4th Dec 2007 07:02
CareTech Holdings PLC04 December 2007 For immediate release 4 December 2007 CARETECH HOLDINGS PLC ("CareTech", "the Group" or "the Company") Preliminary Results for the year ended 30 September 2007 Financial Highlights • Turnover increased 59% to £53.1m (2006: £33.5m) • EBITDA (being the operating profit before interest, taxation, depreciation, goodwill amortisation, exceptional items and share based payments) increased 98% to £10.9m (2006: £5.5m) • Operating profit increased by 106% to £9.1m (2006: £4.4m) • Profit before tax, amortisation of goodwill, exceptional items and profit on sale of fixed assets increased by 66% to £6.2m (2006: £3.7m) • Profit before tax increased by 63% to £5.4m (2006: £3.3m) • Adjusted earnings per share (being before goodwill amortisation and exceptional items) 13.70p (2006: 8.17p), basic earnings per share 14.06p (2006: 7.07p) • Two acquisitions completed during the year representing 184 beds • Overall resident capacity increased by 290 to 1,029 • Occupancy levels at the year end of 90% Commenting on the results, Farouq Sheikh, Executive Chairman said: "CareTech leads the way in providing creative "person-centred" services. Withthis in mind we have increased the range of services we offer within ourspecialist field of learning disability. This development, coupled with thecompletion of our regional management project puts us in a stronger position tocontinue our strategic goals. The performance of the underlying business is strong. The 2006 acquisitions ofDelam Care and Lonsdale Midlands both performed ahead of expectations in 2007and the initial results from both Counticare and One-step are very positive.Having organised the Group's management into a regional structure, we remainideally placed for further progress in all service areas. Moreover the market remains favourable. Within the highly fragmented social caremarket smaller operators are struggling to meet an increased regulatory burdenwhile demographic change leads toward greater demand, especially among the mostdisabled potential users. We look forward to the coming year with confidence asthe Board continues to selectively evaluate growth opportunities." Enquiries: CareTech 01707 652053 Farouq Sheikh - Executive Chairman David Spink - Finance Director Buchanan Communications 020 7466 5000 Tim Anderson / James Strong CareTech Holdings PLC Chairman's Statement Introduction It gives me great pleasure to present our full year results for 2007. In linewith previous years I can report another year of substantial progress for theGroup, with strong growth in revenues and underlying earnings since ourflotation in October 2005. CareTech leads the way in providing creative "person centred" services. Withthis in mind we have increased the range of services we offer within ourspecialist field of learning disability. This development, coupled with thecompletion of our regional management project puts us in a stronger position tocontinue our strategic goals. Market fundamentals and demographics remainfavourable to our strategic position. Results The results to 30 September 2007 demonstrate further significant growth withrevenues up 59% to £53.1m and EBITDA (being the operating profit beforeinterest, taxation depreciation, amortisation, exceptional items and share-basedpayment costs) up 98% to £10.9m. Profit before tax, amortisation and exceptional items increased by 66% to £6.2m,with adjusted basic earnings per share (i.e. on the same basis) increasing by68% to 13.7p. Over the three year period from 2005-2007 profit before tax, goodwill,amortisation and exceptional items has risen from £1.6m to £6.2m representing acompound growth rate of 96%. Similarly, basic earnings per share, adjusted asabove, has increased from 4.1p to 13.7p representing a compound growth rate of83%. Further success with growth strategy The Group continues to deliver against its ambition to become a consolidator inthe highly fragmented market in which it operates. In the two years sinceflotation we have grown from 423 beds and 55 day centre places to the current1,029 beds and 229 day places. Through regionalisation of the operational management structure, we havepositioned the Group to be able to meet its strategic targets with anorganisation "fit for purpose". During 2007 significant growth has again been made with residential bed capacityincreasing by 290 to 1,029 beds. Once again this has been achieved through acombination of acquisitions, representing 184 beds, together with organic growthof existing services of 106 beds. Organic growth underpins the business and the management team has deliveredsolid performance in this growth area as well as through acquisition. This inpart stems from the build up of our regional identity and the consequentstrengthening of local relationships with local