18th Jun 2008 07:00
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For Immediate Release |
18 June 2008 |
An analyst briefing will be held at the offices of Buchanan Communications, 45 Moorfields, London, EC2Y 9AE at 10.00 am
CareTech Holdings PLC
Interim Results for the six months ended 31 March 2008
CareTech Holdings PLC (AIM: CTH) ("CareTech" or "the Group"), a leading UK provider of learning disability care services, is pleased to announce its Interim Results for the six months ended 31 March 2008, in accordance with IFRS.
CareTech also announces today the acquisition of Valeo Limited for a total consideration of up to £15.3 million. The Group also announces a conditional placing of 7,142,857 New Ordinary Shares at 420p per share. A separate statement is being made today setting out further details on the Acquisition and Placing.
Highlights
Turnover increased 24% to £ 30.7m (2007: £24.8m)
EBITDA increased 51% to £7.0m (2007: £4.7m)(1)
Operating profit increased 59% to £6.3m (2007: £4.0m).
Profit before tax, amortisation and exceptional items increased by 47% to £3.9m (2007: £2.7m)
Profit before tax increased by 58% to £3.8m (2007: £2.4m).
Adjusted basic earnings per share up 36% to 8.40p (2007: 6.17p)(2) and basic earnings per share up 60% to 7.49p (2007: 4.68p).
Bed capacity increased from 1,029 to 1,073 with mature occupancy maintained at 94%.
Interim dividend of 1.025p per share declared (2007: 1p per share).
Notes:
Farouq Sheikh, Executive Chairman, said:
"CareTech has made further good progress in the first half of the financial year. Our acquisitions have been successfully integrated and are performing well. Organic growth continues ahead of market expectations and the Group remains well placed to deliver growth in future periods.
"We are delighted to welcome Valeo to the Group. The acquisition opens up a new exciting region for us and increases our portfolio of quality freehold assets. Together with the acquisition of Beacon Care homes in April 2008 Valeo provides a significant uplift to our client capacity, which underpins future revenues and profits.
"The Placing announced today gives us the financial strength to continue our strategy to take advantage of the consolidation opportunities in the PLD market and to increase the number of beds and homes we operate, reinforcing our position as a market leader in its niche."
For further information please call:
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CareTech Holdings PLC
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01707 652053
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Farouq Sheikh, Executive Chairman
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David Spink, Finance Director
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Buchanan Communications
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020 7466 5000
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Diane Stewart
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Tim Anderson
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Carrie Clement
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Brewin Dolphin Investment Banking
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0845 270 8600
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Matt Davis
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Andrew Emmott
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CareTech Holdings PLC
Chairman's Statement
Introduction
I am pleased to present my interim report for the six months ended 31 March 2008. This period has seen further strong growth for the Group from both continuing organic development and from the acquisition of One-Step, which was announced to shareholders in July 2007.
Adoption of IFRS
This is the Group's first set of results reported under International Financial Reporting Standards ('adopted IFRS') as adopted by the European Union.
Conversion to adopted IFRS is an accounting change which will have no significant overall impact on CareTech's earnings before interest, tax, depreciation and amortisation ('EBITDA'). All adjustments to the financial statements arising from the adoption of IFRS are non-cash items with the principal change being a move to full provisioning in respect of deferred taxation.
Financial results
The Company is reporting a strong uplift in revenues and earnings reflecting the impact of our investments in 2007, together with the organic growth initiatives implemented for the current year.
Revenues increased by 24% to £30.7m. EBITDA has also risen significantly in the period to £7m, up 51% on the same period in 2007.
Profit before taxation, excluding amortisation and exceptional costs increased by 47% to £3.9m (2007: £2.7m).
Basic earnings per share have grown by 60% and adjusted basic earnings per share have grown by 36%.
Cash flows from operations in the period were £6.3m (2007: £4.2m), but significant expenditure on acquisitions and organic developments resulted in a cash outflow in the period of £0.6m. Cash balances at 31 March were £0.5m (2007: £1.5m) with net debt at £80.7m (2007: £55.1m)
Client capacity and occupation
Total client capacity has increased from 1,029 places at 30 September 2007 to 1,073 places at 31 March 2008, representing an increase of 4.3% and pleasing progress towards our medium term objective of 1,500 places. Following the Beacon acquisition in April, client capacity is now at 1,186 places.
High occupation levels have been maintained; for the established services (i.e. those owned and operated for more than 12 months) the occupation rates are 94%.
Operating review
Turnover increased by 24% to £30.7m reflecting the impact of the 2007 acquisitions of Counticare and One-Step together with the organic development.
EBITDA of £7.0m demonstrates the continuing impact of the Group's operational gearing, with operating margins increasing from 18.8% of revenues in the first half of 2007 to 22.9% for the equivalent period in 2008.
Counticare has performed well since acquisition, and has integrated quickly with our existing services in Kent to provide a platform for organic development over the next 12-18 months. One-Step has added considerable momentum to our supported living services, where we now support 169 clients on this basis.
Service delivery
The provision of specialist residential services to adults with complex learning difficulties remains the cornerstone of the Groups' offering. However the Group is continuing to further develop supported living and children's services, in order to provide referring local authorities with a range of care solutions they are increasingly demanding. Supported living services remain attractive to commissioners of care services and we continue to expand the One Step model across our three operating regions. Children's services remain an area of opportunity for CareTech, and by leveraging off the childcare management team acquired as part of the acquisition of Delam Care, we now have a further 4 services running in the Midlands, together with a fifth service under development for launch later in the year.
