CareTech Holdings PLC (AIM: CTH), a pioneering provider of specialist social care and education services to adults and children in the UK, today announces a pre-close trading update for the half-year ended 31 March 2021. The Group will report its unaudited half-year results on Thursday 17 June 2021.
Group performance for H1 in-line with market expectations
Continued resilience against impact of COVID-19 pandemic
Net debt reduced to £263.1m (£268.9m at 30 September 2020) and leverage reduced to below medium term target of 3.0x EBITDA
Launch of the 100 Voices initiative to enable Smartbox technology to reach adults and children in CareTech services
Portfolio of highly specialised facilities for the treatment and care of adults with complex learning disabilities, autism and mental health diagnoses, comprising 142 beds, successfully transferred from the Huntercombe Group
13 new Children's Services developments opened with an active pipeline for H2 2021
Final dividend of 8.75p per share reconfirmed and to be paid to shareholders on 5 May 2021
Farouq Sheikh, Executive Chairman of CareTech, commented:
"I am delighted with the performance of the Group over the first half of the financial year. Operationally the business continues to demonstrate considerable resilience in this challenging environment and I am pleased to report that our trading performance for the period is in-line with market expectations with stronger performance for the Group when compared with the same period last year.
"I am excited we have launched our innovative 100 Voices programme, which allows Smartbox technology to reach adults and children within the Group. Not only has this allowed contact with loved ones during the pandemic but reaffirmed our belief that digital adoption can be central to allowing individuals with complex needs to live more independently.
"During the first half, we have completed a number of development opportunities within our portfolio and continue to see a strong pipeline for the remainder of the year across the Group. We have successfully transitioned seven higher acuity adults specialist services from the Huntercombe Group and have already taken steps to improve performance.
"I remain sincerely appreciative to our staff during this period. Their efforts, determination and support for others has continued to be truly extraordinary."
Trading and operational performance
The overall performance of the Group was in line with market expectations, with stronger revenues and increased EBITDA for the Group when compared to the same period last year.
All of the Group's operations have remained open during the first half of the year with a focus on obtaining COVID-19 vaccinations for staff and service users. A taskforce has been set up to support and co-ordinate CareTech's group-wide vaccination programme. As at 31 March 2021, over 6,500 staff members and 1,800 service users had received the first dose of the vaccination.
Following the acquisition of a majority holding in Smartbox in October 2020 and the Group's ambitions to build out its digital healthcare capabilities, CareTech will be including a new Digital Technology segment in the divisional reporting within the interim results. Smartbox has successfully transitioned into the CareTech Group, with the launch of a new 100 Voices initiative to ensure that Smartbox technology reaches adults and children in CareTech care homes, specialist schools and complex needs services. The initiative will provide individuals with a voice and in turn allow them to live a more independent life.
As at 31 March 2021, unaudited net debt was £263.1m compared with £268.9m at 30 September 2020 with net debt/unaudited adjusted EBITDA falling to 2.8x. Strong operating cash flow has been deployed to open 13 new developments, to acquire and integrate Smartbox and transition adult specialist service sites transferred from the Huntercombe Group in November 2020. The Group's capital allocation policy remains to deploy free cash flow to organically invest in the business, add developments to the portfolio, assess bolt-on acquisition opportunities and continue a progressive dividend policy.
The National Living Wage increased from 1 April 2021 to £8.91. From 1 June 2021, the Group is increasing the minimum national hourly rate to £9.00 to recognise CareTech's front line staff who have been key to supporting service users during the pandemic. The Group expects fee increases to cover the majority of additional operational costs including increases to front line staff pay. CareTech noted the Supreme Court's judgement regarding sleep-ins and the Group's significant provision of c.£12m will be released and reflected in the H1 results.
Capacity and occupancy
The Group's net capacity as at 31 March 2021 was 5,135 places (September 2020: 4,984 places). Adult's Services increased to 2,140 (September 2020: 1,997), the increase mainly attributable to the addition of 142 beds from seven services that were previously operated by The Huntercombe Group, offering highly specialised facilities for the treatment of complex learning disabilities, autism and mental health. Children's Services increased to 1,981 (September 2020: 1,959) with the addition of 13 new developments opening in the period offset by four closures. Fostering decreased to 1,014 (September 2020: 1,028) largely due to blocked beds as a result of COVID-19 restrictions.
At 31 March 2021, occupancy levels in the mature estate remained at 83% (September 2020: 83%) with blended occupancy increasing to 81% (September 2020: 80%).
CQC quality ratings and staff retention
Throughout the COVID-19 pandemic, both CQC and OFSTED have suspended all routine inspections. CQC have undertaken a limited number of rated inspections during the period and overall the Group has been found to have continued to deliver high quality care in extremely challenging circumstances. The Group has also performed well in the CQC infection control inspection programme with a high number of our services achieving 'assured' from the regulator. Across the Group, CQC quality ratings at 31 March 2021 remained ahead of sector comparators at 88% Good or Outstanding (September 2020: 91%), the change being attributable to a limited number of services moving from Good to Requires Improvement. These sites have a comprehensive improvement plan in place and the Group is confident these will be upgraded as the regulator returns to a more usual and regular pattern of inspections. OFSTED ratings have remained at the high levels of 82% Good or Outstanding across the Group.
Staff retention increased to 76% compared to 75% in the previous period. Throughout the pandemic we have partnered with many displaced sectors such as retail, corporate hospitality and leisure, which has allowed the Group to offer opportunities to both experienced candidates as well as those looking for their first role in social care. Successful applicants are supported through our comprehensive induction programme, which historically has resulted in good rates of long-term retention compared to the sector as a whole.
The Group reconfirms its final dividend of 8.75p per Ordinary Share which was approved by Shareholders at the Group's AGM on 9 March 2021 and will be paid on 5 May 2021 to shareholders who were on the share register at the close of business on 4 March 2021.