Reconfigurations and acquisitions boost CareTech at year-end

Specialist social care services provider CareTech Holdings confirmed that trading for the year to 30 September was in line with market expectations in a trading update on Thursday.

The AIM-traded company said its care pathways continued to be a “key foundation” for delivering positive outcomes for its service users, and in total it added 248 beds in the year.

During the year, a total of 161 beds in reconfigured and new services had been brought into service, with those beds having a higher contribution than the beds pre-configuration as part of an ongoing strategy to enhance fees and margins.

Approximately a third of the additional beds were a result of the group's acquisition of Selborne Care in June, which has an adult residential capacity of 57 beds and provides adult supported living services to 30 service users.

Selborne Care performed in line with expectations, CareTech’s board confirmed.

The group's net capacity at year-end was 2,534 places, a net increase in capacity of 215 places.

A net 33 places were removed for reconfiguration.

Those included 36 places in services that had been withdrawn for reconfiguration into new care models, and three places added in supported living.

Occupancy levels in the mature estate remained “strong” at 93%, in line with the prior year, and the blended occupancy remained around 86%.

Annual fee rate negotiations with local authorities again led to a positive outcome, CareTech’s board claimed, adding that the key to improving fee rates remained its work on reconfiguring services that it owns, and repositioning them for the needs of more complex service users in line with commissioner demand.

“In April 2017 the National Living Wage was set at £7.50 an hour for all staff aged 25 and over,” the board noted in its statement, adding that the “new benchmark is welcome as we expect it will improve staff recruitment and retention.”

CareTech said the change to the National Minimum Wage, for those aged under 25, affected only a minority of its staff.

“We are recovering the increase in cost from the appropriate local authorities and these negotiations are almost satisfactorily complete.”

The company also undertook a second sharesave scheme for staff during the year, whereby on 13 October it granted options in aggregate over 254,681 ordinary shares.

“As part of our ongoing commitment to excellence in care, the management team has been further strengthened in the year and we will continue to bring senior executives into the business to drive growth and quality,” the board added.

Acquisitions undertaken in recent years had performed ahead of expectations, CareTech claimed, in part as a result of being within the wider group.

As a result of good initial returns, the board planned to further invest in some of those businesses.

During the year, the group also purchased a number of properties for refurbishment into new services.

It said there was a “particular focus” on property acquisitions and refurbishments in the year with work in progress on a number of projects that will open during 2017 and 2018.

“The CareTech Charitable Foundation was created during the year,” the board also noted, adding that its objectives were “to promote the education of people with special needs and those at a disadvantage and to provide relief to those with physical and mental illness by the provision of counselling and support.”

CareTech said the focus of the foundation would be both on projects and people in the UK and throughout the world.

Looking at the books, net debt reduced to £147.2m at period end from £156.9m a year earlier, with the proceeds from the placement of 11 million new shares in March which raised £37m of net proceeds being partly spent on the acquisition of Selborne Care in June.

The group said it continued to work on “a number” of other acquisition opportunities, and had a “strong pipeline” of projects and transactions in progress.

CareTech said it will announce its preliminary results in early December.

“I am very pleased to report another successful year of trading at CareTech,” said executive chairman Farouq Sheikh.

“During the year we continued to deliver our organic and acquisitive growth strategies and also launched some important initiatives including the CareTech Charitable Foundation and the second employee sharesave scheme.

“We enter the current financial year with strong underlying cash flow, solid organic growth and a sizeable pipeline of opportunities, which together give us confidence in continuing to deliver our exciting growth strategy.”