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CareTech Holdings PLC  -  CTH   

Interim Results

Released 07:00 19-Jun-2017

RNS Number : 4002I
CareTech Holdings PLC
19 June 2017
 

For immediate release                                                                                                      19 June 2017

 

 

 

CareTech Holdings PLC

("CareTech" or the "Company")

 

Interim Results for the six months ended 31 March 2017

 

CareTech Holdings PLC (AIM: CTH), a pioneering provider of specialist social care services in the UK, is pleased to announce its interim results for the six months ended 31 March 2017.

 

Financial Highlights

·      Revenue increased by 11.3% to £78.8m (H12016: £70.8m)

·      Underlying EBITDA(i) increased by 8.3% to £18.3m (H12016: £16.9m)

·      Underlying profit before tax(ii) increased by 13.9% to £13.1m (H12016: £11.5m)

·      Underlying diluted earnings per share(ii) increased by 11% to 16.37p (H12016: 14.75p)

·      Operating profit decreased by 28.5% to £10.7m (H12016: £15.0m) and profit before tax decreased by 37.5% to £7.0m (H12016: £11.2m) principally due to £5.6m profit on sale of fixed assets in 2016  

·      Strong operating cash inflow before non-underlying items of £15.8m (H12016: £15.6m) with net debt of £122.5m at 31 March 2017 (31 March 2016: £156.4m) (iii)

·      Interim dividend increased by 10% to 3.30p (2016: 3.00p) per share

·      Net assets have grown by 38.5% to £195.2m (H12016: £140.9m)

·      Cash inflows from operating activities were £11.4m (H12016: £13.8m)

·      Placing of 11,000,000 new shares raising £37m (net of expenses)

·      Improved banking facilities with the deferral of two loan repayments

 

Strategic Highlights

·      After the half year end there was an acquisition investment of £20.7m of placing proceeds in Beacon Reach and Selborne Care (see separate release announced today)

·      Recent acquisitions Spark of Genius, Oakleaf Care (Hartwell) and ROC North West have continued to grow

·      Further strengthening of the management team and additional I.T. infrastructure

·      Overall net capacity increased since the year end by 40 places

·      Improved quality ratings particularly with CQC

·      Disability confident level 3 accreditation obtained and CareTech Charitable Foundation established

 

Commenting on the results, Farouq Sheikh, Executive Chairman of CareTech, said:

 

"We are pleased to report an impressive performance for the first half of 2017 which delivered year on year growth in revenue, underlying EBITDA, underlying profit before tax and underlying EPS.  

 

"Having raised £37m of net proceeds from the share placing in March 2017, the Group has completed on two acquisitions with a total spend of £20.7m since the half year ended.  A number of potential acquisition opportunities are under active consideration and in addition we have a strong organic pipeline of additional beds in reconfigured services and in new services.

 

"The Directors believe that this will lead to a sustained growth in capacity and revenues which will generate additional EBITDA and cash so that the Group can achieve its target of double digit growth annually in underlying diluted earnings per share.

 

"It is pleasing to recognise the hard work that has gone into the disability confident level 3 accreditation.  Also the creation of the CareTech Charitable Foundation is an exciting initiative to make a difference to support service users and our staff and their families plus contribute to disability related causes.

 

"The continued provision of first-class social care which represents good value and is focused on successful service user outcomes will remain the main market driver for CareTech's continuing growth."

 

 

(i)             Underlying EBITDA is operating profit stated before depreciation, share -based payments charge and non-underlying items explained in note 3.

(ii)            Underlying profit before tax and underlying diluted earnings per share are stated before non-underlying items (explained in note 3).

(iii)           Net debt is defined by the Group's banking facilities and comprises cash and cash equivalents net of loans and borrowings.

(iv)           EBITDA is operating profit stated before depreciation, share-based payments charge and amortisation of intangible assets.

 

 

 

 

 

For further information, please contact:

 

CareTech Holdings PLC

Farouq Sheikh, Executive Chairman

Michael Hill, Group Finance Director

 

01707 601 800

Buchanan (PR Adviser)

Mark Court

Sophie Cowles

Stephanie Watson

 

020 7466 5000

Panmure Gordon (Nomad and Joint Broker)

Freddy Crossley

Peter Steel

Charles Leigh-Pemberton

 

020 7886 2500

WH Ireland (Joint Broker)

Adrian Hadden

James Bavister

020 7220 1666

 

 

This announcement contains inside information for the purposes of Article 7 of Regulation (EU) No 596/2014

 

                                                

About CareTech

 

CareTech Holdings plc is a leading provider of specialist social care services, supporting adults and children with a wide range of complex needs in more than 260 specialist services around the UK.

 

Committed to the highest standards of care and care governance, CareTech provides its innovative care pathways through five divisions covering adult learning disabilities, specialist services, young people residential services, foster care and learning services which come under the two outcome-based sectors of Adult Services and Young People Services.

 

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.  Its property portfolio comprises more than 200 properties.

