5th Dec 2006 07:02
CareTech Holdings PLC05 December 2006 For Immediate Release 5 December 2006 CareTech Holdings PLC ("CareTech", the "Group" or the "Company") Preliminary Results for the year ended 30 September 2006 CareTech Holdings PLC (AiM: CTH), a leading UK provider of learning disabilitycare services, is pleased to announce its preliminary results for the year ended30 September 2006. Financial Highlights • Turnover increased 49% to £33.5m (2005: £22.5m) • EBITDA1 increased 126% to £5.5m (2005: £2.4m) • Operating profit increased by 169% to £4.4m (2005: £1.7m) • Profit before tax amortisation of goodwill and profit on sale of fixed assets increased by 140% to £3.7m (2005: £1.6m) • Profit before tax increased by 54% to £3.3m (2005: £2.2m) • Adjusted basic earnings per share 8.17p (2005: 4.10p), basic earnings per share 7.07p (2005: 6.17p) • Two acquisitions completed during the year for a total of £24.2m, representing 42 homes and 236 beds • Overall resident capacity increased by 316 to 739. • Occupancy levels at the year end of 91% Notes 1. Being the operating profit before interest, taxation, depreciation and amortisation of goodwill. Commenting on the results, Farouq Sheikh, Executive Chairman said: "We entered the new financial year with confidence and remain firmly focussed onproviding first class care for the people we support and delivering outstandingshareholder value. In November we completed the acquisition of the Counticare group of servicescomprising 12 freehold homes and a well-regarded day care facility for a cashconsideration of £15m. This has increased capacity by 101 client beds and 150day care places respectively to a current Group total of 840 client beds and 229day care places. The full year effect of growth achieved in 2006, together with the progressalready achieved in the current year puts us in a very strong position todeliver another solid set of results for 2007. The market remains favourable and CareTech continues to be well placed to play aleading role in consolidating the growing PLD market". Enquiries: Farouq Sheikh 01707 652053Executive Chairman David Spink 01707 652053Finance Director Diane Stewart / Tim Anderson 020 7466 5000Buchanan Communications CareTech Holdings PLC Chairman's Statement Introduction I am pleased to present our full year results for 2006, in what has been anotheryear of sustained growth for CareTech. CareTech is founded on delivering quality "person-centred" care services withinan efficient business model. I am delighted to say that we continue to maintainthe right balance between these complementary principles and this underpins ourlong term success. The Group has added a further 316 beds bringing capacity to 739 at the year end,representing a growth of 75%. This includes the organic development of 80 beds,together with the 236 beds added through the Midlands-based acquisitions ofDelam Care Limited and Lonsdale Midlands Limited. This performance, which hasexceeded the directors' expectations, reflects the delivery of the strategy setout at the flotation last year; a combination of organic and acquisition ledgrowth to deliver shareholder value. Results Results to 30 September 2006 demonstrate further growth through both organicdevelopment and acquisitions. Revenues rose by 49% to £33.5m. EBITDA rose by126% to £5.5m (2005: £2.4m) and profit on ordinary activities before taxation,amortisation of goodwill and profit on sale of fixed assets by 140% to £3.7m.(2005: £1.6m). Profit before taxation increased by 54% to £3.3m (2005: £2.2m).Adjusted basic earnings per share increased by 99% to 8.17p; basic earnings pershare increased by 15% to 7.07p (2005: 6.17p). Growth Strategy The achievements of 2006 continue the well-established track record of growththrough organic development and acquisition. I am particularly pleased thathaving exceeded the organic development targets, the Company has also been ableto complete two significant strategic acquisitions. This growth strategy remainsthe Board's focus going forward and is supported by prevailing market activityand demographics. The market for people with learning disabilities is growing but remainsfragmented with a demographic profile driving demand for high quality care andsupport. CareTech is well placed to play a leading role in consolidation andoffers flexible solutions of high quality to support people with learningdisability. There has been a steady and welcome move towards supported living for people whoprefer not to live in residential care settings. The demand for residential carewill however continue, with an emphasis toward those people with more complexneeds. This is the area in which CareTech has built its reputation forexcellence. The executive team has been systematically building up its supportedliving portfolio so as to offer an attractive blend of services forcommissioners and care managers and today has 4 supported living services,supporting 77 individuals. Demand for the support of disabled children and young people reflects ademographic change. Children with significant disabilities are routinelysurviving birth trauma thanks to advances