CareTech Holdings PLC Interim Results For the six months/media/Files/C/...CareTech Presentation Team...
Transcript of CareTech Holdings PLC Interim Results For the six months/media/Files/C/...CareTech Presentation Team...
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CareTech Holdings PLCInterim Results
For the six months ended 31 March 2018
CareTech Presentation Team
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• Farouq Sheikh Chairman
• Michael Hill Group Finance Director
• John Ivers Chief Operating Officer
Agenda
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• Welcome
• Executive Summary
• The Journey so far
• Strategic Focus
• Moving Forward
• Our Care Pathways Approach
• Initiatives Underpinning Growth
• Our Services Today
• Recent Acquisitions Update
• Our People, Systems and Quality
• Financial Results
• Outlook
• In Summary
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Executive Summary
• CareTech has a proven track record of growth, profitability and cash generation over 20 years
• Underlying EBITDA and Diluted EPS have grown by CAGRs of 30% and 25% respectively since IPO
• We operate in c.£12.6bn per annum UK social care sector
• Significant organic growth opportunities and bolt on acquisitions are being driven by:
- Market growing in size and value - Regulatory burden
- Increased outsourcing - Shortfall of specialist beds
• In recent years CareTech has raised money through our shareholders and management, and has a proven track record
of making accretive and successful acquisitions
The Journey so far…
Today• UK Market size of £12.6bn per annum
• Capacity of 2,534
• CareTech market share of less than 2%
• Three specialist operating divisions:
– Adult services – incorporating adult learning disability
– Children services – incorporating young people residential services, fostering care and learning services
– Specialist Services – incorporating mental health and acquired brain injury
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At IPO• UK Market size of £2.1bn
• Capacity of 435
• CareTech market share of less than 1%
• One focused operating division – residential and day care services for adults with learning disabilities
12th year on the Public Markets
Underlying EBITDA and Diluted EPS has grown by CAGR of 26% and 20% respectively since IPO
£22.5m
£166.0m
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2005A
2007A
2009A
2011A
2013A
2015A
2017A
Revenue CAGR 18% A
£2.4
£39.9
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1 2 3 4 5 6 7
EBITDA CAGR 26% A
m
m
4.10p
38.03p
p
10p
20p
30p
40p
1 2 3 4 5 6 7
EPS CAGR 20% A
Highlights
Financial
• Revenue increased by 11.2% to £87.6m
(H12017:£78.8m)
• Underlying EBITDA increased by 6.6% to £19.5m
(H12017: £18.3m)
• Underlying profit before tax increased by 5.3% to
£13.8m (H12017: £13.1m)
• Strong operating cash inflow of £19.1m (H12017:
£15.8)
• Interim dividend increased by 6.1% to 3.50p
(H12017: 3.30p) per share
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Operational
• Improved CQC and Ofsted ratings remain ahead of
sector averages
• Strong Occupancy maintained
• Accelerated organic growth continues
• Successful ongoing integration of recent acquisitions
• Strengthened management team able to scale the
business further
Targeting double digit
growth
Strategic Focus and Priorities
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Board took a number of Strategic Initiatives in recent years – benefits of which are coming through:
• Creation of complementary care pathways focused on outcomes for Service Users
• Reconfigured existing property assets – meeting market demand
• Investment in People and IT systems
• Strengthening of balance sheet
• Acceleration of Organic Growth and Bolt-on Acquisitions
Moving Forward
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• Managing through market dynamics and headwinds
• More of the same
- Core organic
- Reconfigurations
- Targeted Bolt On Acquisitions
- Geographic and Care Pathway Expansions
• Harnessing technology
- Use to assist with care provision (tele care)
- Validating and tracking outcomes using technology
- Diagnostic tools
- Monitoring and support
• International Development
- Arab Health 2018
- Exploring related opportunities
• Charitable Foundation
- First Social Care Provider
Key Investment MeritsAn investment in CareTech offers investors
➢ Strong defensive characteristics– Visibility of contracted revenue
– Length of resident stay measured in decades
– Strong asset backing
➢ Strong organic growth opportunity– There is an undersupply of places
– A highly scalable model – reinforced through improved organisational structure
➢ Strong acquisition growth opportunity– Highly fragmented market to consolidate – geographical and service fragmentation
– Many small operators unable to cope with regulation
➢ Proven business model– Strength and depth of management team to operational level
– Demonstrable track record of delivering growth
– Ahead on quality standards
– Strong cash generation
– Solid strategic position
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Our Care Pathways
