CareTech Holdings plc : Preliminary Results

For Immediate Release

8 December 2011

CareTech Holdings PLC

("CareTech" or "the Group" or "the Company")

Unaudited Preliminary Results for the year ended 30 September 2011

CareTech Holdings PLC (AIM: CTH), a leading UK provider of specialist social care services, is pleased to announce its unaudited preliminary results for the year ended 30 September 2011.

Highlights

·	Revenue increased by 22% to £109.2m (2010: £89.7m)
·	Underlying EBITDA(i)increased 4% to £23.2m (2010: £22.4m)
·	Underlying Profit before tax(ii) has decreased by 3% to £15.9m (2010: £16.4m)
·	Profit before tax decreased by 2% to £7.4m (2010: £7.6m)
·	Underlying diluted earnings per share(ii)decreased by 8% to 25.35p (2010: 27.59p)
·	Diluted earnings per share decreased by 14% to 11.71p (2010: £13.55p)
·	Strong cash inflows from operating activities increased by 12% to £22.2m (2010: £19.8m) with net debt of £127.3m (2010: £113.2m)
·	Overall capacity increased by 247 to 2,056
·	Recent acquisitions have been successfully integrated and the divisional structure is now in place
·

(i)    Underlying EBITDA is operating profit stated before depreciation, share-based payments charge and non-underlying items.

(ii)    Underlying profit before tax and diluted earnings per share are stated before amortisation of intangible assets and non-underlying items.

(iii)   Non underlying items comprise: amortisation of intangibles, acquisition expenses, bargain purchase credits, fair value adjustments on prior year acquisitions, gains or losses on disposal of plant and equipment, changes in value and additional finance payments in respect of derivative financial instruments, post acquisition integration and reorganisation costs, minimum future lease uplifts and provision for onerous leases. 

Commenting on the results, Farouq Sheikh, Executive Chairman said:

"The 2011 results demonstrate our ability to deliver a strong foundation in all four of our operating divisions, against very consistent strategic objectives.  Our extended care pathway range of services, young services users, high-quality care provision and available capital for growth provided the Group with a strong platform to continue our successful trajectory. 

With a carefully developed pipeline of organic initiatives complemented by a small number of bolt on acquisitions, we are in a favourable competitive position to support local authorities and service users with an effective and growing range of services.  I look forward with confidence to further progress in 2012."

For further information please contact

CareTech Holdings PLC	01707 601 800
Farouq Sheikh, Executive Chairman
Michael Hill, Finance Director
Brewin Dolphin Investment Banking	0845 213 4730
Matt Davis
Sean Wyndham-Quin
Buchanan Communications	0207 466 5000
Diane Stewart
Tim Anderson
Carrie Clement

Chairman's Statement

2011 has been another important year in the development of CareTech.  I am pleased to report another sound set of results for the CareTech Group.  This achievement is even more significant when one considers the prevailing economic backdrop.  The past year has been challenging but has created opportunities for the Group, many of which have been stimulated by a complex economic and social care environment.

Key achievements in 2011 include implementation of a divisional structure, successful acquisitive and organic growth initiatives and the investment in and refocusing of resources.  Together these create even stronger value to shareholders in the new economic environment.

Announced separately today and below, the board has been conducting a strategic review of the most appropriate way to deliver value to shareholders.  This review has led to the refinement of our business model, focusing on organic growth through the reinvestment of operating cash flows. 

Results

Revenue of £109.2m (2010: £89.7m) for the year to 30 September 2011 represented growth of 21.7% and generated underlying EBITDA growth of 3.6% to £23.2m (2010: £22.4m).

There is a 3.6% growth in underlying Operating Profit to £20.4m (2010: £19.7m). Increasing financial expenses due to the net debt rising from £113.2m to £127.3m results in underlying profit before tax of £15.9m (2010: £16.4m).

Underlying Diluted earnings per share are 25.35p (2010: 27.59p) which arises due to weighted number of shares rising by 3.3 % when underlying profit after tax has come down by 4.5% to £12.6m (2010: £13.2m).  The effective tax rate has risen from 19.0% to 20.6% which has increased the tax charge by £0.2m to £3.3m, when underlying profit before tax had itself come down by £0.5m to £15.9m.

Cash inflows from operating activities before tax of £22.2m (2010: £19.8m) were 12% higher than last year which further demonstrates the quality of the Group's income stream.  Net debt at 30 September 2011 of £127.3m (2010: £113.2m) includes consideration for acquisitions announced during the second half of the year and further investment in the organic development of the Group.

