CareTech Holdings PLC

Preliminary Results For the year ended 30 September 2013

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Presentation Structure

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PRESENTERS: Farouq Sheikh, Chairman

Michael Hill, Group Finance Director

AGENDA

OUR BUSINESS AND THE MARKET: About CareTech

The Journey So Far…

Growth Since IPO

Group Highlights

CareTech - Core Strengths

Our Business

Range of Services

Direction of Travel

PRELIMINARY RESULTS: Financial Highlights

EBITDA Bridge

Services Revenue and EBITDA Split

Non Underlying Items

Cash Flow Highlights

Balance Sheet Highlights

Bank Facility

EQL Solutions

Addressing Market Perceptions

SUMMARY

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 30

September 2013

• 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

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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

Four Specialist Operating Divisions

Adult Services

1. Adult Learning Disability

2. Mental Health

Young People & Families

3. Young People Residential Services

4. Fostering Care

Market Size £3.0bn

Capacity 423 (2005)

CareTech Share <1%

Market Size £9.0bn

Capacity 2,116 (30 September 2013)

CareTech Share <2%

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Growth since IPO September 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 in line with management expectations, reflecting further development of our care

pathway range of services:

- Revenue at £114.3m up 0.2% - Underlying EBITDA at £26.4m up 6.0%

- Net Assets have increased by £22.6m up 29.7% - Underlying PBT at £17.5m up 4.8%

• Strong cash generation with 90% cash conversion ration

• Capacity at 30 September 2013 is 2,116 reflecting a reduction due to changes in definition

• Excellent occupancy levels maintained

- 92% in established services - 86% 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.

• Acquisition of Property Portfolios

- Additional facilities to total £178.0m - Property valuation at £275m

• 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

• In November 2013 EQL Solutions was acquired which extends the support pathway

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Direction of Travel

Adults LD 78%

Young People

10%

Fostering 8%

Mental Health

4% 2010

-

5.0

10.0

15.0

20.0

25.0

Adults LD YoungPeople

Fostering MentalHealth

EQL

2010

2010 2010

2010

2014

2014

2014

2014

2014

Growth 18% 173 % 115 % 140 % 100%

Adults LD 60%

Young People

20%

Fostering 12%

Mental Health

7% EQL 1%

2014

EBITDA

£22.4m

Consensus EBITDA

£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

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Our Business

CareTech Holdings PLC

Learning Disability

Residential Care

and

Community Support

Residential Care

and

Education of

children

Fostering

and

Family

Assessment

Mental Health

and

Specialist

Services

Corporate Direction and Support Incorporate the Shared Services Centre, Human Resources, National Training Centre, Quality, Regulation and Compliance, Treasury and IT

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Range of Services and Geographical Coverage

Adult Learning

Disabilities

• Residential care

• Independent supported living

• Community support services

• Transitional Services

1,423

Mental Health • Residential care

• Low secure and step down

• Independent supported living

• Community outreach

161

Young People

Residential

Services

• Residential care of children

• Transitional Services

149

Foster Care • Fostering 383

2,116

Care Pathway

30 Sept 2013

Capacity

Capacity at 30 Sept 2013 – 2,116 places

Capacity: 1,423 places

Occupancy: 85%

Average weekly fee: £1,169

Turnover: £73.9m

EBITDA: £18.5m

30/09/2013

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

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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: 149 places

Occupancy: 78%

Average weekly fee: £3,689

Turnover: £19.6m

EBITDA: £6.2m

30/09/2013

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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

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Capacity: 383 places

Occupancy: 85%

Average weekly fee: £795

Turnover: £14.3m

EBITDA: £4.3m

30/09/2013

Mental Health

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• 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: 161 places

Occupancy: 82%

Average Weekly fee: £1,065

Revenue: £6.5m

EBITDA £2.2m

30/09/2013

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Financial Highlights

Financial

• Revenue increased by 0.2% to £114.3m (2012: £114.1m)

• EBITDA increased by 6.0% to £26.4m (2012: £24.9m )

• PBT increase of 4.8% to £17.5m (2012 : £16.7m)

• Diluted EPS increase by 3.6% to 27.43p (2012: 26.47p)

• Operating cash inflow of £23.9m (2012: £22.3m)

• Full year dividend up by 4% to 6.76p (2012: 6.50p)

• Net debt at £168.6m (2012: £131.2m)