 

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

 

 

Chairman's Statement

 

The solid platform has continued to deliver strong organic growth as well as multiple acquisition opportunities planned

 

I am pleased to report another solid performance in the six months ended 31 March 2017. CareTech has delivered an impressive performance increasing revenue, underlying EBITDA, and underlying profit before tax compared with the comparable period in 2016.   The strong performance further demonstrates the benefits of the Board's strategy over recent years, in which it has actively sought to:

 

·      Create complementary care pathways focused on outcomes for service users

·      Reconfigure the existing property portfolio to meet market demand

·      Invest in people and I.T. systems

·      Strengthen the balance sheet through a combination of share placements and improved banking facilities

·      Accelerate organic growth complemented by bolt-on acquisitions

 

The growth going forward is underpinned by the strong foundation that we have built over the past few years and the Group continues to develop and grow its five operating divisions, which come under the two outcome-based sectors of Adult services and Young People services. We continue to extend both our geographic coverage and our outcome based care pathway range of services organically and through the purchase and sale of properties to meet the needs of our marketplace, specifically the requirement for greater acuity service provision. This indicates that CareTech is in a very strong position to address the demands of our evolving marketplace and the Board remains confident of the Group's performance for the remainder of the year.

 

Following the recent share placement and improved banking facilities plus further strengthening of the management team, the Group is ideally placed to make further bolt-on acquisitions to our existing care pathways in a market that remains very fragmented.  We are also currently making good progress on a number of organic projects adding beds in reconfigured services and in new services where we have acquired properties in the North West, West of England and Scotland.

 

Our current initiatives and acquisition strategy give the Group the ability to achieve double digit growth annually in underlying diluted earnings per share going forwards.

 

Our performance during the first half of the current year has been underpinned by the strategic initiatives undertaken over recent years which have delivered a stronger performance compared with the same period last year on all of the key financial metrics.

 

CareTech's care pathways continue to be a key foundation to delivering positive outcomes for our service users.  By helping them to live more independently, we are working in partnership with local authorities by providing them with greater value for money.

 

Results

Group revenue in the half year has grown by 11.3% to £78.8m (H12016: £70.8m) has delivered an underlying EBITDA (i) of £18.3m (H12016: £16.9m), representing growth of 8.3%.  Without the effect of reconfigurations and acquisitions Group revenue and EBITDA would have grown on a like for like basis by 4.2 % and 2.6 % respectively; this constitutes an investment for the future and allows the Group to meet Commissioner demands whilst expanding our care pathways and geography.

 

The underlying EBITDA(i) margin was 23.2% (H12016: 23.8%) having made further investment in the management team and reflecting the change of mix in margins for some of the acquired businesses.  Underlying margins continue to improve through reconfigurations and operational efficiencies and have grown from 20.9% in HI2013 and 22.6% in H12014 to 23.8% in H12015.

 

Underlying profit before tax(ii) increased by 13.9% to £13.1m (H12016: £11.5m) and underlying diluted earnings per share(ii) was 16.37p (2016: 14.75p) This increase of 11% is due to the growth in underlying earnings arising from the improved EBITDA and lower financial expenses partially offset by an increase in the number of shares issued in March 2017 as a result of the placing.

 

Operating profit, profit before tax and EPS are lower than the first half of 2016 principally due to the profit on sale of fixed assets as a result of the ground rent transaction.

 

During this period, we also maintained our strategic focus towards taking the Group's operational platform forward to the next stage of development in what is a growing market. As a consequence, we have further invested in our property estate, our IT systems and operating structure in order to provide the appropriate quality and resource to drive medium term growth organically, investing £9.2m in the period (H12016: £6.1m). Additionally, following our analysis in the past two years of demand trends, new services and new properties are being developed including further children's services in Scotland, and further homes in North West and West of England.  Homes are being reconfigured to meet new demand and service requirements of Care Commissioners in the West Midlands and North West England and these are planned to be completed in the coming months. 

 

Care commissioners continue to demand flexible high quality care solutions and favour operators able to deliver across the care pathway.  Pleasingly, some of the 2016 reconfigured services that have opened are already experiencing strong levels of demand from local authorities for referrals, validating our strategy of reconfiguration focusing upon greater acuity service provision.

 

A key feature of this business is its strong cash generation.  Operating cash inflow before non-underlying items of £15.8m represents a 86% cash conversion of underlying EBITDA(i), which demonstrates the continued strong quality of our earnings.  As a result of this and the focus on organic growth as well as the net share placement monies, net debt as defined by the Group's bank facilities was £122.5m at 31 March 2017 £33.9m lower than the year end position at 30 September 2016 of £156.4m.

 

Net assets have increased by £43.6m in the half year to 31 March 2017 which is an increase of 30.9% compared with March 2016 due mainly to the share placement.

 

In the trading update issued on 27 April 2017, CareTech announced that, annual fee rate negotiations with local authorities remain at an early stage and this year are taking place against the backdrop of an increase in the Living Wage to £7.50 per hour from 1 April 2017.  The Board anticipates that a more positive outcome will be achieved than in recent years and that the costs associated with the Living Wage will be fully absorbed by fee increases.

 

Dividend

Our policy continues to be to increase the dividend broadly in line with the movement in underlying diluted earnings per share. Given the consistent earnings growth and cash generation the Board is therefore declaring an interim dividend of 3.30p (H12016: 3.00p) per share, to be paid on 24 November 2017 to shareholders on the Register of Members on 26 October 2017 with an associated record date of 27 October 2017.

