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CareTech Holdings (CTH)

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Thursday 18 June, 2020

CareTech Holdings

Interim Results

RNS Number : 3007Q
CareTech Holdings PLC
18 June 2020
 

For immediate release    18 June 2020

 

 

CareTech Holdings PLC

("CareTech" or the "the Group")

 

Interim Results for the six months ended 31 March 2020

 

Robust H1 performance. Resilient business model.

 

CareTech Holdings PLC (AIM: CTH), a pioneering provider of specialist social care and education services for adults and children in the UK, is pleased to announce its interim results for the six months ended 31 March 2020.

 

Highlights

 

· Robust financial performance for H1 2020 in line with market expectations

· Strong financial position with net debt reduced to £287.4m at 31 March 2020 reflecting strong cash flow generation

· Integration of Cambian continues with improved quality ratings, staff retention and training initiatives proving successful, occupancy increasing and cost synergies on track

· Local Authorities, the NHS, Public Health England, and our regulators remain highly supportive of the high quality services we provide and have funded these throughout the current crisis

· CareTech COVID-19 Fund of up to £1m launched to proactively assist our staff at this difficult time

· Investment into the largest provider of private outpatient mental health services in the United Arab Emirates completed in February 2020

· Increased interim dividend of 4.0p declared and dividend policy reaffirmed

 

 

 

H1 2020 (pre IFRS 16)

H1 2019 (as reported pre IFRS 16)

% change

H1 2020 IFRS 16

change

H1 2020 (as reported, post IFRS 16)

Group revenue

£208.5m

£192.5m

+8%

-

£208.5m

Underlying EBITDA (i)

£38.0m

£33.3m

 

+14%

£3.5m

£41.5m

Underlying profit before tax (ii)

£25.9m

£20.7m

+25%

£(0.4)m

£25.5m

Underlying basic earnings per share (ii)

18.44p

15.82p

+17%

(0.33)p 

18.11p

Statutory profit before tax

£18.1m

£6.9m

+162%

£(0.4)m

£17.7m

Statutory earnings per share

9.82p

5.77p

+70%

(0.33)p

9.49p

Operating cash flow before non-underlying items

£34.5m

£28.2m

+22%

£3.5m

£38.0m

Net debt ( iii)

£287.4m

£293.0m

-2%

-

£287.4m

Net assets

£353.0m

£328.4m

+7%

£(0.4)m

£352.6m

Interim dividend

4.0p

3.75p

+7%

-

4.0p

 

Unless otherwise stated, results are presented for H1 2020 on a non-statutory illustrative basis excluding the impact of IFRS 16 "Leases" ("IFRS 16") to enable comparison with 2019 performance.

 

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

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

iii. Net debt comprises Cash and cash equivalents net of bank loans and borrowings and HP leases previously accounted for under IAS17 excluding Project Teak sale and leaseback. Net debt remains unchanged following the adoption of IFRS 16.

 

 

 

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

 

"We have had a strong first half, delivering a robust performance against an unprecedented and challenging COVID-19 pandemic. The specialist social care services we provide remain vital in the UK and I am delighted to say we have been able to ensure these remain open and operating to our usual high-quality standards both during the period ended 31 March 2020 and to date.

I am extremely proud of the way our employees have responded to the pandemic and I would like to express my sincere appreciation to all of our staff and the Executive team for their leadership during this period. Their dedication to supporting our service users throughout this difficult time and achieving better outcomes on a daily basis has been truly inspiring. To proactively support our staff, a CareTech COVID-19 Fund was launched in March, allocating up to £1m of the Group's cash to support staff facing adversity. We are also prioritising the wellbeing of our employees by focussing our support on their health including mental health.

I am pleased to report that the Group's trading performance for the first half is in-line with market expectations. We are progressing well with our strategic objective of improving the Cambian business and we are well on track to deliver our medium term Cambian EBITDA margin target of 16% and deliver synergies of at least £5m by September 2020.

In February 2020, we completed an investment in the largest provider of private outpatient mental health services in the United Arab Emirates. CareTech is looking forward to expanding the pathway in the region into specialist social care and specialist education services.

In these uncertain times, CareTech has demonstrated the resilience of its business model and with the strength of cash flows available to the Group this puts us in a strong position to continue to grow market share".

There will be a presentation of the results to analysts at 10.00am this morning via conference call. This presentation will be available after the conference call at https://www.caretech-uk.com/investors/reports-and-presentations/financial-reports.aspx .

 

 

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

 

 

 

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 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

 

 

Chairman's Statement

 

 

CareTech has delivered a strong set of results for the six months to 31 March 2020.

 

The past six months have been both challenging and rewarding. The Group has continued to benefit from favourable demographics underpinned by the growth in outsourcing to the private sector. We continue to work extremely closely with Local Authorities and Regulators in providing high quality care and to achieve positive outcomes for our service users.

 

We have continued to deliver the highest standards of care during the COVID-19 pandemic and the Group has played a vital role in ensuring our services remain fully operational. The majority of service users we care for are children and adults with learning disabilities, mental health diagnoses and/or with challenging behaviours. Less than 3% of our service users fall into the formal NHS high-risk category groups for COVID-19, such as those with underlying health conditions, which is very different to that of elderly care services which have been significantly impacted by the virus.

 

In these unprecedented times, our focus has been on delivering safe services and the health, safety and wellbeing of our employees and service users.  A COVID-19 taskforce, comprising both divisional leadership and members of the Group Executive Team, was set up at the outset of the pandemic outbreak. Through the use of a dynamic risk assessment tool we have been able to provide real time monitoring and support across all of our services as well as ensuring that we have a business continuity plan at each site. This covers arrangements to provide staff cover between services, utilising extra staff as necessary and overall reducing agency workers. Following the latest Government and Public Health guidance, we have strict precautions in place at our sites including enhanced levels of cleaning, additional hygiene facilities and social distancing. Enhanced precautions and safety checks have also been set up and only essential visits are taking place with oversight being provided remotely where possible and appropriate. Through all of the above and the incredible dedication of our staff, support teams and management, we continue to provide excellent support and care to those in our services.