in medical science and the heroicefforts of health professionals. These children often require a lifetime ofspecialist social care as well as continuing health support. CareTech is wellplaced to offer the support these very disabled children and young people needand with this in mind has begun to build a portfolio of specialist services tomeet demand. We were very pleased with our purchase of Delam Care, a companywith a very strong reputation for the provision of services to children, andwhere we have retained the services of their experienced management team, andintend to leverage their childcare experience across the Group. CareTech Holdings PLC Chairman's Statement - Continued Dividend The strategy remains in line with that set out at flotation. The Board is notproposing the payment of a dividend (2005: nil) and retained profits willcontinue to be re-invested in the development of new services, to deliverfurther growth in earnings. The Board will however keep the dividend policyunder review. Outlook We entered the new financial year with confidence and remain firmly focussed onproviding first class care for the people we support and delivering outstandingshareholder value. In November, we completed the acquisition of the Counticare group of servicescomprising 12 freehold homes and a well-regarded day care facility for a cashconsideration of £15m. This has increased capacity by 101 client beds and 150day care places. Current capacity numbers are therefore 840 client beds and 229day care places. The full year effect of growth achieved in the year to 2006 with the progressalready achieved in the current year puts us in a very strong position todeliver another solid set of results for 2007. The market is set to remain favourable and CareTech continues to be well placedto play a leading role in consolidating the growing PLD market. Conclusion The success we have achieved in the year has, once again, been made possible bythe hard work and dedication of all of our staff. I would like to record mythanks to colleagues and advisors for their continued and personal contributionto our business achievements and to the care of the many people we support inour homes and services across the UK. We have a strong team at all levels within the Group and it is pleasing to seemany employees participating in the share option schemes which were launched inthe year. With strong demographics, a clear development strategy and a winning team,CareTech is well placed to deliver long term and sustainable growth. Farouq SheikhExecutive Chairman CareTech Holdings PLC Chief Executive's Review Introduction The past year has been a year of significant growth for the Group. We haveworked hard to deliver the results set out in this Report and Accounts, withactivity levels controlled and effectively managed. This has been underpinned by our previous investment in the head officeinfrastructure. Several key achievements have positioned us to accommodatefurther growth. In particular we have strengthened the financial management teamand we are implementing the use of information technology across the Group. Ouroperational management has also progressed with an evolving structure thatrelies on devolved responsibilities and local relationship management to supportfurther development. Development of services 2006 has been a year of systematic growth with total client capacity increasingby 75% from 423 beds to 739 beds. This increase has been achieved by bothorganic development of the existing portfolio together with two significantacquisitions. Organic growth Organic development remains a key focus for growth and during the year wecomfortably exceeded our targets. 80 bed places were added, comprising 75 placeswithin 12 new homes, together with 5 additional places within the existinghomes. Our key relationships with local commissioning managers have helped with thedelivery of organic development. Of particular note is the creation of anexceptional school leaver service developed in partnership with localcommissioners. We have always aimed to maintain the correct balance between acquisitions andorganic growth. In the past year we have made best use of our existing assets byadding beds, remodelling existing services and acquiring new sites to deliverboth growth and improved quality. We have a skilled team, able to seeopportunities for development across the whole portfolio. Where service trendsevolve we work with care managers to remain at the leading edge of servicedelivery, modifying and improving the services in line with their expectations. During the year, 4 supported living services have been developed, offeringpeople with learning disabilities the opportunity for a "place of their own"while enjoying a comprehensive package of care and support offered in asupported living programme. This has proved very successful and signposts theway forward for community support of people who prefer not to live in aresidential care setting. Acquisitions CareTech is a quality provider and consolidator in the highly fragmentedspecialist care market, with a reputation that proves attractive to potentialvendors. During