 

Service user capacity and occupancy

During the half year there was a total net increase of 40 residential and fostering places.  There were 13 additional beds in reconfigured services and in new services there were 20 new beds in Adults and 20 new beds in Children's.  These generate a higher contribution than the beds pre-configuration and are part of our ongoing strategy to enhance margins.  There were 13 new beds withdrawn for reconfiguration in the half year.  There was no change of capacity in fostering. The Group's net capacity at the half year was 2,359 places (2,319 places as at 30 September 2016).  Once the services have been reconfigured, we expect them to contribute a higher profit margin than previously.   

Compared with 30 September 2016, occupancy levels in the mature estate are unchanged at 93% and the blended occupancy is also unchanged at approximately 86%.

Share Placement

The Board decided to make further acquisitions after a number of bolt-on targets were identified which could enhance the geographic spread of services and improve the care pathways.

 

On 23 March 2017, CareTech announced a share placing which raised approximately £37 million (net of expenses).  A number of organic growth projects and potential bolt-on acquisitions have been identified and the intention is that the placing proceeds be deployed within approximately twelve months.

We continue to make good progress with a number of these opportunities.  We undertake a thorough review process of new potential targets by a small senior team and have a strong pre- and post-implementation focus.  The success of recent acquisitions and their integration into our core business is the template for future projects.

On 28 March 2017, 344,305 new ordinary shares were issued as part of the arrangements for full and final settlement of the earn-out agreed with the vendors of ROC North West Limited ("ROC"), acquired by the Company in December 2015.  The new ordinary shares were issued at a deemed price of 365 pence per share.  The new shares were listed on AIM on 3 April 2017.

The four banks in the Group's banking syndicate agreed on 28 March 2017 to defer repayment of the loan instalments due on 1 April 2017 and on 1 October 2017 until January 2019.  The Company plans to make these additional funds of £11.55m available for the purchase of more properties and bolt-on acquisitions.

Acquisitions

Since the half year ended the first £3.8m has been committed to the acquisition and development of Beacon Reach near Preston, a children's education and residential facility previously registered for 34 residential places set on 18 acres of pastureland.

 

 

 

The Group is also pleased to announce that it has agreed to acquire the entire issued share capital of Selborne Care Limited for a total consideration of £16.9m in cash (see separate release announced today).

 

Selborne is a high quality provider of specialist residential care, supported living and day care services for adults with learning disabilities and challenging behaviours.  Selborne is based in Droitwich and operates across the Midlands and the South West.

 

Residential care services are provided through 8 care services with a combined capacity of 57 beds.
Supported living services are provided to 30 service users.  Innovative outreach and day services are also offered.

 

These two acquisitions utilise £20.7m of the funds raised from the share placement.

 

Operating review

The Group continues to benefit from the organisational improvements put in place over the past few years. In the half year, we have continued to strengthen the management structure and improve the efficiency of our processes following further investment in new systems which will continue through the second half of the year.  Our recent appointments have put us in a strong position to benefit from a number of commissioning opportunities by working in partnership with the NHS and Local Authorities especially in light of Joint Commissioning currently being developed.

 

The Time and Attendance system, which had been implemented across residential services before the half year, provides margin improvements at homes level and it further progresses our back office centralisation which continues in the second half year with further new IT developments.

 

A summary outline of our divisions and sectors:

For the time being we continue to report the five operating divisions with their individual statistics and we report Adult Services which is the total of Adult Learning Disabilities and Specialist Services, and Young People Services which is the total of Young People Residential, Fostering and Learning Services.

Adult Services

The Adult Services capacity is 1,799 with Revenue growing by 14.0% to £48.0m (H12016: £42.1m) and EBITDA by 10.5% to £13.7m (H12016: £12.4m).  The sector's margin has come back a little to 28.6% (HI2016 29.5%) as a result of the investment in further reconfigurations and service mix.

 

Adult Learning Disabilities - with a client capacity at 31 March 2017 of 1,604 places and first half revenue of £40.3m, this division represents 51% of the Group's activities. We continue to offer a flexible, person-centred approach with support being offered on an individual planned basis.  Demand remains high for the support of people with learning disabilities and we recognise an increasing complexity of need for referrals to our specialist services. We have identified a small number of additional learning disability residential services to reconfigure into services that provide a greater level of acuity and these are being developed with further services opening in Supported Living in the North West and South East.  A contract has been won to start in August 2017 in Supported Living in Wigan which will be for 36 beds. The focus on quality continues with the Care Quality Commission new ratings for the Group's services being rated better than the national averages.

 

Specialist Services - our care pathway for specialist services includes a small community based "open" hospital, residential care homes, independent supported living and community outreach. We also include all adult specialised services in this portfolio including Oakleaf with its care and rehabilitation of men with acquired brain injury.  At 31 March 2017 the division had a capacity of 195 places and generated revenue of £7.7m in the first half of our financial year up 126.7% on March 2016 principally due to Oakleaf being included for the full half year rather than just March 2016 when it was acquired.