authority purchasers. Service development The Group remains committed to the core activity of providing residentialservices to adults with learning disabilities, but recognises the opportunitiesthat arise from being able to offer a wider menu of service options to SocialServices care purchasers. In 2006 we acquired the children's services operated by Delam Care and during2007 we have launched a further three services for children and school leaversin the Midlands area. Our continuing dialogue with service purchasers has recognised a significantdemand for supported living services to individuals who are more independentthan those living under the residential care model. Our acquisition of One Stepin July 2007 has given further momentum to our existing supported livingservices and is an exciting innovation that we will begin to roll out across ouroperating regions in the current year. CareTech Holdings PLC Chairman's Statement - continued Dividend In July 2007 we announced an interim dividend to shareholders of 1p per share.The Board is proposing a final dividend of 2p per share payable to shareholderson 14th March 2008, subject to approval by shareholders at the forthcomingAnnual General Meeting. Outlook The performance of the underlying business is strong. The 2006 acquisitions ofDelam Care and Lonsdale Midlands both performed ahead of expectations in 2007and the initial results from both Counticare and One-step are very positive.Having organised the Group's management into a regional structure, we remainideally placed for further progress in all service areas. Moreover the market remains favourable. Within the highly fragmented social caremarket smaller operators are struggling to meet an increased regulatory burdenwhile demographic change leads toward greater demand, especially among the mostdisabled potential users. We look forward to the coming year with confidence asthe Board continues to selectively evaluate growth opportunities. Conclusion Our continuing success is underpinned by the hard work and dedication of allstaff. I would again express my thanks to colleagues for their considerableeffort in what has been an energising and fulfilling year. I look forward to the year ahead with enthusiasm. I am confident that our teamswill deliver the very best and innovative services to those we support and in sodoing will enable all stakeholders to share in our success going forward. Farouq SheikhChairmanCareTech Holdings PLC CareTech Holdings PLC Chief Executive's Review Introduction 2007 has been another productive year and our annual financial statements to 30September reflect the solid platform that we continue to build. We have maintained exceptional standards within our core activity and retain ourfocus on high quality individually focussed service delivery. Through ourinitiatives and innovations we continue as a favoured provider with a broadrange of services that anticipate and meet demand for a spectrum of needs withinthe learning disability field. Our market position has strengthened and we continue our strategic approach toconsolidation, adding a further 290 beds to our portfolio through selectiveacquisition and organic growth. We have also increased our day centre capacityto 229 places. The market in which we operate yields significant growth opportunity with anincrease of demand year on year, consolidation opportunities and demand forservice diversity. CareTech is a social care provider and in the past year we have worked with morethan 140 separate Social Services departments. We understand their evolvingcommissioning strategies and the value between the traditional residential caremodel of service provision and the emerging requirement for the provision ofsupported living services. This approach is delivering positive growth forCareTech and our long term relationship with these commissioners offers a gooddeal of confidence about future opportunity. Market review The market for learning disability is large and expected to grow significantlyin the foreseeable future. Department of health statistics indicate • There are 1.4m people in the UK with a learning disability • 185,000 of these people are severely disabled and unable to live independently. Research by Lancaster University confirms that there is currently a shortfall inthe provision of appropriate places of 25,000, mainly residential beds. The market continues to be highly fragmented with the majority of places beingprovided by small independent operators with three or less homes. Laing andBuisson, in their 2007 annual review of the mental health and learningdisability market confirm that "there remains considerable scope forconsolidation". Strategic review On flotation in October 2005 we set out our strategic objective to growsubstantially and become a leading provider through consolidation