the year we completed 2 acquisitions in the Midlands. The acquisition of Delam Care Limited brings forward the planned opportunity toprovide services to children and young people who have learning disabilities.Delam is well regarded by care commissioners and their service model will beintroduced across the CareTech network. The Delam services also support adultswith learning disability and provide a strong platform for further growth in theregion for both children and adult provision Lonsdale Care, based in the West Midlands, enabled us to consolidate localservices into a regional management structure and bring forward ourorganisational strategic plan. It brought a quality portfolio of residential andnursing home services together with innovative supported living schemes and agood local administrative structure. CareTech Holdings PLC Chief Executive's Review - continued The acquisitions are summarised as: Cash Homes Beds Consideration £'m Delam Care Limited 9.2 14 77 Lonsdale Midlands Limited 15.0 28 159 Both businesses have performed ahead of expectations since acquisition and thestrengthened management team in the Midlands Region is performing well. Theseservices have enjoyed good occupancy levels and provide further developmentopportunities. A key focus for the management team remains the pace at which newly-createdservices can be brought to maturity on a fully occupied basis. I am pleased toreport an overall increase in occupation levels to 91% (2005: 90%) including anoccupation percentage of 94% in mature homes, (i.e. those which have beenestablished for 12 months). Quality The Company has a person centred ethos and principled service offering with asound reputation in the sector. We are working to take our message to familiesand service users themselves and have a successful platform for engagement withusers and their care managers in our sponsorship of the major annual conferenceLearning Disability Today. We are delighted to be invited once again to beco-sponsors of this event alongside the leading not for profit organisations andthe Department of Health CareTech has a long-standing partnership with independent quality auditassessors who monitor and report on performance within the Company's services.This is backed by monthly "Directors Visits", routine audits by the Commissionfor Social Care and Inspection and the active involvement of our own managementteam. The staff development team has supported service quality and achieves admirableresults within a comprehensive programme that includes industry leadinginduction as well as technical training. The Trainee Manager Scheme and Top TeamAward have delivered good results, providing a foundation for further growth andthe Company is in line with national standards for NVQ training among carestaff. Regional management structure Anticipating further growth, the Executive has completed the creation of 3regional management teams, each headed by a Regional Operations Director. Theregions are each structured to support around 500 service users (residents) andeach region is responsible for service delivery, service development andfinancial performance, supported by local finance teams and the head officestaff. In line with the decentralisation policy we have appointed a Group FinancialController and two new Regional Operations Directors. In addition, the recentacquisitions have brought skilled professionals to reinforce regionalmanagement. Both Lonsdale and Counticare have provided office facilities andinfrastructure to support the new regional model of service management. Within the strategic plan, further regional development will occur as growth andconsolidation of services is achieved. Current trading 2007 has started well with existing services performing in line with plan. Thecurrent year will benefit from the full year contribution of the developmentscompleted in 2006, together with that from the acquisitions also completed in2006. This will give the business a solid platform on which to build on furtherearnings growth during the course of this year. In addition the pipeline oforganic developments is strong with many projects already under way. We have already completed the Counticare acquisition and this is an excitingopportunity that fits neatly with our existing operations in Kent and SouthLondon. CareTech Holdings PLC Chief Executive's Review - continued Outlook The Group has made substantial progress since its IPO in October 2005; it hasdelivered significantly ahead of the plans outlined at that time and is wellplaced for continuing growth. The regulated markets in which we operate arehighly fragmented and CareTech will continue its leading role as a consolidator. We continue to enjoy good relationships with long-standing partners and morerecent developments in London and the Midlands have strengthened our existingrelationships with commissioners and care managers in those areas. Demand for services remains high and the Group is in constant dialogue withcommissioners for the development of new services. As a result, we believe thisgrowth to be sustainable and the outlook remains