14th Dec 2005 07:01
CareTech Holdings PLC14 December 2005 For Immediate Release 14 December 2005 CareTech Holdings PLC ("CareTech", the "group" or the "company") Preliminary Results for the year ended 30 September 2005 CareTech Holdings PLC (AIM: CTH), a leading UK provider of learning disabilitycare services, is pleased to announce its maiden preliminary results for theyear ended 30 September 2005. Highlights • Turnover increased 23% to £22.5m (2004:£18.2m) • EBITDAR1 increased 50% to £5.6m (2004:£3.7m) • Profit on ordinary activities before tax excluding amortisation of goodwill and exceptional items increased by 215% to £1.6m (2004:£0.5m) compared with the profit estimate of £1.5m • Profit before tax was £2.2m after exceptional items of £0.9m (2004: Profit before tax was £5.5m after exceptional items of £5.3m) • Adjusted earnings per share 4.10p (2004: 1.87p) and earnings per share 6.17p (2004: 18.73p) • Two acquisitions completed during the period for a total of £5.6m, representing 10 homes and 38 beds • Overall resident capacity increased by 64 to 423 • Occupancy levels at the year end of 90% • Successful flotation on AIM in October 2005, raising £10m net of expenses to repay £6.5m of bank indebtedness and to support growth initiatives • Board strengthened through the appointment of three non executive directors Notes: 1. Being the operating profit before interest, taxation, depreciation, amortisation, property rentals and exceptional items. Commenting on the results Farouq Sheikh, Executive Chairman said: "2005 was a year of significant activity for the group, both corporate andoperational. We added 64 new beds in the year whilst improving underlyingmargins and maintaining good levels of occupancy across the portfolio. The new financial year has started positively and the group seeks to build onits solid base of contracted income, taking advantage of the continuing streamof referrals from care service purchasers who are seeking to place prospectiveresidents with a known and proven care provider. CareTech is well placed to play a leading role in consolidating the growing PLDmarket and I am confident of the group's prospects for the current financialyear." Enquiries: Farouq Sheikh 01707 652053Executive Chairman David Spink 01707 652053Finance Director Diane Stewart/ Tim Anderson 0207 466 5000Buchanan Communications CareTech Holdings PLC Chairman's statement Introduction I am pleased to present my first report as Chairman of CareTech Holdings PLCfollowing its admission to AiM. In short, 2005 was a year of significantactivity for the group, both corporate and operational. Despite the inevitabledistraction arising from the completion of the exit of our private equityinvestor and the flotation, we added 64 new beds in the year whilst improvingunderlying margins and maintaining good levels of occupancy across theportfolio. The sound and commendable results achieved in the year are a testament to theway the management team has performed throughout the period. They also representa solid foundation on which the group can continue to grow. Flotation In October 2005 the company completed its flotation on AiM following thecompletion of the two stage exit of Barclays Private Equity in July 2005. I wishto extend a very warm welcome to the new shareholders who have invested andjoined the company. The directors believe that the flotation will assist thecompany in achieving its growth aspirations both organically and by acquisitionto deliver earnings growth for the benefit of shareholders. We were pleased to introduce 3 share ownership schemes which have been wellreceived by staff. Going forward we believe these schemes will help with therecruitment and retention of staff and moreover, being the only listedspecialist care operator, it will also help in attracting key individuals as thegroup grows. Results The results to 30 September 2005 cover the period ending shortly before ourflotation on AiM. The financial statements demonstrate a strong uplift in ourportfolio of sites, with 13 new operations added in the year. Resident capacityincreased by 64 to 423 and the group maintained the high occupancy levels in itsestablished operations. Revenues rose by 23% to £22.5m. Results for the yearshow a 50% increase in EBITDAR. This is defined as operating profits beforetaking account of depreciation, amortisation of goodwill, property rental costsand exceptional items; the most meaningful operating profit comparative figurefollowing the sale and leaseback of certain assets in 2004. Profits before taxation excluding amortisation of goodwill and exceptional itemsincreased to £1.6m (2004: £0.5m). This is ahead of the profit estimate of £1.5mset out in the Company's AiM admission document. Board I am delighted to welcome to the board, Richard Steeves, as non-executive deputychairman, together with Richard Midmer and Karl Monaghan as non-executivedirectors, with effect from 7 October. I believe that we have appointed a strongnon executive team who will complement and strengthen the existing executiveteam