in the market.I am pleased to report considerable progress in our drive to meet strategictargets with our current portfolio representing 1,029 beds and 229 day careplaces. Our strategy for growth continues unchanged and is characterised by a commitmentto provide first class services to people with a learning disability. We aremindful of evolving commissioning strategies and are introducing new servicesthat offer a wider range of options for person-centred planning, including: Supported living schemes • focussed on our recent acquisition of One-Step; a pioneer in this field. Care of disabled children • focussed on the specialist services acquired with Delam Care. Through these developments we remain a provider of specialist services, but areable to provide local authorities with a wider range of solutions to theirplacement needs. CareTech Holdings PLC Chief Executive's Review - continued Capacity growth During the year we have added a further 290 beds, increasing our capacity to1,029, compared with 423 at flotation. This has been achieved from both organicdevelopment of existing services and from selective acquisitions. 2006 Acquisitions I can report strong performance from the two acquisitions undertaken in 2006.Delam Care continues as a quality provider of services for children, attainingfrequent "excellent" ratings from OFSTED (the children services regulator). Thedevelopment of children services is gaining momentum and a further threeservices representing 28 beds were commissioned in 2007. Lonsdale Midlands has similarly performed well and during the year have beenawarded significantly improved quality ratings from CSCI (the adult servicesregulator). In addition, our success with Lonsdale has led to 24 new clientsbeing transferred to us through the tender route as well as a 12 client contractextension being awarded. 2007 Acquisitions During the year we announced two further important acquisitions. Counticare was purchased in November 2006 as an established provider ofresidential services in Kent. This has added a further 101 clients to ourexisting 18 homes in that region, a substantial day centre and the accommodationfor our regional management team. Counticare has integrated well and performed ahead of expectations. One-Step was purchased in July 2007 and represents an exciting development ofour supported living services. The business provides services to approximately75 fairly independent people, together with a pioneering family assessmentcentre for up to 6 families. The post-acquisition of One-Step has been very exciting and our strategy is tothoughtfully introduce its business model across our network, complimenting theexisting residential services. The founders of One-Step are part of the ongoingteam, having taken a significant part of their net consideration in CareTechshares and driving the roll out programme. Organic development Organic growth underpins our development strategy and continues to be animportant aspect of our growth. One consideration when reviewing acquisitions isthe opportunity for organic growth that stems from the proposal. During theyear, 106 organic beds were added with each of our regions able to bolt onadditional capacity. Operational review (i) Management restructuring We have completed our organisational restructuring into three geographicalregions, which equips us for further growth in association with key localauthority commissioners. Each region is seen as a business unit with a regional director and financialaccountant leading the management teams. We have devolved business development,human resources and training teams to a local level. The regions are supportedfrom the centre and key performance indicators monitored on a weekly basis. (ii) Quality The focus on quality has been further strengthened in the year. We haveappointed a Quality and Performance Director who is already increasing thequality benchmarks through a team devolved to the regions. Each region has aquality auditor driving improvement. CareTech Holdings PLC Chief Executive's Review - continued (iii) Infrastructure We recognise that the success of our growth programme requires additionalinfrastructure and have invested significantly in modern information technologyutilising industry standard financial and management applications. We providebetter and smarter information for the regional teams through high capacitylease lines. Current Trading Trading performance The Group has again demonstrated a significant increase in financialperformance. Revenues are 59% up at £53.1m, EBITDA is 98% up at £10.9m andprofit before tax up 63% at £5.4m. Basic earnings per share have increased from 7.07p to 14.06p and we haveintroduced an interim dividend during the year of 1p per share. Performancecontinues to be underpinned by the increasing bed capacity and the