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 Portfolio Acquisition

• November 2013 – EQL Solutions

2013

Revenue

£m

2013

Underlying

EBITDA

£m

2012

Revenue

£m

2012

Underlying

EBITDA

£m

Adult Learning Disabilities 73.9 18.5 75.8 18.1

Mental Health 6.5 2.2 6.0 2.0

Young People Residential Services 19.6 6.2 17.0 5.3

Foster Care 14.3 4.3 15.3 4.2

114.3 31.2 114.1 29.6

Less Unallocated Group Costs (4.8) (4.7)

114.3 26.4 114.1 24.9

Margin 23.0% 21.8%

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Service Revenue & EBITDA Split for the year ended 30 September 2013

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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:

Year ended

30 September 2013

£’m

Year ended

30 September 2012

£’m

Acquisition Fees and Stamp Duty (2.4) (0.1)

Integration, Reorganisation Costs and Redundancy costs (1.4) (1.1)

(3.8) (1.2)

Fair Value Adjustment For Prior Year Acquisitions - (0.2) Non-cash

Gain recognised in respect of business combination 18.5 - Non-cash

Adjustments for Minimum Future Lease Payment Uplifts (1.2) (1.8) Non-cash

Onerous Lease Provisions Reorganised (0.1) (0.3) Non -cash

EBITDA Adjustment Items 13.4 (3.5)

Amortisation of Intangibles (3.7) (4.3) Non-cash

Loan Finance Arrangement Fees - (0.4) Non-cash

Charges Relating to Derivative Financial Instruments 0.9 (2.1) Non-cash

PBT Adjustment Items 10.6 (10.3)

(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

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Cashflow Highlights for the year ended 30 September 2013

2013

£m

2012

£m

Operating Cashflow before Adjustments 26.3 24.9

Increase in working capital (2.4) (2.6)

23.9 22.3

Acquisitions & Capital Expenditure (44.0) (10.7)

Interest, Dividend & Tax Paid (10.8) (10.3)

Treasury & Acquisition Related Costs (6.5) (5.2)

Decrease / (Increase) In Net Debt (37.4) (3.9)

Opening Net Debt (131.2) (127.3)

Closing Net Debt (168.6) (131.2)

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Balance Sheet Highlights as at 30 September 2013

2013

£m

2012

£m

Tangible Fixed Assets - £275m Val’n 238.6 192.1

Goodwill and Intangibles

Deferred Consideration

Net Debt

62.1

(0.5)

(168.6)

64.5

(1.4)

(131.2)

Other Liabilities (Net) (32.9) (47.9)

Net Assets 98.7 76.1

Key Bank Covenant Requirements 2013

EBITDA: INTEREST 4.1 times

NET DEBT: EBITDA 5.1 times

LOAN: VALUE 63%

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Bank Facility and Covenants

Facility

• Additional borrowing under banking facility completed August 2013 with the 4 Banks from 2012

Refinancing

• Term loan/ revolving credit/ overdraft - £178.0m

• Expires January 2017

– All in debt service charge less than 4.5%

– 4 banks – RBS, Lloyds TSB, Santander Corporate Banking and AIB Group

• Independent freehold property valuation - £275.0m

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EQL Solutions

Business Overview

• Market leading provider of pre-employment training and work based learning (WBL)

• Revenue Sources and values 2013/14 – Skills Funding Agency (SFA) contracts

– Employer contracts with the SFA – Barclays, Phones 4 U and Weatherspoons

– Skills Development Scotland + Welsh Assembly

• Two major product streams with approximately 6,000 leavers – Pre-employment

– Apprenticeships

• EQL act as managing partner for Barclays Bridges into Work Programme

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EQL Solutions (Extending the Support Pathway)

Total 5,955

Scotland 245

North East 169

Yorkshire 527

East Midlands 535

East 419

London 725

South East 647

Wales 179

West Midlands 682

South West 596

North West 1231

Number of Staff – 260 Value of contracts 2013/2014 - £10.7m

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EQL Solutions

Acquisition Rationale

1. Extending the Support Pathway

• Diverse but complementary service offering

2. Expand the Apprenticeship and Pre Employment platform - for our service users

3. Expand the EQL platform to the Healthcare Sector – for our staff

4. Secure contracts and profitable

• Low risk entry to a connected market

• Potential for significant growth through revenue investment

• EBITDA accretive

Addressing Market Perceptions

Market Perceptions Actions

• Fee Pressure - Positive net fee increase

• Refinance Risk - Completed August 2013

• Debt levels - Freehold property valuation £275m

• Constraints on Growth - Growth achieved in line with

consensus numbers

• Corporate Governance - Expansion of Board and new Care

Governance Committee

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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

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