 

To recognise the cost pressures on social care providers caused by COVID-19, higher sickness absence rates, personal protective equipment (PPE) costs and higher administration costs, additional funding of £1.6bn was announced by the Local Government Association in mid-March 2020. The Group is working closely with all Local Authorities in establishing a dedicated funding arrangement to support our services which will be collected during the second half. As a consequence, we are confident of meeting market expectations for the full year 2020.

 

Despite this challenging backdrop we continue to successfully integrate Cambian. Ofsted ratings have increased to 82% Good or Outstanding (from 77% at the time of acquisition) and best practice is being shared across the Group. However, due to COVID-19, Ofsted have suspended all routine inspections, which will delay the reporting of improved progress. The EBITDA margin of the Cambian business has improved to c.14% and we are in a strong position to achieve our medium term target of 16% pre synergies as set out at the time of acquisition. The Group confirms that it is on track to deliver £5m of pre-tax profit synergies for the year through further back-office integration, the relocation of Cambian's head office in November 2019, and streamlining IT and procurement.

 

On 4 February 2020, CareTech completed the acquisition of a 51% interest in AS Investments Holding Ltd and AS1 Investments Holding Ltd (the "AS Group") which holds a majority equity interest in the Macani Medical Center and American Center for Psychiatry and Neurology respectively. The AS Group was established in 2015 by Shafqat Malik, co-founder and CEO, to introduce best in class mental healthcare services in the United Arab Emirates. The partnership is already discussing a number of opportunities through the provision of special education needs services in the region and a wider social care provision.

 

CareTech is well placed, through its innovative care pathway, to address the demands of a growing and evolving marketplace and the Board remains confident of the Group's performance for the remainder of the year which continues to trade in line with market expectations. Looking forward, the Group will continue to extend both UK geographic coverage and the range of outcome based Care Pathway services. This will be achieved through both organic development, re-provisioning our services to address demand and through bolt-on acquisitions in particular focused on the higher acuity service provision.

 

 

Financial Results

 

Results in this section are presented for H1 2020 on a non-statutory illustrative basis excluding the impact of IFRS 16 "Leases" ("IFRS 16") to enable comparison with 2019 performance. Included in the Group consolidation results and reported in Adults Services and Children's Services operating segments for the six months ended 31 March 2020 are the AS Group's Revenue, EBITDA and other income statement items together with cash flows following completion on 4 February 2020.

 

Group revenue in the half year has increased by 8.3% to £208.5m from £192.5m reflecting the continued turnaround in Cambian, re-positioned services coming online and fee increases. Local Authorities continue to demand flexible high-quality care solutions for children and adults with mid-to-higher acuity care needs.

 

The National Minimum and Living Wage increased from 1 April 2020. As with prior years, annual fee negotiations with Local Authorities are well underway and we expect fee increases to cover the additional costs resulting from increases in salaries to front line staff as Local Authorities recognise that front line staff are an integral part of quality care delivery.

 

Divisional EBITDA before unallocated costs increased by 7.9% to £48.6m (2019: £45.1m) and Group underlying EBITDA(i) increased by 14.1% to £38.0m (2019: £33.3m) reflecting the synergy saving from the Cambian acquisition. Underlying EBITDA(i) margin has increased from 17.3% to 18.2%.

 

Underlying profit before tax(ii) increased by 25.1% to £25.9m (2019: £20.7m) and underlying basic earnings per share(ii) was 18.44p (2019: 15.82p).

 

A key feature of this business is its strong cash flow generation. EBITDA to cash conversion(iii) remained strong for the period from 1 October 2019 to 31 March 2020 at 92% against a backdrop of the relocation of Cambian's back office to CareTech's head office in November 2019 and mobilising working from home arrangements in response to COVID-19. Other key cash flows during the first half included £4.8m spent on developments, £2.2m of integration costs, £4.7m on the UAE acquisition, payment of the interim dividend of £4.1m and corporation tax payments of £2.0m. Net debt was £287.4m as at 31 March 2020 compared with £291.1m at September 2019.

 

Net assets have increased to £353.0m as at 31 March 2020 (2019: £328.4m).

 

Service user capacity and occupancy

 

The Group's net capacity as at 31 March 2020 was 5,044 places (September 2019: 5,079 places), the decrease attributable primarily to the Fostering division reflecting COVID-19 restrictions in places available. Adults Services capacity was 1,967 (September 2019: 1,968), Children's Services 1,948 (September 2019: 1,933) and Fostering 1,129 (September 2019: 1,178).

 

At 31 March 2020, occupancy levels in the blended estate increased to 81% (September 2019: 80%) and occupancy in the mature estate remained constant at 85% (September 2019: 85%).

 

Operating review

We are the pre-eminent provider of children's and adults services for those with a learning disability, mental health or challenging behaviour across the UK. We are increasingly developing and offering services across this broad spectrum 'Care Pathway', so that we are able to provide care and support for a vulnerable person on their life journey for a young person through to adulthood.

 

(1)  Adults Services

 

Adults Services offers a flexible, person-centred approach with support offered on an individual planned basis both within a registered residential setting and in step-down supported housing. Specialist Services comprise the Adult Mental Health Services and Oakleaf Care (Hartwell). Specialist Services works in partnerships with the NHS to ensure a successful transition out of acute care, delivering pathways to independence. The typical age profile for service users in our adult services ranges from young adults to middle age with a very small portion of elderly people.

 

 

 

Half Year

 

2020

2019

Revenue

£66.0m

£62.1m

Pre IFRS 16 EBITDA before unallocated costs

£15.9m

£15.0m

Post IFRS 16 EBITDA before unallocated costs

£16.8m

£15.0m

 

 

Revenue increased by 6.3% to £66.0m and EBITDA by 6.0% to £15.9m. Capacity fell by 1 place since September 2019 to 1,967 with 20 supported living contracts coming to an end offset by 19 new beds being brought into service.

Across the Group the focus on quality continues with Care Quality Commission (CQC) quality ratings at 91% Good or Outstanding in Adults Services, which compares favourably to the national average of 84%.

 

The market for adult high acuity care and the support of people with learning disability is estimated to be £5.8bn(iv) and growing year on year due to demographics and individuals living longer. Demand remains high across the spectrum for the support of people with learning disabilities and the Group recognises an increasing complexity of need for referrals to specialist services within the Group.

