Extraordinary days, every day

Transcription

1 Extraordinary days, every day CareTech Holdings PLC Interim Report 2009

2 Contents 01 Overview 02 Chairman s Statement 04 Unaudited Consolidated Income Statement 05 Unaudited Consolidated Statement of Recognised Income and Expense 06 Unaudited Consolidated Balance Sheet 07 Unaudited Consolidated Cash Flow Statement 08 Notes 12 Directors and Advisers IFC1 CareTech Holdings PLC Interim Report 2009

3 Overview Leading the way CareTech is a leading provider of quality specialist social care services. We aim to provide better lives for people with severe learning difficulties, challenging behaviours, mental health problems and autism spectrum disorders, helping them discover greater independence and an improved quality of life. We maintain exceptional standards and retain our focus on high quality individual service needs making sure people experience extraordinary days, every day. Highlights 39.5m Revenue increased by 29% (2008: 30.7m) 9.6m Adjusted EBITDA 1 increased by 36% (2008: 7.0m) 9.9m Cash inflow from operating activities increased by 57% (2008: 6.3m) 5.7m Adjusted profit before tax 2 increased by 47% (2008: 3.9m) 10.21p Adjusted earnings per share 2 increased by 22% (2008: 8.40p) 1,380 Bed capacity increased from 1,308 to 1,380 with mature occupancy maintained at 94% 1.600p Interim dividend of 1.600p per share represents growth of 56% (2008: 1.025p per share) 1 Adjusted EBITDA is operating profit stated before depreciation, amortisation of intangible assets and share-based payments charge. 2 Adjusted profit before tax and adjusted earnings per share are stated before amortisation of intangible assets and significant items (explained in note 2). CareTech Holdings PLC Interim Report

4 Chairman s Statement Opportunities for growth We have delivered a strong performance in the first six months of our financial year with growth in underlying earnings and operating cashflow. Further benefits of scale and our investment in the development of the business are delivering significant returns. We continue to see exciting new opportunities for growth in a non discretionary area of public spending; consolidating the specialist social care services market through a range of progressive organic developments and selective acquisitions. Farouq Sheikh, Chairman Results The Group performed strongly in the six months to 31 March Revenue grew by 29% to 39.5m (2008: 30.7m) which, together with further benefits from our operational gearing, helped to deliver adjusted EBITDA of 9.6m (2008: 7.0m) representing growth of 36%. Adjusted profit before tax increased by 47% to 5.7m (2008: 3.9m) and, following an increase in the number of shares in issue after the July 2008 placing, adjusted earnings per share rose by 22% to 10.21p (2008: 8.40p). Our balance sheet remains strong with the backing of a substantial freehold property portfolio, whilst the first half cash inflow from operating activities of 9.9m (2008: 6.3m) demonstrates the quality of our income stream. At 31 March 2009 net debt of 89.3m represents an increase of 4.0m during the first six months of our financial year following further investment in organic developments and the acquisition of the assets and business of Lyndhurst Psychiatric Care ( Lyndhurst ). Dividend The Board is pleased to declare an interim dividend of 1.600p (2008: 1.025p) per share, representing an increase of 56%, which will be paid on 6 August 2009 to shareholders on the register at 26 June Our policy is to grow future dividends in line with earnings growth. Client capacity and occupancy Client capacity has increased from 1,308 places at 30 September 2008 to 1,380 places at 31 March 2009, representing an increase of 72 beds (5.5%). 47 beds were developed through organic initiatives and a further 25 beds were taken on through the acquisition of Lyndhurst. Occupancy in our established services where we have operated for more than twelve months continues at a high rate of 94%. With average lengths of stay measured in decades it is this security of occupancy which provides excellent visibility of our future income stream. Operating review The Group s performance in the six months to 31 March 2009 has benefited from economies of scale delivered from further organic growth and last year s acquisitions of Beacon Care and Valeo. The underlying EBITDA margin increase from 22.9% to 24.3% demonstrates the effectiveness of the organisational structure which we have established. We currently operate through two divisions, with six business units, providing the platform for growth. The structure facilitates the nurturing of local relationships with the support of corporate resources. As we anticipate further growth in the future we will continue to develop our management teams and the range of specialist skills of our staff. The range of specialist social care services provided by the Group includes residential, transitional, supported living and day-opportunity services for people with learning difficulties together with step down and community mental health provision. We also continue to develop our children s (aged 12 and over) services and family assessment centres. With high quality care 02 CareTech Holdings PLC Interim Report 2009

