Interim Results For the six months ended 31 March 2015 1 Contents - - PowerPoint PPT Presentation

CareTech Holdings PLC Interim Results

For the six months ended 31 March 2015

1

Contents

2

• Executive summary
• Overview
• Highlights
• Initiatives underpinning growth
• Organic growth initiatives
• Growth opportunities through bolt on acquisitions
• Divisional breakdown
• Financial results
• Summary

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

4

• 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

• Young people residential services
• Fostering care
• Learning services

Adult Services

• Adult learning disability
• Mental health

Highlights

Financial

• Underlying EBITDA increased by 4% to £14.5m

(H1:2014: £13.9m)

• Underlying PBT increased by 11% to £9.4m (H1:2014:

£8.5m)

• Underlying diluted EPS increased by 8% to 14.05p

(H1:2014: 13.07p)

• Interim dividend up by 8% to 2.80p (H1:2014: 2.60p)
• Underlying operating cash inflow of £12.9m (H1:2014:

£13.1m) 89% cash conversion ratio

• Net debt at £147.2m (H1:2014: £165.7m)
• Net assets increased by 26.7% to £130.8m

5

Operational

• Solid performance
• High quality ratings
• Extending Care Pathways through successful outcomes
• Improved blended occupancy rates
• Improved EBITDA margins
• Strengthened management team
• Share placing funds raised of £21m
• Accelerated organic growth
• Good progress on aquisitions

Double digit growth

Initiatives Underpinning Growth

Organic Initiatives

Reconfigurations of existing homes

• Lindisfarne
• Brisbane Road

New Organic beds

• Hermitage Wood Crescent
• Tynley Road

Surrey Supported Living

• Cumberland Avenue
• Bank Street
• St Pauls

Leeds Supported Living

• Coppice Lodge
• Cragside

Freehold new beds

• Bethany

Bolt on Acquisitions

Exclusivity on 3 businesses with Heads signed which will account for over half of the placing proceeds raised

6

Strengthened Management Team

John Ivers - Chief Operating Officer

• Excellent Sector experience (Chief Operations Officer for HC One

(which was formed out of Southern Cross); Chief Executive of Saga Healthcare which had acquired Nestor Healthcare where he had been Chief Executive)

• Proven track record in integration of acquisitions

Senior Tender Writer

• Part of the Business Development Team
• Supporting and delivering Tenders across all Divisions
• Incorporating Adults, Community Living, Mental Health and Children’s

Services Head of Business Development for Children and Young People Services

• Work with the Operational teams and Head Office personnel
• Implement and drive growth in CareTech’s Children’s Services Division

Business Development Director for the North & Midlands Adults Division

• Responsible for all Business Development activity
• Executing the Group’s growth strategy

Project Surveyor

• Supports the Group Project Manager within the Estates function

developing existing properties for organic growth

Organic Growth - Reconfigurations of existing homes

7

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

8

Organic Growth - Supported Living – New beds

Tynley Road

• 5 bedrooms
• Guildford
• Opened April 2015

Cumberland Avenue

• 5 bedrooms
• Guildford
• Opened June 2015

Hermitage Wood Crescent

• 6 bedrooms
• Woking
• Opened October 2014
• 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

Leeds

St Pauls

• 4 bedrooms
• Leeds
• Opened December 2014

Bank Street

• 4 bedrooms
• Leeds
• Opened December 2014

Surrey

• 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

9

Organic Growth - New beds

Coppice Lodge – Winning of Tender, New Build and New Geography

Haroon Sheikh with a Councillor and Commissioner from Dudley and a service user at the opening of Coppice Lodge

10

• Cambridge Council
• Staffordshire County Council
• Liverpool City Council
• West London Alliance
• Rochdale Council
• Hampshire County Council
• Eastern Region
• Walsall Council
• Wolverhampton City Council

Selection of Tender Wins and Framework Agreements in the Half Year

11

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

Organic Growth – New beds

Not for Profit 35% Local Authority 20% Independent 45%

Adults Learning market size £8.2bn pa

Growth opportunities through Bolt on Acquisitions

12

Drivers for Growth

• UK total Social Care market is growing by 5% each year
• Outsourcing from Local Authorities/NHS keeps increasing the Private Sector

market

• The market is highly fragmented and regulatory burden is driving

consolidation

• Opportunities arising from retirements
• 20,000 shortfall of specialist beds

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

70% of Private

• perators have 3

services or less

Divisional breakdown

13

Extraordinary days every day Divisional breakdown for the half year ended 31 March 2015

Range of services and geographical coverage

14

Care Pathway – 31 March 2015 Capacity

Adult Learning Disabilities

• Residential care
• Independent supported living
• Community support services
• Transitional Services

1,482

Mental Health

• Residential care
• Low secure and step down
• Independent supported living
• Community outreach

114 1,596

Young People Residential Services

• Residential care of children
• Transitional Services

154

Foster Care

• Fostering

302 456

Learning services

• Pre-employment and

apprenticeships

2,052 440

Six months ending 2015 Revenue £m 2015 Underlying EBITDA £m 2014 Revenue £m 2014 Underlying EBITDA £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

Service Revenue & EBITDA Split for the six months ended 31 March 2015

Adult Learning Disabilities

• 1.4m people in the UK have a learning disability
• 13.2% (185,000) of these cannot live independently
• UK market for adult residential learning disability and supported living worth