 

We expect to see the benefit during the second half of the year and during 2021 of a number of larger specialist services projects.

 

(2)  Children's Services

 

This division contains children's residential care homes, which includes facilities for children with learning difficulties and emotional behavioural disorders, and specialist schools.

 

 

Half Year

 

2020

2019

Revenue

£121.5m

£110.8m

Pre IFRS 16 EBITDA before unallocated costs 

£29.0m

£26.5m

Post IFRS 16 EBITDA before unallocated costs

£30.9m

£26.5m

 

 

Children's Services capacity is 1,948 (September 2019: 1,933). There has been a net increase of 15 during the first half from new developments across the CareTech and Cambian portfolio. Revenue grew by 9.6% to £121.5m (2019: £110.8m) and EBITDA grew by 9.6% to £29.0m (2019: £26.5m).

 

The OFSTED ratings for Children's services are 82% Good or Outstanding.

 

The market for specialist children's residential and education placements is estimated to be £5.1bn(v) and growing, driven by population growth and increasing survival rates of the current addressable population, as well as a greater awareness and, in certain cases, increased incidence of certain conditions amongst the underlying population.

 

(3)  Foster Care

 

Fostering is an important part of our care pathway and represents a good family based alternative to residential care. In line with the rest of our portfolio we have focussed on more specialised fostering for those with a higher acuity need and support. We continue to train our foster carers with the skills required to manage more complex work and have linked the Fostering division with our residential team for children so that we can maintain an effective care pathway.

 

 

 

Half Year

 

2020

2019

Revenue

£21.0m

£19.6m

Pre IFRS 16 EBITDA before unallocated costs

£3.7m

£3.6m

Post IFRS 16 EBITDA before unallocated costs

£4.0m

£3.6m

 

Whilst there has been a decrease in availability of placements due to COVID-19 restrictions to 1,129 (September 2019: 1,178), occupancy has not been impacted. Revenues for the division increased by 7.3% to £21.0m and EBITDA by 3.5% to £3.7m.

 

The OFSTED ratings for Foster Care is 100% Good or Outstanding.

 

The market size of foster care across England is worth £2bn(v) and growing given increased demand for a new family care environment which offers those we care for. Not only does this provide care within an ordinary family home setting but provides Commissioners a cost effective option.

 

Net debt

 

At 31 March 2020, the Group's net debt had decreased by £3.7m to £287.4m compared with net debt of £291.1m at 30 September 2019.  

 

As at the end of March, the Group has immediately available liquidity of £60m, comprising £35m of available cash and £25m of undrawn revolver. The Group's existing long-term debt, totalling £322m, matures in 2022 and 2023. The financial covenants attached to our committed facilities are that EBITDA should be no less than 4 times interest, net debt should be no more than 4.5 times EBITDA and Loan-to-value should not be higher than 62.5%. As at 31 March 2020, we were operating comfortably within these ratios.

CareTech continues to have a strong active pipeline of investment in new properties, conversion work on properties acquired and bolt-on acquisition opportunities and will look to deploy free cash flow into these projects whilst reducing net debt/ EBITDA in the medium term to under 3.0x.

Impact of IFRS 16

 

A new accounting standard, IFRS 16 Leases, was adopted with effect from 1 October 2019. The standard requires leases which were previously treated as operating leases to be recognised as a lease liability with the associated asset capitalised and treated as a right of use asset.

 

The Group elected to adopt the standard using the modified retrospective approach, which means that comparative results for H1 2019 are not restated. On 1 October 2019, £71.6m of leases were recognised as liabilities on adoption of the standard and £72.1m capitalised as right of use assets.

 

The financial impacts of IFRS 16 on H1 2020 are set out in the table below.

 

 

H1 2020 (pre IFRS 16)

£m

Impact of IFRS 16

£m

IFRS 16 (post IFRS 16)

£m

Underlying operating profit

32.0

0.8

32.8

Net finance costs

(6.1)

(1.2)

(7.3)

Underlying profit before tax

25.9

(0.4)

25.5

Right-of-use assets

-

70.9

70.9

Other assets

890.7

-

890.7

Lease Liabilities

(18.5)

(70.8)

(89.3)

Other Liabilities

(519.2)

(0.5)

(519.7)

Net assets

353.0

(0.4)

352.6

Net debt

287.4

-

287.4

 

The changes in accounting resulting from the implementation of IFRS 16 will not affect the way liquidity is assessed against the Group's banking covenants, which will continue to be assessed as though the accounting rules had not changed. As such, headline financial leverage will continue to be measured on a consistent (i.e. 'frozen GAAP') basis in 2020 and the Group continues to target a headline financial leverage, excluding the increase in leverage associated with the implementation of IFRS 16, of below 3.0x in the medium term.

 

Our People

The Group's annualised retention rate sits at 75% and when compared with the industry average of under 70%, our retention rate remains favourable. Recruitment during the period and beyond continues to improve and applications have increased since the outbreak of the COVID-19 pandemic.

CareTech remains committed to building the best leadership and workforce through skills enhancement and development of its staff. It is in the pilot stages of adding modules centred on 'Essential Skills for Care' to its induction programme. This is an innovative approach to providing a sound platform for our staff to help manage their career pathway with CareTech. This continuing commitment to learning and development will greatly enhance the delivery of great quality of care for individuals supported by the Group.

Additionally in the first six month of the trading year our Learning and Development Division has delivered 195 learning intervention courses. The training consists of statutory and mandatory elements, along with specific training for staff to enhance positive outcomes for the people we support. CareTech also has an in house Apprenticeship Training provider, DHA Learning Services, and up to the end of March 2020 over 900 staff were enrolled on an apprenticeship programme.

The Group launched an approved option scheme for employees ("CSOP") and a separate share scheme for executives ("EXSOP") in October and November 2019, respectively, which has resulted in over 500 Managers and Executives either being granted share options or holding jointly owned shares in CareTech. The Directors believe the Group's share schemes play an important part of staff incentivisation and retention. Over the coming months a further Save-as-you Earn ("SAYE") scheme will be launched and will be open to all colleagues. The 2016 SAYE scheme saw hundreds of staff gaining from participating in the scheme.