Dividend

The Board has proposed a final dividend of 4.00p (2010: 3.66p) per share bringing the total dividend for the year to 6.00p (2010: 5.50p), being growth of 9%.  The final dividend will be paid, subject to shareholder approval, on 17th February 2012 to shareholders on the register of members on 20th January 2012.

Our policy had been to increase the total dividend per year broadly in line with the movement in underlying diluted earnings per share but the Board has taken the view that this policy should be reconsidered for 2011.  The final dividend will therefore increase to 4.00p per share demonstrating a confident view of the company's fundamental strength.

Strategic Review

CareTech announced on 8 July 2011 that it was commencing a strategic review to evaluate the most appropriate method of delivering value to shareholders.  This review included evaluation of a largely leverage funded offer from management for the Company.  Since this date the management team and their advisers have been successful in securing finance for an offer reflecting the attractiveness of the company to lenders.  However, the terms, particularly in respect of junior leverage are not sufficiently attractive to allow the management to put forward a proposal at a price which the board currently believes to be compelling for shareholders. 

This evaluation has been completed with little impact on the business, but it is now appropriate to draw it to a close.  As part of the strategic review the Board has refined its business model to focus on growth initiatives which can be achieved through the reinvestment of operating cash flows. Implementation of this strategy has required an investment in additional personnel, further development of the care pathway and focussing resources on opportunities.  With all of this the Board believes that CareTech is well equipped to deliver sustainable earnings growth without significant growth in net debt.

Strategy

Local Authority Social Service Departments are the principal sponsors of the people we support and our key partners with a shared commitment to high quality and best value. Public sector financial constraints have had a significant impact on Local Government finance although social care has to an extent been protected. Social care commissioners are increasingly looking at ways to manage the market more effectively and driving toward better value from provider organisations. This offers a good opportunity for flexible providers who can respond positively to the challenges faced by commissioners.

But financial constraint is not the only issue facing commissioners. A much more important, almost revolutionary, shift in social care moves control toward service users and drives fundamental change in the way services are delivered. I am confident that CareTech remains ahead of the change process and this has contributed to our success in the past year.

Commissioners and users share our passion for safe and effective service delivery. In line with our approach to continuous improvement the executive team recently carried out a high level review of our services and standards of care, cross referencing them and testing them against CQC reports. We are constantly alert to risk and will continue to manage our care provision with considerable diligence.  Our approach has always been to "build in" quality but we also check and review the standards of delivery on a regular basis.

Last year we flagged our drive to develop services for children and people with mental health issues. The demand for this change has been exciting and we have made significant developments in fostering and specialist residential care for children. Key to our pace of change has been the creation of specialist divisions led by industry specialists and supported by a strong corporate team.

Our people

Due to further expansion of the Group during the year and its positioning for further growth, we are delighted to welcome a number of new management and professional colleagues.  I would like to thank all of our employees for their commitment, dedication and hard work in delivering outstanding services every day and their overall contribution to Group performance during the year.

Outlook and prospects

The 2011 results demonstrate our ability to deliver a strong foundation in all four of our operating divisions, against very consistent strategic objectives.  Our extended care pathway range of services, young services users, high-quality care provision and available capital for growth provided the Group with a strong platform to continue our successful trajectory. 

With a carefully developed pipeline of organic initiatives complemented by a small number of bolt on acquisitions, we are in a favourable competitive position to support local authorities and service users with an effective and growing range of services.  I look forward with confidence to further progress in 2012.

Farouq Sheikh

Chairman

8 December 2011

Chief Executive's Statement & Operating Review

A strong foundation for growth

Continued development during the year results in a comprehensive range of services which are delivered from an efficient and effective cost base.  This places us in a favourable position across the market.  Crucially, our commitment to quality control and regulatory compliance offers assurance that users of our services are safe and well supported on their own pathway to success in life.

Overview of progress

During the year to 30 September 2011 we have continued to deliver growth, both organically and by acquisition, and have developed an operational platform which will deliver our strategy.

Capacity during the year increased by 247 so that we are able to support up to 2,056 vulnerable Children and Adults.  Capacity has grown by 14%.  Occupancy levels in the mature state have been maintained at 92% and 87% including facilities being developed.

Organic initiatives, including small bolt-on acquisitions (net of reconfigurations) contributed 82 places towards the Group's overall capacity increase during the financial year.  Supported living services continue to be developed across the Group in response to market demand.  We continue to invest in our portfolio of freehold properties including reconfiguration projects where the nature of service is modified in order to support the changing needs of services users and / or their respective placing commissioners.

During the second half of the 2011 financial year we announced the acquisition of TLC (Wales) Limited with the Interim report in June 2011 and the only bolt-on acquisition afterwards was Complete Care and Enablement Service Limited in July.

