Financial Results for the year ending 30 September 2019

December 2019

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▪ Farouq Sheikh Group Executive Chairman

▪ Gareth Dufton Interim Group Finance Director

▪ John Ivers Group Chief Operating Officer

Today’s presentation team

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▪ Overview

▪ Financial review

▪ Operational review

▪ Outlook

Agenda

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▪ CareTech offers access to a c£15bn p.a. UK social care sector with high growth segment and favourable demographics with increased outsourcing of care

▪ CareTech is a profitable, cash generative and asset backed business with visibility of revenue and an attractive yield

Growth▪ Revenue CAGR 21% since IPO in 2005▪ UK market grown from c £2.2bn to

£15bn today since IPO▪ Significant organic and external

opportunities

Profitability▪ EBITDA CAGR of 25% since IPO▪ EBITDA margin of 18.6% with

potential to grow▪ EPS CAGR of 16%▪ Operating leverage through organic

expansion and occupancy

Stability▪ Good visibility on revenue streams▪ Highly cash generative▪ Asset backed - property portfolio

valued at £774m (Sep 2018)

Experience▪ 25 years of experience in a highly

regulated sector▪ Above average ratings and staff

retention▪ Successful care pathways create win-

win outcomes for all stakeholders

Unique access to the social care market

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Proven track record

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EBITDA CAGR 25% A

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EPS CAGR 16% A

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Revenue CAGR 21% A

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Highlights for the year 2019

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▪ Like-for-like underlying performance in theCareTech business has increased

▪ Improvement on CQC and Ofsted Quality Ratings

▪ Accelerated organic growth initiatives including property purchases and reconfigurations

▪ Strong occupancy levels have been maintained throughout the year

▪ Staff retention initiatives have proven successful with retention rates ahead of sector average

▪ Exciting initiatives and partnerships launched by the

CareTech Charitable Foundation

▪ Transformational year following the acquisition of Cambian

▪ Unconditional regulatory clearance from Competition and Markets Authority in Feb 2019

▪ Extended care pathway and broader geographical and acuity service offering

▪ Quality ratings increased to 80% (good/outstanding)

▪ Delivered against what we set out in our Cambian acquisition plans:▪ £3m of synergies at PBT delivered, actions

taken to deliver £5m for FY20▪ Margin improvement to 13.4% pre-

synergies, 14.8% post synergies (pre-acquisition 10.9%)

CareTechCambian

Financial Results for the year ended 30 September 2019

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Gareth Dufton, Interim Group Finance Director

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▪ Revenue increased to £395.0m▪ CareTech like-for-like £196.5m (2018: £185.7m)

▪ Underlying EBITDA increased to £73.5m▪ CareTech like-for-like £44.3m (2018: £43.9m)

▪ Underlying EPS increased by 7.2% to 37.6p

▪ Strong operating cash conversion c.90%

▪ Integration plan for the combined business is well underway with synergies delivered of over £3m of PBT in line with acquisition plan

▪ Net debt of £291.1m (3.9x Net debt/ EBITDA). Medium term target under 3.0x

▪ Bank facilities in place until 2022/2023 including an undrawn £25m revolving credit facility

▪ Final dividend increased by 6% to 7.95p

Financial Highlights

for the year ended 30 September 2019

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Financial Highlights

Group CareTech Cambian

Revenue £395.0m £196.5m £198.5m

Underlying EBITDA £73.5m £44.3m £29.3m

EBITDA margin 18.6% 22.5% 14.8%

EBITDA margin (pre-synergies) 13.4%

Operating cash conversion 90%* 101% 100%

Property valuation £774m £424m £350m

* reflecting that Cambian was acquired mid-October

Cambian results for post acquisition period from 19 October 2018

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Operating Segments

Year ended 30 September 2019

2019 2019 2018 2018

Revenue EBITDA Margin Revenue EBITDA Margin

£m £m £m £m

Adults Services

CareTech 123.6 32.7 26.5% 118.8 31.9 26.9%

Cambian - - - -

123.6 32.7 118.8 31.9

Children's Services

CareTech 64.9 18.2 28.1% 58.7 17.0 29.0%

Cambian 165.7 37.5 22.6% - -

230.6 55.7 58.7 17.0

Foster Care

CareTech 8.0 1.5 18.8% 8.2 1.9 23.0%

Cambian 32.8 6.0 18.5% - -

40.8 7.5 8.2 1.9

Corporate Overheads (22.4) - (6.9)