positive. Conclusion The Group's success is founded on the skills and commitment of our staff. Weencourage development and leadership and are already seeing an emergence of thenext generation of managers. I welcome our many new colleagues particularly thestaff of Delam, Lonsdale and Counticare and take this opportunity to extend mysincere thanks and appreciation for the support and dedication of all staff. Haroon SheikhChief Executive Officer CareTech Holdings PLC Finance Director's Review Overview The financial performance of the Group continues to be strong. Revenues andoperating profits reflect significant uplifts arising from good performances bythe established portfolio, together with positive contributions from bothorganic developments and acquisitions. Turnover and operating profit Turnover increased by 49% in the year to £33.5m, of which the acquisitionscontributed £4.8m. Operating profits increased by 169% to £4.4m, (2005: £1.7m). Continuingoperations performed strongly combining the full year effects of the 2005developments, together with the contribution from new services commenced in theyear. Continuing operations increased operating profits to £3.6m (2005: £1.7m).The acquisitions both performed ahead of expectations in the period for whichtheir results are consolidated; their operating profit was £0.8m. Overheads in the year were £2.6m (2005: £1.9m). This reflects the additionalstructures which form the regional management teams, together with additionalgoodwill amortisation and public company costs. EBITDA increased by 126% to £5.5m (2005: £2.4m), of which the acquisitionscontributed £1m. Profit on ordinary activities before tax Profit on ordinary activities before tax, amortisation of goodwill and profit onsale of fixed assets increased by 140% to £3.7m (2005: £1.6m). Profit on ordinary activities before tax, increased by 54% to £3.3m (2005:£2.2m). The charge relating to the amortisation of goodwill has increased in theyear to £0.4m (2005: £0.3m) reflecting the part year amortisation of goodwillarising on acquisitions made in the year. Tax The Group's effective rate of tax for the year was 23.7%. (2005: 16.9%) which in2006 is lower than the standard rate of tax principally as a result of theutilisation of prior year tax losses in the acquisitions. In 2005 the effectiverate benefited from there being no tax on the profit on the disposal ofproperties. Earnings per share On an adjusted earnings basis (i.e. earnings per share before amortisation ofgoodwill and profit on sale of fixed assets) basic earnings per share were 8.17p(2005: 4.10p) representing an increase of 99%. Basic earnings per share rose14.6% to 7.07p (2005: 6.17p). Cashflow Cash generated from operations remains strong at £4.4m (2005: £2.1m). Thetrading flows for the year were however impaired by approximately £0.8m as aresult of certain funding authorities reviewing their historic practice ofpaying quarterly in advance. Capital expenditure was £33.6m in the year, (2005: £7.5m) including £15.5m inrespect of acquisitions. This was funded by utilisation of increased debtfacilities where loans drawn down were £27.3m. In October 2005, the Company placed 7,062,500 ordinary shares at £1.60 raising,£9.5m net of expenses. CareTech Holdings PLC Balance sheet and gearing Shareholders' funds at 30 September 2006 were £16.2m (2005: £4.2m). Thisincrease reflects the impact of the net placing proceeds, together with retainedprofit for the year. The placing proceeds were used to repay bank debt and fundorganic development. The development and acquisitions in the year have subsequently been debt fundedand net bank debt at the end of the year was £35.0m (2005: £13.7m). During November 2006, the Group reached agreement with its bankers, Royal Bankof Scotland, to increase debt facilities by a further £10m to £60m. Post balance sheet events On 16 November 2006, the Group purchased freehold assets from CounticareHoldings Limited, together with the entire issued share capital of CounticareLimited and Hazeldene UK Limited for a cash consideration of £15m plus costs. International financial reporting standards ("IFRS") The deadline for compliance with IFRS for AiM listed companies is for accountingperiods commencing on or after 1 January 2007. The Group's first requiredreporting under IFRS will be its half year report at March 2008. Preliminarywork has been carried out in 2006 to familiarise the Board with the implicationsof implementing IFRS. This work will continue in 2007. David SpinkFinance Director5 December 2006 CareTech Holdings PLC Group Profit and Loss AccountFor the year ended 30 September 2006 Notes 2006 2005 £000 £000_______________________________________________________________________________________ _______________________________________________________________________________________ Turnover - continuing operations 28,622 22,475 - acquisitions 4,828 -_______________________________________________________________________________________ 33,450 22,475Cost of sales (26,394) (18,923)_______________________________________________________________________________________ Gross profit 7,056 