of myself, Haroon Sheikh, David Spink, Graham Mattinson and Stewart Wallaceand contribute to the continued development of the group. Dividend In line with the company strategy set out at flotation, the board is notproposing the payment of a dividend and will continue to reinvest profits todevelop CareTech's operations to deliver future growth in earnings. Growth Strategy The group has a well established track record of growth by both organicdevelopment and acquisition. The group is continuing to further develop itsexisting portfolio of homes and is seeking to add new homes. Part of CareTech'sgrowth strategy at flotation was to exploit the acquisition opportunities withinthe growing and fragmented market for people with learning disabilities ('PLD').To that end, a number of opportunities are actively being investigated. Prospects The new financial year has started positively as the group seeks to build on itssolid base of contracted income, taking advantage of the continuing stream ofreferrals from care service purchasers who are seeking to place prospectiveresidents with a known and proven care provider. CareTech is well placed to play a leading role in consolidating the growing PLDmarket and I am confident of the group's prospects for the current financialyear. Conclusion I would like to extend my personal thanks to the members of the management andthe whole of the CareTech staff. During this very active and challenging yearthey have shown their resilience and commitment to the success of theorganisation by delivering outstanding results at all levels. With them, I look forward to the new chapter in CareTech's development, whichinevitably will bring new opportunities and challenges for us all. I amconfident that the team will continue to deliver outstanding services for ourclients and, by so doing, enable all stakeholders to share in these successesgoing forward. Farouq SheikhExecutive ChairmanCareTech Holdings PLC13 December 2005 CareTech Holdings PLC Chief Executive's Review Introduction CareTech has made significant progress in the year, enabling us to report astrong set of results in our maiden report as an AiM listed company. The demand for our services remains high and prospects strong. We are indiscussions with care managers so that we can develop new services to addressthe shortfall of learning disability care places in the UK estimated to be inthe region of 25,000 people. We also have continued participation in theoutsourcing market, where during the year two contracts were awarded for there-provision of existing services. In the last quarter of 2005, the group concluded developments which had beenprogressed during the year. A further 13 new services were introduced,representing 64 new residents, including a strategic expansion of our geographiccoverage to the West Midlands. Operational Review Care Services The management of services, existing and new, has been supported extremely wellby the operations team. The role of Area Care Directors has ensured good qualityand continuity of care for residents within our services. Underpinning this, ona day-to-day basis are the home managers, who are responsible for directing andleading the staff. This approach continues to ensure the delivery of 'personcentred services' focussed on meeting individual resident needs. Training of staff is well supported and managed by our in-house trainingdepartment. Our training programme requires that all staff participate in theLearning Disabilities Awards Framework ('LDAF') approved induction programme.LDAF is an industry-recognised training programme and our accreditation inproviding and supporting this, is well received by care professionals in thesector. Generally the use of external agency staff has been kept at low levels duringthe year as a result of successful recruitment and retention initiatives. Teamawards, employee benefit schemes, extensive training, and competitiveremuneration packages have all helped with this whilst the share ownershipschemes recently launched as part of the flotation should reap furtherimprovements in the coming year. The group's unique Quality Assurance Monitoring Programme has continued toprovide valuable audit of our services and enabled the operations team tobenefit from this independent review of services. Development of services During the year, group efforts have been focussed on the development ofadditional capacity. Following detailed discussions with local authority caremanagers in specific geographies the group has successfully expanded capacity by13 new homes. Of these, 12 were added in the final months of the financial yearwhich will benefit the results of future periods. The board believes that the acquisition of a 9 home service with an initialresident capacity of 32 in the West Midlands completed in August 2005 to be ofsignificant strategic importance. This will allow the group to developrelationships with new purchasing authorities and discussions are continuingwith care managers regarding the further development and expansion of serviceswithin