caretech holdings plc interim results/media/files/c/caretech-uk/... · 2014-06-12 · presentation...
TRANSCRIPT
CareTech Holdings PLC
Interim ResultsFor the six months ended 31 March 2014
1
Presentation Structure
2
PRESENTERS: Farouq Sheikh, Chairman
Michael Hill, Group Finance Director
AGENDA
OUR BUSINESS AND THE MARKET: Overview
About CareTech
The Journey So Far…
Growth Since IPO
Group Highlights
Direction of Travel
CareTech - Core Strengths
Our Business
Range of Services
INTERIM RESULTS: Financial Highlights
Services Revenue and EBITDA Split
Non Underlying Items
Cash Flow Highlights
Balance Sheet Highlights
SUMMARY
Overview
• Another set of solid results
• Underpins the Board’s strategy of diversification over recent years
• A Sound platform
• A defensive business
• Growth attributes
• Asset backed
• Increasing dividends
3
About CareTech
• The leading specialist provider of social care for children and adults with complex needs
• Founded in 1993
• Floated on AIM in 2005 and progressively grown from 423 places (at float) to 2,116 on 31
March 2014
• Highly visible long term income stream with strong asset backed balance sheet
– Freehold property portfolio of 164 homes independently valued at £275m in August 2013
• National profile supported by a strong regional structure for service delivery
• Client focused innovative care pathway approach
• Strategy of investment in organic growth and selective acquisitions which enhance core
services
• Dedicated specialist support growth
4
The Journey So Far………..
Market Size at IPO
Market Size Today
One Focussed Operating Division
Residential and Day Care Services
For Adults with Learning Disabilities
Five Specialist Operating Divisions
Adult Services
1. Adult Learning Disability
2. Mental Health
Young People & Families
3. Young People Residential Services
4. Fostering Care
5. Learning Services
Market Size £3.0bn
Capacity 423 (2005)
CareTech Share <1%
Market Size £9.0bn
Capacity 2,116 (31 March 2014)
CareTech Share <2%
5
6
Growth since IPOSeptember 2005 to September 2013
423
2,116
0
1000
2000
3000
2005 2013
Capacity
£23m
£114m
0
40
80
120
2005 2013
Revenue
£2.4m
£26.4m
0
10
20
30
2005 2013
Underlying EBITDA
4.1p
27.43p
0
10
20
30
2005 2013
Diluted EPS
40% Annual Compound Growth Rate 31% Annual Compound Growth Rate
Group Highlights
• Solid performance, reflecting further development of our care pathway range of services:
- Revenue at £61.5m up 9% - Underlying EBITDA at £13.9m up 18%
- Net Assets have increased by £26m up 34% - Underlying PBT at £8.5m up 12%
• Strong cash generation and increased dividend
• Capacity at 31 March 2014 is 2,116 unchanged from September 2013
• Excellent occupancy levels maintained
- 92% in established services - 84% including facilities undergoing development
• Senior management team strengthened with expertise in both Supported Living + Clinical
• Fee rate changes are slightly positive and expected to remain positive for the remainder of this year
• In November 2013 EQL Solutions was acquired which extends the support pathway
• Scotland platform extended into additional Childrens Residential Services and Fostering
• An increased emphasis on the quality of care provision through the activities of the Care Governance and
Safeguarding Committee
7
8
Direction of Travel
Adults LD78%
Young People
10%
Fostering8%
Mental Health
4% 2010
-
5.0
10.0
15.0
20.0
25.0
Adults LD YoungPeople
Fostering MentalHealth
EQL
2010
20102010
2010
2014
2014
2014
2014
2014
Growth 18% 173 % 115 % 140 % 100%
Adults LD60%
Young People
20%
Fostering12%
Mental Health
7%EQL1%
2014
EBITDA
£22.4m
ConsensusEBITDA
£31.0m
CareTech - Core Strengths
• Experienced and committed management team
– A professional team with an impressive track record
– Sharp market awareness and innovative care pathway approach
– Our credibility is strengthened by a caring approach, integrity and sound financial acumen
• Scalable platform
– National profile supported by a local structure for service delivery
– Demographics favour growth and offers market penetration opportunity
– Growth stems from capacity increase not fees
• Financial stability
– Highly visible long term income stream
– Robust free cash flow
– Strong asset backed balance sheet
– High acuity care that’s non discretionary
• Care governance and high quality standards