Our Approach Delivering
5000 expert trained and
quality focused staff provide care through over
300 sites
Tailored to individual
service user and family
requirements
High Quality
Outcome focused
Promoting independence
and choice
Excellent Value
Offering a broad range of services across Care Pathway
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Care Pathway – 31 March 2018 Capacity
Our Core Business TodayAdult Learning
Disabilities
• Residential
• Independent supported living
• Community support services
• Transitional Services
1,732
% net Growth
from Mar 2017
Adults
Specialist
Services
• Residential care
• Low secure and step down
• Independent supported living
• Community outreach
214 1,946 8%
Young People
Residential
Services
• Residential care of children
• Transitional Services
• Education and therapy
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Children’s & Young People
Foster care • Fostering 301 626 12%
Overall Capacity 2,572 9%
Learning
services
• Employee Pre-employment and
apprenticeships
509
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Expanding our Operational Footprint
Children and Young People Fostering Adults
Areas of specialism • Learning disability
• Mental Health Issues
• Autism Spectrum Conditions
• Complex social, emotional and
behavioural difficulties
• Young people in crisis
• Education and Therapy
• Foster Placements for Children and
Young People with challenging and
complex behaviours
• Family placements for Children and
Young People with disabilities
• Learning disabilities
• Mental Health
• Autism and Asperger’s
• Physical disabilities
• Sensory Impairment
• Dual Diagnosis
• Brain Injury Rehabilitation (ABI)
(new 2016)
Regional coverage • South West (extended 2017)
• Home Counties
• North West (extended 2017)
• North East (extended 2017)
• Midlands
• Scotland (extended 2017)
• Wales
• London, Kent, Sussex, Hampshire
and Essex
• North West England
• Midlands (new 2017)
• Wales
• UK Mainland
• Independent Hospital in
Hampshire
• Specialist ABI Service, Oakleaf in
East Midlands (new 2017)
• Expansion in North West, South
West and Midlands (2017)
Market • £1.5bn p.a. growing 5.7% p.a. • £1.6bn p.a. at 5.2% p.a. • £9.5bn p.a. growing at 5.5% p.a.
Market Share • 3% • 1% • 2%
Growth Potential Significant Significant Significant
Initiatives Underpinning Growth
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Our Focus and Approach
• Pioneering provision of specialist social care services across the UK
- Strong Team with focus on positive outcomes in a community setting
• National profile with Local Engagement and Service Delivery
- Powered by CareTech with support infrastructure
- Facilitating growth
- Local ‘brands’ with high quality reputation for excellent service delivery
• Innovative Emerging Models of Care
- Extending Care Pathway (Children’s/Young People – Adults)
• New Partnerships Approach
- Registered Housing Providers as partners
- Health and Social Care Partnering Opportunities
- Evolving payments/funding models
Community Based Adult Services
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• Established 25 years ago as the initial CareTech service and brand
- 1732 capacity March 2018
• Increased service offering (Learning Disability/Mental Health/Physical Disabilities)
• Geographic Expansion (North/South Regional focus across UK)
• Reconfiguring services to meet changing needs and demand
- Hospital/Institutional step down and rehabilitation
- Communal supported living promoting independence and choice
- Apartments and self-contained flats
- Access to local community and support networks
• Developing new projects to meet growing needs
Revenue EBITDA
IPO 2005 £23.0m £2.4m
Full Year 2017 £87.7m £26.3m
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Adults Supported Living Services
Grand DriveHerne Bay Kent supported Living development. A conversion from exregistered care home into eleven self-contained studios/flats.Supported Living service for individuals with Learning Disabilities,Mental Health and Autism, staffed 24 hours. Current occupancy 6people in phase 1 of project.
Toms LaneHertfordshire supported living development. Three-bedroom Bungalow staffed 24 hours for two individualswith Learning Disabilities who moved in together in thefirst week of the service opening.
Charlton ArmsMidlands supported living development.Eight flats for individuals with complexneeds. Opened mid Dec 2017 full in April2018.
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Adults Supported Living Services
Mottram RoadTameside supported living development with eight individual apartments, supporting people with complex needs. Opened June 2017, last bed filled January 2018.
Chambers GroveHertfordshire – Supported Living development. Four-bedroom House staffed 24 hours for four individuals with Learning Disabilities, Mental Health and Autism. Full in first month of opening.
Falklands DriveCambridgeshire – supported living development. Two Bedroom bungalow – bespoke single service which is staffed 24 hours for one individual with Learning Disabilities & Mental Health.