5 standards at the forefront of our operations we are able to offer a range of services which supports the needs of individual service users and their respective funding authorities. Acquisition Responding to an increased demand for community mental health provision we have enhanced our step down mental health capabilities by the purchase of 25 beds from Lyndhurst during the period. Established in 1985 Lyndhurst was acquired for cash consideration of 5.4m and is complementary to our One-Step supported living business as well as extending our range of specialist social care services. We plan to build upon the expertise which Lyndhurst brings to the Group in order to further expand mental health and related services across our regions. Strategy The specialist social care market is large, growing and remains highly fragmented. There are approximately 1.4m people in the UK who have a learning difficulty. Of this group the Department of Health has said that there are currently 185,000 people who are so disabled that they cannot live independently. Laing & Buisson (L&B) estimate that 85,775 residential beds are available across the UK. A shortfall in the provision of care is evident. Recent research at Lancaster University indicates annual growth of 5.5% in the number of people with learning difficulties who are likely to use services. The special interest group MIND considers that up to 40% of people with learning difficulties have an additional mental health problem. The UK independent sector for learning difficulties and mental health is estimated to be worth 6.7bn (L&B). Within the UK there are said to be 8.6m people who have specific mental health disorders (2007). During crisis, many of these people will require acute or therapeutic health care as hospital in-patients. However, many will also require step down or community services once they have left the acute services, and often for an extended period during their journey back to an ordinary life. Mental health provision is also highly fragmented and diverse in both quality and type of service. The directors believe that CareTech s unique blend of quality and thoughtful delivery of care and support lends itself well to the development of new and innovative approaches to community based mental health. Indeed, the synergy offered through further development of a clinical infrastructure in mental health will enhance the services offered to each of CareTech s client groups. With our sophisticated care pathway, high quality standards, strong financial backing and dedicated employees we have a clear and focused strategy making us a leading consolidator of the market for both learning difficulties and community mental health provision. CareTech is also well placed to build on the trend for more able people to move into independent supported living; freeing space for the most complex people to be supported within existing residential care services and driving the organic growth of further complex needs resources. The Group will continue to evaluate further selective acquisition opportunities alongside organic growth in order to develop our range of services and geographic coverage to meet the needs of clients and deliver accretive returns on investment. Outlook and prospects Organic growth in the first half of the financial year is again ahead of expectations and we have built upon a strong regional management structure to support local relationships and drive forward further growth. The acquisition of Lyndhurst is an important extension of our community mental health capability and provides additional opportunities for expanding our specialist services. The Group s margin growth again illustrates the specialist nature of our business and the effectiveness of our overhead base. With robust internal quality standards, a business which operates in an area of non discretionary public spending, high levels of occupancy and a visible income stream the Board remains confident about the future prospects of the Group and its ability to continue to grow market share. Farouq Sheikh Chairman 18 June 2009 CareTech Holdings PLC Interim Report