Market
The market for the provision of care to people with learning disabilities remains highly fragmented and is continuing to grow. The factors which will drive an increase in demand include:
Population change, which is projected to increase demand by 1% per annum and raise the age profile of service recipients, more of whom are surviving to old age.
Increasing unwillingness or inability of parents to provide informal care, which may cause latent demand to be expressed more vigorously.
Improved medical techniques at birth which may on balance increase the number and proportion of service users with lifelong severe learning and/or physical disabilities.
Banking facilities
On 23 April the Group agreed a new banking facility of £120m with the Royal Bank of Scotland and Allied Irish Bank. The Directors believe the terms to be attractive particularly in the current market.
The additional facilities have been utilised in part to fund the Beacon acquisition with significant headroom available for future acquisitions.
Dividend
An interim dividend of 1.025 pence per share (2007: 1.0 pence) will be paid on 25 July 2008 to shareholders on the register at 27 June 2008.
Acquisition
Further details of the acquisition are set out in a separate announcement made today.
Placing and General Meeting
The Placing is conditional, inter alia, on shareholder approval at a General Meeting to be held at 10.00am on Monday 7 July 2008 at West Lodge Park Hotel, Cockfosters Road, Barnet, Hertfordshire EN4 0PY. Further details of the Placing and General Meeting are set out in a separate announcement made today.
Outlook
The Group has made a successful start to the new financial year and the Board remains confident about prospects for the future. The organic growth is again ahead of expectations and the recently announced acquisition of the Beacon Care homes together with acquisition of Valeo announced today provides a significant uplift to our client capacity, which underpins future revenues and profits.
The Placing announced today, subject to shareholder approval, will allow the Company to realise its growth plans by taking advantage of the consolidation opportunities that are currently available in the PLD market. The Group will continue actively to evaluate further selective acquisition opportunities. Following the achievements of the first half, the Directors believe confidently the Group is well positioned to continue to deliver earnings growth in the second half of the year and beyond.
Farouq Sheikh
Executive Chairman
18 June 2008
CareTech Holdings PLC
Unaudited Consolidated Income Statement - IFRS
For the six months ended 31 March 2008
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Notes |
6 months ended 31 March 2008 unaudited £000 |
6 months ended 31 March 2007 IFRS restated £000 |
Year ended 30 September 2007 IFRS restated £000 |
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Revenue |
30,690 |
24,849 |
53,119 |
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Cost of sales |
(19,512) |
(18,747) |
(38,930) |
||
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Gross profit |
11,178 |
6,102 |
14,189 |
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Administrative expenses |
|
(4,875) |
(2,135) |
(4,816) |
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Operating profit |
6,303 |
3,967 |
9,373 |
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EBITDA 1 |
7,038 |
4,668 |
10,879 |
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Depreciation |
(623) |
(398) |
(878) |
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Amortisation |
(67) |
(25) |
(76) |
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Share-based payment charge |
(45) |
- |
(87) |
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Goodwill adjustment |
- |
(78) |
(157) |
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Exceptional items |
2 |
- |
(200) |
(308) |
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6,303 |
3,967 |
9,373 |
|||
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Financial income |
14 |
87 |
62 |
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Financial expenses |
(2,490) |
(1,629) |
(3,741) |
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Profit before taxation |
3,827 |
2,425 |
5,694 |
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Taxation - exceptional items |
2 |
- |
- |
892 |
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Taxation |
3 |
(1,086) |
(729) |
(2,017) |
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Profit attributable to equity shareholders |
2,741 |
1,696 |
4,569 |
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Earnings per share |
|||||
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Basic |
4 |
7.49p |
4.68p |
12.59p |
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Diluted |
4 |
7.39p |
4.63p |
12.44p |
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Adjusted earnings per share |
|||||
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Basic |
5 |
8.40p |
6.17p |
13.79p |
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Diluted |
5 |
8.29p |
6.10p |
13.63p |
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______________________________