Total 395.0 73.5 18.6% 185.7 43.9 23.6%

Non underlying items

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Financials

30-Sep 30-Sep2019 2018£000 £000

Acquisition expenses 10,331 4,525

Integration and restructuring costs 5,597 2,863Profit arising from the ground rent transaction (4,565) -Charitable donations 736 380Termination of onerous leases 1,092 377Amortisation of intangible assets 10,188 7,428Impairment of goodwill - 2,000Non underlying items 23,379 17,573Fair value movements relating to derivative financial instruments 1,487 (787)Charges relating to derivative financial instruments 217 513IAS 17 lease imputed interest 345 223Finance fees extinguished 397 -Included in finance expenses 2,446 (51)Tax effect:Current tax (1,090) (1,004)Deferred tax (4,119) (621)Included in taxation (5,209) (1,625)Total non underlying items 20,616 15,897

Cambian integration update

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▪ Margin improvement plan being delivered

▪ improvement to 13.4% (pre synergies) from 10.9% (June 2018)

▪ Delivered £3m of pre-tax profit synergies for the year

▪ On track and already taken action to deliver pre-tax profit synergies of £5m for FY2020

▪ Initiatives that have been implemented include:

▪ CEO, CFO, COO and all non-executive board members have left the group

▪ Streamline of senior management team

▪ Exercised break clause on lease of Cambian head office and all employees relocated to CareTechHQ

▪ IT costs have been streamlined and a new IT strategy put in place

▪ A number of non-staff synergy savings such as Procurement and Estates have been made

▪ Cambian now on CareTech’s accounting platform

Cash flow and balance sheet KPI’s

as at 30 September 2019

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Cash Flow Balance Sheet and KPI’s

£m £mEBITDA 73.5 Property Valuation September 2018 774.1Movement in working capital* (7.2) Tangible fixed assets - net book value 609.7Capital expenditure (31.5) Net debt (291.1)Acquisition of Cambian (net of cash acquired) (160.3) Net assets 335.4Proceeds from ground rent transaction 31.8 Cash & undrawn facilities 54.2Non underlying and acquisition costs (20.3) Operating cash conversion 101%Tax, interest and HP (19.2) Free cash flow 30.4Dividends (10.8)Movement in net debt (144.0) CovenantsOpening net debt (147.0) EBITDA: Interest 6.5:1Closing net debt (291.1) Net debt: EBITDA 3.9:1

Loan: Value 42%

*excludes the pre-acquisition period

IFRS16 - Leases

▪ To be adopted for FY 30 September 2020

▪ Adopting “modified retrospective” transitional approach

▪ Mainly property leases affected. Short term leases (<12 months) and low value (c£4k) excluded

▪ Estimated impact of the change of accounting standard is as follows:

▪ Right of use assets and corresponding lease liability £72m

▪ EBITDA +£8m

▪ Depreciation -6.3m

▪ Interest -2.3m

▪ PBT –0.6m

▪ EPS -0.5p

▪ IFRS 16 will not have any impact on the underlying commercial terms of each lease, and will not have any impact on the commercial performance of the Group, nor the cash flow generated in the year

▪ No impact on banking covenants

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Operational review

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John Ivers, Group Chief Operating Officer

CareTech is a reliable and trusted partner

▪ We create value for authorities in a range of care services, from residential care to supported living, therapy and education

▪ Person-centered planning, putting the service user first to deliver positive outcomes

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Overcoming Sector Challenges

Growing number of adults and children

with care need

Pressure on budgets, trend to outsourcing

Excellent track record, trusted provider,

reputation

Driving Outcomes and Results

Highest quality care, ability to provide

capacity

Positive outcomes for commissioners

Stakeholder satisfaction

Size and range allows for provision of person-centered planning

Proven track record, above-average ratings

Highly motivated employees

Innovative Care Pathways

Favourable Demographics and Growth in Outsourcing Continues in our Markets

Long established model of Social Care with independent sector prevalent and increasing

Key Drivers

Opportunity to improve outcomes of currentinterventions across Care Pathways

Increasing prevalence and determination of learning disabilities,mental health and special education needs

Children andYoung People

£3.7bn(1) £1.

UK Social Care Market Size

£12.6bn(1)

<5%

33%

<8%

60%

<3%

75%

£3.7bn(1) £1.6bn(1) £9.5bn(1)

Enlarged CareTechGroup Addressable Market Share

Independent sector Penetration

AdultsFostering

Social Care Sector in UK

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Local authorities are our primary clients

▪ 250 local councils responsible for adult care and childrens’ services

▪ Budgets are separated and dedicated

▪ CareTech best in class in response to commissioner needs

All Political Parties Manifestos additional fundingfor Social Care is helpful.

Demand IncreasingIncreasing numbers of Looked After Children and Adults

Social Care critical to NHS systemFocus on early intervention and preventing bed blocking NHS. Community based service approach.