3,552 Administrative expenses (2,623) (1,902)_______________________________________________________________________________________ Operating profit - continuing operations 3,590 1,650 - acquisitions 843 - _______ _______ 4,433 1,650_______________________________________________________________________________________ Operating profit before interest, taxation,depreciation and amortisation 5,502 2,438 Depreciation (670) (517) Amortisation (399) (271)_______________________________________________________________________________________ Operating profit 4,433 1,650_______________________________________________________________________________________ Profit on sale of fixed assets - 875 Interest receivable and similar income 122 39 Interest payable and similar charges (1,210) (397)_______________________________________________________________________________________ Profit on ordinary activities before taxation 3,345 2,167 Taxation on profit on ordinary activities (792) (366)_______________________________________________________________________________________ Profit on ordinary activities after taxation and for the financial year 2,553 1,801_______________________________________________________________________________________ Earnings per share - basic 2 7.07p 6.17p - diluted 2 7.03p 6.17p Adjusted earnings per share - basic 2 8.17p 4.10p - diluted 2 8.13p 4.10p_______________________________________________________________________________________ There are no other recognised gains or losses other than the results as statedabove for the current and preceding year. CareTech Holdings PLC Group Balance SheetAt 30 September 2006 Notes 2006 2005 £000 £000______________________________________________________________________________________ Fixed AssetsIntangible assets 3 7,408 4,371Tangible assets 48,401 15,761______________________________________________________________________________________ 55,809 20,132______________________________________________________________________________________ Current AssetsStock - 22Debtors 2,766 2,672Cash at bank and in hand 1,478 1,827______________________________________________________________________________________ 4,244 4,521Creditors: amounts fallingdue within one year (6,851) (11,825)______________________________________________________________________________________ Net current liabilities (2,607) (7,304)______________________________________________________________________________________ Total assets less current liabilities 53,202 12,828______________________________________________________________________________________ Creditors: amounts fallingdue after more than one year (36,984) (8,663)______________________________________________________________________________________ Net assets 16,218 4,165______________________________________________________________________________________ Capital and ReservesCalled up share capital 181 1Share premium account 9,569 249Profit and loss account 6,468 3,915______________________________________________________________________________________ Equity shareholders' funds 5 16,218 4,165______________________________________________________________________________________ These financial statements were approved by the Board of Directors on 5 December2006 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 2006 Notes 2006 2005 £000 £000_______________________________________________________________________________________ Net cash inflow from operating activities 4 4,547 2,064Returns on investments and servicing of finance 6 (1,082) (380)Taxation - -Capital expenditure and financial investment 6 (18,045) (7,542)Acquisitions, net of cash acquired (15,572) -Dividends paid_______________________________________________________________________________________ Net cash outflow before financing (30,152) (5,858) Financing 6 29,803 6,413_______________________________________________________________________________________(Decrease)/increase in cash (349) 555_______________________________________________________________________________________ Notes 2006 2005 £000 £000_______________________________________________________________________________________ Reconciliation of net cash flow tomovement in net debt Change in cash in the period 7 (349) 555Cash flow from increase in debt financing 7 (20,538) (6,413)Redemption of share capital - (6,445)New HP inceptions 7 (330) (235)_______________________________________________________________________________________ Change in net debt resulting from cash flows 7 (21,217) (12,538) Net debt at start of financial year (13,746) (1,208)_______________________________________________________________________________________ Net debt at end of financial year 7 (34,963) (13,746)_______________________________________________________________________________________ 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 21 "Events after thebalance sheet date", FRS 22 "Earnings per share" and FRS 28 "Correspondingamounts" in these financial statements. There has been no impact of adoptingthese standards. Going concern Although the balance sheet of the Group shows net current liabilities, theprojected future 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 2006. 