The UK’s largest provider of social care and education services for adults and children, Caretech (CTH:AIM) delivered better than expected revenue and profits for the full year ended 30 September, lifting the shares 3.2% to 398.5p.
Following the Cambian acquisition last year, which doubled the size of the business, the focus has been on integrating operations and delivering the targeted synergies, so management has to be applauded for achieving their objectives, seemingly without any hiccups.
Revenue was up 113% to £395m with the Caretech business seeing like-for-like growth of 6% to £195.6m, while Cambian’s revenues were £198.5m.
Earnings before interest, tax, depreciation and amortisation (EBITDA) rose 67.4% to £73.5m for the group. One of the objectives post acquisition was to improve Cambian’s margins and some progress has been made with EBITDA margins hitting 13.4% from 10.9%. The medium-term goal is 16%.
SYNERGIES ON TARGET
Caretech has delivered the targeted £3m of synergies and is now shooting for an additional £5m for next year. These savings have been achieved by removing senior levels of Cambian’s management with the chief executive, finance chief and head or operations all leaving the group as well removing back-office duplication.
At the same time as delivering on financial objectives, it is also pleasing that Caretech has improved its social care scores with an Ofsted rating of 80% as well as a higher Care Quality Commission (CQC) rating of 95%, way above the market average of 84% demonstrating a strong culture of quality care.
The dividend is being hiked 6% which brings the full-year pay-out to 11.7p, up 6.4% providing a 2.9% yield. The business is set to extract further efficiencies from Cambian and is actively looking to make bolt-on acquisitions as it continues to consolidate a fragmented market.
Net debt was reported at £291.1m, just under four times EBITDA, and is expected to drop back to below three times in the medium term as profits grow. The debt is backed by a property portfolio of £774m, representing 42% loan to value.