 

Young People Services

The Young People Services capacity is 560 with revenues growing by 7.0% to £30.8m (H12016: £28.7m) and EBITDA by 6.6% to £8.0m (H12016: £7.5m).  The underlying focus of providing a complete care pathway for Young People is now coming through with much more strength and the sector also reflects the acquisition of ROC in December 2015 for the full half year with both ROC and Spark of Genius opening new services in the half year.

 

Young People Residential Services - provides care, support and education to young people with complex behavioural problems, physical impairments, learning disabilities and emotional behavioural disorders ('EBD'). This division generated revenue of £20.8m and had a capacity at 31 March 2017 of 259 places. We operate services that cater for local needs but also manage certain highly specialised services that have a national catchment. Since 2012 the Group gained a foothold in Scotland and this was further extended through the acquisition of Spark of Genius and with the opening of additional services in Fife and Paisley. The division focuses increasingly on those children with the most complex needs and those who require our sophisticated clinical input. 

 

Foster Care - with a capacity of 301 children we have established ourselves as one of the largest independent fostering agencies in England and Wales. The division had turnover of £4.3m in the six months to 31 March 2017.  We have observed a significantly increased demand for foster care for children who might otherwise have entered the residential care system. Foster care represents much better value for commissioners but the complexity of children being referred will often make the matching process quite complex, favouring larger agencies like CareTech with a greater range of well supported foster carers. 

 

Learning Services - Revenue to 31 March 2017 was £5.7m in the first half of the financial year and includes Dawn Hodge Associates (DHA) which has just had an Ofsted outcome of "outstanding" as an independent learning provider.  The Group has expanded the new CareTech Aspire Programme in this half year; it will ensure that all of CareTech's care staff receive all mandatory and statutory training to the highest standard whilst also being offered the opportunity to complete a Level 2 or Level 3 apprenticeship which has been carefully tailored to suit individual roles.

The Aspire programme aims to empower every member of staff to deliver high quality, personalised care and ensure there is a development pathway available to all. From November 2014, all newly hired support workers have been offered an apprenticeship as part of their induction to CareTech.  To date 178 CareTech care staff have completed their apprenticeship programme and 393 are still undergoing their apprenticeship.  There are also 58 CareTech managers on the Level 5 Health and Social Care Diploma which is offered, provided and supported by EQL.

This programme is one of a number of initiatives being taken on staff development and retention. There is also good progress on Pre-Employment Training Courses for Young People which are being introduced into some of our Young People Residential Services.

As an employer, CareTech is a registered apprenticeship training provider in its own right and the Board is convinced of the benefits that our apprenticeship programme has had for both our own staff and for the users of our services.  The apprenticeship levy is an opportunity to continue to deliver excellence in the care sector and is a tangible example of the Group's commitment to training and retaining its workforce.  The Group is also fully committed to Disability Confident and has achieved the employer scheme accreditation to level 3.

Strategy

The specialist social care market continues to benefit from strong demographic trends and higher acuity levels across the UK. Local Authorities are faced with increasing demands and financial pressures that have led to a greater focus on value for money. CareTech's experience has been that service commissioners recognise that the most complex people require continuing support which focuses on outcome based care pathways.

 

For those able to transition we provide clear outcome-based pathways from residential care, principally into various forms of supported housing or foster care for children, while residential options continue to be in demand for those with the greatest need. However, we anticipate further shifts toward more sophisticated supported living packages linked to new personalised payment methodologies.

 

Our diversification policy means that we are now offering the full spectrum of social care services with the exception of traditional elderly care.  We believe that our strategic position is now very strong, backed by an effective organisational structure, first class quality control and developing clinical infrastructure. In the medium term we are focusing on organic growth that builds on our successful base position.  However, we will undertake further strategic acquisitions that meet our key criteria by offering new expertise, geographical presence or consolidation opportunities.

 

People

There have been no changes to the Board, the Remuneration Committee, Care Governance and Safeguarding Committee or the Audit Committee in the half year.

 

As a foundation for growth the Senior Executive Team at CareTech has been further strengthened in the half year and we will continue to bring senior executives into the business to help build a strong foundation from which to drive growth and quality.  The Adults Learning Disabilities Division is now managed by two managing directors having been split into two regions to enable geographic focus, and a new Children's managing director has been appointed.  A further appointment will be a Specialist Services managing director to reflect the broadening of acuity services. The Learning Division and Compliance teams have also being strengthened.

The Group is repeating the Sharesave scheme for all staff offered in 2016 and it is hoped that there will again be strong demand. The Group has also created the CareTech Charitable Foundation which is a Registered Charity with objectives to help those in need of assistance with education and provide support to disadvantaged people.

Outlook and prospects

The continued provision of first-class social care which represents good value and is focused on successful client outcomes will remain the main market driver for CareTech's continuing growth.

 

The proven strategy of taking the Group from a single division to now supporting five complementary divisions has given the Group a resilient foundation from which to build.

 

With a strengthened management team and having undertaken the share placement and with improved banking facilities in place, the Group has a number of consolidation opportunities and property projects which are currently being progressed.  The Board believes that this will lead to a growth in capacity and revenues which will generate additional EBITDA and cash to continue organic and infrastructure improvements so the Group can achieve its target of double digit growth annually in underlying diluted earnings per share.

 

CareTech will continue to work in partnership with local authorities to deliver innovative services focused on delivering positive outcomes for individuals.

