CARETECH HOLDINGS PLC 
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For immediate release | 28 August 2013 |
CareTech Holdings PLC
("CareTech" or "the Group")
Acquisition of Freehold Properties
CareTech Holdings PLC (AIM: CTH), a leading UK provider of specialist social care services, is pleased to announce the purchase of the freeholds of two property portfolios, comprising in total 29 properties, for an aggregate consideration of £38m including costs. These properties are currently occupied leasehold by the Group.
The Board responded swiftly to the opportunity to acquire these key property assets at what it considers to be a compelling valuation. It is expected that the transaction will be immediately earnings enhancing and will save the Group substantial cost in rental charges over the lifetime of the historic leases.
The rent saving in 2014 will be up to £4.4m, compared with interest payments associated with the acquisition of the properties of £1.6m. The rent saving is expected to increase in future years as the previous rental terms were subject to increases based on inflation. The extent to which rent savings will be reflected in the Group's profitability is dependent on the extent of reconfiguration work that the Group elects to carry out at the properties. The reconfiguration of services is a central part of the Board's strategy in enhancing average fee rates and in maintaining the Group's reputation as a provider of highest quality of care and this acquisition provides an opportunity which was not available as leaseholders.
Twenty-eight of the freehold assets are being acquired from The Quercus Healthcare Property Partnership for a cash consideration of £29.5m. In addition, Roborough House in Plymouth is being acquired from Roborough Properties for a total consideration of £6.5m, to be satisfied with £5m in cash and by the issue of 794,335 new ordinary shares of 0.5p each ("Ordinary Shares") in CareTech. The price of the shares issued is based on the average mid-market quotation during the five trading days prior to this announcement, equivalent to 184p per share.
Application has been made for 794,335 new Ordinary Shares to be admitted to trading on the AIM market of the London Stock Exchange ("Admission") and Admission is expected to occur at 8.00 a.m. on 2 September 2013.
The cash consideration for the acquisition of the freeholds has been provided by existing and new debt facilities provided by the Group's syndicate of four lenders: Royal Bank of Scotland, Lloyds TSB, Allied Irish and Santander. The new banking facilities have been provided on the same competitive terms as the £149.4m banking facility announced on 17 June 2012, with debt service cost after hedging at less than 4.5%.
The Board believes the willingness of the syndicate to provide the additional debt further underlines the Group's strong asset backing and attractiveness to lenders. The net debt position of the Company following this transaction will be approximately £169m. The Board is entirely comfortable with the revised level of net debt and anticipates that the cash generative nature of the transaction will enhance all debt service metrics and assist the Group to repay debt going forwards.
Farouq Sheikh, CareTech's Executive Chairman, said:
"The opportunity to acquire these 29 properties at this price is compelling. The immediate benefit to the Group of replacing a rent cost of £4.4m per annum with interest costs of £1.6m will be immediately earnings enhancing. Furthermore, we now have much greater flexibility to reconfigure and upgrade the properties in line with our strategy for enhancing fee rates whilst offering the highest quality of care."
For further information, please contact:
CareTech Holdings PLC Farouq Sheikh, Executive Chairman Michael Hill, Group Finance Director | 01707 601800 |
Buchanan Mark Court Fiona Henson Sophie Cowles | 0207 466 5000 |
Panmure Gordon (NOMAD) Fred Walsh Charles Leigh-Pemberton Grishma Patel | 020 7886 2500 |
WH Ireland Adrian Hadden James Bavister | 020 7220 1666 |
This information is provided by RNS
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