– Safeguarding is critical and our highest priority
– Unique Care Governance and Safeguarding Committee at board level
9
Our Business
CareTech Holdings plc
Adult ServicesResidential
Careand
CommunitySupport
Mental Healthand
SpecialistServices
Residential Care and
Education of Children
Fostering Learning Services
Corporate Direction and SupportIncorporates the Shared Services Centre, Human Resources, National Training Centre, Quality, Regulation and Compliance, Treasury and IT
10
11
Range of Services and Geographical Coverage
Adult Learning
Disabilities
• Residential care
• Independent supported living
• Community support services
• Transitional Services
1,430
Mental Health • Residential care
• Low secure and step down
• Independent supported living
• Community outreach
150
Young People
Residential
Services
• Residential care of children
• Transitional Services
153
Foster Care • Fostering 383
2,116
Care Pathway
31 March 2014
Capacity
Capacity at 31 March 2014 – 2,116 places
Capacity: 1,430 places
Occupancy: 86%
Average weekly fee: £1,161
Turnover: £36.6m
EBITDA: £10.0m
31/03/2014
Adult Learning Disability
• Market
– 1.4m people in the UK have a learning
disability
– 185,000 of these cannot live independently
– UK market for adult residential LD and
Supported Living worth £5.9bn
– 5.5% p.a. market growth rate
– Highly fragmented
– CareTech has less than 2% market share
– High demand for community based care and
high value specialist residential services
12
Young People Residential Services
• Markets
– 16,000 children in England looked after
outside foster care
– Residential children’s market across
England worth £1.0bn
– 5.7% p.a. market growth rate
– Highly fragmented
• Fees range considerably
– The higher the specialism and staffing
ratios, the higher the weekly fee
– Many placements at ACAD, Branas and
Greenfields are at £4500+ per week
Capacity: 153 places
Occupancy: 77%
Average weekly fee: £3,276
Turnover: £10.6m
EBITDA: £3.8m
31/03/2014
13
Fostering
• Market
– Every 22 minutes a child comes into care
– 67,050 “Looked After” Children in England
(and rising)
– 50,260 placed in foster care (An increase of
3.7% from 2011)
– 35,260 placed within Local Authority foster
care (A reduction of 3% from 2011)
– The Independent Fostering market is worth
approx £1.1bn
– CareTech is a top 5 provider with a 2%
market share
– Through the Children and Families Bill in
English LA’s are to be given funding to 21
for Young People in Foster Care
14
Capacity: 383 places
Occupancy: 81%
Average weekly fee: £803
Turnover: £6.6m
EBITDA: £1.5m
31/03/2014
Mental Health
15
• Market
– 2.4% of the UK population will be referred
to a specialist psychiatric service
– NHS/LA total spend on mental health is
£14.4bn (2010)
– Independent sector share is £1.2bn
representing 7.6% market share
– 70% of prisoners have mental health
problems
Capacity: 150 places
Occupancy: 87%
Average Weekly fee: £1,160
Revenue: £3.7m
EBITDA £1.2m
31/03/2014
16
Learning Services
Acquired EQL Solutions in November 2013 out of the administration of Elmfield Training
Business Overview
• Market leading provider of pre-employment training and work based learning (WBL)
• Revenue Sources for 2013/14 and 2014/15– Skills Funding Agency (SFA) contracts
– Employer contracts with the SFA – Barclays, Phones 4 U and Weatherspoons; recent gain with Paddy Power
– Skills Development Scotland + Welsh Assembly
• Two major streams are being developed– Pre-employment and Apprenticeships for CareTech staff (3,500)
– Pre-employment and Apprenticeships for CareTech service users (2,000)
• Income in the 5 months to 31 March 2014 £3.8m
17
Financial Highlights
Financial
• Revenue increased by 9% to £61.5m (HY 2013: £56.6m)
• Underlying EBITDA increased by 18% to £13.9m (HY 2013: £11.8m)
• Underlying PBT increase of 12% to £8.5m (HY 2013 : £7.6m)
• Underlying Diluted EPS increase by 11% to 13.07p (HY2013:
11.82p)
• Underlying Operating cash inflow of £13.1m (HY2013: £10.9m)
• 94% cash conversion ratio
• Interim dividend up by 12% to 2.60p (2013: 2.32p)
• Net debt at £165.7m (2013: £133.2m)
Operational
• Extending care pathway range of specialisms into
fostering, family assessments, EBD and MH hospital
• Extended geographical reach into Scotland
• Invested in acquisition/development infrastructure and I.T.