1 Operating profit before depreciation, amortisation, goodwill adjustments, exceptional items and share based payments.
CareTech Holdings PLC
Unaudited Consolidated Statement of Recognised Income and Expenses - IFRS
For the six months ended 31 March 2008
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6 months ended 31 March 2008 unaudited £000 |
6 months ended 31 March 2007 IFRS restated £000 |
Year ended 30 September 2007 IFRS restated £000 |
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Cash flow hedge reserve movement |
(812) |
72 |
(201) |
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Deferred tax on hedge reserve movement |
224 |
(20) |
60 |
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Deferred tax on share based payment |
(85) |
(3) |
204 |
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Net (expense) / income recorded in equity |
(673) |
49 |
63 |
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Profit for period |
2,741 |
1,696 |
4,569 |
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Total recognised income and expenses for period attributable to equity shareholders |
2,068 |
1,745 |
4,632 |
CareTech Holdings PLC
Unaudited Consolidated Balance Sheet - IFRS
At 31 March 2008
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31 March 2008 unaudited £000 |
31 March 2007 IFRS restated £000 |
30 September 2007 IFRS restated £000 |
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ASSETS |
|||
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Non-current Assets |
|||
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Goodwill |
11,991 |
9,786 |
11,674 |
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Other intangible assets |
881 |
198 |
948 |
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Property plant and equipment |
104,613 |
70,012 |
88,008 |
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Total non-current assets |
117,485 |
79,996 |
100,630 |
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Current Assets |
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Trade and other receivables |
7,398 |
2,609 |
8,394 |
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Financial instruments |
- |
68 |
- |
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Cash and cash equivalents |
530 |
1,470 |
1,093 |
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Total current assets |
7,928 |
4,147 |
9,487 |
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TOTAL ASSETS |
125,413 |
84,143 |
110,117 |
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LIABILITIES |
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Current liabilities |
|||
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Short term financial liabilities |
316 |
297 |
431 |
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Trade and other payables |
9,486 |
7,397 |
12,508 |
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Financial instruments |
1,017 |
- |
205 |
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Total current liabilities |
10,819 |
7,694 |
13,144 |
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Non-current liabilities |
|||
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Long term financial liabilities |
80,903 |
56,862 |
71,035 |
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Deferred consideration payable |
5,515 |
- |
- |
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Deferred tax |
8,818 |
6,954 |
8,693 |
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Total non-current liabilities |
95,236 |
63,816 |
79,728 |
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TOTAL LIABILITIES |
106,055 |
71,510 |
92,872 |
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Net Assets |
19,358 |
12,633 |
17,245 |
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Capital and reserves |
|||
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Called up share capital |
183 |
181 |
183 |
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Share premium account |
9,569 |
9,569 |
9,569 |
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Merger reserve |
1,998 |
- |
1,998 |
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Hedging reserve |
(732) |
48 |
(144) |
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Retained earnings |
8,340 |
2,835 |
5,639 |
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Equity shareholders' funds |
19,358 |
12,633 |
17,245 |
CareTech Holdings PLC
Unaudited Consolidated Cash Flow Statement - IFRS
For the six months ended 31 March 2008
|
6 months ended 31 March 2008 unaudited £000 |
6 months ended 31 March 2007 IFRS restated £000 |
Year ended 30 September 2007 IFRS restated £000 |
|
|
Cash flows from operating activities |
|||
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Operating profit |
6,303 |
3,967 |
9,373 |
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Depreciation |
623 |
398 |
878 |
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Amortisation |
67 |
25 |
76 |
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Share based payments |
45 |
- |
87 |
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Change in debtors |
996 |
157 |
(3,826) |
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Change in creditors |
(1,714) |
(381) |
2,288 |
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Cash flows from operations |
6,320 |
4,166 |
8,876 |
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Tax paid |
(386) |
(63) |
(369) |
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Net cash from operating activities |
5,934 |
4,103 |
8,507 |
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Cash flows from investing activities |
|||
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Purchase of subsidiary undertakings net of cash acquired |
(318) |
(15,078) |
(23,927) |
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Purchase of property plant & equipment |
(13,107) |
(7,105) |
(15,667) |
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Net cash used in investing activities |
(13,425) |
(22,183) |
(39,594) |
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Cash flows from financing activities |
|||
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Repayment of borrowings |
(100) |
- |
- |
|
Interest received |
14 |
87 |
62 |
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Interest and bank fees paid |
(2,718) |
(1,663) |
(3,717) |
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New borrowings |
9,871 |
19,739 |
34,903 |
|
Capital element of finance leases |
(139) |
(91) |
(184) |
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Dividends paid |
- |
- |
(362) |
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Net cash generated from financing activities |
6,928 |
18,072 |
30,702 |
|
Net change in cash |
(563) |
(8) |
(385) |
|
6 months ended 31 March 2008 unaudited £000 |
6 months ended 31 March 2007 IFRS restated £000 |
Year ended 30 September 2007 IFRS restated £000 |
|
|
Reconciliation of cash |
|||
|
Cash at start of period |
1,093 |
1,478 |
1,478 |
|
Change in cash balances |
(563) |
(8) |
(385) |
|
Cash at end of period |
530 |
1,470 |
1,093 |
Net debt is disclosed in the balance sheets as:
|
6 months ended 31 March 2008 unaudited £000 |
6 months ended 31 March 2007 IFRS restated £000 |
Year ended 30 September 2007 IFRS restated £000 |
|
|
Cash at bank and in hand |
530 |
1,470 |
1,093 |
|
Bank borrowings |
(80,331) |
(55,829) |
(70,562) |
|
Finance leases and hire purchase contracts |
(888) |
(786) |
(905) |
|
Net debt |
(80,689) |
(55,145) |
(70,374) |
CareTech Holdings PLC
Notes to the Financial Statements
1. Accounting policies
The interim financial information for each of the six month periods ended 31 March 2008 and 31 March 2007 is unaudited and does not constitute statutory accounts for the purpose of section 240 of the Companies Act 1985. The figures for the year ended 30 September 2007 have been extracted from the Group accounts for that year, as adjusted for IFRS conversion. Those financial statements have been delivered to the Registrar of Companies and include an auditors' report which was unqualified.
2. Exceptional items
|
6 months ended 31 March 2008 unaudited £000 |
6 months ended 31 March 2007 IFRS restated £000 |
Year ended 30 September 2007 IFRS restated £000 |
|
|
Acquisition integration costs |
- |
100 |
227 |
|
Management restructuring costs |
- |
100 |
81 |
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Total |
- |
200 |
308 |
|
Taxation adjustments in respect of prior years |
- |
- |
800 |
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Taxation effect of operating exceptional items |
- |
- |
92 |
|
Total taxation adjustments |
- |
- |
892 |
Exceptional items for the period ended 31 March 2007 and year ended 30 September 2007 represent the costs associated with restructuring, reorganising and integration following the Counticare acquisition together with the non-recurrent cost attributable to the creation of the regionalised management structure.