 

Farouq Sheikh

Chairman 

19 June 2017

(i)   Underlying EBITDA is operating profit before depreciation, share-based payments charge
and non underlying items (explained in note 3);

(ii)  Underlying profit before tax and underlying diluted earnings per share are stated before non underlying items (explained in note 3).

 

 

 

Condensed Consolidated Statement of Comprehensive Income

for the six months ended 31 March 2017

 

 

 

 

Six months ended

Six months ended

Year ended

 

 

31 March 2017

31 March 2016

30 September 2016

 

 

unaudited

unaudited

audited

 

 

Before non

 

Before non

 

Before non

 

 

 

underlying

Total

underlying

Total

underlying

Total

 

 

items(i)

unaudited

items(i)

unaudited

items(i)

audited

 

Note

£000

£000

£000

£000

£000

£000

Revenue

 

78,774

78,774

70,825

70,825

148,979

148,979

Cost of sales

 

(50,447)

(50,447)

(45,661)

(45,661)

(94,682)

(94,682)

Gross profit

 

28,327

28,327

25,164

25,164

54,297

54,297

 

 

 

 

 

 

 

 

Administrative expenses

 

(12,634)

(17,585)

(10,683)

(10,134)

(22,328)

(23,838)

Operating profit

 

15,693

10,742

14,481

15,030

31,969

30,459

 

 

 

 

 

 

 

 

EBITDA

3

18,331

18,331

16,850

16,850

37,056

41,289

Depreciation

 

(2,608)

(2,608)

(2,344)

(2,344)

(5,026)

(5,026)

Amortisation of intangible assets

3

-

(3,363)

-

(2,865)

-

(5,743)

Share-based payments charge

 

(30)

(30)

(25)

(25)

(61)

(61)

Profit on sale of fixed assets

3

-

-

-

5,623

-

-

Acquisition expenses

3

-

-

-

(1,505)

-

-

Share placing costs

3

-

(348)

-

-

-

-

Integration,reorganisation and redundancy costs

 

3

 

-

 

(1,240)

 

-

 

(704)

 

-

 

-

Operating profit

 

15,693

10,742

14,481

15,030

31,969

30,459

Financial expenses

4

(2,601)

(3,729)

(3,003)

(3,834) 

  (5,887)

(7,924)

Profit before tax

 

13,092

7,013

11,478

11,196

26,082

22,535

Taxation

5

(2,547)

(1,638)

(2,295)

(2,477)

(2,035)

336

Comprehensive income
for the period attributable
to equity shareholders of
the parent

 

 

 

 

10,545

 

 

 

5,375

 

 

 

9,183

 

 

 

8,719

 

 

 

24,047

 

 

 

22,871

Earnings per share

 

 

 

 

 

 

 

Basic    

6

16.37p

8.35p

14.75p

14.00p

38.03p

 36.17p

Diluted

6

16.37p

8.35p

14.75p

14.00p

38.03p

36.17p

 

(i)         Non underlying items are explained in note 3.

 

Condensed Consolidated Statement of Changes in Equity at 31 March 2017

 

 

 

 

Six months ended

Six months ended

Year ended

 

31 March 2017

31 March 2016

30 September 2016

 

unaudited

unaudited

audited

 

£000

£000

£000

Balance at start of period

151,667

133,699

133,699

Total comprehensive income

5,375

8,719

22,871

Transactions with owners recorded directly in equity:

 

 

 

Issue of ordinary shares

57

214

258

Share premium on shares issued

38,749

-

-

Reduction in shares held

1,272

 (43)

-

Equity settled share-based payments charge

30

25

61

Dividends

(1,925)

(1,739)

(5,222)

Balance at end of period

195,225

140,875

151,667

 

 

 

Condensed Consolidated Balance Sheet at 31 March 2017

 

 

31 March 2017

31 March

2016

30 September

2016

 

unaudited

unaudited

audited

 

£000

£000

£000

Non-current assets

 

 

 

Property, plant and equipment

272,719

263,432

267,667

Other intangible assets

43,087

44,628

43,982

Goodwill

43,021

43,049

43,021

 

358,827

351,109

354,670

Current assets

 

 

 

Inventories

815

562

815

Trade and other receivables

17,917

14,736

18,508

Cash and cash equivalents

9,843

4,103

4,308

 

28,575

19,401

23,631

Total assets

387,402

370,510

378,301

Current liabilities

 

 

 

Loans and borrowings

607

1,646

6,990

Trade and other payables

Deferred and contingent consideration payable

15,359

2,270

18,742

3,925

17,666

3,850

Ground rent liabilities arising under IAS17

50

59

50

Deferred income

1,933

2,114

2,119

Corporate Tax

9,096

9,512

9,250

Derivative financial instruments

724

425

1,083

 

30,039

36,423

41,008

Non-current liabilities

 

 

 

Loans and borrowings

131,724

158,590

153,742

Deferred and contingent consideration payable

1,872

2,025

2,025

Ground rent liabilities arising under IAS17

7,318

7,359

7,343

Deferred tax liabilities

Derivative financial instruments

20,472

752

24,386

852

21,552

964

 