benefit ofthe operational gearing within the business. The current year has started wellwith progress continuing to be made in each of the regions. Outlook In the UK overall and specifically in England there remains a significantshortfall of capacity for people with learning disability. The positivedemographics mean that this is certain to continue for the foreseeable future.The regionalisation process means that we now have better and closer workingrelationships with local purchasers. We are already seeing the benefits of thisfrom the number of initiatives and business development opportunities that theseare generating. This, together with the wider range of services that we now haveon offer puts us in a strong position as we continue growing the business. In addition, there is considerable opportunity for further consolidation of thehighly fragmented provider sector. As we look forward, CareTech can continueleading the consolidation process; the market place is large and there arenumerous opportunities for us to consider. We have developed a strong reputationas a preferred partner and consolidator and look forward with confidence to thefuture as we continue to execute the strategy set out at the time of flotation. Conclusion It has been another very successful year for CareTech. I would like to take theopportunity of thanking our committed management teams and staff for theirenergy and enthusiasm during this year. I also welcome our new colleagues andwish them well in their careers with CareTech. Through our efforts we have been able to provide better lives for more than1,000 people, helping them discover greater independence and an improved qualityof life; doing things most of us take for granted. Haroon SheikhChief Executive Officer4 December 2007 CareTech Holdings PLC Finance Director's Review Overview The Group has performed well in the year, with solid results from underlyingcore activities and stronger than forecast contributions from the acquisitionsmade since flotation in October 2005 Turnover and operating profit Turnover increased by 59% to £53.1m, including £6.6m from the Counticare and OneStep acquisitions. Operating profit increased by 106% to £9.1m including a contribution from theacquisitions of £1.6m. The Group's operational gearing means a continuingincrease in operating margins, arising from adding additional revenue to asubstantially complete cost base; EBITDA margins (being Earnings beforeinterest, tax, depreciation and amortisation) increased from 16.4% to 20.5%. Administrative expenses, including goodwill amortisation of £0.5m (2006: £0.4m)increased to £5.1m (2006: £2.6m), reflecting the establishment of the regionalstructure which has been a significant achievement in the year and whichprovides an excellent platform for future growth. At September 2007 the regionalteams are largely complete and focussed to deliver additional growth in 2008. Exceptional operating items The financial statements reflect the cost of certain non recurrent costsattributable to the integration of the Counticare and One-Step acquisitions,together with one off costs attributable to the introduction of the regionalmanagement structure. Total exceptional costs are £308,000, comprisingacquisition integration costs of £227,000 and management restructuring costs of£81,000. The tax effect of these costs amounts to £92,000. Taxation The Group's effective tax rate in the year (after adjusting for the exceptionaltax credit) was 20.9% (2006: 23.7%), which continues to be lower than thestandard rate due to the benefit of capital allowances and the utilisation ofprior year losses in recent acquisitions During the year the Group has made significant progress in agreeing prior yearand acquisition related tax matters. As a result an exceptional tax profit andloss credit of £800,000 has been recognised. Earnings per share Basic earnings per share have increased from 7.07p in 2006 to 14.06p in 2007.Basic earnings per share before exceptional items and amortisation haveincreased from 8.17p to 13.70p and from 8.13p to 13.54p on a fully dilutedbasis. Dividend During the year the Group introduced an interim dividend payment to shareholdersof 1p per share (2006: nil). The directors are proposing a final dividend of 2pper share payable to shareholders on 14th March 2008, subject to approval byshareholders at the forthcoming Annual General Meeting. Cashflow and net debt The operating cashflows of the Group remain strong with net operating inflows at£8.9m. Capital expenditure, development and acquisitions amounted to £39.6m,partly funded by operating cashflow, together with further utilisation of debtfacilities of £34.9m. Financing and tax costs were £4.0m. At 30 September 2007,net debt was £70.4m. The Group continues to demonstrate strong trading cashflows which will fund theorganic