The Group was also immensely proud to launch the COVID-19 Staff Fund, a £1m fund set up by the Board to support our staff and their families through this unprecedented time which has brought many challenges for us all. During this period we have prioritised the wellbeing of our employees by focussing our support on their physical and mental health and have introduced new health and safety measures to all our services.

 

Social Responsibility

 

As a leading provider of specialist social care, we have the opportunity to support the wider social care sector. The CareTech Foundation, an independent grant-making corporate foundation in the UK social care sector, was set up with this objective in mind. Notable achievements over the last six months include:

 

·Increasing impact delivered through the Foundation's Partnership Grants, with some 105,000 beneficiaries supported directly and indirectly to date as set out in the Foundation's recently-published Impact Report (https://www.caretechfoundation.org.uk/impact-report-2018-2019/). The Company continues to provide additional in kind support, such as the recent visit to Pakistan by our Specialist Services team to advise on British Asian Trust's mental health programme

 

·Its headline support, alongside the company, of the Care Sector Ball 2019 which raised £200,000 for the Care Workers Charity and Alzheimer's Society

 

·Growth in the range of Community Grants provided to local causes, including: provision of state of the art equipment for a school for those with autism in London, support of the Inclusive Sports Festival in Birmingham; and, a series of five grants nominated by staff at CareTech's Greenfields School for charitable projects in their local community

 

·   A significant increase in the support provided through the Foundation's Staff Hardship Fund and its match-funding scheme to support staff members' charitable fundraising.

 

As previously announced, to further support the CareTech Charitable Foundation, the Group has agreed to donate one million new ordinary CareTech shares to the Foundation ("New Shares"). This donation will provide the Foundation with additional income and demonstrates the Group's commitment to wider society, to its staff, and its desire to play a strong leadership role within the social care sector. In connection with the donation, the CareTech Foundation will enter into a lock-up undertaking not to sell the New Shares without the CareTech Board's approval. Application has been made for admission of the New Shares to trading on the AIM Market of the London Stock Exchange ("Admission"), with issue of the New Shares and Admission expected to take place on or around 22 June 2020.

 

Dividend

 

Our policy to increase the dividend broadly in line with the movement in underlying diluted earnings per share continues. Given the consistent earnings growth and cash generation, the Board is therefore declaring an interim dividend of 4.0p (2019: 3.75p) per share, to be paid on 23 November 2020 to shareholders on the Register of Members on 22 October 2020 with an associated record date of 23 October 2020. The Ordinary shares of CareTech will be marked ex-dividend on 22 October 2020.

 

Outlook and prospects

 

The Group has a resilient and proven business model and during these uncertain times has a robust financial position. We continue, through our staff teams and operational leadership, to manage services exceptionally well through COVID-19. The actions being taken, and continuing to be taken, ensure that we are realising only minimal operational and financial impacts relating to COVID-19, and we are confident in meeting market expectations for the full year.

 

We are recognised in the sector for providing first-class social care which represents good value and is focussed on providing high quality care to our service users. We have increased our stakeholder engagement and are committed to working with Local Authorities and Regulators to deliver more innovative services focussed on delivering positive outcomes for individuals. 

 

Farouq Sheikh

Chairman 

18 June 2020

(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).

(iii)  EBITDA to cash conversion is calculated as operating cash flows before non underlying items divided by underlying EBITDA

(iv) Data from Laing and Buisson Adult Specialist Care 2nd edition 2015/2016 report

(v) Data from Laing and Buisson Children's Services Market report 3rd edition 2017 report

 

 

 

 

 

 

Condensed Consolidated Statement of Comprehensive Income

for the six months ended 31 March 2020

 

 

 

 

Six months ended

Six months ended

Year ended

 

 

31 March 2020

31 March 2019

30 September 2019

 

 

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

2

208,526

208,526

192,510

192,510

394,994

394,994

Cost of sales

 

(139,105)

(139,105)

(131,684)

(131,684)

(262,018)

(262,018)

Gross profit

 

69,421

69,421

60,826

60,826

132,976

132,976

 

 

 

 

 

 

 

 

Administrative expenses

 

(36,615)

(43,943)

(33,494)

(46,913)

(70,121)

(93,500)

Operating profit

 

32,806

25,478

27,332

13,913

62,855

39,476

 

 

 

 

 

 

 

 

Underlying EBITDA (i)

 

41,452

41,452

33,349

33,349

73,546

73,546

Depreciation

 

(8,496)

(8,496)

(5,957)

(5,957)

(10,631)

(10,631)

Share-based payments charge

 

(150)

(150)

(60)

(60)

(60)

(60)

Non underlying items

3

-

(7,328)

-

(13,419)

-

(23,379)

Operating profit

 

32,806

25,478

27,332

13,913

62,855

39,476

 

 

 

 

 

 

 

 

Financial expenses

4

(7,268)

(7,810)

(6,626)

(7,067)

(12,690)

(15,136)

Profit before tax (ii)

 

25,538

17,668

20,706

6,846

50,165

24,340

Taxation

5

(4,717)

(6,451)

(3,922)

(660)

(9,423)

(4,214)

Profit for the period

Non-controlling interest

 

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

 

 

 

20,821

(654)

 

 

20,167

11,217 (654)

 

 

10,563

16,784

(108)

 

 

16,676

6,186

(108)

 

 

6,078

40,742

(422)

 

 

40,320

 

20,126

(422)

 

 

19,704

Earnings per share

 

 

 

 

 

 

 

Basic  (ii)

6

18.11p

9.49p

15.82p

5.77p

37.60p

18.38p

Diluted (ii)

6

18.05p

9.45p

15.73p

5.73p

37.48p

18.31p

 

 

* The Group has applied IFRS 16 "Leases" using the modified retrospective method. Under this method, the comparative information is not restated. See Note 1 for further details.