162,138

193,212

185,626

Total liabilities

192,177

229,635

226,634

Net assets

195,225

140,875

151,667

 

Equity attributable to equity shareholders of the parent

 

 

 

Share capital

378

321

321

Share premium

120,499

81,664

81,750

Shares held by Employee Benefit Trust

(4,800)

(6,072)

(6,072)

Merger reserve

9,023

9,022

9,023

Retained earnings

70,125

55,940

66,645

Total equity attributable to equity shareholders of the parent

195,225

140,875

151,667

 
 

Consolidated Cash Flow Statement for the six months ended 31 March 2017

 

 

Six months ended

Six months ended

Year ended

 

31 March 2017

31 March 2016

30 September 2016

 

unaudited

unaudited

audited

 

£000

£000

£000

Cash flows from operating activities

 

 

 

Profit before tax

7,013

11,196

22,535

Financial expenses

3,729

3,834

7,924

Depreciation

2,608

2,344

5,026

Amortisation of intangible assets

3,363

2,865

5,743

Share-based payments charge

30

25

61

Acquisition transaction costs

-

1,505

660

Integration,reorganisation and redundancy costs

1,588

704

1,780

(Profit) on disposal of property, plant and equipment

-

(5,623)

(5,623)

Operating cash flows before movement in working

18,331

16,850

38,106

capital and non- underlying items

 

 

 

(Increase) in inventory

-

-

(253)

Decrease/(Increase) in trade and other receivables

(Decrease) in trade and other payables                                          

142

(2,669)

(342)

(863)

(3,498)

(163)

Operating cash flows before non-underlying items

15,804

15,645

34,192

  Integration and restructuring costs

  Payments under onerous contracts

(1,449)

-

(709)

-

(1,780)

-

  Cash inflows from operating activities

14,355

14,936

32,412

  Tax paid

(2,873)

(1,087)

  (1,458)

Net cash from operating activities

11,482

13,849

30,954

 

Cash flows from investing activities

 

 

 

Proceeds from sale of property, plant and equipment

125

29,726

29,854

Payments for business combinations net of cash acquired

Acquisition of intangible items

(427)

-

(27,603)

(1,348)

(27,603)

-

Acquisition of property, plant and equipment

Acquisition of software

(7,048)

(2,196)

(4,766)

-

(10,765)

(3,580)

Payment of acquisition costs

-

(2,303)

(3,654)

Payment of ground rent transaction costs

(197)

-

-

Net cash used in investing activities

(9,743)

(6,294)

(15,748)

Cash flows from financing activities

 

 

 

Proceeds arising from the issue of share capital (net of costs)

37,548

75

75

Proceeds from new loan (net of costs)

9,627

27,950

-

Interest paid

(2,556)

(3,311)

(5,544)

Cash outflow arising from derivative financial instruments

Bank fees on refinancing

(372)

-

(321)

(443)

(779)

27,507

Repayment of borrowings

(37,400)

(28,377)

(28,377)

Payment of finance lease liabilities

(1,126)

(988)

(2,260)

Dividends paid

(1,925)

(1,739)

(5,222)

Net cash used in financing activities

3,796

(7,154)

(14,600)

Net change in cash and cash equivalents

5,535

401

606

Cash and cash equivalents at start of the period

4,308

3,702

3,702

Cash and cash equivalents at end of the period

9,843

4,103

4,308

 

Net debt as defined by the Group's banking facilities comprises:

 

 

31 March 2017

31 March 2016

30 September 2016

 

Unaudited

unaudited

audited

 

£000

£000

£000

Cash and cash equivalents

9,843

4,103

4,308

Bank loans and borrowings

(132,331)

(160,488)

(160,732)

Net debt at end of the period

(122,488)

(156,385)

(156,424)

 

 

 

Notes

 

1.   Accounting policies

This interim report has been prepared on the basis of the accounting policies expected to be adopted for the year ending 30 September 2017. These are anticipated to be in accordance with the Group's accounting policies as set out in the latest annual financial statements for the year ended 30 September 2016.

All International Financial Reporting Standards ("IFRS"), International Accounting Standards ("IAS"') and interpretations currently endorsed by the International Accounting Standards Board ("IASB") and its committees as adopted by the EU and as required to be adopted by AIM-listed companies have been applied. AIM-listed companies are not required to comply with IAS 34 'Interim Financial Reporting' and accordingly the Company has taken advantage of this exemption.

The financial information in this interim report does not constitute statutory accounts for the six months ended 31 March 2017 and should be read in conjunction with the Group's annual financial statements for the year ended 30 September 2016. Financial information for the year ended 30 September 2016 has been derived from the consolidated audited accounts for that period which were unqualified.

The condensed consolidated interim financial statements for the six months to 31 March 2017 have not been audited or reviewed by auditors pursuant to the Auditing Practices Board guidance on Review of Interim Financial Information.

This unaudited interim report was approved by the Board on 6 June 2017.

2.   Segmental information

IFRS 8 requires operating segments to be determined based on the Group's internal reporting to the Chief Operating Decision Maker ("CODM"). The CODM has been determined to be the Chief Executive Officer as he is primarily responsible for the allocation of resources to segments and the assessment of the performance of each of the segments.