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. 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. On subsequent disposal or termination of any business the profit or loss ondisposal is calculated after 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 lineShort leasehold property - over the life of the leaseFixtures, fittings and equipment - 25% reducing balanceMotor vehicles - 25% reducing balance Stock Stock is included at the lower of cost and net realisable value on an averagecost basis. 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. CareTech Holdings PLC Notes to the Financial Statements - Continued 1. Accounting policies (continued) 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. Turnover Turnover represents the gross fees receivable for the period derived from theGroup's principal activity wholly undertaken in the United Kingdom. Accordinglyno 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. CareTech Holdings PLC Notes to the Financial StatementsCareTech Holdings PLC Notes to the Financial Statements - Continued 2. Earnings per share 2006 2005 £000 £000 Earnings for the year 2,553 1,801 Goodwill amortisation 399 271Profit on sale of fixed assets - (875)______________________________________________________________________________________ Adjusted earnings for the year 2,952 1,197______________________________________________________________________________________ Weighted number of shares in issue for basicearnings per share 36,116,358 29,169,924 Weighted number of shares in issue for dilutedearnings per share 36,294,625 29,169,924______________________________________________________________________________________ Adjusted earnings for the year represent earnings for the year adjusted forgoodwill amortisation and the profit on sale of fixed assets. 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. 2006 2005 Earnings per share (pence per share) Basic 7.07p 6.17pDiluted 7.03p 6.17p Adjusted earnings per share (pence per share) Basic 8.17p 4.10pDiluted 8.13p 4.10p_______________________________________________________________________________________ CareTech Holdings PLC Notes to the Financial Statements - Continued 3. Intangible assets Group Goodwill £000_______________________________________________________________________________________ Cost At 1 October 2005 5,208 Additions 3,436_______________________________________________________________________________________ At 30 September 2006 8,644_______________________________________________________________________________________ Amortisation At 1 October 2005 837 Provided during the year 399_______________________________________________________________________________________ At 30 September 2006 1,236_______________________________________________________________________________________ Net book value At 30 September 2006 7,408_______________________________________________________________________________________ At 30 September 2005 4,371_______________________________________________________________________________________ CareTech Holdings PLC (a) Acquisition of Delam Care Limited On 2 May 2006, CareTech Community Services Limited acquired the entire sharecapital of Delam Care Limited, together with associated freehold properties fora cash consideration of £9,070,000 plus costs. The provisional fair values attributed by the directors to the net assets are asfollows: Book Fair value Fair Value Fair value value of freeholds adjustment £000 £000 acquired £000 £000 Intangible 30 (30) -Tangible fixed assets 113 7,000 7,113Stock 30 30Debtors 1,411 1,411Cash 624 624Creditors (602) (602) _________ 8,576 _________ Consideration paid - cash 9,070Costs of acquisition 367 _________Total of acquisition 9,437 _________Goodwill arising on acquisition 861 _________ The book values of assets and liabilities were extracted from the underlyingaccounting records of Delam Care Limited at the date of acquisition. Thefreeholds acquired were valued on an existing use market value basis. The goodwill arising on this acquisition will be amortised to the profit andloss account over its estimated useful economic life of 20 years, being theperiod over which the directors estimate that the value of the underlyingbusiness acquired is expected to exceed the value of the underlying assets. In its financial year to 30 April 2005, Delam Care Limited recorded a retainedloss of £22,000. In the period since acquisition to 30 September 2006, DelamCare Limited contributed turnover of £1,610,000 and operating profits of£427,000. In the period from 1 May 2005 to acquisition, Delam Care Limitedrecorded turnover of £3,674,000, gross profit of £1,355,000, operating profitsof £857,000 and a retained profit of £587,000. CareTech Holdings PLC (b) Acquisition of Lonsdale Midlands Limited On 26 May 2006, CareTech Community Services Limited acquired the entire sharecapital of Lonsdale Midlands Limited, for a cash consideration of £6,514,000plus costs. In addition £8.1m