3. Taxation
|
6 months ended 31 March 2008 unaudited £000 |
6 months ended 31 March 2007 IFRS restated £000 |
Year ended 30 September 2007 IFRS restated £000 |
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Current tax - current period |
821 |
494 |
1,020 |
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Deferred tax |
265 |
235 |
997 |
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Total tax charge for period |
1,086 |
729 |
2,017 |
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Effective current tax rate |
21.5% |
20.4% |
17.9% |
|
Effective total tax rate |
28.4% |
30.1% |
35.4% |
CareTech Holdings PLC
Notes to the Financial Statements - Continued
4. Earnings per share
|
6 months ended 31 March 2008 unaudited £000 |
6 months ended 31 March 2007 IFRS restated £000 |
Year ended 30 September 2007 IFRS restated £000 |
|||
|
Profit attributable to ordinary shareholders |
2,741 |
1,696 |
4,569 |
||
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Weighted number of shares in issue for basic earnings per share |
36,596,061 |
36,232,424 |
36,298,178 |
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Weighted number of shares for diluted earnings per share |
37,067,762 |
36,602,106 |
36,737,180 |
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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. |
|||||
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Earnings per share (pence per share) |
|||||
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- basic |
7.49p |
4.68p |
12.59p |
||
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- diluted |
7.39p |
4.63p |
12.44p |
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5. Adjusted earnings per share
|
6 months ended 31 March 2008 unaudited £000 |
6 months ended 31 March 2007 IFRS restated £000 |
Year ended 30 September 2007 IFRS restated £000 |
|||
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Profit attributable to ordinary shareholders |
2,741 |
1,696 |
4,569 |
||
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Amortisation |
67 |
25 |
76 |
||
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Goodwill adjustment |
- |
78 |
157 |
||
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Exceptional items |
- |
200 |
308 |
||
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Tax effect of operating exceptional items |
- |
- |
(92) |
||
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Tax adjustment in respect of prior years |
- |
- |
(800) |
||
|
Deferred tax charge under IFRS |
265 |
235 |
997 |
||
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Deferred tax charge under UK GAAP |
- |
- |
(208) |
||
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Adjusted profit attributable to ordinary shareholders |
3,073 |
2,234 |
5,007 |
||
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Adjusted earnings per share (pence per share) |
|||||
|
- basic |
8.40p |
6.17p |
13.79p |
||
|
|
- diluted |
8.29p |
6.10p |
13.63p |
|
6. Reconciliation of shareholders funds
|
6 months ended 31 March 2008 unaudited £000 |
6 months ended 31 March 2007 IFRS restated £000 |
Year ended 30 September 2007 IFRS restated £000 |
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|
Balance at start of period |
17,245 |
10,888 |
10,888 |
|
|
Profit for the period |
2,741 |
1,696 |
4,569 |
|
|
Dividends paid |
- |
- |
(362) |
|
|
Cash flow hedge movement, net of tax |
(588) |
52 |
(141) |
|
|
Share based payments |
45 |
- |
87 |
|
|
New shares issued |
- |
- |
2,000 |
|
|
Deferred tax on share based payments |
(85) |
(3) |
204 |
|
|
Balance at end of period |
19,358 |
12,633 |
17,245 |
CareTech Holdings PLC
Notes to the Financial Statements - Continued
7. Post balance sheet events
During April 2008, the Group entered into a new banking facility providing a total funding facility of £120m.
On 29 April 2008, the Group acquired the entire share capital of Beacon Care Holdings Limited and Beacon Care Investments Limited together with 16 freehold properties for up to £22.5m. Consideration of £18.6m was paid on completion and was satisfied by a cash payment of £15.6m and by the issue, to the vendors, of 600,000 ordinary shares of 0.5 pence each in CareTech. Deferred consideration of up to £3.9m in cash will become payable to the vendors following the achievement of certain performance targets. The Directors have not yet completed their assessment of the fair values.
On 18 June 2008, the Group acquired the entire share capital of Valeo Limited for up to £15.3m. Initial consideration of £12.5m was paid on completion satisfied by £11m in cash, the assumption of £0.5m of liabilities and by issue to the vendors of 200,000 ordinary shares of 0.5 pence each in CareTech. Deferred consideration of up to £2.8m (to be satisfied by the issue of ordinary shares of 0.5 pence each at a value of 525 pence per share in CareTech), will become payable to the vendors following the achievement of certain performance targets. The Directors have not yet completed their assessment of the fair values.
These interim financial statements do not include any adjustments in respect of these transactions.
8. Distribution to shareholders
This interim report is being sent to all shareholders and will be available to the public on the Group's website (www.caretech-uk.com) and from the Group's registered office, Leighton House, 33-37 Darkes Lane, Potters Bar, Hertfordshire EN6 1BB.
CareTech Holdings PLC
Restatement of Financial Information Under IFRS
1. Introduction
CareTech historically prepared its primary financial statements under UK Generally Accepted Accounting Principles ('UK GAAP'). In accordance with the AIM Rules for Companies, the Group is required to prepare its' financial statements under International Financial Reporting Standards ('IFRS'), as adopted by the EU, as its primary accounting basis.
The first reported results under IFRS are for the six months ended 31 March 2008 and the first full year reporting under IFRS will be for the year ending 30 September 2008.