Our internal management structure has been further developed and strengthened.  The operational teams for the four divisions have been reinforced by experienced sector specialists joining the Group.  In addition, there has been further investment in our infrastructure including finance, human resources and quality.

Local Authorities demand high-quality services at competitive fee rates and we believe that the progress made by the Group during the year provides us with a range of specialist services which are delivered from an efficient cost base and place us in a favourable market position.

Strategic Acquisitions

For the first part of the year acquisitions were undertaken in line with our strategy of extending the care pathway range of services and expanding the geographical reach of the Group.  We have made three strategic  acquisitions during the year, the last of which was in July, and three organic bolt-ons.  The six acquisitions have a combined consideration of £12.6m including deferred and contingent consideration of £2.0m which together are expected to be accretive to earnings in the first full year of operation.  Some of the key attractions of each strategic acquisition is as follows:-

Care UK Foster Care Limited together with Foster Support Group Limited ("CareTech Foster Care") was established in 1989 as Foster Support Group and continued to grow its market share in Fostering from its base in Margate, Kent.  It was acquired by Care UK Limited who also opened an office in London so that the business could provide an outsourcing solution to local authorities across London, the South East and Midlands.  On acquisition 74 children, aged from birth to 18 years old, were cared for by CareTech Foster Care's foster carers for funding authorities located mainly in London, Kent and Shropshire.  These foster carers sit well alongside the foster carers that are with Outlook as for example both CareTech Foster Care and Outlook have children in placement from London Local Authorities, only the CareTech Foster Care carers reside within London whilst the Outlook carers reside in areas like Sussex, Kent and Essex.

Phoenix Therapy and Care Limited ("Phoenix") is a domiciliary care agency supporting people in their own homes who have acquired a brain or spinal cord injury.  It is based near Edinburgh.  On acquisition it had 14 service users.

Professional Integrated Care Services Limited together with TLC (Wales) Limited ("TLC") is a high quality specialist provider of fostering services with well established relationships with Local Authorities across Wales.  TLC is based in Crosshands near Llanelly and joined the group with 70 child placements.  Its specialisation is the care of children with disabilities and over the years TLC has built and trained a highly experienced group of carers who provide outstanding services.  The complex needs of the children include attention deficit disorder, autistic spectrum disorder and sensory impairments.

Care pathway range of services

The Group's focus remains as a provider of specialist social care.  This is underpinned by a well defined range of provision which meet all of the commissioners requirements.  These services are now extensive and focussed on providing quality care and positive outcomes for all of our service users within the personalisation agenda.

The range of services that are offered by the Group to meet market demand are described as a care pathway.  We have four care pathways and these are also our business segments for reporting purposes:

(1) Adult Learning Difficulties

This includes Adult residential care homes, independent supported living and community support services. 

Turnover for 2011 was £75.7m (2010 £72.2m) and EBITDA for 2011 was £18.0m (2010 £19.9m) with capacity closing at 1,413 (2010: 1,352).

The principal reasons for the fall in EBITDA of £1.9m was fee pressure from Local Authorities and reconfiguration of homes.

(2) Childrens and Young Persons Residential

This segment is Childrens residential care homes which includes facilities for children with learning difficulties and emotional behavioural disorders ("EBD")

Turnover for 2011 was £14.2m (2010: £8.2m) and EBITDA for 2011 was £4.5m (2010: £2.6m) with capacity ending 2011 at 108 (2010: 100). 

(3) Mental Health

The Adult services for this care pathway include a community based hospital, adult residential care homes, independent support living and community outreach.

Turnover for 2011 was £6.2m (2010 £3.4m) and EBITDA for 2011 was £1.9m (2010 £1.0m) with capacity ending 2011 at 134 (2010: 118).

(4) Fostering and Family Assessments

Child Fostering covers both mainstream foster care services and specialist provision such as care for children with disabilities, and Residential and Foster Care Family Assessments.

Turnover in 2011 was £13.0m (2010 £5.9m) and EBITDA for 2011 was £3.2m (2010 £1.9m) with capacity ending 2011 at 401 (2010: 239).

There are unallocated Group overheads in 2010 of £3.0m and 2011 of £4.5m which bring the EBITDA to the underlying Group EBITDA in 2010 of £22.4m and 2011 of £23.2m.

Principal risks

The Group has industry leading policies and processes in place to identify, mitigate and manage operations risks.  Despite the strength of our policies and procedures we have adopted a model of continuous improvement led by our skilled executive team.