(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 Changes in Equity at 31 March 2020

 

 

 

Share

capital

Share

premium

Shares held by Executive Shared Ownership Plan

Retained

earnings

Merger

reserve

Total Attributable to owners of the parent

Non-controlling Interest

Total

Equity

 

£000

£000

£000

£000

£000

£000

£000

£000

 

 

 

 

 

 

 

 

 

At 1 October 2018

379

120,820

(4,750)

82,122

9,023

207,594

639

208,233

Adoption of IFRS 91

-

-

-

(525)

-

(525)

-

(525)

Restated at 1 October 2018

379

120,820

(4,750)

81,597

9,023

207,069

639

207,708

Total comprehensive income

-

-

-

19,704

-

19,704

-

19,704

 

 

 

 

 

 

 

 

 

Issue of ordinary shares

166

484

-

-

116,513

117,163

-

117,163

Equity-settled share-based payments charge

-

-

-

60

-

60

-

60

Redemption of share options

-

-

1,213

-

-

1,213

-

1,213

Dividends

-

-

-

(10,802)

-

(10,802)

-

(10,802)

Minority interest

-

-

-

-

-

-

318

318

Transactions with owners recorded directly in equity

166

484

1,213

(10,742)

116,513

107,634

318

107,952

 

 

 

 

 

 

 

 

 

At 30 September 2019

545

121,304

(3,537)

90,559

125,536

334,407

957

335,364

Total comprehensive income

-

-

-

10,563

-

10,563

-

10,563

 

 

 

 

 

 

 

 

 

Issue of ordinary shares (i) (ii)

5

10,059

(9,768)

-

1,806

2,102

7,842

9,944

Equity-settled share-based payments charge

-

-

-

150

-

150

-

150

Dividends

-

-

-

(4,093)

-

(4,093)

-

(4,093)

Minority interest

-

-

-

-

-

-

654

654

Transactions with owners recorded directly in equity

5

10,059

(9,768)

(3,943)

1,806

(1,841)

8,496

6,655

 

 

 

 

 

 

 

 

 

At 31 March 2020

550

131,363

(13,305)

97,179

127,342

343,129

9,453

352,582

(i) The Group launched a separate share scheme for executives ("EXSOP") in November 2019. This resulted in the issue of ordinary shares at a premium to be held jointly by the employee benefit trust.

(ii) Ordinary shares were issued as part of the acquisition of the AS Group (see note 7), the resulting premium is recognised as a merger reserve. 
 

Condensed Consolidated Balance Sheet at 31 March 2020

 

 

31 March 2020

31 March

2019

30 September

2019

 

unaudited

unaudited

audited

 

£000

£000

£000

Non-current assets

 

 

 

Property, plant and equipment

685,832

600,526

609,658

Other intangible assets

87,505

84,147

80,348

Goodwill

84,307

79,178

79,456

 

857,644

763,851

769,462

Current assets

 

 

 

Inventories

1,925

998

998

Trade and other receivables

65,669

55,382

53,011

Cash and cash equivalents

36,408

26,733

29,238

 

104,002

83,113

83,247

Total assets

961,646

846,964

852,709

 

Current liabilities

 

 

 

Trade and other payables

Contingent consideration payable 

59,003

2,308

53,763

-

58,937

-

Lease liabilities

6,719

2,479

1,763

Deferred income

39,251

37,666

28,710

Corporation tax

16,272

13,114

13,777

 

123,553

107,022

103,187

Non-current liabilities

 

 

 

Loans and borrowings

320,399

315,312

315,878

Provisions

14,803

14,936

14,884

Lease liabilities

82,615

17,159

17,805

Deferred tax liabilities

Derivative financial instruments

65,923

1,771

64,130

-

63,951

1,640

 

485,511

411,537

414,158

Total liabilities

609,064

518,559

517,345

Net assets

352,582

328,405

335,364

 

Equity attributable to equity shareholders of the parent

 

 

 

Share capital

550

545

545

Share premium

131,363

120,820

121,304

Shares held by Employee Benefit Trust

(13,305)

(4,750)

(3,537)

Merger reserve

127,342

125,535

125,536

Non-controlling interest

9,453

769

957

Retained earnings

97,179

85,486

90,559

Total equity attributable to equity shareholders of the parent

352,582

328,405

335,364

 
 

Consolidated Cash Flow Statement for the six months ended 31 March 2020

 

 

Six months ended

Six months ended

Year ended

 

31 March 2020

31 March 2019

30 September 2019

 

unaudited

unaudited

audited

 

£000

£000

£000

Cash flows from operating activities

 

 

 

Profit before tax

17,668

6,846

24,340

Financial expenses

7,810

7,067

15,136

Depreciation

8,496

5,957

10,631

Amortisation of intangible assets

4,537

4,922

10,188

Charitable foundation donation

308

390

736

Share-based payments charge

150

60

60

Acquisition transaction costs

231

10,318

10,331

Integration and restructuring costs

2,178

2,354

5,597

Foreign exchange gains

(56)

-

-

Profit arising from ground rent transactions

-

(4,565)

(4,565)

Other non-underlying items

130

-

1,092

Operating cash flows before movement in working

41,452

33,349

73,546

capital and non underlying items

 

 

 

Increase in inventory

-

(100)

(100)

Decrease/increase in trade and other receivables

681

(3,226)

(6,518)

Decrease in trade and other payables 

(3,948)

(1,812)

(604)

Operating cash flows before non underlying items

38,185

28,211

66,324

(2,178)

(2,354)

(5,597)

(308)

(390)

(736)

(130)

(231)

-

-

(151)

(14,393)

  Cash inflows from operating activities

35,338

25,467

45,447

(1,984)

(2,818)

(5,889)

Net cash from operating activities

33,354

22,649

39,558

 

Cash flows from investing activities

 

 

Proceeds from sale of property, plant and equipment

186

31,026

Business combinations net of cash acquired (Note 7)

(1,440)

(160,271)

Acquisition of property, plant and equipment

Acquisition of software

(11,131)

(1,703)

(14,866)

(858)

Payment of deferred consideration

-

(966)

Payment of acquisition costs

-

(13,902)

-

Net cash used in investing activities

(14,088)

(159,837)

(167,852)

Cash flows from financing activities

 

 

 

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

Proceeds from finance sale and leaseback

294

-

-

-

Interest paid

(6,745)

(4,773)