Under IFRS 1, First Time Adoption, the transition date for the conversion to IFRS is the start of the earliest comparative period presented in the entity's first IFRS Financial Statements. Therefore the date of transition to IFRS is 1 October 2006.
The following pages explain how the Group's reported performance and financial position are affected by the change to IFRS, and present the restatement of financial information previously published under UK GAAP, as follows:
Restated balance sheet on transition at 1 October 2006;
Restatement of financial statements at 30 September 2007 and for the year then ended; and
Restatement of interim financial statements at 31 March 2007 and for the six months then ended.
2. Highlights
Conversion to IFRS is an accounting change and has no significant impact on the Group's profit before tax and no impact on cash flows or net debt position. The conversion has no effect on the underlying business, on risk management or the Group's strategy.
The impact of adopting IFRS on the Group's financial statements is most notable in the following areas:
Accounting for business combinations and the treatment of related goodwill and intangible assets;
Accounting for the fair value of financial instruments held for hedging bank debt;
Accounting for deferred taxation; and
Reclassification of certain items, known as "presentation adjustments".
|
6 months ended 31 March 2007 |
Year ended 30 September 2007 |
||||
|
IFRS £000 |
UKGAAP £000 |
IFRS £000 |
UKGAAP £000 |
||
|
Consolidated Income Statement |
|||||
|
Revenue |
24,849 |
24,849 |
53,119 |
53,119 |
|
|
EBITDA |
4,668 |
4,672 |
10,879 |
10,909 |
|
|
Operating profit |
3,967 |
3,657 |
9,373 |
9,120 |
|
|
Profit before tax |
2,425 |
2,115 |
5,694 |
5,441 |
|
|
Basic EPS |
4.68p |
4.47p |
12.59p |
14.06p |
|
|
Adjusted EPS |
6.17p |
5.98p |
13.79p |
13.70p |
|
|
Adjusted fully diluted EPS |
6.10p |
5.92p |
13.63p |
13.54p |
|
|
Consolidated Cash Flows Statement |
|||||
|
Cash flows from operations |
4,166 |
4,166 |
8,876 |
8,876 |
|
|
Net debt |
55,145 |
55,145 |
70,374 |
70,374 |
|
CareTech Holdings PLC
Restatement of Financial Information Under IFRS
3. Basis of preparation
The financial information in this document has been prepared in accordance with current IFRS, which is subject to ongoing amendment by the IASB and subsequent endorsement by the European Commission. As a result, information contained within this document will be updated for any subsequent amendment to IFRS, for new standards as they are put into place and as best practice evolves.
The rules for first-time adoption of IFRS are set out in IFRS 1 'First Time Adoption of International Financial Reporting Standards'. While a company is generally required to apply IFRS accounting policies retrospectively to determine its opening balance sheet under IFRS, IFRS 1 allows a number of exceptions to this general principle. The key exemptions taken by the Group are:
No restatement of business combinations pre-transition date;
Property, Plant and Equipment is to be retained at historic cost and not revalued.
The Groups auditors, KPMG, have issued unqualified opinions on the Group's UK GAAP financial statements for the years ended 30 September 2006 and 30 September 2007.
Subject to audit, EU endorsement of outstanding standards and no further changes from the IASB, this information is expected to form the basis for comparatives when reporting financial results for 2008 and for subsequent reporting periods.
The Group prepares the cash flow statement for both UK GAAP and IFRS using the indirect method. Consequently, adjustments made to working capital items in the balance sheet on conversion to IFRS lead to an adjustment in the IFRS cash flow statement. There are no changes between cash flows from operating activities, investing activities, and financing activities. No adjustments have been made to cash and cash equivalents and no other adjustments have been made to the cash flow statement on conversion.
4. Key accounting changes
The following are the most significant adjustments arising from transition to IFRS.
4.1. Business combinations
IFRS 3 - Business Combinations does not permit the amortisation of goodwill through the income statement. Instead, goodwill is carried at cost and reviewed for impairment annually and also when there is any indication that the carrying value may not be recoverable. Under the transitional arrangements of 'IFRS 1 - First Time Adoption of IFRS', the Group has decided to apply the standard prospectively from 1 October 2006. Consequently periodic amortisation of goodwill through the income statement has ended. Under UK GAAP goodwill was amortised over its estimated useful life, which did not exceed twenty years.
New intangible assets created under 'IFRS 3 - Business Combinations' relate to customer relationships and are deemed to have a finite life and no residual value. Customer relationships are amortised over their estimated useful economic lives, which does not exceed ten years. Under UK GAAP, intangible assets were not separately recognised from goodwill.
The UK GAAP goodwill balance of £7,408,000, as reported at 30 September 2006, has been included in the IFRS consolidated opening balance sheet and is no longer amortised. This gives rise to a credit of £452,000 to operating profit in the Group's consolidated income statement for the year ended 30 September 2007.
An impairment analysis was conducted at 30 September 2006, 31 March 2007 and 30 September 2007. This did not give rise to an impairment charge under IAS 36 'Impairment of Assets'.
4.2 Interest rate swaps
Under IAS 39, the Group must recognise its financial instruments at fair value at each balance sheet date.
CareTech Holdings PLC
Restatement of Financial Information Under IFRS
The Group has chosen to apply hedge accounting under IAS 39. As such, movements in the fair value of these instruments are taken to the Statement of Recognised Income and Expenses. At transition their fair value represented a liability of £4,000. At 30 September 2007 this had increased to a liability of £205,000, with the movement being charged through the Statement of Recognised Income and Expenses.