There are a number of key issues which could have a material impact on our reputation, operations or financial performance and these are:

·    Delivering high standards of care;

·    Compliance with regulations, legislation or duties of care in different regulatory and legal structures;

·    Managing our people effectively including attracting, retaining and developing talent;

·    Significant changes in government policy or legislation in England, Scotland or Wales that impact market opportunities or operating performance;

·    Managing profit margins if movements in operating costs are detrimental relative to changes in fee rates;

·    Maintaining occupancy levels;

·    Business continuity.

·    Funding to meet current and future business requirements.

Risk management

Taking each of those principle risks in turn I will explain how each risk is managed.

(1) High standards of care

     The Group invests in training and improving its staff, complemented by a comprehensive internal quality and compliance team working under the leadership of our Director of Quality and Performance.

(2) Compliance with regulations

     Services are regulated by Ofsted and the Care Quality Commission ("CQC") or the equivalent in Wales and Scotland.  External regulators work closely with our service managers and their Operations Directors.

(3) Managing our people effectively

     The Group has a proven management structure for each segment with clear principles of delegation and authority supported by written policies and procedures, backed up with a culture of open communication and 'whistleblowing' policies.

(4) Changes in Government policy or legislation

     Significant changes in policy or legislation are anticipated, monitored and reported through to the Executive who examine closely any potential impact on the business.

(5) Managing profit margins and especially operating costs

     Weekly monitoring and monthly financial reporting ensures that any movements in operating costs are quickly highlighted and acted upon.

(6) Maintaining occupancy levels

     Occupancy is driven by reputation for effectiveness, skill base service availability and the underlying relationships with commissioners.  Referrals are dealt with by experienced care staff who try to match local authority placement requirements to our services to retain occupancy levels.

(7) Business continuity

     Business continuity is subject to detailed planning and covers events such as pandemic illness, major industrial action, terrorism and extreme weather conditions.

(8) Funding to meet business requirements

     The Group monitors its bank facilities regularly to ensure that it has suitable headroom and is making the best use of new financial products.  In 2012 the Group's facilities will be renegotiated as the current facility runs to April 2013.

Behind all of these risks and uncertainties the Group monitors and regularly reviews key performance indicators to highlight change.  Insurance policies are maintained and the adequacy of these are reviewed at regular intervals.

Large and growing market

It is estimated that across the UK there are 1.4m adults with learning difficulties ("LD") of which around 185,000 need care and support costing a total of £7.4 billion.  The residential adult LD component of this market is worth £3.2 billion and cares for 54,000 individuals whilst the residential MH element amounts to £1.3 billion and 29,000 people.  The remaining £2.9 billion of care is provided to adults who require supported living, community outreach services etc.

The adult LD market is not only large, but is also growing by approximately 5.5% per annum due to advances in medical science and demographic profiles.

2.4% of the adult population of the UK will be referred to a specialist psychiatric service at some time.  The total current local authority and NHS spend on mental health is around £12 billion per annum.  

Adult LD and MH market demand is satisfied by a highly fragmented profile of providers.  Approximately 33% of provision is by the "not-for-profit" sector and about 20% is provided for by local authorities themselves and so may present opportunities for further outsourcing.  The remaining 47% of the adult market is satisfied by the independent sector of which CareTech is a part.  70% of independent providers have three facilities or less and the largest six together have less than 10% market share.  CareTech has less than a 2% share of the overall adult market and is one of the largest providers.

The market for specialist children's services is also large and highly fragmented.  Across England alone there are 65,500 children looked after and this market grew by 2% during the past year.  74% (48,530 places) of these children are in foster care which costs £1.1 billion per annum in total.  CareTech has less than a 0.5% market share and local authorities themselves facilitate 57% of the fostering services.

Residential children's services provides for about 7,910 children in England and CareTech has a market share of less than 2%.

Our chosen markets are large and growing, yet highly fragmented.  We are a leading player with less than 2% market share across the care pathway range of services.

Strategy, objectives and key performance indicators ("KPI's")

Our strategy of extending the care pathway range of specialist social services across an expanding geographical reach is complemented by a number of short, medium and long-term objectives.

The objectives of CareTech include gaining market share by delivering high-quality services.  We regard our reputation and relationships with services users, social workers, commissioners, staff and the community as critical and take our responsibilities in this respect very seriously.  Attracting, retaining and developing our staff is an important objective as their performance underpins service delivery and strategic growth.  To provide and support funding for expansion and investment we are continually focused on operating efficiently in the interest of all of our stakeholders.

·      Quality ratings for individual services;

·      Occupancy movements;

·      Staffing levels and head count movements;

·      Care staff costs relative to service income;

·      EBITDA;

·      Profit before tax;

·      Earnings per share;

·      Net debt;

·      Capacity growth;

·      Investment capital applied as a multiple of EBITDA growth.