6 Unaudited Consolidated Income Statement for the 6 months ended 31 March 2009 Before Before Before amortisation amortisation amortisation & significant Total & significant Total & significant Total items (1) unaudited items (1) unaudited items (1) audited Note Revenue 39,510 39,510 30,690 30,690 67,713 67,713 Cost of sales (25,067) (25,067) (19,512) (19,512) (42,043) (42,043) Gross profit 14,443 14,443 11,178 11,178 25,670 25,670 Administrative expenses (5,893) (6,002) (4,808) (4,875) (9,885) (10,854) Operating profit 8,550 8,441 6,370 6,303 15,785 14,816 EBITDA 9,587 9,587 7,038 7,038 17,254 17,254 Depreciation (941) (941) (623) (623) (1,356) (1,356) Amortisation of intangible assets (109) (67) (218) Share-based payments charge (96) (96) (45) (45) (113) (113) Significant items 2 (751) Operating profit 8,550 8,441 6,370 6,303 15,785 14,816 Financial income Financial expenses 2,3 (2,834) (8,448) (2,490) (2,490) (5,318) (7,233) Financial expenses excluding significant items (2,834) (2,834) (2,490) (2,490) (5,318) (5,318) Loan finance costs written-off on refinancing 2 (650) IAS 39 movements 2 (5,614) (1,265) Financial expenses (2,834) (8,448) (2,490) (2,490) (5,318) (7,233) Profit before tax 5, ,894 3,827 10,538 7,654 Taxation 2,4 (1,176) (201) (821) (1,086) (2,122) (2,383) Profit/(loss) attributable to equity shareholders of the parent 4,553 (195) 3,073 2,741 8,416 5,271 Earnings/(loss) per share Basic 5, p (0.44)p 8.40p 7.49p 21.82p 13.67p Diluted 5, p (0.44)p 8.29p 7.39p 21.58p 13.52p (1) Significant items are explained in note CareTech Holdings PLC Interim Report 2009

7 Unaudited Consolidated Statement of Recognised Income and Expense for the 6 months ended 31 March 2009 Effective portion of changes in fair value of cash flow hedges (812) (359) Net change in fair value of cash flow hedges transferred to profit and loss 564 Deferred tax on hedge reserve movement 224 (61) Deferred tax on share-based payments charge (85) Net (expense)/income recognised directly in equity (673) 144 (Loss)/profit for the period (195) 2,741 5,271 Total recognised income and expense attributable to equity shareholders of the parent (195) 2,068 5,415 CareTech Holdings PLC Interim Report

8 Unaudited Consolidated Balance Sheet at 31 March 2009 Non-current assets Goodwill 15,713 11,991 15,574 Other intangible assets 1, ,149 Property, plant and equipment 157, , , , , ,299 Current assets Trade and other receivables 10,829 7,398 11,433 Cash and cash equivalents 6, ,126 16,904 7,928 13,559 Total assets 191, , ,858 Current liabilities Loans and borrowings 5, Trade and other payables 6,130 2,512 3,981 Tax payable 3,191 2,484 3,208 Deferred and contingent consideration payable 8,856 8,361 Deferred income 5,929 4,490 7,792 29,192 9,802 23,692 Non-current liabilities Loans and borrowings 90,283 80,903 87,089 Deferred and contingent consideration payable 5,515 Deferred tax liabilities 12,194 8,818 13,102 Derivative financial instruments 6,724 1,017 1, ,201 96, ,455 Total liabilities 138, , ,147 Net assets 52,677 19,358 53,711 Equity attributable to equity shareholders of the parent Share capital Share premium 38,825 9,569 38,543 Merger reserve 5,037 1,998 5,037 Hedging reserve (732) Retained earnings 8,591 8,340 9,908 Total equity 52,677 19,358 53, CareTech Holdings PLC Interim Report 2009

9 Unaudited Consolidated Cash Flow Statement for the 6 months ended 31 March 2009 Cash flows from operating activities Profit before tax 6 3,827 7,654 Financial income (13) (14) (71) Financial expenses 8,448 2,490 7,233 Depreciation ,356 Amortisation Share-based payments charge Interest received Operating cash flows before movement in working capital 9,600 7,052 16,574 Decrease/(increase) in trade and other receivables (2,160) (Decrease)/increase in trade and other payables (260) (1,714) (38) Cash inflows from operating activities 9,944 6,334 14,376 Tax paid (1,152) (386) (670) Net cash from operating activities 8,792 5,948 13,706 Cash flows from investing activities Acquisition of subsidiaries, net of cash acquired (5,852) (318) (30,637) Acquisition of property, plant and equipment (2,432) (13,107) (18,181) Acquisition of software (26) (419) Net cash used in investing activities (8,310) (13,425) (49,237) Cash flows from financing activities Proceeds from the issue of share capital (net of costs) ,012 Proceeds from new loan (net of costs) 7,170 9,871 96,454 Interest paid (2,480) (2,718) (5,318) Repayment of borrowings (100) (82,024) Payment of finance lease liabilities (288) (139) (445) Dividends paid (1,218) (1,115) Net cash from financing activities 3,467 6,914 36,564 Net increase/(decrease) in cash and cash equivalents 3,949 (563) 1,033 Cash and cash equivalents at start of the period 2,126 1,093 1,093 Cash and cash equivalents at end of the period 6, ,126 Net debt in the balance sheet comprises: Cash at bank and in hand 6, ,126 Bank loans (93,422) (80,331) (86,177) Finance leases and hire purchase contracts (1,947) (888) (1,262) Net debt at end of the period (89,294) (80,689) (85,313) CareTech Holdings PLC Interim Report

