2016: GBP1,780,000), which were paid in the year.
(ii) The present value of the future cash flows receivable from the operation of certain leased assets has been assessed as being lower than the present value of the rental payments to which the Group is committed. Therefore, the Group has provided for GBP287,000 (2016: GBPnil) being the present value of any onerous element of the remaining lease life.
(iii) Non-underlying items relating to derivative financial instruments include the movements during the year in the fair value of the Group's interest rate swaps which are not designated as hedging instruments and therefore do not qualify for hedge accounting, together with the quarterly cash settlement, and accrual thereof.
(iv) Deferred tax arises in respect of the following:
2017 2016
GBP000 GBP000
Derivative financial instruments (188) 190
Full provision for deferred tax under
IAS 12 (981) 1,184
Intangible assets 730 -
Roll over relief 14 -
Prior year adjustment 3,101 -
Other adjustments - 913
2,676 2,287
4 Taxation
(a) Recognised in the consolidation 2017 2016
statements of comprehensive income
GBP000 GBP000
Current tax expense
Current year (4,809) (4,471)
Current tax on non-underlying items
(note 3) 1,114 84
Corporation tax overprovided in previous
periods (56) 2,281
Total current tax (3,751) (2,106)
Deferred tax expense
Current year 825 (1,027)
Prior year 1,320 1,182 Deferred tax on non-underlying items (note 3) 2,676 2,287 Total deferred tax 4,821 2,442 Total tax in the consolidated statement of comprehensive income 1,070 336
(b) Reconciliation of effective tax rate
2017 2016
GBP000 GBP000
Profit before tax for the year 16,779 22,535
Tax using the UK corporation tax rate
of 19.5% (2016: 20%) 3,272 4,507
Non-deductible expenses 636 (820)
Other tax adjustments (613) (1,284)
Corporation and deferred tax overprovided
in previous periods (4,365) (2,692)
Utilisation of brought forward losses - (47)
Total tax in the consolidated statement
of comprehensive income (1,070) (336)
5 Earnings per share
2017 2016
GBP000 GBP000
Profit attributable to ordinary
shareholders 17,849 22,871
Weighted number of shares in issue
for basic earnings per share 70,037,602 63,229,346
Effects of share options in issue 24,389 -
Weighted number of shares for diluted
earnings per share 70,061,991 63,229,346
Diluted earnings per share is the basic earnings per share adjusted for the dilutive effect of the conversion into fully paid shares of the weighted average number of share options outstanding during the period.
Earnings per share (pence per share) Basic 25.48p 36.17p Diluted 25.48p 36.17p 6 Underlying earnings per share
A measure of underlying earnings and underlying earnings per share has been presented in order to present the earnings of the Group after adjusting for non-underlying items which are not considered to reflect the underlying trading performance of the Group.
2017 2016
GBP000 GBP000
Profit attributable to ordinary shareholders 17,849 22,871
Non-underlying items (note 5) 8,787 1,176
Underlying profit attributable to
ordinary shareholders 26,636 24,047
Underlying earnings per share (pence
per share)
Basic 38.03p 38.03p
Diluted 38.02p 38.03p
7 Dividends
The aggregate amount of dividends comprises:
2017 2016
GBP000 GBP000
Interim dividend paid in respect of
prior year but not recognised as liabilities
in that year (3.00p per share (2016:
3.00p per share)) 1,923 1,739
Final dividend paid in respect of the
prior year (6.25p per share (2016:
5.60p per share)) 4,010 3,483
Aggregate amount of dividends paid
in the financial year (9.25p per share
(2016: 8.40p per share)) 5,933 5,222
The aggregate amount of dividends proposed and not recognised as liabilities as at the year end is 9.90p per share, GBP7,493,075 (2016: 9.25p per share, GBP5,938,214).
8 Business Combinations (a) Acquisitions 2017
The Group made one acquisition in the year which has been accounted for as business combinations under IFRS3 (revised).
The following table of fair values summarises the acquisition made during the financial year:
On 19 June 2017 the Group acquired the equity of Selborne Care Limited, which provides a range of supported living, residential care and day opportunity services in Birmingham, Sandwell, Coventry and Warwickshire, Worcestershire, Wolverhampton, Bristol, South Gloucestershire, Bath and North East Somerset, Devon Plymouth and Cornwall.
The book values attributable to the acquisition were GBP18,281,289 net assets and fair value adjustments were GBP4,397,000.
Book Fair value
values adjustment Total
GBP000s GBP000s GBP000s
Intangible assets 296 - 296
Property plant &
equipment 12,571 4,997 17,568
Trade and other
receivables 989 (250) 739
Cash 2,590 2,590
Trade and other
payables (1,526) (350) (1,876)
Deferred Tax (1,113) (1,113)
Net Assets on acquisition 13,807 4,397 18,204
The Acquisition accounting is draft and
will be finalised when the properties
have been revalued and any separate identifiable
intangibles (such as customer relationships)
will be adjusted in next year's financial
statements.
Satisfied as follows:
Cash 18,281 18,281
Goodwill 77
The acquisition was undertaken to enhance the Group's position in the respective industries. Control was obtained through the acquisition of share capital.
The book values of the assets and liabilities were extracted from the underlying accounting records of the acquired entities on the date of acquisition. The book value of receivables represents the gross contractual amounts receivable, all of which are considered recoverable. The fair value adjustments made to property, plant and equipment, trade and other receivables and creditors are to reflect their value on a going concern market value basis. The remaining goodwill of GBP77,000 relates to the assembled workforce acquired on acquisition.
Goodwill which is not expected to be tax deductible arises due to the requirement to recognise deferred tax in respect of the fair value adjustments to intangible assets and property, plant and equipment, together with synergies expected to arise from combining operations, workforce in place and other intangible assets which do not qualify for separate recognition.
(b) Reconciliation to Group Cash Flow
2017 2016
GBP000 GBP000
Cash consideration paid on acquisitions
in the year 18,281 28,536
18,281 28,536
Deferred and contingent consideration payable is analysed as follows:-
2017 2016
GBP000 GBP000
Contingent consideration
Due within one year 2,420 3,850
Due over one year 1,133 2,025
3,553 5,875
(c) Proforma results
The underlying result for the combined entity for the year as though the acquisition date for all business combinations had been the beginning of the year is as follows:
2017 2016
GBP000 GBP000
Revenue 175,431 154,583
Operating profit 35,454 29,852
9 Copies of the Annual Report and Accounts
Copies of the Annual Report and Accounts will be sent to Shareholders in due course and will be available to members of the public from the Company's registered office located at 5th Floor, Metropolitan House, 3 Darkes Lane, Potters Bar, Herts, EN6 1AG and on the Company's website: www.caretech-uk.com.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR GBBDDXDGBGRR
(END) Dow Jones Newswires
December 07, 2017 02:00 ET (07:00 GMT)
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