Purchased June 2017 coverage across the Midlands and South West regions of the UK
Providers of specialist residential care, supported living services, outreach and day care services for adults with a range of learning disabilities and associated mental health needs including challenging behaviours
Integration plans already underway, whilst retaining the Selborne Brand. To include CareTech’s wider governance and leadership embedded in the regions existing management structure
Residential care of 57 beds across 8 services, with supported living provided to 47 service users. On track to achieve targeted EBITDA for 2017/18
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Recent Acquisition
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Children and Young People Integrated SEN, SEMH Services and LD with Education & Therapy Pathways • Special education needs (SEN) delivered in specialist settings:
- 325 Residential Capacity March 2018
• SEMH (Social Emotional and Mental Health) services for Children and Young People.
• Learning Disability, Autism and associated complex needs
• 11 Specialist Schools across the UK.- 411 pupils including day pupils
• Integrated therapy input.
• Residential short break and respite options
• 4 Specialist Fostering Agencies- 301 capacity March 2018
• Award winning services.₋ Management Excellence Award 2016₋ Best Children’s Service 2017
Revenue EBITDA
IPO 2005 Nil Nil
Full Year 2017 £52.4m £15.1m
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Extending Scope and Coverage of Existing Services Children's and Young People
HidelowExtending the highly successful specialist children’s service from Wales into England. Converting a holiday let complex in Worcestershire into a 8 bed Children’s service. Opened November 2017 and received their first Ofsted inspection achieving an overall ‘Good’ rating
Acorn Way Our Short Break service within Inspire continues to grow, currently supporting over 100 families, achieving an Outstanding rating from Ofsted
Linx Supported AccommodationDuring 2017 / 2018 have developed Linx; our Supported Accommodationservice for Young People aged 16+. During the last year we have increasedcapacity by a further 10 placements
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Recent Acquisition Update
Strong management team retained and focused on growth based on strong quality service provision
Since our acquisition in July 2015, we have commissioned the following Residential homes for Children and Young People:
West Cottage – Opened Nov 2016, full occupancyBrandyburn – Opened Jan 2017, full occupancyThe Shian – Opened April 2017, full occupancyEaster Hayston – Opened July 2017, full occupancyOaklea – Opened January 2018, building to full occupancy
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Recent Acquisition Update
Laceby House is a 5 bed home in Oldham for young people with social, emotional and behavioural difficulties. Laceby opened in June 2017
Purchased December 2015. Children’s service based in the North West.
New Projects:
Fairfield is a 5 bed home in Rawtenstall for young people with social, emotional and behavioural difficulties. Opened in October 2016
Red Rock is a 5 bed property located in Wigan and will support young people with social, emotional and behavioural difficulties. Opened in Dec 2017
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Recent Purchase
Building on the successful acquisition of ROC NW. Purchased in June 2017
Establishing a regional base in the North West (Preston) with capability to develop and grow
Mountwood is a children’s home and school for 23 young people consisting of a selection of 8 bespoke modern buildings
The site is set on a plot of 14 acres
The site opened in July 2017and is for young people with a Learning Disabilities and Autistic Spectrum Conditions
There is strong referral demand and support from commissioners for this service and we have welcomed 8 new residents over the past 3 months
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Neurological services – specialists in providing nursing and personal care for people with complex and progressive neurological conditions including Huntington’s Disease and complex and challenging dementia
Care at home – We specialise in enabling rehabilitation and maximising independence and well-being for children and adults with complex and additional support needs
Newly Formed January 2018
Specialist Services Division
Mental health services – focusing on a recovery model to community transitional placements and supported living accommodation, service users with complex mental health needs receive personalised programmes which can be through short-term, crisis, respite placements or longer term options
Our services provide care and rehabilitation by delivering integrated care pathways
All services benefit from large multi-disciplinary teams providing expert and specialist knowledge- 214 capacity March 2018
Revenue EBITDA
IPO 2005 Nil NilFull Year 2017 £15.5m £3.9m
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• Northamptonshire based provider of specialist brain injury rehabilitation and other neurological conditions for men over 18
• 100 residential and nursing places with three different service levels• Strong reputation and quality ratings• Planned development to increase Cotswolds capacity with 12 new beds, totalling 41• Launch of Mosley Lodge at Main Site of a 4 bed higher acuity service • Wider geographical development of brain injury services ongoing
Recent Acquisitions Update
Initiatives Supporting Growth
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Our People• Positive attraction and retention
- Net growth H1 2017/18 of +500 new hires
- Staff annualised turnover 21% versus 30-40% of sector
comparison
• 58 managers/deputies on leadership and management programme
• 200+ staff on apprenticeship programme
• 400 staff members in Sharesave Scheme
Recognition and Award Winners• National Care Awards (14 national winners – 39 regionals)• LaingBuisson Awards 2017 – Best children’s service• Great British Care Awards • Finalist Health Investor Awards in 3 categories
‘Best in Class’ Quality• Adults services 87% Good rating (CQC)• Specialist Services 91% Good rating (CQC)• Overall Industry Adult Ratings 71% Good (CQC)• Children’s services 33% Outstanding 48% Good rated (Ofsted)
Systems and Processes• Time and Attendance – fingerprint system• ‘Line of Sight’ RAG rated, KPI report for each service• Data Analytics and Electronic Forms (Launching 2018).