The CODM uses underlying EBITDA as reviewed at monthly Executive Committee meetings as the key measure of the segments' results as it reflects the segments' underlying trading performance for the period under evaluation. Underlying EBITDA is a consistent measure within the Group.

Inter-segment turnover between the operating segments is not material.

Our two key segments are Adult Services (Adult) and Children Services (Children).  Adult Services comprises the Adult Learning Disabilities (ALD) and Mental Health (MH) divisions and the Children Services comprises Young People Residential Services (YPR), Foster Care (FC) and Learning Services (Learning).

 

 

2.   Segmental information continued

The segmental results for the six months ended 31 March 2017, six months ended 31 March 2016 and year ended 30 September 2016 and the reconciliation of the segment measures to the respective statutory items included in the consolidated financial information are as follows:

Six months ended 31 March 2017

Continuing Operations

ALD

SS

Adults

YPR

FC

Learning

Children

Total

Client Capacity

1,604

195

1,799

259

301

-

560

2,359

Revenue (£'000)

40,331

7,673

48,004

20,772

4,328

5,670

30,770

78,774

EBITDA (£'000)

11,577

2,142

13,719

6,247

1,102

686

8,035

21,754

 

 

 

 

 

 

 

 

 

Six months ended 31 March 2016

 

 

 

 

 

 

 

 

Continuing Operations

ALD

MH

Adults

YPR

FC

Learning

Children

Total

Client Capacity

1,527

216

1,743

247

302

-

549

2,292

Revenue (£'000)

38,695

3,385

42,080

17,705

5,211

5,829

28,745

70,825

EBITDA (£'000)

11,315

1,090

12,405

5,617

1,328

536

7,481

19,886

 

 

 

 

 

 

 

 

 

Year ended 30 September 2016

 

 

 

 

 

 

 

 

Continuing Operations

ALD

MH

Adults

YPR

FC

Learning

Children

Total

Client Capacity

1,577

206

1,783

235

301

-

536

2,319

Revenue (£'000)

84,351

5,748

90,099

38,980

8,714

11,186

58,880

148,979

EBITDA (£'000)

26,396

1,663

28,059

11,806

2,187

1,013

15,006

43,065

 

Reconciliation of EBITDA to profit after tax:

 

Six months ended

Six months ended

Year ended

 

31 March 2017

31 March 2016

30 September 2016

 

unaudited

unaudited

audited

 

£000

£000

£000

Underlying EBITDA before unallocated costs

21,754

19,886

43,065

Unallocated costs

(3,423)

(3,036)

(6,009)

Underlying EBITDA

18,331

16,850

37,056

Depreciation

(2,608)

(2,344)

(5,026)

Amortisation

(3,363)

(2,865)

(5,743)

Share-based payments charge

(30)

(25)

(61)

Non underlying items

(1,588)

3,414

4,233

Operating profit

10,742

15,030

30,459

Financial expenses

(3,729)

(3,834)

(7,924)

Profit before tax

7,013

11,196

22,535

Taxation

(1,638)

(2,477)

336

Profit after tax

5,375

8,719

22,871

 

All operations of the Group are carried out in the UK, the Company's country of domicile. All revenues therefore arise within the UK and all non-current assets are likewise located in the UK. No single external customer amounts to 10% or more of the Group's revenues.

No asset and liability information is presented as this information is not allocated to operating segments in the regular reporting to the group's Chief Operating Decision Maker and are not measures used by the CODM to assess performance and to make resource allocation decisions.

 

 

3.   Non-underlying items

Non underlying items are those items of financial performance which, in the opinion of the Directors, should be disclosed separately in order to improve the readers understanding of the trading performance of the Group. Non underlying items comprise the following:

 

 

Six months ended

Six months ended

Year

ended

 

 

31 March 2017

31 March 2016

30 September 2016

 

 

unaudited

unaudited

audited

 

Note

£000

£000

£000

Acquisition expenses

(i)

-

1,505

(390)

Integration, reorganisation and redundancy costs

(ii)

1,588

704

1,780

Profit arising from the ground rent transaction under IAS17

 

 

-

 

(5,623)

 

(5,623)

Amortisation of intangible assets

 

3,363

2,865

5,743

Included in administrative expenses

 

4,951

(549)

1,510

Fair value movements relating to derivative financial instruments

 

(iii)

 

(571)

 

488

 

1,258

Charges relating to derivative financial instruments

IAS 17 lease imputed interest

Other financing costs relating to ground rent transactions

 (iii)

 

 

 

414

112

1,173

322

21

-

646

133

-

 

Included in financial expenses

 

1,128

831

2,037

Tax effect:

 

 

 

 

Current tax

(iv)

(322)

(211)

(84)

Deferred tax

(v)

(587)

393

(2,287)

Included in taxation

 

(909)

182

(2,371)

Total non underlying items

 

5,170

464

1,176

 

(i)   In accordance with IFRS 3 (as revised) items associated with business combinations have been taken to the income statement as incurred.

(ii)   The Group incurred a number of costs relating to the integration of recent acquisitions and reorganisation of the internal operating and management structure.

(iii)  Non underlying items relating to derivative financial instruments include the movements during the year in
the fair value of the Group's interest rate swaps which are not designated as hedging instruments and therefore do not qualify for hedge accounting, together with the quarterly cash settlements and accrual thereof.