Outlook

The economic conditions remain complex and the pressure on public spending present both challenges and opportunities in our market.

As one of the largest and strongest providers of services in our sector, with a robust balance sheet and effective business model, we are well positioned to gain further market share through organic initiatives supported by small bolt-on acquisitions.

Our work force is strong and we will continue the development of skills backed by their drive to deliver outstanding results for the peoples we support.  With my colleagues across the organisation I look forward with enthusiasm and confident to the year ahead.

Haroon Sheikh

Chief Executive Officer

8 December 2011

Finance Review

Overview

The Group remains in a strong position to continue as leading provider of a high-quality specialist social care services in a fragmented, large and growing market.

The Group has continued to make considerable progress during the year.

The underlying operating cash flow remains strong at £22.2m compared to £19.8m last year, with the key focus in 2010 of making strategic acquisitions to gain market share and extend the care pathway range of services slowing down in 2011.  There were 4 bolt on acquisitions in the first half and 2 in the second half of 2011 but the focus has moved to organic developments and cost efficiencies during 2011 and for 2012.

Income Statement

The following is a summary of underlying performance extracted from the Consolidated Income Statement.

	2011	2010 as restated	Growth
	£m	£m
Revenue	109.2	89.7	21.7%
Gross profit	42.7	37.4
Administrative expenses	(19.5)	(15.0)
Underlying EBITDA	23.2	22.4	3.6%
Underlying EBITDA margin	21.2%	25.0%
Depreciation	(2.7)	(2.5)
Share-based payments charge Underlying Operating profit	(0.1) 20.4	(0.2) 19.7	3.6%
Net financial expenses	(4.5)	(3.3)
Underlying profit before tax	15.9	16.4	(3.0%)
Taxation	(3.3)	(3.1)
Effective tax rate	20.6%	19.0%
Underlying profit for the year	12.6	13.3
Weighted average number of diluted shares (millions)	49.7	48.1	(3.3%)
Underlying diluted earnings per share	25.35p	27.59p	(8.1%)
Full year dividend per share	6.00p	5.50p

Revenue

Revenue of £109.2m (2010: £89.7m) was 21.7% higher than in 2010.  Excluding the revenue generated by the six 2011 strategic acquisitions, revenue grew by 13.9%.

In the established Adult Learning Difficulties segment we continued to experience high levels of occupancy and reported 92% occupancy at 30 September 2011.  When blended with facilities under development the overall occupancy level during the second half of the year and at 30 September 2011 was 87% of capacity (September 2010: 86% of capacity).  Demand for residential services continues to be robust for high acuity users.

As set out in the Chief Executive's statement and note 2 we are reporting segmental information for the financial year and last year.  Information on client capacity and turnover for all of the 4 segments is now reported.

	2011	2011	2010	2010
	Revenue	Underlying EBITDA	Revenue	Underlying EBITDA
	£m	£m	£m	£m
Adult Learning Difficulties	75.8	18.0	72.2	19.9
Young People Residential Services	14.2	4.5	8.2	2.6
Foster Care and Family Services	13.0	3.3	5.9	1.9
Mental Health	6.2	1.9	3.4	1.0
	109.2	27.7	89.7	25.4
Less unallocated group costs		(4.4)		(3.0)
	109.2	23.3	89.7	22.4

Development of our care pathway and an improving range of service options has led to the proportion of Adult Learning Difficulties turnover moving from 80.5% in 2010 to 69.4% in 2011.

Underlying EBITDA

Including acquisitions, underlying EBITDA has grown by 3.6% from £22.4m in 2010 to £23.2m in 2011.  Underlying EBITDA margin has reduced from 25% to 21.3% due to our infrastructure investments, reconfiguration of existing homes and fee rate pressures from local authorities as well as the segment mix.

The Young People Residential Services and Mental Health Segments have higher margins but require considerable capital investment, whilst the Fostering Services operate on lower profit margins partly because they do not require high levels of organic capital.  Adult Learning Difficulties margin has come down due to fee pressures and new services such as Supported Living and Domiciliary Care having different returns compared to the organic development and reconfigured services.

Administrative expenses, before depreciation and share-based payments charges, were £19.5m (2010: £15.0m) increased by £4.5m during the year and represent 17.9% of Group revenue.  Property rental costs of £6.8m are included within these administrative expenses and are 6% of revenue.  The year also saw investment in the operating and management structure of each segment in order to facilitate future growth.

