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CareTech shares lifted as full year profits and dividend jump over 10%

The AIM 100 social care services provider reported an underlying pre-tax profit of £32.9mln, up 11.9% on the year before, while revenues also increased by 11.9% to £185.7mln

Child playing
Recent acquisition Cambian currently operates 222 residential facilities, specialist schools and fostering offices

Shares in CareTech Holdings PLC (LON:CTH) were lifted in early trading Thursday after the firm’s full-year profits and its final dividend jumped over 10%.

The AIM 100 social care services provider reported an underlying pre-tax profit of £32.9mln, up 11.9% on the year before, while revenues also increased by 11.9% to £185.7mln.

READ: CareTech looking forward to sweating Cambian's "sub-optimised assets"

The group’s overall capacity had also risen to 2,622 from 2,534 last year, while cash inflows had increased to £30.9mln from £22.1mln and net debt fell slightly to £147mln from £147.1mln.

As a result of the improved performance, CareTech said it has raised its final dividend to 7.5p per share from 6.6p, taking the full year dividend to 11p from 9.9pm last year.

In its outlook, the group said it had “major investment plans” for 2019 and beyond, adding that it would also be integrating children’s services group Cambian in the new year after acquiring the company post-period end.

Farouq Sheikh, executive chairman of CareTech, said: "On joining AIM, the Group had a capacity of 435 places, an underlying EBITDA of £2.4mln with an underlying diluted EPS of 4.1p. Today our capacity has increased over six-fold to 2,622, our underlying EBITDA has grown significantly to £43.9mln today whilst underlying diluted EPS is 35.06p per share. Underlying EBITDA and diluted EPS have grown by an impressive compound annual growth rate of 26% and 20% respectively since IPO”.

In a note to clients, analysts at City broker Liberum reiterated their ‘Buy’ rating and 525p price target on the stock, saying the group’s second-half revenues of £98mln had come in ahead of their forecasts and management had provided “a positive outlook” by reiterating a target of delivering double-digit EPS growth.

“For the highest quality operator in a growth sector and the potential to grow EPS by 60% by 2022, we think 8x Sept 2020 EV/EBITDA is too cheap” they added.

Shares were up 3.1% at 365p, a 44% discount to Liberum’s target.

Quick facts: CareTech Holdings

Price: 458 GBX

AIM:CTH
Market: AIM
Market Cap: £518.34 m
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