this region. Capacity has also been increased through the acquisition of a six person servicein Reading, the development of a home in Barnet to provide a six person serviceand the purchase of a new property in South London which is being developed toprovide services for up to 12 people. CareTech's growing reputation with local authorities as a provider of highquality care solutions has been further demonstrated by the award of twooutsourcing contracts (in competitive tenders) from authorities with whomvaluable relationships have been forged in the last 2-3 years. Current Trading Group operations are already benefiting from the developments which came onstream in the final quarter of 2005. Our focus remains that of maintaining ourhigh levels of occupation in established homes, and bringing the newly-openedhomes to a mature occupation level. Demand for service remains high and the group is actively pursuing thedevelopment of new services for care commissioners with whom we have developedstrong relationships. Outlook We see the increased regulation of a highly fragmented market as an importantdriver of demand for larger operators such as CareTech and we are looking totake a leading role in the opportunities arising from the consolidation of themarket. Market demographics, together with a well-evidenced shortage of supplypresent some exciting opportunities for the group's growth. The group has made significant progress during the year and has delivered astrong set of results which provide a solid platform for further growth. Thisachievement is testament to the quality and commitment of our workforce and therelationships we enjoy with our partners. I would like to take the opportunityto thank our staff for their tremendous efforts in the year. Haroon SheikhChief Executive Officer13 December 2005 CareTech Holdings PLC Finance Director's Review Overview Key financial features for the year are: (i) the increased operating margins of the group arising from the significantimpact of adding the operating profits from new client capacity to therelatively fixed central cost base, and (ii) the year on year effect of the 2004 sale and leaseback transaction, whichadded a net £2.0m to the operating cost base by way of property rental costs,but which reduced interest on bank borrowings by £1.2m. Revenue and operating profit Turnover increased by 23% in the year to £22.5m. EBITDAR (i.e. operating profitbefore depreciation, amortisation of goodwill, property rental costs andexceptional items; the only meaningful comparative figure following the sale andleaseback transaction completed in August 2004) increased by 50% to £5.6m.Profit before taxation excluding exceptional profits on property sales, andgoodwill amortisation increased by 215% to £1.6m (2004: £0.5m). Profit on ordinary activities before taxation was £2.2m (2004: £5.5m includingexceptional items of £0.9m (2004:£5.3m). Redemption of share capital During 2004, the company negotiated the exit of its venture capital partner,Barclays Private Equity ("BPE"). The exit was agreed to have two phases, withthe first being completed in August 2004 and the second in July 2005, throughthe redemption of the remaining shares held by BPE for £6.5m. Sale and leaseback In August 2004, the group concluded the sale and leaseback of 26 homes for aconsideration of £28m. The proceeds were applied to the repayment of bank debtand the funding of the initial phase of the BPE exit. The financial statementsfor the current year reflect the additional property rental costs arising forthis transaction (£2.0m), together with reduced interest costs of £1.2m. In September 2005, the group concluded the further sale and leaseback of adevelopment to a property which has been included in the 2004 sale and leasebackportfolio. This transaction resulted in cash proceeds of £1.6m and anexceptional profit on sale of fixed assets of £0.9m. Business acquisitions On 11 August 2005, CareTech Community Services Limited purchased a group of 9freehold homes in the West Midlands as a going concern for a cash considerationof £4.4m. plus costs. This represented a strategic development for the group andwill act as a springboard for further development and acquisition in this area. On 15 August 2005, CareTech Community Services Limited acquired the assets andundertaking of a property in the Reading area for a cash consideration of £675kplus costs. This acquisition represents a valuable extension to the existingservices in Oxfordshire and the site is capable of significant furtherdevelopment. Capital expenditure The total capital expenditure for the year was £9.2m. The principal areas ofinvestment were in the purchase and development of land and buildings. Includingthe West Midlands and Reading acquisitions, this was £8.2m. Cashflow and debt facilities Cashflow and net debt The cash generated from operating activities continues to be very strong. Netcashflow from operating activities in the year was £2.1m (2004:£2.0m) During the year, the group negotiated revised facilities with the Royal Bank