10 Notes 1. Accounting policies This interim report has been prepared on the basis of the accounting policies expected to be adopted for the year ended 30 September These are anticipated to be in accordance with the Group s accounting policies as set out in the latest annual financial statements for the year ended 30 September All International Financial Reporting Standards ( IFRS ), International Accounting Standards ( IAS ) and interpretations currently endorsed by the International Accounting Standards Board ( IASB ) and its committees as adopted by the EU and as required to be adopted by AIM-listed companies have been applied. AIM-listed companies are not required to comply with IAS 34 Interim Financial Reporting and accordingly the Company has taken advantage of this exemption. The financial information in this interim report does not constitute statutory accounts for the 6 months ended 31 March 2009 and should be read in conjunction with the Group s annual financial statements for the year ended 30 September Financial information for the year ended 30 September 2008 has been derived from the consolidated audited accounts for that period which were unqualified. The condensed consolidated interim financial statements for the 6 months to 31 March 2009 have not been audited or reviewed by auditors pursuant to the Auditing Practices Board guidance on Review of Interim Financial Information. This unaudited interim report was approved by the Board on 18 June Significant items Significant items are those items of financial performance that the directors consider should be separately disclosed to assist in the understanding of the trading performance achieved by the Group. Significant items comprise the following: Note Acquisition integration costs (i) 456 Business restructuring costs (ii) 295 Included in operating expenses 751 Loan finance costs written off on refinancing (iii) 650 IAS 39 movements on derivative financial instruments (iv) 5,614 1,265 Included in financial expenses 5,614 1,915 Significant items tax effect: Current tax (v) (402) Deferred tax (vi) (975) Included in taxation (975) (i) Following the acquisitions of the Beacon and Valeo businesses during the year ended 30 September 2008, the Group incurred a number of costs relating to reorganisation as these businesses were integrated into the Group. (ii) During the year ended 30 September 2008 the Group incurred significant costs as it restructured its business with respect to agency staff costs. To address this, non-recurring costs were incurred to establish a wider pool of Group employees. (iii) In April 2008, the Group completed a new banking facility agreement. The unamortised element of loan fee costs on the replaced debt was therefore fully written off. (iv) IAS 39 movements on derivative financial instruments represent the movements during the period in the fair value of the Group s interest rate swaps which do not qualify for hedge accounting. (v) Represents the current tax on items (i), (ii), and (iii) above. (vi) A deferred tax credit of 1,572,000 (30 September 2008: 354,000) arises in respect of IAS 39 movements on derivative financial instruments in (iv) above. In addition, a charge arises from the effects of full provision for deferred tax under IAS 12 amounting to 597,000 (31 March 2008: 265,000; 30 September 2008: 1,017,000). 08 CareTech Holdings PLC Interim Report 2009

11 3. Financial Expenses On bank loans and overdrafts 2,772 2,436 5,198 Finance charge on finance leases Financial expenses before significant items 2,834 2,490 5,318 Significant items (explained in note 2) 5,614 1,915 Total financial expenses 8,448 2,490 7, Taxation Current tax expense Current period before significant items 1, ,047 Significant items (explained in note 2) (402) Total current tax 1, ,645 Deferred tax expense Current period before significant items (72) 75 Significant items (explained in note 2) (975) Total deferred tax (1,047) Total tax expense Current period before significant items 1, ,122 Significant items (explained in note 2) (975) Total tax 201 1,086 2,383 Effective tax rate on adjusted profit before taxation 20.5% 21.1% 20.1% 5. Earnings per share (Loss)/profit attributable to ordinary shareholders (195) 2,741 5,271 Weighted number of shares in issue for basic earnings per share 44,586,292 36,596,061 38,566,397 Weighted number of shares for diluted earnings per share 44,586,292 37,067,762 38,991,559 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. (Loss)/earnings per share (pence per share) Basic Diluted (0.44p) 7.49p 13.67p (0.44p) 7.39p 13.52p CareTech Holdings PLC Interim Report