Fragmented sector with room for consolidation

Note: (1) Laing and Buisson

Capacity 1,933 1,178 1,968

Sites245 residential sites

47 educational facilities11 locations 208 sites

Regulator Ratings

93% good/outstanding CareTech80% Cambian 100% good rated with Ofsted 95% good/outstanding CQC rated

Foster Care Adult ServicesChildren’s Services

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Areas of specialism

▪ Learning disability

▪ Mental Health Issues

▪ Autism Spectrum Conditions

▪ Complex social, emotional and

behavioural difficulties

▪ Young people in crisis

▪ Education and Therapeutic support

▪ Therapeutic Foster Placements

for 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

▪ Multi Diagnosis

▪ Brain Injury Rehabilitation

Proximity to decision makers through local brands

CareTech Group today

Operational alignment and progress

▪ Aligned CareTech and Cambian Operational teams

▪ Local focus on service delivery with retained brands

▪ Shared best practice approach

▪ Sustained progress on key metrics

▪ People, Quality and Occupancy across enlarged Group

▪ Embedded operational monitoring and performance review process

▪ Business review/Devolved Budget/Approvals Process/KPI Reporting

▪ Integrated shared services

▪ Finance/Back Office/Support Services

▪ Estates Management

▪ Operational Quality Monitoring

▪ Joint collaboration across Care Pathways

▪ Repositioning of CAMHs Service and Specialist School

▪ Extension of service offering and shared referrals

▪ 3 Adult Placement transitions from Cambian Services

▪ Business development and referrals opportunities across Group

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Growing our Business across the enlarged

CareTech Group

CapacityOccupancyPeople Quality

Growing Core Services

Reconfiguration

High Occupancy Levels

87% blended/92% mature CareTech

73% blended/74% mature Cambian

Our People

Annualised Staff retention

77% CareTech71% Cambian

166 staff SAYE scheme, >600 option plan

804 Apprenticeship

High Quality Performance

Good/Outstanding Ratings

95% Adults93% CareTech

Children’s80% Cambian

KPIs for improved financial performanceFocus on initiatives to improve all four key elements

Additional Opportunities

▪ Bolt-ons

▪ Extended Care Pathways

▪ International opportunities

▪ Harnessing Technology

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Our people

CareTech relies on skilled staff to deliver best-in-class care. Staff retention is a priority

▪ c.10,000 staff

▪ Annualised retention rate at 74% (77% for CareTech employees and 71% for Cambian employees) vs industry average of 70%

▪ Fees and uplifts align to staff increases

▪ Approved Share Option Plan: Options have been granted to c.600 employees covering Home and Service Managers

▪ Internal and External Awards – CareTech National Awards, LaingBuisson, Great British Care Awards, Health Investor Awards

▪ No major adverse impact expected from Brexit

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Children’s Services Recent Projects

South Parade - located in WarringtonWas opened as a Solo Home in October 2019.

Mill House - located in EssexOpened in September 2019.

Culcheth House - Opened January 20195 bedded home. Located near Warrington.

Walnut Tree School - located in Bedfordshire. The school was reconfigured and opened in February 2019. This serves the Cambian homes in the surrounding area.

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Adult Services Recent Projects

Victoria Lodge is a six-bed community based acquired brain injury residentialservice (including 1 flat) in Bognor Regis for adults. Opened on 19 March 2019

Uplands completed £1m refurbishment of Uplands Hospital, Farnham, resulting inrepositioning 24 operational beds through a recovery model (care pathway) forthose with Mental Health conditions across 3 specialist units. Opened on 26 March2019

Brisbane Road is located in Ilford, Essex. Following on the success in 2015 ofcreating 5 one bedroom self contained flats. The redevelopment opened in May2019 has provided two more self-contained one bedroom flats

The Opportunity and Outlook

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Farouq Sheikh, Group Executive Chairman

▪ Exceptionally busy and successful year

▪ The acquisition of Cambian represents a transformational change to the business

extending our care pathways and geographical offering

▪ All KPIs set out in the acquisition plan have been delivered:

▪ Improved Ofsted quality ratings to 80%

▪ Integration on track

▪ £3m PBT synergies delivered

▪ 13.4% margins pre synergies (10.9% pre-acquisition)

▪ Against this backdrop, like-for-like underlying performance in the CareTech business

has continued to grow and perform well

▪ CareTech is a profitable, cash generative and asset backed business with an

attractive yield

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Summary

Summary

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The CareTech Value Creation Opportunity

▪ Regulatory burden increasing▪ Shortage of specialist beds▪ Consolidation in the sector

▪ Improved staff retention & quality ratings will lead to increased occupancy levels

▪ £6m synergies by FY2021

▪ Use to assist with care provision (Tele care)▪ Validating & tracking outcomes using technology▪ Diagnostic tools▪ Monitoring and support

▪ Scale benefit, services and coverage extended▪ Market share 6%+ ▪ International opportunity

Market trends

Cambian integration

Technology

Enlarged Group

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Q&A

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