development of further bed capacity. In October however, the Groupreached agreement in principle with its bankers Royal Bank of Scotland toincrease its facilities by a further £25m to £100m. CareTech Holdings PLC Finance Director's Review - continued Key performance indicators The Group uses the following financial and non financial key performanceindicators to measure the operational and strategic performance of the business. Earnings before interest, tax, depreciation and amortisation (EBITDA) The Group monitors the progress of each home through the measurement of itsoperating contribution against its targets. This combines with the cost ofcentral operational management to reflect EBITDA. During 2007, the EBITDA marginincreased from 16.4% to 20.5%, reflecting the increasing economies of scalewithin the Group. Earnings per share (EPS) The primary performance indicator is the Group's earnings per share. Ourstrategic objective is to increase earnings per share each year through organicgrowth of the core business and through acquisitions. The 2007 results showimproved basic and diluted earnings per share. Occupation levels All homes are closely monitored to achieve the appropriate balance between fulloccupation and client compatibility (which is required for long-termoccupation). During the year we maintained occupation levels in mature services(being homes open for more than 12 months) at 95% with an overall blend acrossall services at the year end of 90%. International financial reporting standards ("IFRS") The Group's first required reporting under IFRS will be its half year report asat 31 March 2008. Preliminary work has been carried out in 2007 to familiarisethe Board with the implications of implementing IFRS for CareTech. It isintended to publish an IFRS transition statement prior to the above half yearreport which will restate the results for the year ended 30 September 2007 fromUK GAAP to IFRS. David SpinkFinance Director4 December 2007 CareTech Holdings PLC Group Profit and Loss AccountFor the year ended 30 September 2007 Notes Before Goodwill 2007 Before Goodwill 2006 exceptional amortisation Total exceptional amortisation Total items and and items and and amortisation exceptional amortisation exceptional items items £000 £000 £000 £000 £000 £000 Turnover 1 - continuing operations 46,530 46,530 33,450 33,450- acquisitions 6,589 6,589 - - 53,119 53,119 33,450 33,450 Cost of sales (38,790) (100) (38,890) (26,394) (26,394) Gross profit 14,329 (100) 14,229 7,056 7,056 Administrative expenses (4,449) (660) (5,109) (2,224) (399) (2,623) Operating profit- continuing operations 7,988 (432) 7,556 4,832 (399) 4,433- acquisitions 1,892 (328) 1,564 - - - 9,880 (760) 9,120 4,832 (399) 4,433 Operating profit beforeinterest, taxationdepreciation, amortisation,share based payments andexceptional items 10,909 10,909 5,502 5,502 Depreciation (942) (942) (670) (670) Amortisation (452) (452) (399) (399)Share based payments (87) (87) -chargeExceptional items 3 (308) (308) - Operating profit 9,880 (760) 9,120 4,832 (399) 4,433 Interest receivable and 62 62 122 122similar income Interest payable and (3,741) (3,741) (1,210) (1,210)similar charges Profit on ordinary 6,201 (760) 5,441 3,744 (399) 3,345activities beforetaxation Taxation on profit on 2 (1,228) 892 (336) (792) (792)ordinary activities Profit on ordinary 4,973 132 5,105 2,952 (399) 2,553activities after taxationand for the financialyear Earnings per share - basic 4 13.70p 14.06p 8.17p 7.07p - diluted 4 13.54p 13.90p 8.13p 7.03p There are no other recognised gains or losses other than the results statedabove for the current and preceding year. CareTech Holdings PLC Group Balance SheetAt 30 September 2007 Notes 2007 2006 £000 £000 Fixed assetsIntangible assets 5 9,253 7,408Tangible assets 88,264 48,401 97,517 55,809Current assetsDebtors 8,394 2,766Cash at bank and in hand 1,093 1,478 9,487 4,244Creditors: amounts falling Due within one year (12,713) (6,851) Net current liabilities (3,226) (2,607) Total assets less current liabilities 94,291 53,202 Creditors: amounts falling Due after more than one year (71,035) (36,984) Provisions for liabilities (208) - Net assets 23,048 16,218 Capital and ReservesCalled up share capital 8 183 181Share premium account 8 9,569 9,569Merger reserve 8 1,998 -Profit and loss account 8 11,298 6,468 Shareholders' funds 23,048 16,218 These financial statements were approved by the Board of Directors on 4 December2007 and were signed on its behalf by: F Sheikh D SpinkChairman Finance Director CareTech Holdings PLC Group Cash Flow StatementFor the year ended 30 September 2007 Restated Notes 2007 2006 £000 £000 Net cash inflow from operating activities 6 8,876 4,547Returns on investments and servicing of finance (3,655) (1,082)Taxation (369) -Capital expenditure and financial investment 