of Lonsdale's bank debt was repaid on acquisition. The provisional fair values attributed by the directors to the net assets are asfollows: Book Value Fair Value Fair value Adjustments £000 £000 £000 Intangible 28 (28) -Tangible fixed assets 9,551 2,869 12,420Debtors 3,551 49 3,600Cash 45 45Creditors (11,065) (771) (11,836) __________ 4,229 __________ Consideration paid - cash 6,514Costs of acquisition 290 __________ Total cost of acquisition 6,804 __________ Goodwill 2,575 __________ The book values of assets and liabilities were extracted from the underlyingaccounting records of Lonsdale Midlands Limited at the date of acquisition. Thefair value adjustments made to tangible fixed assets reflect their value on anexisting use market value basis. The fair value adjustments to stock and debtorswere to adjust the carrying values of assets acquired to their estimatedrealisable value. The fair value adjustments to creditors principally relate tothe recognition of liabilities not recorded in the underlying records at thedate of acquisition. The goodwill arising on this acquisition will be amortised to the profit andloss account over its estimated useful economic life of 20 years, being theperiod over which the directors estimate that the value of the underlyingbusiness acquired is expected to exceed the value of the underlying assets. In its financial year to 31 July 2005, Lonsdale Midlands Limited recorded aretained loss of £1,815,000. In the period since acquisition to 30 September2006, Lonsdale Midlands Limited contributed turnover of £3,218,000 and operatingprofits of £416,000. In the period from 1 August 2005 to acquisition, LonsdaleMidlands Limited recorded turnover of £7,416,000 gross profit of £1,972,000, anoperating loss of £473,000 and a retained loss of £1,007,000. CareTech Holdings PLC Notes to the Financial Statements - Continued 4. Reconciliation of operating profit to net cash flow from operating activities 2006 2005 £000 £000______________________________________________________________________________________ Operating profit 4,433 1,650 Depreciation 670 517 Amortisation of goodwill 399 271 Change in debtors 1,775 (873) Change in creditors (2,730) 499______________________________________________________________________________________ Net cash flow from operating activities 4,547 2,064______________________________________________________________________________________ 5. Reconciliation of movements in shareholders' funds 2006 2005 £000 £000 Profit for the financial year 2,553 1,801 New shares issued 9,500 - Shares redeemed - (6,445)______________________________________________________________________________________ 12,053 (4,644) Opening shareholders' funds 4,165 8,809______________________________________________________________________________________ Closing shareholders' funds 16,218 4,165______________________________________________________________________________________ 6. Analysis of cash flows 2006 2005 £000 £000_______________________________________________________________________________________ Returns on investments and servicing of finance Interest received 122 39 Interest paid (1,204) (419)_______________________________________________________________________________________ (1,082) (380)_______________________________________________________________________________________ _______________________________________________________________________________________ 2006 2006 £000 £000_______________________________________________________________________________________ Capital expenditure and financial investment Purchase of tangible fixed assets (18,045) (9,162) Proceeds of disposal of tangible fixed assets - exceptional item - 1,620_______________________________________________________________________________________ (18,045) (7,542)_______________________________________________________________________________________ CareTech Holdings PLC Notes to the Financial Statements - Continued 6. Analysis of cash flows - Continued 2006 2005 £000 £000_______________________________________________________________________________________ Financing Issue of ordinary share capital 9,500 - Repayment of loans (6,800) (3,177) Capital element of finance lease rental payments (235) (97) New term loan drawn down 27,338 16,132 Redemption of share capital - (6,445)________________________________________________________________________________________ 29,803 6,413________________________________________________________________________________________ 7. Analysis of net debt At 1 Oct Cash Acquisitions At 30 Sept 2005 Flow £'000 2006 £'000 £'000 £000 Cash at bank and in hand 1,827 (1,018) 669 1,478 Debt due within one year (6,800) 6,800 - Debt due after one year (8,321) (27,338) (35,659) Finance leases and hire (452) (330) (782) purchase contracts________________________________________________________________________________ (13,746) (21,886) 669 (34,963)________________________________________________________________________________ This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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