National Living Wage, Sleeps and Fee Uplifts• Fully implemented across business• Fee recovery for existing placements (less than 2% required) on track• Net placements on new fee profile
Divisional breakdown
26Extraordinary days every day
Financial Resultsfor the half ended 31 March 2018
Financial Highlights
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• Revenue increased by 11.2% to £87.6m (H12017: £78.8m)• Underlying EBITDA increased by 6.6% to £19.5m (H12017: £18.3m)• Underlying profit before tax increased by 5.3% to £13.8m (H12017: £13.1m)• Operating profit increased by 1.9% to £10.9m (H12017: £10.7m) and profit
before tax increased by 21.4% to £8.5m (H12017: £7.0m) • Interim dividend increased by 6.1% to 3.50p (2017: 3.30p) per share• Net assets have grown by 6.7% to £208.3m (H12017: £195.2m)• Cash inflows from operating activities were £15.8m (H12017: £11.4m)
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Service Revenue & EBITDA Splitfor the six months ended 31 March 2018
Six months ending
2018 2018 2017 2017Revenue Underlying Revenue Underlying
£m EBITDA £m EBITDA£m £m
Adult Learning Disabilities 49.8 13.1 40.3 11.6
Specialist Services 7.5 2.1 7.7 2.1
Sub Total 57.3 15.2 48.0 13.7
Young People Residential Services
25.2 7.0 20.8 6.2
Foster Care 4.1 1.0 4.3 1.1
Sub Total 29.3 8.0 25.1 7.3
Learning Services 1.0 0.1 5.7 0.7
Sub Total 87.6 23.3 78.8 21.7
Less Unallocated Group Costs (3.8) (3.4)
Total 87.6 19.5 78.8 18.3
Margin 22.3% 23.2%
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:
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2018£m
2017£m
Acquisition Costs - -
Integration, Reorganisation Costs and Redundancy costs (1.1) (1.6)
Profit arising from ground rent transaction - -
EBITDA Adjustment Items (1.1) (1.6)
Bank fees written off -
Onerous lease provision (0.7) -
Amortisation of Intangibles (3.6) (3.4)
Financing costs relating to ground rent transactions - (1.1)
PBT Adjustment Items (5.4) (6.1)
(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
Financials
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Cashflow Highlightsfor the six months ended 31 March 2018
2018£m
2017£m
Operating Cash flow before Adjustments 19.5 18.3
Movement in working capital (0.4) (2.5)
19.1 15.8
Capital Expenditure (9.4) (9.2)
Payments under onerous contracts (0.7) -
Interest, Dividend & Tax Paid (6.3) (7.4)
Share Placing funds - 37.5
Acquisitions - (0.4)
Treasury & Acquisition Related Costs (2.6) (2.4)
Decrease In Net Debt 0.1 33.9
Opening Net Debt (147.1) (156.4)
Closing Net Debt (147.0) (122.5)
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Balance Sheet Highlightsas at 31 March 2018
2018 2017
£m £m
Tangible Fixed Assets - £327m Valuation 300.4 272.7
Goodwill and Intangibles 83.4 86.1
Net Debt -147.0 -122.5
Other Liabilities (Net) -28.5 -41.1
Net Assets 208.3 195.2
Actual 2018 Actual 2017
EBITDA: INTEREST 7.8 times 6.5 times
NET DEBT: EBITDA 3.5 times 2.9 times
LOAN: VALUE 47% 42%
Continuing our growth……
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KeyA: ActualC: Consensus estimates
p
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10p
12p
x
1x
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3x
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5x
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Net debt toEBITDA
Divi pershare CAGR25% A
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2005 A 2007 A 2009 A 2011 A 2013 A 2015 A 2017 A
RevenueCAGR 18%A
EBITDACAGR 26%A
EPS CAGR20% A
Outlook
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IPO 2005 Actual 2017Placing 2015
Direction of Travel
Underlying Market factors remain positive
• Growing market
• Increased outsourcing
• Regulatory burden increasing
• Shortage of specialist beds
Certain Perceived Headwinds
• National Minimum Wage and National Living Wage
• Staffing and staff retention
• Fee rates
• Brexit
Revenue £23m
EBITDA £2.4m
EPS 4.1p
Market size £2.1bn
Market Share 1%
Revenue £123.3m
EBITDA £30.7m
EPS 31.02p
Market size £9.7bn
Market Share less
than 2%
Revenue £166.0m
EBITDA £39.9m
EPS 38.0p
Market size £12.6bn
Market Share 2%
Half Year Actual 2018
Revenue £87.6 mEBITDA £19.5m
EPS 14.86pMarket size
£12.6bnMarket Share 2%
• Strong start to the year
• Trading in line with current market expectations
• CareTech is a profitable, cash generative and asset backed business with an attractive yield
• Highly fragmented market with growth opportunities through organic and acquisition
• Exciting and identifiable opportunities for both organic development, property
related transactions, bolt on acquisitions and reconfigurations
• Experienced and strengthened management team whose interests are aligned with shareholders
• A business model that is flexible, scalable and well positioned for growth
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SummarySummary
Disclaimer
This presentation has been prepared by CareTech Holdings PLC (“CareTech” or the “Company”) and the information contained herein is restricted and is not intended for distribution to, or use by any person or entity in any jurisdiction
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Australia, Canada, Japan, the Republic of South Africa or any other jurisdiction in which such release, publication or distribution would be unlawful.