There is no change to the economic consequences or cash flows arising as a result of having entered into the swaps, and there is no impact of this accounting on covenant compliance - covenants are set with reference to cash interest payable, not the accounting charge.
4.3 Taxation
IAS 12 - Income Taxes differs from UK GAAP by using a balance sheet based methodology. Changes in the accounting treatment of a number of balance sheet items will impact the deferred tax charge and liability. Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited to equity, in which case the deferred tax is also dealt with in equity. Deferred tax adjustments are also required in respect of certain of the adopted IFRS transitional accounting adjustments noted above, principally due to the prohibition against discounting deferred tax balances, against fair value adjustments in respect of acquisitions and the amounts recognised when accounting for IAS 39.
The effect on the income statement has been to increase the tax charge by £789,000 in the year to September 2007 and by £235,000 in the six months to 31 March 2007.
Furthermore, under UK GAAP deferred tax was not required to be provided where proceeds on the sale of assets had been reinvested into qualifying business assets and gains rolled over. Under IFRS deferred tax on such rolled over gains is required to be recognised even where the liability will not crystallise until the new assets are sold. The effect of this adjustment was to reduce net assets by £5,213,000 at date of transition. This was reduced to £4,866,000 as at 30 September 2007 due to changes in the underlying corporation tax rate.
4.4. Purchased software
Various reclassifications of balance sheet items have been made to ensure compliance with IFRS. The most notable is that under IFRS, the cost of purchased software, which was previously presented within 'Property, plant and equipment' under UK GAAP, is reclassified to 'Intangible assets' under IFRS. The effect of this transfer is to reduce property plant and equipment by £256,000 and increase intangible assets by the same value as at 30 September 2007.
An impairment analysis was conducted at each of the Balance Sheet dates. This did not indicate impairment under IAS 36 'Impairment of Assets'.
5. Future changes
The Group will monitor proposed changes to IFRS, assessing how best practice develops and evaluating their impact on the Group's financial statements.
6. IFRS Financial Information and reconciliations
The following pages reconcile between the financial information previously published under UK GAAP and the financial information prepared under IFRS for the following statements:
Transitional balance sheet adopted at 1 October 2006;
Income statement and balance sheet for the year ended 30 September 2007; and
Income statement and balance sheet for the period ended 31 March 2007.
CareTech Holdings PLC
Restatement of consolidated balance sheet
At 1 October 2006 - transition date
|
|
UK GAAP as previously reported
|
|
Presentation adjustments
|
|
|
Accounting adjustments
|
|
Restated in accordance with IFRS
|
|
|
£000
|
|
£000
|
|
|
£000
|
|
£000
|
|
Non-current assets
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment
|
48,401
|
|
|
|
|
-
|
|
48,401
|
|
Intangible assets (a)
|
7,408
|
|
|
|
|
861
|
|
8,269
|
|
|
55,809
|
|
|
|
|
861
|
|
56,670
|
|
Current assets
|
|
|
|
|
|
|
|
|
|
Trade and other receivables
|
2,766
|
|
|
|
|
|
|
2,766
|
|
Cash and cash equivalents
|
1,478
|
|
|
|
|
|
|
1,478
|
|
|
4,244
|
|
|
|
|
|
|
4,244
|
|
Total assets
|
60,053
|
|
|
|
|
861
|
|
60,914
|
|
Current liabilities
|
(6,851)
|
|
6,851
|
|
|
|
|
-
|
|
Trade and other payables (b)
|
|
|
(2,916)
|
|
|
(185)
|
|
(3,101)
|
|
Tax liabilities
|
|
|
(2,036)
|
|
|
|
|
(2,036)
|
|
Deferred income
|
|
|
(2,691)
|
|
|
|
|
(2,691)
|
|
Financial instruments (c)
|
|
|
|
|
|
(4)
|
|
(4)
|
|
|
(6,851)
|
|
(792)
|
|
|
(189)
|
|
(7,832)
|
|
Non-current liabilities
|
(36,984)
|
|
36,984
|
|
|
|
|
-
|
|
Loans and borrowings
|
|
|
(36,192)
|
|
|
|
|
(36,192)
|
|
Deferred tax (a)(b)(c)(d)(e)
|
|
|
|