Cash outflow arising from derivative financial instruments

(411)

(594)

Bank loans drawdown

-

431,910

Loan arrangement fees

-

(4,696)

Repayment of borrowings

-

(263,576)

Proceeds from shareholder loans (Note 7)

1,808

-

Payment of finance lease liabilities

(3,197)

(1,126)

Dividends paid

(4,093)

(2,645)

(10,802)

Net cash (utilised in)/generated from financing activities

(12,344)

154,500

148,111

Net change in cash and cash equivalents

6,922

17,312

19,817

Exchange gain on cash and cash equivalents

248

-

-

Cash and cash equivalents at start of the period

29,238

9,421

9,421

Cash and cash equivalents at end of the period

36,408

26,733

29,238

 

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

 

 

31 March 2020

31 March 2019

30 September 2019

 

unaudited

unaudited

audited

 

£000

£000

£000

Cash and cash equivalents

36,408

26,733

29,238

Loans and borrowings

(320,399)

(315,312)

(315,878)

Lease liabilities (i)

(3,436)

(4,481)

(4,437)

Net debt at end of the period

(287,427)

(293,060)

(291,077)

 

(i) Net debt includes HP leases previously recognised under IAS 17 now included in lease liabilities.
 

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 2020. 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 2019 together with the adoption of IFRS 16.

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.

In the current year, the following new and revised standards and interpretations have been adopted:

 

IFRS 16

Leases

IFRIC 23

Uncertainty over Income Tax Treatments

Amendments to IAS28 (Oct 2017)

Investments in Associates and Joint Ventures

Amendments to IFRS 9 (Oct 2017)

Financial Instruments

Amendments to IAS 19 (Feb 2018)

Employee Benefits

The annual improvements 2015-2017

Business Combinations, Joint Arrangements, Income tax and Borrowing costs

 

The amendments and interpretations listed above which were adopted did not affect the amounts reported in these interim financial statements, other than the impact of IFRS 16 is explained in note 8.

 

The financial information in this interim report does not constitute statutory accounts for the six months ended 31 March 2020 and should be read in conjunction with the Group's annual financial statements for the year ended 30 September 2019. Financial information for the year ended 30 September 2019 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 2020 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 18 June 2020.

Going concern

 

The Group is financed by bank loan facilities that mature in 2022 and 2023. The Directors have considered the Group's forecasts and projections, and the risks associated with their delivery, and are satisfied that the Group will be able to operate within the covenants imposed by bank loan facilities for at least twelve months from the date of approval of the condensed consolidated financial information. In relation to available cash resources, the Directors have had regard to both cash at bank and a £25m committed undrawn revolving credit facility. The Group has undertaken extensive activity to identify and mitigate its exposure to plausible risks which may arise from COVID-19. Based on the Directors' current assessment of the likelihood of the COVID-19 risks arising together with their assessment of the planned mitigating actions being successful, the Directors have concluded it is appropriate to prepare the accounts on a going concern basis.

 

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.

The interim results report segmental information on the Group's three operating divisions (and the comparative information has been represented on this basis):

· Adults Services;

· Children's Services; and

· Foster Care. 

 

The condensed segmental results for the six months ended 31 March 2020, six months ended 31 March 2019 and year ended 30 September 2019 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 2020

unaudited

£000

Six months ended

Year ended

31 March 2019

30 September 2019

unaudited

audited

£000

£000

Adults Services

 

 

 

Client capacity

1,967

1,971

1,968

Revenue

66,043

62,123

123,635

Pre IFRS 16 EBITDA before unallocated costs

15,874

14,971

32,726

IFRS 16 adjustment

959

-

-

EBITDA before unallocated costs

16,833

14,971

32,726

 

 

 

 

Children's Services

 

 

 

Client capacity

1,948

1,934

1,933

Revenue

121,479

110,804

230,575

Pre IFRS 16 EBITDA before unallocated costs

29,030

26,480

55,632

IFRS 16 adjustment

1,886

-

-

EBITDA before unallocated costs

30,916

26,480

55,632

 

 

 

 

Foster Care

 

 

 

Client capacity

1,129

1,167

1,178

Revenue

21,004

19,583

40,784

Pre IFRS 16 EBITDA before unallocated costs

3,748

3,622

7,551

IFRS 16 adjustment

283

-

-

EBITDA before unallocated costs

4,031

3,622

7,551

 

 

 

 

Total

 

 

 

Client capacity

5,044

5,072

5,079

Revenue

208,526

192,510

394,994

Pre IFRS 16 EBITDA before unallocated costs

48,652

45,073

95,909

IFRS 16 adjustment

3,129

-

-

EBITDA before unallocated costs

51,781

45,073

95,909

 

 

 

 

 

Reconciliation of EBITDA to profit after tax

Six months ended

31 March 2020

unaudited

£000

Six months ended

Year ended

31 March 2019

30 September 2019

unaudited

Audited

£000

£000

Underlying EBITDA before unallocated costs

51,781

45,073

95,909

Unallocated costs

(10,329)

(11,724)

(22,363)

Underlying EBITDA

41,452

33,349

73,546

Depreciation

(8,496)

(5,957)

(10,631)

Share-based payments charge

(150)

(60)

(60)

Non underlying items

(7,328)

(13,419)

(23,379)

Operating profit

25,478

13,913

39,476

Financial expenses

(7,810)

(7,067)

(15,136)

Profit before tax

17,668

6,846

24,340

Taxation

(6,451)

(660)

(4,214)

Profit after tax

11,217

6,186

20,126

Profit attributable to:
Owners of the parent

 

10,563

 

6,078

 

19,704

Non-controlling interest

654

108

422

 

Operations of the Group are primarily carried out in the UK, the Company's country of domicile. On 4 February 2020 the Group completed the acquisition of the AS Group, registered in the United Arab Emirates. All other revenues 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 above as this information is not allocated to operating segments in the regular reporting to the Group's CODM 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 2020

31 March 2019

30 September 2019

 

 

unaudited

unaudited

audited

 

Note

£000

£000

£000

Acquisition expenses

(i)

231

10,318

10,331

Integration and restructuring costs

(ii)