Systems
• High quality ratings
• Senior Management team strengthened
• August 2013 – Property Business Combination
• November 2013 – EQL Solutions Acquisition
2014
Revenue
£m
2014
Underlying
EBITDA
£m
2013
Revenue
£m
2013
Underlying
EBITDA
£m
Adult Learning Disabilities 36.6 10.0 36.8 8.3
Mental Health 3.7 1.2 3.1 1.0
Sub Total 40.3 11.2 39.9 9.3
Young People Residential Services 10.6 3.8 9.2 2.9
Foster Care 6.7 1.5 7.5 1.9
Sub Total 17.3 5.3 16.7 4.8
Learning Services 3.8 0.0 0.0 0.0
Sub Total 61.4 16.5 56.6 14.1
Less Unallocated Group Costs (2.6) (2.3)
Total 61.4 13.9 56.6 11.8
Margin 22.6% 20.9%
18
Service Revenue & EBITDA Splitfor the six months ended 31 March 2014
19
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 2014
£’m
Six months ended
31 March 2013
£’m
Acquisition Costs (0.3) -
Integration, Reorganisation Costs and Redundancy costs (0.9) (0.8)
Adjustments for Minimum Future Lease Payment Uplifts (0.8)
EBITDA Adjustment Items (1.2) (1.6)
Amortisation of Intangibles (1.8) (1.8)
Charges Relating to Derivative Financial Instruments 0.1 (0.7)
PBT Adjustment Items (2.9) (4.1)
(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
20
Cashflow Highlightsfor the six months ended 31 March 2014
2014
£m
2013
£m
Operating Cashflow before Adjustments 13.8 11.8
Decrease/(Increase) in working capital (0.7) (0.9)
13.1 10.9
Acquisitions & Capital Expenditure (3.3) (3.7)
Interest, Dividend & Tax Paid (3.6) (6.6)
Treasury & Acquisition Related Costs (3.4) (2.6)
Decrease / (Increase) In Net Debt 2.8 (2.0)
Opening Net Debt (168.5) (131.2)
Closing Net Debt (165.7) (133.2)
21
Balance Sheet Highlightsas at 31 March 2014
2014
£m
2013
£m
Tangible Fixed Assets - £275m Val’n 239.3 192.6
Goodwill and Intangibles
Net Debt
67.4
(165.7)
63.0
(133.2)
Other Liabilities (Net) (37.8) (45.2)
Net Assets 103.2 77.2
Actual 2014
EBITDA: INTEREST 3.83 times
NET DEBT: EBITDA 5.3 times
LOAN: VALUE 63%
Summary
• An executive team that inspires confidence and whose interests are closely aligned with
shareholders
• A wider range of specialisms that have opened massive market opportunity
• Developing and delivery the right services in the right way and just where they are wanted
• An organisational model that is flexible, scalable and in a position to grow
• Free cash to facilitate growth and reduce net debt
• A track record of successful delivery
22