Underlying operating profit and underlying profit before tax

The depreciation charge has risen to £2.7m (2010: £2.5m) and reflects the investment in freehold properties and the fixtures, fittings and equipment in the homes plus motor vehicles.  After this charge and the share-based payments, underlying operating profit grew by 3.6% to £20.4m (2010: £19.7m).

Net financial expenses of £4.5m (2010: £3.3m) increased over the previous year due to the higher use of the secured bank loans which rose from their 2009 level due to the strategic acquisitions and capital investment in particular in 2010 and also in 2011.

As a result of the higher depreciation charge and higher financial expenses the underlying profit before tax of £15.9m (2010: £16.4m) has reduced by 3.0%.

Taxation and diluted earnings per share

The effective tax rate has risen a little to 20.6% (2010: 19.0%) and reflects management's expectations of future capital investment through organic development relative to available capital allowances and also reflects the impact of the rate reduction in the year.

The weighted number of shares in issue rose by 3.3% whilst the underlying diluted earnings per share came from 27.59p in 2010 to 25.35p in 2011.

Dividends

Our policy had been to increase the total dividend per year broadly in line with the movement in underlying diluted earnings per share but the Board has taken the view that the policy should be reconsidered for 2011.  The final dividend will therefore increase to 4.00p per share (2010: 3.66p), bringing the total dividend for the year to 6.00p (2010: 5.50p), a growth of 9%.  Dividend cover for 2011, based upon diluted earnings per share before non underlying items, was 4.5 times (2010: 4.0 times).

Non underlying items

As more fully explained on the face of the Consolidated Income Statement and in note 4, the Directors have separately disclosed a number of non underlying items on the face of the income statement in order to improve understanding of the trading performance achieved by the Group.  Total adjustments are £6.8m (2010: £6.8m) which is 6.2% of revenue (2010: 7.5%) and the principle items are acquisition transaction costs, post acquisition integration and reorganisation costs and adjustments to minimum future lease payment uplifts.

Cash flow and net debt

The cash flow statement and movement in net debt for the year is summarised below:

	2011	2010 As restated
	£'m	£'m
Underlying EBITDA	23.2	22.4
Increase in working capital	(1.0)	(2.6)
Cash inflows from operating activities	22.2	19.8
Tax paid  / (received)	(1.3)	0.2
Interest paid	(4.8)	(3.7)
Dividends paid	(2.8)	(2.3)
Proceeds from the issue of shares	-	14.6
Acquisitions and capital expenditure	(20.7)	(43.0)
Cash flow before adjustments	(7.4)	(14.4)
Non underlying cashflows including derivative financial instruments	(6.7)	(5.4)
Movement in net debt	(14.1)	(19.8)
Opening net debt	(113.2)	(93.4)
Closing net debt	(127.3)	(113.2)

Net debt at 30 September 2011 of £127.3m (2010: £113.2m) has increased by £14.1m during the financial year, with an investment of £22.4m in acquisitions and capital improvements during the year.

Non underlying items had a cash outflow effect of £3.9m being payment of acquisition and integration costs and settlements arising from derivative financial instruments contributed a cash outflow of £2.8m (2010: £3.0m).

Underlying Cash inflows from operating activities

The £22.2m (2010: £19.8m) cash inflow from operating activities, before non underlying items, represents a 96% (2010: 88%) underlying EBITDA cash conversion ratio, being a further year on year enhancement.

Tax, interest and dividend cash flows

Interest paid of £4.8m (2010: £3.3m) is reflective of the net financial expenses per the Consolidated Income Statement, whilst dividends paid are consistent with the relevant section earlier in the review.

Net tax payments of £1.3m (2010: £0.2m received) were made in the year.

Acquisitions and capital expenditure

During the year we invested funds of £20.4m (2010: £43.5m) and, in addition, estimated that £2m may become payable as deferred and contingent consideration in respect of acquisitions completed during the year.

	Settled	Cash Balances	Funds Invested	Deferred and contingent	Total
	£m	£m	£m	£m
Acquisitions in year	10.9	(0.3)	10.6	2.0	12.6
Prior year deferred consideration	3.0	-	3.0	-	3.0
Capital expenditure	6.8	-	6.8	-	6.8
	20.7	(0.3)	20.4	2.0	22.4

The investment of £12.6m relates to the strategic acquisition of Care UK Foster Care Limited together with Fostering Support Group, Phoenix Therapy and Care Limited, Cameron Care, Selwyn Care, TLC (Wales) and Complete Care; further details of which are explained in the Chief Executive's Statement and Operating Review as well as in the notes to the financial statements.

Deferred consideration of £3m was settled in cash during the year, mainly relating to acquisitions in the Fostering and Family Assessments division.