£6.6bn annually, growing at 5.5% per annum (Laing & Buisson)

• Highly fragmented market
• High demand for community based care and high value specialist residential

services

• Long average length of stay

16

Insert chart on growth of ALD market/map of service locations

Capacity: 1,482 spaces Occupancy: 89% Average weekly fee: £1,186 Turnover: £37.5m EBITDA: £10.4m

*Figures correct at 31/03/2015

Mental Health

17 Capacity: 114 spaces Occupancy: 82% Average weekly fee: £1,144 Turnover: £3.3m EBITDA: £1.0m

*Figures correct at 31/03/2015

Insert chart on growth of MH market/map of service locations

• 2.4% of UK population will be referred to specialist psychiatric service
• Mental Health Care Homes and non acute NHS provision is £1.6bn annually

(Laing & Buisson)

• Independent sector counts for 9% of the care home market and 6% of the

non residential market

• 70% of the prison population have mental health problems

Young People Residential Services

18 Capacity: 154 spaces Occupancy: 69% Average weekly fee: £3,512 Turnover: £10.1m EBITDA: £4.0m

*Figures correct at 31/03/2015

Insert chart on growth of YPRS market/map of service locations

• 17,500 children in England “Looked after” outside of foster care
• Residential children’s market in England worth £1.1bn per annum

(Department for Education Statistics)

• Market growth rate of 5.7% per annum
• Highly fragmented market
• Fees range considerably
• Certain placements at more specialist centres cost over £4,000 per week

• Every 22 minutes a child comes into care
• 68,840 “Looked after” children in England at March 2014, and growing year
• n year
• 51,340 children placed in foster care, being 75% of “Looked after” children

(Department for Education Statistics)

• The independent fostering market is worth c. £1.4bn per annum
• CareTech is a top 5 provider with a 1% market share
• The Children and Families Bill in England gives local authorities funding to 21 for

young people in foster care

Foster Care

19 Capacity: 302 spaces Occupancy: 88% Average weekly fee: £731 Turnover: £5.3m EBITDA: £1.4m

*Figures correct at 31/03/2015

Insert chart on growth of FC market/map of service locations

Learning Services

20 Turnover: £4.5m EBITDA: £0.4m

*Figures correct at 31/03/2015

• Acquired EQL Solutions in November 2013 out of the administration of Elmfield Training
• Market leading provider of pre-employment training and work based learning (WBL)
• Two major streams are being developed as part of the CareTech Aspire Programme
• Pre-employment and Apprenticeships for CareTech staff (3,500) 440 Apprenticeships
• Pre-employment and Apprenticeships for CareTech service users (2,000)
• Income in the half year £4.5 million

Divisional breakdown

21

Extraordinary days every day Financial Results for the half ended 31 March 2015

Financial Highlights

22

• Underlying EBITDA increased 4% to £14.5m (H1:2014:

£13.9m)

• Underlying profit before tax increased 11%
• Interim year dividend increased 8% to 2.80p (H1:2014:

2.60p)

• Strong operating cash flow
• Net Assets increased by 27% to £130.8m

23

Non Underlying Items

• The disclosure of certain current and non-current liabilities has been enhanced and more clearly demonstrates their future

impact on net debt. IFRS also requires changes in acquisition fair values to be restated for the prior period.

• Adjustment items charged / credited in the Income Statement are as follows:

Six months ended 31 March 2015 £’m Six months ended 31 March 2014 £’m Acquisition Costs

• (0.3)

Integration, Reorganisation Costs and Redundancy costs (1.3) (0.9) EBITDA Adjustment Items (1.3) (1.2) Amortisation of Intangibles (2.4) (1.8) Charges Relating to Derivative Financial Instruments (1.6) 0.1 PBT Adjustment Items (5.3) (2.9)

(i) EBITDA is operating profit stated before depreciation, share-based payments charge and adjustment items (ii) Profit before tax and diluted earnings per share are stated before adjustment items

24

Cashflow Highlights for the six months ended 31 March 2015

2015 £m 2014 £m Operating Cash flow before Adjustments 14.3 13.8 Movement in working capital (1.4) (0.7) 12.9 13.1 Acquisitions & Capital Expenditure (4.0) (3.3) Interest, Dividend & Tax Paid (5.1) (3.6) Share Placing funds 19.8

• Treasury & Acquisition Related Costs

(4.7) (3.4) Decrease In Net Debt 18.9 2.8 Opening Net Debt (166.1) (168.5) Closing Net Debt (147.2) (165.7)

25

Balance Sheet Highlights as at 31 March 2015

2015 £m 2014 £m Tangible Fixed Assets - £275m Val’n 248.5 239.3 Goodwill and Intangibles Net Debt 65.6 (147.2) 67.4 (165.7) Other Liabilities (Net) (36.1) (37.8) Net Assets 130.8 103.2 Actual 2015 EBITDA: INTEREST 4.2 times NET DEBT: EBITDA 4.7 times LOAN: VALUE 53%

Summary

• Results in line with expectations
• Profitable growth through organic development and reconfigurations
• Market is large, growing and fragmented
• Platform for growth

– Share placing raised funds of £21m – Strengthened management team – Accelerated organic developments and reconfigurations – Bolt on acquisition opportunities

• Targeting double digit growth over the next few years

26