2,178

2,354

5,597

Profit arising from the ground rent transaction

(iii)

-

(4,565)

(4,565)

Charitable donations

(iv)

308

390

736

Termination of onerous leases

 

130

-

1,092

Other

 

(56)

-

-

Amortisation of intangible assets

 

 

4,537

 

4,922

10,188

 

Included in administrative expenses

 

7,328

13,419

23,379

Fair value movements relating to derivative financial instruments

 

(v)

 

131

 

(153)

 

1,487

Charges relating to derivative financial instruments

Leases imputed interest

(v)

(vi)

181

230

86

112

217

345

Finance fees extinguished

(vii)

-

396

397

Included in financial expenses

 

542

441

2,446

Tax on non underlying items

Tax effect:

 

 

 

 

Current tax

(viii)

(608)

101

(1,090)

Deferred tax 

(ix)

2,342

(3,363)

(4,119)

Included in taxation

 

1,734

(3,262)

(5,209)

Total non underlying items

 

9,604

10,598

20,616

 

(i)  In accordance with IFRS 3 (as revised) items associated with business combinations have been taken to the income statement as incurred and includes costs relating to the review by the Competition and Markets Authority ("CMA"), applicable to the Cambian acquisition only.

(ii)  The Group incurred a number of costs relating to the integration of the Cambian acquisition and reorganisation of the internal operating, finance and management structures as outlined in the Scheme of Arrangement dated 19 September 2018.

(iii)  Profit arises from a ground rent transaction with Alpha Real Capital LLP at a net yield of 2.85% and which raised £31.0m in cash to further support its growth strategy.

(iv)  These charges represent charitable donations made to the Caretech Charitable Foundation ("Foundation"), an independent grant- making corporate foundation registered with the Charity Commission. Funded and founded by Caretech Holdings plc, the Foundation has an independent Board of Trustees responsible for delivering its Charitable Objects. The Trustees include Haroon Sheikh, Farouq Sheikh, Christopher Dickinson and Mike Adams, Directors of the Group.

(v)  Non underlying items relating to the 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.

(vi)  Imputed interest previously recognised under IAS 17 as a result of the ground rent transaction, see (iii).

(vii) Finance fees extinguished relate to finance fees paid on bank facilities which were replaced as part of the Cambian acquisition.

(viii) Represents the current tax on items (ii) and (vii) above.

 

 

 

 

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

 

 

Six months ended

Six months ended

Year

Ended

 

 

31 March 2020

31 March 2019

30 September 2019

 

 

unaudited

unaudited

audited

 

 

£000

£000

£000

Derivative financial instruments (note v)

 

25

(59)

219

Full provision for deferred tax under IAS 12

 

-

402

-

Roll over relief

 

-

(776)

(776)

Intangible assets

 

1,367

1,134

2,357

Change in tax rate

 

(3,762)

-

-

Other adjustments

Prior year adjustments

 

28

-

-

2,662

2,319  -

Total

 

(2,342)

3,363

4,119

 

 

4.  Financial expenses

 

Six months

ended

Six months ended

Year

ended

 

31 March 2020

31 March 2019

30 September 2019

 

unaudited

unaudited

audited

 

£000

£000

£000

On bank loans and overdrafts

5,893

6,498

12,345

Interest expenses on lease liabilities

1,375

128

345

Financial expenses before non underlying items

7,268

6,626

12,690

Amounts relating to derivative financial instruments (note 3) 

312

(67)

1,704

Leases imputed interest (note 3)

230

112

345

Finance fees extinguished (note 3)

-

396

397

Total financial expenses

7,810

7,067

15,136

 

 

5.  Taxation

 

Six months

ended

Six months ended

Year

ended

 

31 March 2020

31 March 2019

30 September 2019

 

unaudited

unaudited

audited

 

£000

£000

£000

Current tax expense

 

 

 

Current period

5,087

3,922

(8,842)

Non underlying items (note 3)

(608)

101

(1,090)

Total current tax

4,479

4,023

(7,752)

 

 

 

 

Deferred tax expense

 

 

 

Current period

Deferred tax on non underlying items (note 3)

(370)

2,342

-

(3,363)

(581)

4,119

Total deferred tax

1,972

(3,363)

3,538

Total tax in the consolidated statement of comprehensive income

6,451

660

4,214

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

18%

19%

19%

      

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6.  Earnings per share

Six months ended

Six months ended

Year

ended

 

31 March 2020

31 March 2019

30 September 2019

 

unaudited

unaudited

Audited

 

£000

£000

£000

Profit attributable to ordinary shareholders

10,563

6,078

19,704

Non underlying items (note 3)

9,604

10,598

20,616

Profit attributable to ordinary shareholders before underlying items

20,167

16,676

40,320

Weighted number of shares in issue for basic earnings per share

111,363,524

105,415,473

107,231,912

Effects of share options in issue

365,110

600,608

365,090

Weighted number of shares in issue for diluted earnings per share

111,728,634

106,016,081

107,597,002

 

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

9.49p

5.77p

18.38p

Diluted

9.45p

5.73p

18.31p

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

 

 

 

Basic

18.11p

15.82p

37.60p

Diluted

18.05p

15.73p

37.48p

 

 

7. Business Combinations

 

On the 4 February 2020 Caretech Holdings plc acquired a 51% interest in AS Investments Holding Limited and AS1 Investments Holding Limited ("the AS Group") which holds a majority equity interest in an out-patient facility in Abu Dhabi and a mental health outpatient group of clinics (the "Investment"). The initial consideration for the investment is £7.2m (which included £0.7m contingent consideration satisfied in May 2020), and a performance driven earn-out mechanism of up to £1.6m to be paid out in 2021.

 

As part of the acquisition the acquiree shareholders, who as part of the acquisition are now shareholders of Caretech Holdings plc.,  have provided a cash loan to the AS Group of £1.8m to be used for investment in future growth. This has resulted in a shareholder loan as noted in the cash flow statement.

