Trading Update

CareTech Holdings PLC

("CareTech" or "the Group")

Trading Update

CareTech Holdings PLC (AIM: CTH), a pioneering provider of specialist social care and education services to adults and children in the UK, today announces a pre-close trading update for the year ended 30 September 2021. The Group will issue its full year financial results on Tuesday, 7 December 2021.

Highlights

· Robust financial performance in-line with market expectations

· Net debt reduced to £259m, underpinned by a significantly increased new property portfolio valuation of the Group's freehold and long leasehold at £930m, with leverage of 2.7x adjusted EBITDA

· Appointment of new Head of Adult's Services and Head of Children's Services

· Continuation of organic growth initiatives - seven new developments opened and eight properties purchased during H2

· Strong pipeline of bolt-on acquisition opportunities

Farouq Sheikh, Executive Chairman of CareTech, commented:

"CareTech performed well during the second half of the year with continuing good cash flow generation in the period. The Group enters the new financial year in a strong financial position and I remain confident in our outlook.

"I am particularly thankful to our people who have worked tirelessly throughout the year, enabling us to deliver excellent quality care to people in our services against a challenging backdrop of ongoing pandemic restrictions.

"We are delighted to welcome Nasir Quraishi and Jeremy Wiles to the newly created roles of Group Executive Director - Adults Services and Group Executive Director - Children's Services respectively, and we have no doubt they will help to deliver our long-term growth plans in the coming years. I would also like to thank John Ivers for his dedicated service as Chief Operating Officer over the last six years. I am pleased that John will continue in his new role as Strategic Executive Director, supporting the Group Executive and enabling us to benefit from his wealth of commercial and operational expertise."

Trading and operational performance

CareTech continued to perform well during the second half of 2021 and expects to report financial performance in-line with market expectations for the year ended 30 September 2021, representing double digit revenue and EBITDA growth.

Adult's Services capacity decreased to 2,104 (March 2021: 2,140) as at the year-end, primarily due to the closure of one Coveberry service, which will be repositioned and reopened during the new financial year. Children's Services capacity increased to 2,000 (March 2021: 1,981) primarily due to six new developments opening, increasing beds by 18. Fostering decreased to 875 (March 2021: 1,014) due to a reduction in the number of foster parents and blocked beds.

At 30 September 2021, occupancy levels in the mature estate was 80% (March 2021: 83%) reflecting the timing of the start of the educational year due to a number of CareTech's non-residential schools operating on a 38-week basis with the new education term commencing in October and beds being blocked due to recruitment challenges. Blended occupancy was 78% (March 2021: 81%).

The Adult's Services division has continued to receive support via Local Authorities to reduce transmission of COVID-19 and this has allowed the Company to continue to prioritise the health, safety and wellbeing of its employees and service users. A key priority during the second half has been encouraging staff to take up the vaccine as key workers. At 30 September 2021, c.80% of our staff had received their second dose of the vaccination.

On 1 June 2021, the Group increased the minimum national hourly rate to £9.00, which is above the National Living Wage of £8.91. Local Authorities have continued with fee increases to cover the additional costs resulting from increases in front line staff pay as a consequence of the National Minimum and Living Wage increases from 1 April 2021.

Net debt and Property Valuation

The Group continues to have a strong financial position with unaudited Net Debt at 30 September 2021 being £259m with net debt/unaudited adjusted EBITDA being 2.7x. Operating cash flow has been deployed to purchase eight new developments which are expected to open in the new financial year.

The Group has a significant property portfolio, consisting of 407 freehold and long leasehold sites. The Company has undertaken a scheduled property revaluation, which Knight Frank has valued at £930 million, an increase of 20% since its last valuation in September 2018 of £774 million.

Quality ratings and staff retention

As the pandemic has eased, both CQC and OFSTED have re-commenced inspections. CareTech's Adult CQC registered service quality ratings at 30 September 2021 were 86% Good or Outstanding (March 2021: 88%) and our Ofsted ratings at 30 September 2021 were 80% (March 2021: 82%).

Whilst both our CQC and Ofsted ratings compares favourably to the national social care average, we remain committed to providing the highest quality of care across all our services and have comprehensive improvement plans in place.

The annualised staff retention rate has fallen from 76% to 71%. Whilst this still compares favourably to the industry average, as the effects of the pandemic have eased, there has been a reduction in applications and a higher rate of attrition leading to recruitment challenges. We continue to consider innovative methods of recruitment, investing in the careers of our staff through best-in-class training and development. During the second half, we also established a new Staff Consultative Committee, which will provide a clear basis for the Board to listen to the views of our staff and have regard to these views during the Board's decision-making process. Our unwavering focus remains to be the employer of choice in our sector.

Executive appointments

As CareTech continues to evolve and grow, Nasir Quraishi and Jeremy Wiles have been promoted to the position of Group Executive Director - Adults Services and Group Executive Director - Children's Services respectively, replacing John Ivers' role as Chief Operating Officer. Nasir and Jeremy have many years of experience in the sector and prior to these appointments have held key senior management roles within CareTech.

In their new roles, Nasir and Jeremy will take responsibility for the Company's operating strategy and become members of the Executive Committee, reporting directly to Haroon Sheikh, Group Chief Executive Officer.

John Ivers will continue with the Company in the newly created role of Strategic Executive Director, supporting the Company's growth plans and working with the Executive team.

In line with our wider plans to accelerate our digital and international growth, and to strengthen clinical governance and leadership capacity across the enlarged Group a number of senior appointments are being made as we actively look to attract and retain the best talent in the market.

Outlook

CareTech enters the new financial year in a strong financial position, underpinned by a significant property portfolio and strong cash generation. Alongside its successful organic growth initiatives, the Group continues to see an active pipeline of bolt-on acquisition opportunities, growth in the MENA region and exciting opportunities to develop its Technology division.

For further information, please contact:

CareTech Holdings PLC 01707 601800

Farouq Sheikh, Executive Chairman

Christopher Dickinson, Group Finance Director

Consilium Strategic Communications 020 3709 5700

Mary-Jane Elliott

Chris Welsh

Angela Gray

Panmure Gordon (Nomad and Joint Broker) 020 7886 2500

Emma Earl

Freddy Crossley

Charles Leigh-Pemberton

Numis (Joint Broker) 020 7260 1000

Jonathan Wilcox

James Black

Duncan Monteith

About CareTech

CareTech Holdings PLC is a leading provider of specialist social care and education services, supporting around 4,500 adults and children with a wide range of complex needs in more than 550 residential facilities and specialist schools around the UK and employing approximately 10,000 staff.

Committed to the highest standards of care and care governance, CareTech provides its innovative care pathways covering; Adult learning disabilities and specialist services; Children's residential and education services; and foster care.

CareTech, which was founded in 1993, began trading on the AIM market of the London Stock Exchange in October 2005 under the ticker symbol CTH.

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