|
|
(6,002)
|
|
(6,002)
|
|
|
(36,984)
|
|
792
|
|
|
(6,002)
|
|
(42,194)
|
|
Total liabilities
|
(43,835)
|
|
-
|
|
|
(6,191)
|
|
(50,026)
|
|
Net assets
|
16,218
|
|
-
|
|
|
(5,330)
|
|
10,888
|
|
|
|
|
|
|
|
|
|
|
|
Called up share capital
|
181
|
|
|
|
|
|
|
181
|
|
Share premium account
|
9,569
|
|
|
|
|
|
|
9,569
|
|
Hedging reserve (c)
|
|
|
|
|
|
(3)
|
|
(3)
|
|
Retained earnings (b)(d)(e)
|
6,468
|
|
|
|
|
(5,327)
|
|
1,141
|
|
Total equity
|
16,218
|
|
-
|
|
|
(5,330)
|
|
10,888
|
The key accounting changes are summarised as follows:
(a) Deferred tax on fair value adjustments
(b) Additional accruals under IAS 19
(c) Fair value of financial instruments adjustment
(d) Deferred tax on rolled over gains
(e) Other adjustment to deferred tax arising from IFRS
CareTech Holdings PLC
Restatement of consolidated income statement
For the year ended 30 September 2007
|
|
UKGAAP as
previously
reported
|
|
Presentation
adjustments
|
|
|
Accounting adjustments
|
|
Restated in accordance with IFRS
|
|
|
£000
|
|
£000
|
|
|
£000
|
|
£000
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
53,119
|
|
|
|
|
|
|
53,119
|
|
Cost of sales (a)
|
(38,890)
|
|
|
|
|
(40)
|
|
(38,930)
|
|
Gross profit
|
14,229
|
|
|
|
|
(40)
|
|
14,189
|
|
Admin expenses
|
(5,109)
|
|
|
|
|
293
|
|
(4,816)
|
|
Operating profit
|
9,120
|
|
|
|
|
253
|
|
9,373
|
|
EBITDA
|
10,909
|
|
|
|
|
(30)
|
|
10,879
|
|
Depreciation (c)
|
(942)
|
|
64
|
|
|
-
|
|
(878)
|
|
Amortisation (b)(c)
|
(452)
|
|
(64)
|
|
|
440
|
|
(76)
|
|
Goodwill adjustment (d)
|
|
|
|
|
|
(157)
|
|
(157)
|
|
Share-based payments
|
(87)
|
|
|
|
|
|
|
(87)
|
|
Exceptional items
|
(308)
|
|
|
|
|
|
|
(308)
|
|
Total profit from operations
|
9,120
|
|
|
|
|
253
|
|
9,373
|
|
Financial income
|
62
|
|
|
|
|
|
|
62
|
|
Financial expense
|
(3,741)
|
|
|
|
|
-
|
|
(3,741)
|
|
Profit before tax
|
5,441
|
|
|
|
|
253
|
|
5,694
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense (a)(e)(f)
|
(336)
|
|
|
|
|
(789)
|
|
(1,125)
|
|
Profit for the period
|
5,105
|
|
|
|
|
(536)
|
|
4,569
|
|
|
|
|
|
|
|
|
|
|
The key accounting changes are summarised as follows:
(a) Additional accruals under IAS 19
(b) Reversal of goodwill amortisation
(c) Reclassification of software depreciation to amortisation
(d) Goodwill reduction in respect of tax losses acquired as part of business combination that were not initially recognised
(e) Reversal of discounting on deferred tax
(f) Other adjustments to deferred tax comprising tax rate change and deferred tax effects of IFRS adjustments
CareTech Holdings PLC
Restatement of consolidated balance sheet
At 30 September 2007
|
|
UK GAAP as previously reported
|
|
Presentation adjustments
|
|
Accounting Adjustments
|
Restated in accordance with IFRS
|
|
|
£000
|
|
£000
|
|
£000
|
£000
|
|
Non-current assets
|
|
|
|
|
|
|
|
Property, plant and equipment
|
88,264
|
|
(256)
|
|
|
88,008
|
|
Intangible assets – goodwill (a)
|
9,253
|
|
(692)
|
|
3,113
|
11,674
|
|
Intangible assets - software
|
|
|
256
|
|
|
256
|
|
Intangible assets – contracts
|
-
|
|
692
|
|
|
692
|
|
|
97,517
|
|
-
|
|
3,113
|
100,630
|
|
Current assets
|
|
|
|
|
|
|
|
Trade and other receivables
|
8,394
|
|
|
|
|
8,394
|
|
Cash and cash equivalents
|
1,093
|
|
|
|
|
1,093
|
|
|
9,487
|
|
|
|
|
9,487
|
|
Total assets
|
107,004
|
|
-
|
|
3,113
|
110,117
|
|
Current liabilities
|
(12,713)
|
|
12,713
|
|
|
|
|
Loans and borrowings
|
|
|
(431)
|
|
|
(431)
|
|
Trade and other payables (b)
|
|
|
(3,018)
|
|
(226)
|
(3,244)
|
|
Tax liabilities
|
|
|
(2,051)
|
|
|
(2,051)
|
|
Deferred income
|
|
|
(7,213)
|
|
|
(7,213)
|
|
Financial instruments (c)
|
|
|
|
|
(205)
|
(205)
|
|
|
(12,713)
|
|
-
|
|
(431)
|
(13,144)
|
|
Non-current liabilities
|
|
|
|
|
|
|
|
Loans and borrowings
|
(71,035)
|
|
|
|
|
(71,035)
|
|
Deferred tax (a)(b)(c)(d)(e)(f)
|
(208)
|
|
|
|
(8,485)
|
(8,693)
|
|
|
(71,243)
|
|
|
|
(8,485)
|
(79,728)
|
|
Total liabilities
|
(83,956)
|
|
|
|
(8,916)
|
(92,872)
|
|
Net assets
|
23,048
|
|
-
|
|
(5,803)
|
17,245
|
|
|
|
|
|
|
|
|
|
Called up share capital
|
183
|
|
|
|
|
183
|
|
