Acquisition and Extended Banking Facilities

CareTech Holdings PLC

("CareTech" or the "Company")

Acquisition

and Extended Banking Facilities

CareTech Holdings PLC (AIM: CTH), a pioneering provider of specialist social care services in the UK, is pleased to announce that it has agreed to acquire the entire issued share capital of Spark of Genius Limited ("Spark"), a Scotland based provider of residential care and education services for young people with complex needs. The total consideration for Spark is up to £9.23 million, comprising an initial payment of £7.48 million in cash and an earn-out of up to £1.75 million payable as described below.

Spark provides residential care and education for challenging and vulnerable young people with complex needs. It has established a ground-breaking model of therapeutic care and education which has generated over the past few years a history of high regulatory grades across its services.

Spark currently has 48 residential places in 9 residential homes in Scotland and 100 education places in 3 schools. Spark also offers employability training and leaving-care services for those over the age of 16. In England, Spark has a joint venture with a local authority, which has already registered two residential homes and one school, offering 10 residential and 35 education places respectively.

Spark was founded in Paisley, Scotland, in 1999 by its chairman and sole shareholder, Tom McGhee, and has grown profitably since. The senior management of team of Spark will continue in their roles at CareTech, driving forward the quality of services for children. In the year ended 31 March 2015, Spark reported revenues of £10.9 million and profit before tax of £1.2 million.

The acquisition of Spark, which is expected to be earnings enhancing in its first full financial year, will be financed from the existing resources of the Company.

Tom McGhee, Chairman of Spark, commented: "Through our education-based approach we have become a market leader in our sector in Scotland. With CareTech's support, and with our existing management team, we can continue to develop our business and the services we provide. CareTech has greatly impressed us as it shares our values, which are focused on the delivery of high quality services to children and young people with complex needs. Becoming part of CareTech is a very positive step for all our stakeholders. It will support our growth whilst we continue to offer excellent outcomes for the children and young people in our care."

Farouq Sheikh, Executive Chairman of CareTech, commented: "We are delighted to announce the acquisition of Spark, whose impressive growth in the past few years reflects the quality and innovation of its services and the strength of its local authority relationships. I would like to welcome the team at Spark to CareTech.

"This acquisition, which is expected to be earnings enhancing in its first full financial year, marks our first transaction following the £21 million placing in March this year. We continue to make good progress on a number of other potential bolt-on acquisitions and expect to have fully deployed the proceeds of the placing during the coming months."

Earn-out consideration

Of the consideration payable to Mr McGhee under the earn-out, £250,000 was settled on completion of the acquisition through the issue of 100,000 ordinary shares in the capital of the Company ("Ordinary Shares") at a price of 250 pence per Ordinary Share. The remainder of the consideration under the earn-out of up to £1.5 million will be determined with reference to Spark's EBITDA performance over the four financial years ending 30 September 2019.

Application for admission to trading on AIM and total voting rights

Application will be made to the London Stock Exchange for 100,000 new Ordinary Shares to be admitted to trading on the AIM Market of the London Stock Exchange, which is expected to occur on or around 3 August 2015. The new Ordinary Shares rank pari passu in all respects with the existing Ordinary Shares in issue, including the right to receive dividends.

On admission, the Company's enlarged issued ordinary share capital will consist of 62,122,598 Ordinary Shares. All of these Ordinary Shares carry voting rights of one vote per Ordinary Share. There are no Ordinary Shares held in treasury and so the total number of voting rights in the Company following admission will be 62,122,598. The above figures should be used by shareholders following admission as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change to their interest in, the Company under the Financial Conduct Authority's Disclosure and Transparency Rules.

Banking facilities

CareTech also announces that it has agreed improvements to its banking facilities, which were due to expire in January 2017, by extending the term two years to January 2019, reducing the cost of its borrowing by a reduction in the interest rate and deferring four loan repayments due between now and October 2016 amounting to £21.6 million.

In addition, a new uncommitted accordion facility has also been agreed of up to £30 million which, alongside the deferral of the four loan repayments, further supports the Company's acquisition strategy.

The total cost of these new facilities is equivalent to a new interest rate of 3.96% per annum through to January 2019, compared with the current total cost of 4.33%. This saving will more than cover the costs of the arrangement and other fees associated with the renegotiation.

Farouq Sheikh, Executive Chairman of CareTech, commented: "These new banking facilities extend our loan facility by two years and save cost by the reduction in interest rate. These enhanced terms underline the support of our banking syndicate for our growth strategy and the quality of CareTech's asset base. As stated last month in our interim results, our objective is to deliver double digit growth and these new banking facilities will help us to achieve that objective."

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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 250 specialist services around the UK.

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

CareTech, which was founded in 1993, began trading on the AIM market of the London Stock Exchange in October 2005 under the ticker symbol CTH. Its freehold portfolio comprises more than 160 properties.

For further information please visit: www.caretech-uk.com.