7 (15,667) (13,345)Acquisitions, net of cash acquired 7 (23,927) (20,272)Dividends paid (362) - Net cash outflow before financing (35,104) (30,152) Financing 7 34,719 29,803 Change in cash (385) (349) Restated 2007 2006 £000 £000 Reconciliation of net cash flow to movement innet debt Change in cash in the period (385) (349)Cash flow from increase in debt and lease financing (34,719) (20,303) Change in net debt resulting from cash flows (35,104) (20,652) New HP inceptions (268) (446)Finance leases acquired with subsidiary - (158) Change in net debt in year (35,372) (21,256) Net debt at start of financial year (35,002) (13,746) Net debt at end of financial year (70,374) (35,002) CareTech Holdings PLC Notes to the Financial Statements 1. Accounting policies Basis of preparation The financial statements have been prepared under the historical costconvention, and in accordance with applicable accounting standards, appliedconsistently in dealing with items which are considered material in relation tothe Group's financial statements. The Group has adopted FRS 20 "Share BasedPayments" the effect on the prior year is immaterial. The auditors have issued an unqualified opinion on the full financial statementswhich will be distributed to shareholders and delivered to the Registrar ofCompanies in due course. The financial information for 2007 does not comprisestatutory financial statements. Statutory financial statements for 2006, onwhich the auditors gave an unqualified opinion, have been delivered to theRegistrar of Companies. Further copies of these preliminary results will beavailable at the company's registered office: Leighton House, 33 -37 DarkesLane, Potters Bar, EN6 1BB. Going concern Although the balance sheet of the Group shows net current liabilities, theprojected further profitability of the Group's trading subsidiaries show thatsufficient cash flows will be generated to finance the Group's tradingactivities. The directors therefore consider it appropriate to prepare thesefinancial statements on a going concern basis. Basis of consolidation The Group accounts consolidate the accounts of CareTech Holdings PLC and itssubsidiary undertakings made up to 30 September 2007. The acquisition method ofaccounting has been adopted. Under this method, the results of subsidiaryundertakings acquired or disposed of in the year are included in theconsolidated profit and loss account from the date of acquisition or up to thedate of disposal. Purchases of subsidiary undertakings are accounted for as tangible fixed assetpurchases where such purchases are not material and where the substance of thetransaction is the purchase of a freehold property, notwithstanding whether anyrevenue is accruing in the subsidiary undertaking at the date of theacquisition. No profit and loss account is presented for CareTech Holdings PLC as permittedby Section 230 of the Companies Act 1985. Goodwill Goodwill arising on acquisitions is capitalised, classified as an asset andamortised on a straight line basis over its estimated useful life up to amaximum of 20 years, being the period over which the directors estimate that thevalue of the underlying business acquired is expected to exceed the value if theunderlying assets. On a subsequent disposal or termination of any business the profit or loss ondisposal is calculated charging/(crediting) the unamortised amount of anyrelated goodwill. Fixed assets and depreciation Depreciation is provided to write off the cost or valuation less the estimatedresidual value of tangible fixed assets over their estimated useful economiclives as follows: Freehold buildings - 2% straight lineLong leasehold property - over life of lease (maximum 50 years)Short leasehold property - over the life of the leaseFixtures, fittings and equipment - 25% reducing balanceMotor vehicles - 25% reducing balance CareTech Holdings PLC Notes to the Financial Statements - continued Leases Assets acquired under finance leases are treated as tangible fixed assets andinitially recorded at the net present value of the minimum lease payments at theinception of the lease. The assets are depreciated over their useful economiclives. Operating lease rentals are charged to the profit and loss account on astraight line basis over the period of the lease. Borrowings Borrowings are initially stated at the fair value of the consideration receivedafter deduction of issue costs. Issue costs, together with finance costs, arecharged to the profit and loss account over the expected term of the borrowings. Taxation The charge for taxation is based on the profit for the year and takes intoaccount taxation deferred because of timing differences between the treatment ofcertain items for taxation and accounting purposes. Deferred taxation is recognised, with discounting, in respect of all timingdifferences