Share premium account
|
9,569
|
|
|
|
|
9,569
|
|
Merger reserve
|
1,998
|
|
|
|
|
1,998
|
|
Hedging reserve (c)
|
-
|
|
-
|
|
(144)
|
(144)
|
|
Retained earnings (a)(b)(d)(e)(f)
|
11,298
|
|
|
|
(5,659)
|
5,639
|
|
Total equity
|
23,048
|
|
-
|
|
(5,803)
|
17,245
|
The key accounting changes are summarised as follows:
(a) Deferred tax on fair value adjustments
(b) Additional accruals under IAS 19
(c) Fair value of financial instruments adjustment
(d) Deferred tax on rolled over gains
(e) Other adjustments to deferred tax arising from IFRS
(f) Deferred tax on share based payments
CareTech Holdings PLC
Restatement of consolidated income sheet
For the six months ended 31 March 2007
|
|
UKGAAP as
previously
reported
|
|
Presentation
adjustments
|
|
Accounting Adjustments
|
Restated in accordance with IFRS
|
|
|
£000
|
|
£000
|
|
£000
|
£000
|
|
|
|
|
|
|
|
|
|
Revenue
|
24,849
|
|
|
|
|
24,849
|
|
Cost of sales (a)
|
(18,788)
|
|
|
|
41
|
(18,747)
|
|
Gross profit
|
6,061
|
|
|
|
41
|
6,102
|
|
Admin expenses
|
(2,404)
|
|
|
|
269
|
(2,135)
|
|
Operating profit
|
3,657
|
|
|
|
310
|
3,967
|
|
EBITDA
|
4,627
|
|
|
|
41
|
4,668
|
|
Depreciation (c)
|
(423)
|
|
25
|
|
-
|
(398)
|
|
Amortisation (b)(c)
|
(347)
|
|
(25)
|
|
347
|
(25)
|
|
Goodwill adjustment (d)
|
|
|
|
|
(78)
|
(78)
|
|
Exceptional items
|
(200)
|
|
|
|
|
(200)
|
|
Total profit from operations
|
3,657
|
|
|
|
310
|
3,967
|
|
Financial income
|
87
|
|
|
|
-
|
87
|
|
Financial expense
|
(1,629)
|
|
|
|
-
|
(1,629)
|
|
Profit before tax
|
2,115
|
|
|
|
310
|
2,425
|
|
|
|
|
|
|
|
|
|
Income tax expense (a)(e)
|
(494)
|
|
|
|
(235)
|
(729)
|
|
Profit for the period
|
1,621
|
|
|
|
75
|
1,696
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The key accounting changes are summarised as follows:
(a) Additional accruals under IAS 19
(b) Reversal of goodwill amortisation
(c) Reclassification of software depreciation to amortisation
(d) Goodwill reduction in respect of tax losses acquired as part of business combination that were not initially recognised
(e) Reversal of discounting on deferred tax
CareTech Holdings PLC
Restatement of consolidated balance sheet
At 31 March 2007
|
|
UK GAAP as previously reported
|
|
Presentation adjustments
|
|
Accounting Adjustments
|
Re-stated in accordance with IFRS
|
|
|
£000
|
|
£000
|
|
£000
|
£000
|
|
Non-current assets
|
|
|
|
|
|
|
|
Property, plant and equipment
|
70,210
|
|
(198)
|
|
|
70,012
|
|
Intangible assets – goodwill (a)
|
7,961
|
|
|
|
1,825
|
9,786
|
|
Intangible assets – contracts
|
-
|
|
198
|
|
|
198
|
|
|
78,171
|
|
-
|
|
1,825
|
79,996
|
|
Current assets
|
|
|
|
|
|
|
|
Trade and other receivables (c)
|
2,609
|
|
|
|
68
|
2,677
|
|
Cash and cash equivalents
|
1,470
|
|
|
|
|
1,470
|
|
|
4,079
|
|
-
|
|
68
|
4,147
|
|
Total assets
|
82,250
|
|
-
|
|
1,893
|
84,143
|
|
Current liabilities
|
(7,549)
|
|
7,549
|
|
|
|
|
Loans and borrowings
|
|
|
(297)
|
|
|
(297)
|
|
Trade and other payables (b)
|
|
|
(2,898)
|
|
(145)
|
(3,043)
|
|
Tax liabilities
|
|
|
(2,091)
|
|
|
(2,091)
|
|
Deferred income
|
|
|
(2,263)
|
|
|
(2,263)
|
|
Financial instruments
|
|
|
|
|
|
|
|
|
(7,549)
|
|
-
|
|
(145)
|
(7,694)
|
|
Non-current liabilities
|
|
|
|
|
|
|
|
Loans and borrowings
|
(56,862)
|
|
|
|
|
(56,862)
|
|
Deferred tax (a)(b)(d)(e)
|
-
|
|
|
|
(6,954)
|
(6,954)
|
|
|
(56,862)
|
|
-
|
|
(6,954)
|
(63,816)
|
|
Total liabilities
|
(64,411)
|
|
-
|
|
(7,099)
|
(71,510)
|
|
Net assets
|
17,839
|
|
-
|
|
(5,206)
|
12,633
|
|
|
|
|
|
|
|
|
|
Called up share capital
|
181
|
|
|
|
|
181
|
|
Share premium account
|
9,569
|
|
|
|
|
9,569
|
|
Merger reserve
|
-
|
|
|
|
|
-
|
|
Hedging reserve (c)
|
|
|
|
|
48
|
48
|
|
Retained earnings (a)(b)(d)(e)
|
8,089
|
|
-
|
|
(5,254)
|
2,835
|
|
Total equity
|
17,839
|
|
-
|
|
(5,206)
|
12,633
|
The key accounting changes are summarised as follows:
(a) Deferred tax on fair value adjustments
(b) Additional accruals under IAS 19
(c) Fair value of financial instruments adjustment
(d) Deferred tax on rolled over gains
(e) Other adjustments to deferred tax arising from IFRS
Related Shares:
CTH.L