Capital expenditure of £6.8m includes £3m to update our portfolio of assets.

Banking arrangements

The Group is pleased to have continued its strong relationships with RBS, Lloyds and Santander, following the refinancing of the debt facilities in 2010.  These facilities expire in April 2013. 

These facilities have certain covenants attached to them which are principally EBITDA related.  The Group has continued to operate comfortably within its bank covenants and at 30 September 2011 has sufficient facility headroom to support the strategy of developing our services and organic care pathway additions.

The Group holds a number of interest rate swaps in order to provide a degree of certainty to interest cash flows.

Outlook

The Group remains in a strong position to continue as a leading provider of high-quality specialist social care services in a fragmented, large and growing market.

Michael Hill

Group Finance Director

8 December 2011

Unaudited Consolidated Statement of Comprehensive Income

for the year ended 30 September 2011

Note		2011			2010 as restated (iii)
		Underlying	Non underlying (i)	Total	Underlying	Non underlying (i)	Total (iii)
		£000	£000	£000	£000	£000	£000
Revenue		109,150	-	109,150	89,697	-	89,697
Cost of sales		(66,487)	-	(66,487)	(52,321)	-	(52,321)
Gross profit		42,663	-	42,663	37,376	-	37,376
Administrative expenses		(22,312)	(8,105)	(30,417)	(17,704)	(3,936)	(21,640)
Operating profit		20,351	(8,105)	12,246	19,672	(3,936)	15,736
EBITDA (ii)		23,209	(4,521)	18,688	22,438	(3,049)	19,389
Depreciation		(2,680)	-	(2,680)	(2,496)	-	(2,496)
Amortisation of intangible assets		-	(3,584)	(3,584)	-	(887)	(887)
Share-based payments charge		(178)	-	(178)	(270)	-	(270)
Operating profit		20,351	(8,105)	12,246	19,672	(3,936)	15,736
Financial income	5	32	-	32	23	-	23
Financial expenses	4,5	(4,512)	(350)	(4,862)	(3,293)	(4,903)	(8,196)
Profit before tax		15,871	(8,455)	7,416	16,402	(8,839)	7,563
Taxation	4,6	(3,274)	1,670	(1,604)	(3,121)	2,079	(1,042)
Comprehensive income for the year attributable to equity shareholders of the parent		12,597	(6,785)	5,812	13,281	(6,760)	6,521
Earnings per share
Basic	7			11.73p			13.63p
Diluted	8			11.71p			13.55p

(i)     Non underlying items comprise: amortisation of intangibles, acquisition expenses, bargain purchase credits, fair value adjustments on prior year acquisitions, gains or losses on disposal of plant and equipment, changes in value and additional finance payments in respect of derivative financial instruments, post acquisition integration and reorganisation costs, minimum future lease uplifts and provision for onerous leases.  See note 4.

(ii)    EBITDA is operating profit stated before depreciation, amortisation of intangible assets, and share-based payments charge.

(iii)   See note 3.

Unaudited Consolidated Statement of Changes in Equity

as at 30 September 2011

	Share capital	Share premium	Merger reserve	Retained earnings	Total equity
	£000	£000	£000	£000	£000
At 1 October 2009	225	38,852	5,037	3,300	47,414
Total comprehensive income
Profit for the year	-	-	-	6,521	6,521
Transactions with owners recorded directly in equity
Issue of ordinary shares	23	14,663	3,461	-	18,147
Equity settled share-based payments charge	-	-	-	270	270
Dividends	-	-	-	(2,326)	(2,326)
At 30 September 2010	248	53,515	8,498	7,765	70,026
At 1 October 2010	248	53,515	8,498	7,765	70,026
Total comprehensive income
Profit for the year	-	-	-	5,812	5,812
Transactions with owners recorded directly in equity
Equity settled share-based payments charge	-	-	-	178	178
Dividends	-	-	-	(2,802)	(2,802)
At 30 September 2011	248	53,515	8,498	10,953	73,214

Unaudited Consolidated Balance Sheet

at 30 September 2011

		2011	2010
		£000	£000 as restated (i)
Non-current assets
Property, plant and equipment		189,504	184,139
Other intangible assets		36,483	26,935
Goodwill		30,059	26,159
		256,046	237,233
Current assets
Inventories		315	152
Trade and other receivables		10,066	11,282
Cash and cash equivalents		13,414	10,008
		23,795	21,442
Total assets		279,841	258,675
Current liabilities
Loans and borrowings		7,460	5,866
Trade and other payables		11,691	13,684
Deferred and contingent consideration payable		6,596	6,582
Deferred income		2,772	3,252
Corporate tax		4,139	2,967
Derivative financial instruments		2,921	2,877
		35,579	35,228
Non-current liabilities
Loans and borrowings		133,271	117,389
Deferred and contingent consideration payable		-	600
Deferred tax liabilities		23,633	20,905
Derivative financial instruments		945	3,437
Minimum future lease payments		12,553	11,090
Onerous lease provision		646	-
		171,048	153,421
Total liabilities		206,627	188,649
Net assets		73,214	70,026
Equity
Share capital		248	248
Share premium		53,515	53,515
Merger reserve		8,498	8,498
Retained earnings		10,953	7,765
Total equity attributable to equity shareholders of the parent		73,214	70,026