(iv)  Represents the current tax on items (ii) and (iii) above.

(v)  Deferred tax arises in respect of the following:

 

 

 

Six months ended

Six months ended

Year

Ended

 

 

31 March 2017

31 March 2016

30 September 2016

 

 

Unaudited

unaudited

audited

 

 

£000

£000

£000

Derivative financial instruments (note iv)

 

(114)

98

190

Roll over relief arising from property disposals

 

-

(1,124)

1,184

Other adjustments

 

701

633

913

Total

 

587

(393)

2,287

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4.   Financial expenses

 

 

Six months

ended

Six months ended

Year

ended

 

31 March 2017

31 March 2016

30 September 2016

 

unaudited

unaudited

audited

 

£000

£000

£000

On bank loans and overdrafts

2,438

2,876

5,560

Finance charges in respect of finance leases

163

127

327

Financial expenses before adjustments

2,601

3,003

5,887

Amounts relating to derivative financial

 

 

 

instruments (note 3)

IAS 17 leases imputed interest (note 3)

1,016

112

810

21

1,904

133

Total financial expenses

3,729

3,834

7,924

 

5.   Taxation

 

 

Six months

ended

Six months ended

Year

ended

 

31 March 2017

31 March 2016

30 September 2016

 

unaudited

unaudited

audited

 

£000

£000

£000

Current tax expense

 

 

 

Current period

2,553

2,300

(4,471)

Non underlying items (note 3)

Corporation tax overprovided in previous periods

(322)

-

 

(211)

-

84

2,281

 

Total current tax

2,231

2,089

(2,106)

 

 

 

 

Deferred tax expense

 

 

 

Current period

Prior year

(6)

-

(5)

-

(1,027)

1,182

Deferred tax on non-underlying items (note 3)

(587)

393

2,287

Total deferred tax

(593)

388

2,442

Total tax in the consolidated statement of comprehensive income

 

1,638

 

2,477

 

336

Effective tax rate on profit before tax
(before non underlying items)

20%

20%

8%

 

.
 

6.   Earnings per share

 

 

Six months ended

Six months ended

Year ended

 

31 March 2017

31 March 2016

30 September 2016

 

unaudited

unaudited

audited

 

£000

£000

£000

Profit attributable to ordinary shareholders

5,375

8,719

22,871

Non-underlying items (note 3)

5,170

464

1,176

Profit attributable to ordinary shareholders before underlying items

10,545

9,183

24,047

Weighted number of shares in issue for basic earnings per share

64,400,048

62,261,789

63,229,346

Effects of share options in issue

6,562

-

-

Weighted number of shares in issue for diluted earnings per share

64,406,610

62,261,789

63,229,346

 

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.

 

 

Earnings per share (pence per share)

 

 

 

Basic

8.35p

14.00p

36.17p

Diluted

8.35p

14.00p

36.17p

 

 

 

 

Earnings per share before non-underlying items (pence per share)

 

 

 

Basic

16.37p

14.75p

38.03p

Diluted

16.37p

14.75p

38.03p

 

 

 

 

 

 

 

  

 

 

 

Directors and Advisers

 

Company Number                                                                   Solicitors

04457287                                                                                  Charles Russell Speechlys        

                                                                                                6 New Street Square

Registered Office                                                                     London EC4A 3LX

5th Floor, Metropolitan House                                                      

3 Darkes Lane                                                                           Pinsent Masons

Potters Bar                                                                               City Point

Herts EN6 1AG                                                                         One Rope Maker Street

                                                                                                London EC2Y 9AH

Directors

Farouq Sheikh               (Executive Chairman)                             Bankers

Haroon Sheikh               (Chief Executive Officer)                         The Royal Bank of Scotland PLC

Michael Hill                   (Group Finance Director)                        280 Bishopsgate

Karl Monaghan              (Non-Executive Director)                        London EC2M 4RB

Mike Adams                  (Non-Executive Director)            

Jamie Cumming             (Non-Executive Director)                        Lloyds TSB Bank PLC

                                                                                               Large Corporate                                                                                                                                                             25 Gresham Street

Company Secretary                                                                 London EC2V 7HN

Michael Hill      

                                                                                                Alliance & Leicester PLC

Nominated Adviser and Joint Broker                                      Santander Corporate Banking

Panmure Gordon (UK) Limited                                                    2 Triton Square

One New Change                                                                      Regents Place

London EC4M 9AF                                                                    London NW1 3AN

 

Joint Brokers                                                                           AIB Group (UK) PLC

WH Ireland                                                                                Corporate Banking

24 Martin Lane                                                                           9/10 Angle Court

London EC4R 0DR                                                                     London EC2R 7AB

 

Auditor                                                                                     Registrars

Grant Thornton UK LLP                                                               Capita Asset Services

202 Silbury Boulevard                                                                  Northern House

Milton Keynes                                                                            Woodsome Park

MK9 1LW                                                                                  Fenay Bridge

                                                                                                Huddersfield

                                                                                                 West Yorkshire  HD8 0GA                                                                                                        

 

                                                          

                                                                                               

 

 

 


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Interim Results - RNS