12 Notes continued 6. Adjusted earnings per share A measure of adjusted earnings and adjusted earnings per share has been presented in order to assist in the understanding of the trading performance achieved by the Group, before amortisation and significant items (explained in note 2). Note (Loss)/profit attributable to ordinary shareholders (195) 2,741 5,271 Amortisation of intangible assets (i) Significant items (explained in note 2) 4, ,927 Adjusted profit attributable to ordinary shareholders 4,553 3,073 8,416 Adjusted earnings per share (pence per share) Basic 10.21p 8.40p 21.82p Diluted (ii) 10.16p 8.29p 21.58p (i) Amortisation is charged on intangible software and customer relationship assets established in accordance with IFRS 3: Business Combinations. As a non-cash charge it is added back to adjusted earnings. (ii) Diluted adjusted earnings per share for the 6 months ended 31 March 2009 is calculated based on 44,803,096 shares. 7. Reconciliation of total equity Balance at start of period 53,711 17,245 17,245 Total recognised income and expense (195) 2,068 5,415 Issue of ordinary shares ,053 Equity settled share-based payments charge Dividends (1,218) (1,115) Balance at end of period 52,677 19,358 53, Dividends Amounts recognised as distributions to equity shareholders in the period: Final dividend for the year ended 30 September 2008 of 2.725p per share 1,218 Interim dividend for the year ended 30 September 2008 of 1.025p per share 383 Final dividend for the year ended 30 September 2007 of 2.000p per share 732 Total dividends 1,218 1,115 Proposed dividends are not included as a liability at the balance sheet date in accordance with IAS 10: Events After the Balance Sheet Date. 10 CareTech Holdings PLC Interim Report 2009

13 9. Business Combination IFRS 3: Business Combinations requires that material business combinations are separately identified and disclosed. During the period, the trade and assets of a step down mental health business known as Lyndhurst were acquired which gives rise to the following provisional fair value table: Fair value acquired 000 Properties 5,812 Other assets 40 5,852 Consideration: Cash consideration 5,400 Costs of acquisition 452 Total cost of acquisition 5,852 The provisional fair value of properties reflect their value on a going concern market value basis. Following acquisition on 16 January 2009, Lyndhurst has contributed EBITDA of 183,000 to the Group s result for the 6 months to 31 March Distribution to shareholders This interim report is being sent to all shareholders and will be available to the public on the Group s website ( and from the Group s registered office, Leighton House, Darkes Lane, Potters Bar, Hertfordshire EN6 1BB. CareTech Holdings PLC Interim Report

14 Directors and Advisers Company Number: Registered Office: Leighton House Darkes Lane Potters Bar Hertfordshire EN6 1BB Directors: Farouq Sheikh (Executive Chairman) Richard Steeves (Non-Executive Deputy Chairman) Haroon Sheikh (Chief Executive Officer) David Pugh (Group Finance Director) Stewart Wallace (Strategic Director) Karl Monaghan (Non-Executive Director) Christa Echtle (Non-Executive Director) Company Secretary: David Pugh Nominated Adviser and Broker Brewin Dolphin Securities Limited 12 Smithfield Street London EC1A 9BD Auditors KPMG Audit Plc 2 Cornwall Street Birmingham B3 2DL Solicitors Pinsent Masons CityPoint One Ropemaker Street London EC2Y 9AH Bankers The Royal Bank of Scotland plc 280 Bishopsgate London EC2M 3YB AIB Group (UK) plc 9/10 Angel Court London EC2R 7AB Registrars Capita Registrars Limited Northern House Woodsome Park Fenay Bridge Huddersfield West Yorkshire HD8 0LA 12 CareTech Holdings PLC Interim Report 2009

15 Designed and produced by Carnegie Orr +44 (0)

16 CareTech Holdings PLC Leighton House Darkes Lane Potters Bar Hertfordshire EN6 1BB Tel: Fax: