CareTech Holdings PLC Interim Results For the six months ended 31 March 2015 1
Contents • Executive summary • Overview • Highlights • Initiatives underpinning growth • Organic growth initiatives • Growth opportunities through bolt on acquisitions • Divisional breakdown • Financial results • Summary 2
Executive Summary • CareTech has a proven track record of growth, profitability and cash generation over 20 years • Underlying EBITDA and Diluted EPS has grown by CAGR of 30% and 25% respectively since IPO • We operate in the £10bn per annum UK Social Care sector • Significant organic growth opportunities and bolt on acquisitions are targeted • Being driven by: – Market growing by 5% per annum – Increased outsourcing – Regulatory burden – Shortfall of specialist beds 3
Overview • A leading specialist provider of social care for adults and children with complex needs • Long term annuity style income stream with strong asset backed balance sheet • Freehold property portfolio of 164 homes independently valued at £275m • Grew range of complementary services and extended geographical coverage through bolt on acquisitions • Specialist operating divisions with client focused care pathway approach: Young People Adult Services • Young people residential services • Adult learning disability • Fostering care • Mental health • Learning services 4
Highlights Operational Financial • Solid performance • Underlying EBITDA increased by 4% to £14.5m • High quality ratings (H1:2014: £13.9m) • Extending Care Pathways through successful outcomes • Underlying PBT increased by 11% to £9.4m (H1:2014: • Improved blended occupancy rates £8.5m) • Improved EBITDA margins • Underlying diluted EPS increased by 8% to 14.05p (H1:2014: 13.07p) • Strengthened management team • Interim dividend up by 8% to 2.80p (H1:2014: 2.60p) Double • Underlying operating cash inflow of £12.9m (H1:2014: digit • Share placing funds raised of £21m £13.1m) 89% cash conversion ratio growth • Accelerated organic growth • Net debt at £147.2m (H1:2014: £165.7m) • Good progress on aquisitions • Net assets increased by 26.7% to £130.8m 5
Initiatives Underpinning Growth Strengthened Management Team Organic Initiatives John Ivers - Chief Operating Officer Reconfigurations of existing homes • Excellent Sector experience (Chief Operations Officer for HC One • Lindisfarne (which was formed out of Southern Cross); Chief Executive of Saga • Brisbane Road Healthcare which had acquired Nestor Healthcare where he had been Chief Executive) New Organic beds • Proven track record in integration of acquisitions • Hermitage Wood Crescent • Tynley Road Surrey Supported Living Senior Tender Writer • Cumberland Avenue • Part of the Business Development Team • Supporting and delivering Tenders across all Divisions • Bank Street • Incorporating Adults, Community Living, Mental Health and Children’s • St Pauls Leeds Supported Living Services • Coppice Lodge Head of Business Development for Children and Young People Services • Cragside Freehold new beds • Work with the Operational teams and Head Office personnel • Bethany • Implement and drive growth in CareTech’s Children’s Services Division Business Development Director for the North & Midlands Adults Division Bolt on Acquisitions • Responsible for all Business Development activity Exclusivity on 3 businesses with Heads signed which will account for over • Executing the Group’s growth strategy half of the placing proceeds raised Project Surveyor • Supports the Group Project Manager within the Estates function developing existing properties for organic growth 6
Organic Growth - Reconfigurations of existing homes Lindisfarne – Reconfiguration to supported living • Freehold Property in Wisbech • Previously a 10 bed residential home with 30% occupancy • Reconfigured service after becoming Preferred Provider to Cambridge Supported Living • Now 6 self contained flats with bedroom, ensuite, kitchenette and living room and Communal areas • Capex investment £230k • Opened June 2015 • Five referrals to date Brisbane Road – Reconfiguration to supported living • Freehold property in Ilford • Reconfigured a closed service into 5 supported living flats • Capex investment £175k • Opened May 2015 7
Organic Growth - Supported Living – New beds • Strong established relationships with Local Authorities • Expanding the provision of supported living services nationally • Capex investment minimal • Quick turnaround • Properties sourced by external housing providers with CareTech providing the care Surrey Cumberland Avenue Tynley Road Hermitage Wood Crescent • • • 5 bedrooms 5 bedrooms 6 bedrooms • • • Guildford Guildford Woking • • Opened April 2015 • Opened June 2015 Opened October 2014 Leeds Bank Street St Pauls • • 4 bedrooms 4 bedrooms • • Leeds Leeds • • Opened December 2014 Opened December 2014 8
Organic Growth - New beds Coppice Lodge – Winning of Tender, New Build and New Geography • Won new tender with Dudley • Purchased Freehold site with an old pub and land in Dudley • Two phases for development • Phase 1 built new home on land - Coppice Lodge • 6 bedrooms • Young persons service • Respite service provision for high acuity children who live at home in the Dudley area • Supports over 70 families • Opened November 2014 • Phase 2 reconfigure old pub – to be completed • Total cost to date £1.3m cost with estimated cost to complete phase 2 £0.5m = £1.8m Haroon Sheikh with a Councillor and Commissioner from Dudley and a service user at the opening of Coppice Lodge 9
Selection of Tender Wins and Framework Agreements in the Half Year • Cambridge Council • Staffordshire County Council • Liverpool City Council • West London Alliance • Rochdale Council • Hampshire County Council • Eastern Region • Walsall Council • Wolverhampton City Council 10
Organic Growth – New beds Cragside - Reconfiguration • Freehold property in Huddersfield • Previously 7 bed registered home with Occupancy 28% • Reconfigured into 5 self contained flats to meet changing demands • Adults over the age of 18 • Autism specific service • Capex investment £230k • Opened June 2015 Bethany – Additional bed • Freehold property in Harrogate • Existing 7 bed property with 100% occupancy • Due to high demand reconfigured a downstairs room • Increased capacity by 1 • Capex investment £9k • Opened October 2014 11
Growth opportunities through Bolt on Acquisitions Drivers for Growth • UK total Social Care market is growing by 5% each year • Outsourcing from Local Authorities/NHS keeps increasing the Private Sector Adults Learning market size £8.2bn pa market Independent Not for Profit • 45% The market is highly fragmented and regulatory burden is driving 35% consolidation 70% of Private • Opportunities arising from retirements operators have 3 Local services or less Authority • 20,000 shortfall of specialist beds 20% Bolt on Acquisitions • Investment of share placing proceeds • Plan to repeat previous market activity by investment in bolt on acquisitions/reconfigurations • Projects already targeted, looking to deploy proceeds within 12 months • Exclusivity on 3 businesses which will account for more than half of the proceeds raised 12 12
Divisional breakdown Divisional breakdown for the half year ended 31 March 2015 13 Extraordinary days every day
Range of services and geographical coverage Care Pathway – 31 March 2015 Capacity • 1,482 Adult Learning Disabilities Residential care • Independent supported living • Community support services • Transitional Services • 114 1,596 Residential care Mental Health • Low secure and step down • Independent supported living • Community outreach • 154 Residential care of children Young People Residential Services • Transitional Services • Fostering 302 456 Foster Care 2,052 • Pre-employment and Learning services 440 apprenticeships 14
Service Revenue & EBITDA Split for the six months ended 31 March 2015 Six months ending 2015 2015 2014 2014 Revenue Underlying Revenue Underlying £m EBITDA £m EBITDA £m £m Adult Learning Disabilities 37.5 10.4 36.7 10.0 Mental Health 3.3 1.0 3.7 1.2 Sub Total 40.8 11.4 40.4 11.2 Young People Residential Services 10.1 4.0 10.7 3.8 Foster Care 5.3 1.4 6.6 1.5 Sub Total 15.4 5.4 17.3 5.3 Learning Services 4.5 0.4 3.8 0.0 Sub Total 60.7 17.2 61.5 16.5 Less Unallocated Group Costs (2.7) (2.6) Total 60.7 14.5 61.5 13.9 Margin 23.8% 22.6% 15
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