ofScotland plc. The group secured a facility of £20m, of which £13.5m is for thepurpose of financing acquisitions and developments with £6.5m being availablefor the financing of the share buy-back. The £6.5m was drawn in full in order toaccommodate the share buy-back in July 2005, but this facility was repaid inOctober 2005 from the net proceeds of the placing at flotation. During the year, drawings of £3.1m from the previous facility were repaid fromthe new facility and further drawings of £5.2m made to facilitate the businessacquisitions and other developments undertaken in the year. Net debt at 30 September was £13.7m, prior to the receipt of the £10m netproceeds of the placing at flotation. Effective tax rate The group's effective tax rate on profit on ordinary activities for the year was28.3%. Earnings per share Earnings per share have been calculated as required by FRS 14 to take intoaccount the effect of changes in the capital structure immediately prior toflotation. As set out in note 2, adjusted earnings per share have also been calculated. Balance sheet and gearing Shareholders' funds at 30 September 2005 are £4.2m (2004: £8.8m). Thisrepresents an underlying increase of £1.8m, together with a reduction of £6.4marising from the buy back of the share capital. Whilst the group's properties are stated in the balance sheet at a historic costvaluation of £14.1m, the recently completed sale and leaseback transactionsindicate that the value of the remaining assets as going concerns may beconsiderably in excess of this value. Post balance sheet events On 4 October 2005, the share capital of the company was re-organised to createan issued share capital of 29,169,924 ordinary shares and 53,402 deferredshares. On 4 October, CareTech Community Services Limited acquired a freehold propertyin Rickmansworth for a cash consideration of £0.5m plus costs. This propertywill undergo a significant refurbishment and will commence operations during thecoming year. On 12 October 2005, the company issued a further 7,062,500 ordinary shares aspart of its flotation on AiM. International financial reporting standards ("IFRS") The deadline for compliance with IFRS has been deferred for AiM listed companiesto accounting periods commencing on or after 1 January 2007. The group's firstrequired reporting order IFRS will be its half year report at 31 March 2008.Preliminary work has been carried out in 2005 to familiarise the board with theimplications of implementing IFRS. This work will continue in 2006. David SpinkFinance Director13 December 2005 CareTech Holdings PLC Group Profit and Loss Account For the year ended 30 September 2005 2005 2004 Notes £000 £000 Turnover 22,475 18,234 Cost of sales (18,923) (14,502) Gross profit 3,552 3,732 Administrative expenses (1,902) (1,878) Operating profit 1,650 1,854 EBITDAR: Operating profit before interest, taxation, depreciation, amortisation and property rentals 5,620 3,750 Operating leases rentals onand and buildings (3,182) (1,200) EBITDA: Operating profit before interest, taxation depreciation, amortisation 2,438 2,550 Depreciation (517) (427) Amortisation (271) (269) Operating profit 1,650 1,854 Exceptional items 1 875 5,252 Interest receivable and similar income 39 17 Interest payable and similar charges (397) (1,644) Profit on ordinary activities before taxation 2,167 5,479 Taxation on profit on ordinary activities (366) (513) Profit on ordinary activities after taxation 1,801 4,966 Dividends 0 (700) Retained profit for the financial year 1,801 4,266 Earnings per share 2 6.17p 18.73p Adjusted earnings per share 2 4.10p 1.87p CareTech Holdings PLC Group Statement of Total Recognised Gains and Lossesfor the year ended 30 September 2005 2005 2004 £000 £000 Retained profit for the year 1,801 4,266 Total Recognised Gains relating to the year 1,801 4,266 2005 2004 £000 £000Note of Historical Cost Profits and Losses Retained profit on ordinary activities before taxation 2,167 5,479 Realisation of property revaluation gains of previous years - 5,277 Historical cost profit on ordinary activities before taxation 2,167 10,756 Historical cost profit for the year retained aftertaxation and dividends 1,801 9,543 CareTech Holdings PLC Group Balance SheetAt 30 September 2005 Notes 2005 2004 £000 £000 Fixed AssetsIntangible assets 4,371 4,642Tangible assets 15,761 7,761 20,132 12,403Current AssetsStock 22 22Debtors 2,672 1,832Cash at bank and in hand 1,827 1,272 4,521 3,126Creditors: amounts fallingDue within one year (11,825) (4,338) Net current liabilities (7,304) (1,212) Total assets less current liabilities 12,828 11,191 Creditors: amounts fallingDue after more than one year (8,663) (2,382) 4,165 8,809 Capital and ReservesCalled up share capital 1 1Share premium account 249 249Profit and loss account 3,915 8,559 4,165 8,809 Shareholders' funds Equity 3 4,165 8,809 CareTech Holdings PLC Group Cash Flow StatementFor the year ended 30 September 2005 2005 2004 Notes £000 £000 Net cash inflow from operating activities 4 2,064 2,022Returns on investments and servicing of