CareTech performing in line with forecasts

Specialist social care and education services provider CareTech Holdings was performing in line with expectations in the year so far, shareholders were told on Tuesday.

The AIM-traded firm said it had delivered on all of its key work streams, as investors gathered for the annual general meeting in Potters Bar.

“[This] has been achieved against the backdrop of the Cambian acquisition, the subsequent CMA review and the sad passing of our finance director, Michael Hill,” chairman Farouq Sheikh said.

“Following the completion of the Cambian acquisition in October 2018, the CMA placed an interim hold separate order over the combined business.

“Following its phase one review, we were delighted to have received unconditional clearance in mid-February.”

Sheikh said CareTech’s integration plan was now firmly underway, and it had welcomed all of the Cambian employees, service users and stakeholders to the CareTech family.

CareTech had set out its plans to improve the performance of the core Cambian business and deliver synergies for the enlarged group, with the firm apparently remaining on track to deliver those.

“Cambian shares our commitment in delivering the highest standards of care,” Sheikh said.

“Our strategy of working with care commissioners to deliver innovative services mean that we continue to be well positioned within our industry.

“We benefit from favourable demographics underpinned by the growth in outsourcing to the private sector and from the increasingly stringent regulatory environment, which is driving consolidation in a fragmented market.”

The company’s “pioneering” care pathways - which Sheikh added now included Cambian's specialist children's education and therapeutic fostering services - its record of delivering successful outcomes for service users, and its robust balance sheet put the group in “a strong position” to continue growing market share, the board believed.

CareTech completed its second ground rent transaction with Alpha Capital in January, which raised £32.6m in cash on “attractive terms”, further strengthening the firm’s balance sheet and providing capital for investment.

“In that announcement, we highlighted that the enlarged group's property portfolio was valued at £774m on 19 September 2018 and that our loan to value is expected to be approximately 40% whilst the pro-forma net debt to EBITDA of the enlarged group is expected to be under 4.0x.”

Sheikh said that following on from the announcements at year-end, CareTech had continued to improve its quality ratings while delivering a range of organic initiatives and increasing the number of staff who had progressed through training programmes.

“As is usual at this time of year, we have begun annual fee discussions with local authorities. Initial feedback is commensurate with our expectation of an increase in fees compared with last year.

“We believe that the national living wage has a positive impact, not only on the pay of our valued colleagues but in our discussions with local authorities, who also recognise how front line staff are an integral part of quality care delivery.

“During the year ahead, CareTech will continue to integrate Cambian and finesse its care pathway model, provide high quality care for children and adults and deliver value for money for care commissioners.”

Sheikh said the company's commitment to that strategy gave the directors confidence in the months ahead, and beyond.