The presentation and the information contained herein is for information purposes only and shall not constitute an offer to sell or otherwise issue or the solicitation of an offer to buy, subscribe for or otherwise acquire securities in any
jurisdiction in which any such offer or solicitation would be unlawful. This presentation and the information herein does not constitute or form part of any offer to issue or sell, or the solicitation of an offer to purchase, acquire or
subscribe for any securities in the United States, Canada, Australia, Japan or the Republic of South Africa and may not be viewed by persons in the United States (within the meaning of Regulation S under the US Securities Act of 1933, as
amended (the “Securities Act”)). Securities in the Company may not be offered or sold in the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and
the securities law of any relevant state or other jurisdiction of the United States.
Recipients in jurisdictions outside the United Kingdom should inform themselves about and observe any applicable legal or regulatory requirements in relation to the distribution or possession of these presentation slides to or in that
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This presentation is strictly confidential and is being provided to you solely for your information and may not be reproduced in any form or further distributed to any person or published in whole or in part, for any purpose; any failure to
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This presentation has not been (i) produced as a result of a process which was designed to ensure that it satisfies the standards, of accuracy, disclosure or completeness required of a prospectus, or listing particulars or other disclosure
document to be published in connection with an application for shares or other securities to be admitted to listing or dealing or trading on a regulated market or a recognised investment exchange (as defined in the Financial Services and
Markets Act 2000 (“FSMA”)) (ii) approved for the purposes of section 21 of FSMA by, a person authorised under FSMA or (iii) subjected to the due diligence investigations, verifications and other procedures commonly carried out or
applied in relation to the publication of a prospectus, listing particulars or other disclosure document on such an application, nor does it contain all information that would be required if it were a prospectus for the purposes of Directive
2003/71/EC. Accordingly, this presentation does not purport to be all-inclusive.
In making this presentation available, CareTech makes no recommendation to buy, sell or otherwise deal in shares in CareTech and its subsidiaries (the “Group”) or in any other securities or investments whatsoever, and you should
neither rely nor act upon, directly or indirectly, any of the information contained in these presentation slides in respect of any such investment activity. Past performance is no guide to future performance. If you are considering engaging
in investment activity, you should seek appropriate independent financial advice and make your own assessment.
This presentation (and any subsequent discussions arising thereon) may contain certain statements, statistics and projections that are or may be forward-looking. The accuracy and completeness of all such statements, including, without
limitation, statements regarding the future financial position, strategy, projected costs, plans and objectives for the management of future operations of the Group are not warranted or guaranteed. By their nature, forward-looking
statements involve risk and uncertainty because they relate to events and depend on circumstances that may occur in the future. Although CareTech believes that the expectations reflected in such statements are reasonable, no
assurance can be given that such expectations will prove to be correct. There are a number of factors, many of which are beyond the control of the Group, which could cause actual results and developments to differ materially from
those expressed or implied by such forward-looking statements. These factors include, but are not limited to, factors such as: future revenues being lower than expected; increasing competitive pressures in the industry; and/or general
economic conditions or conditions affecting the relevant industry, both domestically and internationally, being less favourable than expected. We do not intend to publicly update or revise these projections or other forward-looking
statements to reflect events or circumstances after the date hereof, and we do not assume any responsibility for doing so. By accepting these presentation slides, you agree to be bound by the above conditions and limitations
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