finance 5 (380) (1,627)Taxation - (9)Capital expenditure and financial investment (7,542) 23,844Dividends paid - (700) Net cash outflow before financing 5 (5,858) 23,530 Financing 6,413 (23,808) Increase / (Decrease) in cash 555 (278) 2005 2004 Notes £000 £000 Reconciliation of net cash flow tomovement in net debt Change in cash in the year 555 (278)Cash flow from decrease in debt and lease financing (6,413) 23,808New shares issued - 50Redemption of share capital (6,445) (350)New HP inceptions (235) (228) Change in net debt resulting from cash flows (12,538) 23,002 Net debt at start of financial year 5 (1,208) (24,210) Net debt at end of financial year (13,746) (1,208) CareTech Holdings PLC Notes to the Financial Statements 1. Exceptional items 2005 2004 £000 £000 (a) Profit on sale of fixed assets Profit on sale and leaseback transaction 875 5,626 Loss on disposal of other fixed assets - (4) 875 5,622(b) Loan arrangement fees - (370) 875 5,252 2. Earnings per share 2005 2004 £000 £000 Earnings for the year 1,801 4,966 Goodwill amortisation 271 269 Exceptional items (875) (5,252) Taxation on exceptional items - 513 Adjusted earnings for the year 1,197 496 Weighted number of shares in issue 29,169,924 26,507,124 Earnings per share 6.17p 18.73p Adjusted earnings per share 4.10p 1.87p Earnings per share have been calculated as required by FRS14 to take intoaccount the effect of changes in the capital structure immediately prior toflotation. Adjusted earnings for the year represent earnings for the year adjusted forgoodwill amortisation, exceptional items and the taxation thereon. 3. Reconciliation of movements in shareholders' funds Group £000 Retained profit for the financial year 1,801 Shares redeemed (6,445) (4,644) Opening shareholders' funds 8,809 Closing shareholders' funds 4,165 4. Reconciliation of operating profit to net cash flow from operating activities 2005 2004 £000 £000 Operating profit 1,650 1,854 Depreciation 517 427 Amortisation of goodwill 271 269 Change in debtors (873) (401) Change in creditors 499 (127) 2,064 2,022 Analysis of cash flows 2005 2004 £000 £000 Returns on investments and servicing of finance Interest received 39 17 Interest paid (419) (1,644) (380) (1,627) 2005 2004 £000 £000 Capital expenditure and financial investment Purchase of tangible fixed assets (9,162) (3,154) Proceeds of disposal of tangible fixed assets - exceptional item 1,620 26,998 (7,542) 23,844 2005 2004 £000 £000 Financing Issue of ordinary shares capital - 50 Repayment of loans (3,177) (21,650) Loans drawn down - (3,428) Capital element of finance lease rental payments (97) (96) New term loan drawn down 16,132 1,666 Redemption of share capital (6,445) (350) 6,413 (23,808) CareTech Holdings PLC Notes to the Financial Statements - Continued 5. Analysis of net debt At 1 October Cash At 30 Sept 2004 Flow Other 2005 £000 £000 £000 £000 Cash at bank and in hand 1,272 555 - 1,827 Debt due within one year - - (6,800) (6,800) Debt due after one year (2,166) (12,955) 6,800 (8,321) Finance leases and hire purchase contracts (314) 97 (235) (452) (1,208) (12,303) (235) (13,746) 6. Statutory Accounts The financial information set out above does not comprise the company'sstatutory accounts for the years ended 30 September 2004 and 30 September 2005.The accounts for the year ended 30 September 2004 have been filed and those forthe year ended 30 September 2005 will be filed with the Registrar of Companiesfollowing the Annual General Meeting. The company's auditors gave unqualifiedreports on the accounts for those periods and the reports did not contain astatement under section 237(2) or (3) of the Companies Act 1985. 7. Financial Statements and Annual General Meeting Audited financial statements and the annual report will be posted toshareholders on 20 January 2006. The Annual General Meeting will be held on 23February 2006. 8. Accounting policies The accounting policies adopted in this preliminary announcement are consistentwith the 2005 annual accounts, which are themselves consistent with the 2004annual accounts. Notes to the Editors: CareTech which was floated on the AiM in October 2005 is a leading provider ofspecialist residential care services to adults with learning difficulties.CareTech's services are provided through 61 residential care homes and 2 daycentres located predominantly in the South of England and the West Midlands.Current overall capacity is 435 beds in residential services and 55 places inday services. The company is headquartered in Potters Bar. Since formation in 1993 the group has expanded organically through winningtenders and building new homes; and by acquisition - typically asset purchasesof single site care home operations. CareTech's strategy for growth is to takeadvantage of the supply shortage for high care standard PLD places and increasethe number of beds and homes it operates through the development of the existingportfolio, the establishment of new homes and by selected acquisition in afragmented market. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
CTH.L