between the treatment of certain items for taxation and accountingpurposes which have arisen but not reversed by the balance sheet date, except asotherwise required by FRS 19. Post retirement benefits The Group operated a defined contribution pension scheme during the year. Theassets of the scheme are held separately from those of the Group in anindependently administered fund. The amount charged against profits representsthe contributions payable to the scheme in respect of the accounting period. Share based payments The share option programme allows employees to acquire shares of the Company.The fair value of options granted after 13 October 2005 and not yet vested at 30September 2007 is recognised as an employee expense with a correspondingincrease in equity. The fair value is measured at date of grant and spread overthe period during which the employees become unconditionally entitled to theoptions. The fair value of the options granted is measured using an optionpricing model, taking into account the terms and conditions upon which theoptions were granted. The amount recognised as an expense is adjusted to reflectthe actual number of share options that vest except where variations are dueonly to share prices not achieving the threshold for vesting. Share options The cost of awards to employees that take the form of shares or rights to sharesis recognised over the period of the employees' related performance. Whilstthere are no performance criteria, the cost is recognised when the employeebecomes unconditionally entitled to the shares. No cost is recognised in respectof SAYE schemes that are offered on similar terms to all or substantially allemployees. Dividends on shares presented within equity Dividends unpaid at the balance sheet date are only recognised as a liability atthat date to the extent that they are appropriately authorised and are no longerat the discretion of the Company. Unpaid dividends that do not meet thesecriteria are disclosed in the notes to the financial statements. CareTech Holdings PLC Notes to the Financial Statements - continued Sale and leaseback transactions The Group accounts for sale and leaseback transactions according to the natureof the lease arrangement which arises. Transactions which give rise to anoperating lease, in which substantially all the risks and rewards of ownershipare transferred, result in a profit or loss on disposal being recognisedimmediately, calculated by reference to the sale price and the previous carryingvalue. Profits or losses arising on transactions giving rise to a finance lease,where the group retains substantially all the risks and rewards of ownership,are deferred and amortised over the shorter of the lease term and the life ofthe asset. Turnover Turnover comprises the fair value of fee income receivable for the year inrespect of the provision of care services and is recognised, excluding VAT, inrespect of the days that care has been provided in the relevant period. Turnoverinvoiced in advance is included in deferred income until service is provided.The Group's activities are wholly undertaken in the United Kingdom and relate toone business segment and accordingly no segmental analysis is shown. Transactions with group companies The Company has taken advantage of the exemption contained in FRS 8 and notdisclosed transactions with other Group companies. 2. Taxation on profit on ordinary activities (a) Analysis of charge for year 2007 2006 £000 £000 Current tax - current year charge 928 792 - adjustment in respect of prior years (800) - Total current tax 128 792 Deferred tax - current year charge 208 - 336 792 (b) Factors affecting tax charge for year The tax assessed for the year is lower than the standard rate of corporationtax. The differences are explained below: 2007 2006 £000 £000 Profit on ordinary activities before taxation 5,441 3,345 Current tax at 30% (2006: 30%) 1,632 1,004 Capital allowances in excess of depreciation (949) (451) Expenses disallowed 245 239 Adjustment in respect of prior years (800) - 128 792 CareTech Holdings PLC Notes to the Financial Statements - continued 3. Exceptional items 2007 2006 £'000 £'000 Acquisition integration costs 227 - Management restructuring costs 81 - Total operating exceptional items 308 - Taxation adjustments in respect of prior years 800 - Taxation effect of operating exceptional items 92 - 892 - 4. Earnings per share 2007 2006 £000 £000 Earnings for the year 5,105 2,553 Goodwill amortisation 452 399 Exceptional items - acquisition integration costs 227 - - management restructuring costs 81 - - tax adjustment in respect of prior years (800) - - tax effect of operating exceptional items (92) - Adjusted earnings for the year 4,973 2,952 Weighted number of shares in issue for basic earnings per share 36,298,178 36,116,358 Weighted number