 

The AS Group was established in 2015 to introduce best in class mental healthcare services in the Middle East and North Africa region. The Group has an agreement with a leading NHS Foundation Trust Hospital in the mental healthcare arena in the UK for the provision of services in the greater Middle Eastern area. The current operations comprise an out-patient facility in the emirate of Abu Dhabi offering the following services: child and adolescent mental healthcare services, adult psychiatry and psychology services, training, education, to professionals and bespoke services to schools. In addition, the Group owns a majority equity interest in a premier mental health outpatient group of clinics focussing on providing highest quality specialised medical care for neurological, psychiatric and psychological conditions. Key service offerings include psychiatry, psychology, occupational therapy and rehabilitation.

CareTech has been evaluating opportunities for international expansion, believing the Care Pathways strategy successfully delivered in the UK is equally applicable in other territories. The UAE is an attractive market because the need for improved capacity and expertise in specialist social care, special education needs and mental health services has been recognised and is expected to receive significant focus in the coming years.

The book values attributable to the acquisition were £2.0m net assets and provisional fair value and adjustments were £10.1m.

 

 

 

 

 

 

 

 

The provisional acquisition table is as follows:-

 

Book values

£000s

Fair value

adjustments

£000s

Total

£000s

Intangible assets

-

10,325

10,325

Property plant & equipment

843

-

843

Trade and other receivables

2,827

(211)

2,616

Prepayments

77

-

77

Other current assets

1,717

-

1,717

Cash

3,264

-

3,264

Trade and other payables

(5,255)

-

(5,255)

Deferred income

(875)

-

(875)

Finance leases

(568)

-

(568)

Net Assets on acquisition

2,030

10,114

12,144

Less: Non-controlling interest

 

 

(7,842)

 

 

 

4,302

Consideration paid

 

 

8,819

Goodwill

 

 

4,517

 

 

 

 

Consideration paid was:

 

 

£000

Cash

 

 

4,704

Settled in shares

 

 

1,807

Contingent consideration

 

 

2,308

Total consideration

 

 

8,819

 

 

 

 

Reconciliation to the cash flow statement

 

 

£000

Cash paid

 

 

4,704

Cash acquired

 

 

(3,264)

Payments for business combination net of cash acquired

1,440


Goodwill arises as a result the surplus of consideration over the fair value of the separately identifiable assets acquired.

Costs relating to this acquisition are expensed in the Income Statement in accordance with IFRS3 and are identified in note 3 non underlying items.

Goodwill is attributable to the future economic benefits arising from assets which are not capable of being individually identified and separately recognised, these include value of the assembled workforce within the business acquired.

8.  Impact of IFRS 16 - Accounting for leases

IFRS 16 'Leases' has been adopted by the Group on 1 October 2019 for the financial year ending 30 September 2020. IFRS 16 primarily changes lease accounting for lessees. Under the new standard, lease agreements give rise to the recognition of an asset representing 'right of use' assets, recognised on the balance sheet for almost all leases. This has resulted in a significant increase in both assets and liabilities recognised. The costs of operating leases previously included within operating costs has been split and the financing element of the charge is reported within finance expenses whilst the total expense recognised in the Income Statement over the life of each lease will be unaffected by the standard.

The Group elected to adopt the standard using the modified retrospective approach, which means that comparative results for 2018 are not restated. On 1 October 2019, £71.6m of leases were recognised as liabilities on adoption of the standard and £72.1m capitalised as right of use assets

The following assumptions are used when applying IFRS 16:

· The discount rates to be used to calculate the financing component is the Group's incremental cost of borrowing, which for this assessment, as the Directors consider that all of the leases included in each of these categories have similar characteristics, are as below;

property - 3.5%;

motor vehicles - 2.6%;

equipment - 2.5%

· All short-term leases which expire on or before 30 September 2020 are excluded.

· All low value leases as defined in IFRS 16 have been excluded.

The financial impacts of IFRS 16 on H1 2020 are set out in the table below.

 

Six months ended

31 March 2020

Unaudited

(pre IFRS 16)

£000

Impact of IFRS 16

£000s

Six months ended

31 March 2020

Unaudited

(post IFRS 16)

£000s

Underlying EBITDA

38,042

3,410

41,452

Depreciation

(5,931)

(2,565)

(8,496)

Share-based payment charge

(150)

-

(150)

Underlying operating profit

31,961

845

32,806

Underlying net finance costs

(6,054)

(1,214)

(7,268)

Underlying profit before tax

25,907

(369)

25,538

 

 

 

 

Right-of-use assets

-

70,913

70,913

Other assets

890,733

-

890,733

Lease liabilities

(18,541)

(70,793)

(89,334)

Other liabilities

(519,241)

(489)

(519,730)

Net assets

352,951

(369)

352,582

 

Lease liabilities recognised under IAS 17 and previously presented in loans and borrowings, and ground rent liabilities arising under IAS 17, have been represented as lease liabilities.

 

Directors and Advisers

 

Company Number                                                                      Solicitors

04457287                                                                                     Charles Russell Speechlys 

                                                                                                     5 Fleet Place

Registered Office                                                                       London EC4M 7RD

5th Floor, Metropolitan House 

3 Darkes Lane      Ashurst LLP

Potters Bar                                                                                    Broadwalk House

Herts EN6 1AG                                                                             5 Appold Street

                                                                                                      London EC2A 2HA

Directors

Farouq Sheikh                (Executive Chairman)  Registrars

Haroon Sheikh               (Chief Executive Officer)                         Link Asset Services

Christopher Dickinson    (Group Chief Financial Officer)  Northern House

Mike Adams                   (Care Partnerships Director)  Woodsome Park

Karl Monaghan               (Non-Executive Director)  Fenay Bridge

Jamie Cumming             (Non-Executive Director)                        Huddersfield 

Moira Livingston   (Non-Executive Director)                        West Yorkshire HD8 0GA 

Gareth Dufton               (Resigned 13 January 2020)

 

Company Secretary    Auditor 

Christopher Dickinson                                                                   Grant Thornton UK LLP

                                                                                                      30 Finsbury Square

Nominated Adviser and Joint Broker  London 

Panmure Gordon (UK) Limited                                                      EC2A 1AG

One New Change 

London EC4M 9AF 

 

Joint Brokers 

Numis 

10 Paternoster Sq.

London

EC4M 7LT 

 

 

 

 

 

 

 

 


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