of shares in issue for diluted earnings per share 36,737,180 36,294,625 An adjusted earnings per share has also been presented which the directorsconsider gives a useful additional indication of the Group's performance.Adjusted earnings for the year represent earnings for the year adjusted forgoodwill amortisation, exceptional items and the taxation thereon. Diluted earnings per share is the basic earnings per share adjusted for thedilutive effect of the conversion into fully paid shares of the weighted averagenumber of share options outstanding during the year. 2007 2006 Earnings per share (pence per share) Basic 14.06p 7.07p Diluted 13.90p 7.03p Adjusted earnings per share (pence per share) Basic 13.70p 8.17p Diluted 13.54p 8.13p CareTech Holdings PLC Notes to the Financial Statements - continued 5. Intangible assets Group Goodwill £000 Cost At 1 October 2006 8,644 Additions 2,297 At 30 September 2007 10,941 Amortisation At 1 October 2006 1,236 Provided during the year 452 At 30 September 2007 1,688 Net book value At 30 September 2007 9,253 At 30 September 2006 7,408 CareTech Holdings PLC Notes to the Financial Statements - continued (a) Acquisition of assets from Counticare Holdings Limited On 16 November 2006, CareTech Estates Limited acquired certain freeholdproperties from Counticare Holdings Limited and CareTech Community ServicesLimited acquired the entire share capital of Counticare Limited and Hazledene UKLimited for an aggregate cash consideration of £14,277,000 plus costs. The provisional fair values attributed by the directors to the net assets are asfollows: Book Freeholds Fair Value Fair value value acquired adjustment £000 £000 £000 £000 Tangible fixed assets 92 12,242 3,836 16,170Debtors 479 479Cash 180 180Creditors - other payables (1,382) (150) (1,532) (631) 15,297 Consideration paid - cash 14,277Costs of acquisition 1,020Total of acquisition 15,297 Goodwill arising on acquisition - CareTech Holdings PLC Notes to the Financial Statements - continued (b) Acquisition of Community Support Project Limited On 26 July 2007, CareTech Holdings PLC acquired the entire share capital ofCommunity Support Project Limited, together with its wholly-owned subsidiaryOne-Step (Support) Limited and certain freehold and associated long leaseholdproperties for an aggregate consideration of £7,654,000 plus the assumption ofbank and other liabilities of £3,046,000 plus costs. The provisional fair values attributed by the directors to the net assets are asfollows: Book Value Freeholds Fair Value Fair value Acquired Adjustments £000 £000 £000 £000 Intangible fixed assets 2,626 (2,626) -Tangible fixed assets 3,252 3,000 2,448 8,700Debtors 1,323 1,323Cash 208 208Creditors - bank loans (2,084) (2,084) - shareholder loans (962) (962) - other payables (1,110) (150) (1,260) 3,253 5,925 Consideration paid - cash 5,654 - shares 2,000Costs of acquisition 568Total cost of acquisition 8,222 Goodwill arising on acquisition 2,297 CareTech Holdings PLC Notes to the Financial Statements - continued 6. Reconciliation of operating profit to net cash flow from operating activities 2007 2006 £000 £000 Operating profit 9,120 4,433 Depreciation 942 670 Amortisation of goodwill 452 399 Change in debtors (3,826) 1,775 Change in creditors 2,101 (2,730) Share based payments charge 87 - Net cash flow from operating activities 8,876 4,547 7. Analysis of cash flows 2007 2006 £000 £000 Capital expenditure and financial investment Purchase of tangible fixed assets (15,667) (13,345) Proceeds of disposal of tangible fixed assets - - (15,667) (13,345) 2007 2006 £000 £000 Financing Issue of ordinary share capital - 11,300 Expenses associated with the issue of ordinary share - (1,800) capital Repayment of loans - (6,800) Capital element of finance lease rental payments (184) (235) New term loan drawn down 34,903 27,338 34,719 29,803 Restated 2007 2006 £000 £000 Acquisitions Cash consideration paid (21,269) (16,241) Net cash (overdrafts) acquired with subsidiary (1,696) (7,645) undertakings Shareholder loans (repaid)/ recovered on acquisition (962) 3,614 (23,927) (20,272) CareTech Holdings PLC Notes to the Financial Statements - continued 8. Reconciliation of movement in reserves Share Share Merger Profit and Capital Premium reserve Loss Total £000 £000 £000 £000 £000 At 1 October 2006 181 9,569 - 6,468 16,218 Shares issued during year 2 - 1,998 - 2,000 Profit for the year - - - 5,105 5,105 Dividends paid - - - (362) (362) Share based payment - - - 87 87 At 30 September 2007 183 9,569 1,998 11,298 23,048 During the year, 363,637 ordinary shares were issued as part of the acquisitionconsideration in respect of Community Support Project Limited which have givenrise to a merger reserve in accordance with section 131 of the Companies Act1985. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
CTH.L