(i) See note 3

Consolidated Cash Flow Statement

for the year ended 30 September 2011

		2011	2010
		£000	£000 as restated (i)
Cash flows from operating activities
Profit before tax		7,416	7,563
Adjustments for:
Financial income		(32)	(23)
Financial expenses		4,862	8,196
Adjustments for minimum future lease payment uplifts		1,463	1,560
Onerous lease provision charge		646	-
Depreciation		2,680	2,496
Amortisation		3,584	887
Share-based payments charge		178	270
Acquisition transaction cost		1,310	3,562
Post acquisition integration and re-organisation cost		1,474	1,159
Plant and machinery items written off		219	-
Profit on disposal of freehold property		(144)	(350)
Fair value adjustment in respect of prior years acquisitions		230	596
Bargain purchase credit		(821)	(3,828)
Operating cash flows before movement in working capital		23,065	22,088
Decrease in trade and other receivables		879	1,511
Decrease in trade and other payables		(1,559)	(3,777)
Increase in inventories		(163)	(8)
Operating cash flows before adjustment items		22,222	19,814
Non underlying items paid		(3,990)	(2,390)
Cash inflows from operating activities		18,232	17,424
Interest received		32	23
Tax (paid) / received		(1,297)	234
Net cash from operating activities		16,967	17,681
Cash flows from investing activities
Proceeds from sale of property plant and equipment		1,007	-
Acquisition of subsidiaries, net of cash acquired		(13,625)	(32,554)
Acquisition of property, plant and equipment		(6,365)	(7,849)
Acquisition of intangible assets		(50)	-
Acquisition of software		(342)	(713)
Net cash used in investing activities		(19,375)	(41,116)
Cash flows from financing activities
Proceeds from the issue of share capital (net of costs)		-	14,647
Proceeds from new loan (net of costs)		22,249	24,992
Interest paid		(4,794)	(3,264)
Cash outflow arising from derivative financial instruments		(2,797)	(3,025)
Repayment of borrowings		(5,000)	(1,200)
Payment of finance lease liabilities		(1,042)	(702)
Dividends paid		(2,802)	(2,326)
Net cash from financing activities		5,814	29,122
Net increase in cash and cash equivalents		3,406	5,687
Cash and cash equivalents at start of year		10,008	4,321
Cash and cash equivalents at 30 September		13,414	10,008

(i) See note 3

Net debt in the balance sheet comprises:
Cash at bank and in hand		13,414	10,008
Bank loans		(138,350)	(120,934)
Finance lease and hire purchase contracts		(2,381)	(2,321)
		_______	_______
Net debt at 30 September		(127,317)	(113,247)

Notes

CareTech Holdings PLC (the 'Company') is a company registered and domiciled in England and Wales.  The consolidated financial statements of the Company for the year ended 30 September 2011 comprise the Company and its subsidiaries (together referred to as the 'Group').

The unaudited summary financial information set out in this announcement does not constitute the Company's consolidated statutory accounts for the years ended 30 September 2011 or 30 September 2010. The results for the year ended 30 September 2011 are unaudited. The statutory accounts for the year ended 30 September 2011 will be finalised on the basis of the financial information presented by the Directors in this preliminary announcement, and will be delivered to the registrar of companies in due course. The statutory accounts are subject to completion of the audit and may change should a significant adjusting event occur before the approval of the Annual Report.

The statutory accounts for the year ended 30 September 2010 have been reported on by the Company's auditors and delivered to the Registrar of Companies. The auditors have reported on those accounts; their report was unqualified, did not include references to any matter which the auditors drew attention by way of emphasis without qualifying their report and did not contain statements under section 498(2) or (3) of the Companies Act 2006.

The preliminary announcement for the year ended 30September2011 was approved by the Board for release on8 December2011.

IFRS 8 requires operating segments to be determined based on the Group's internal reporting to the Chief Operating Decision maker ('CODM').  The CODM has been determined to be the Chief Executive Officer as he is primarily responsible for the allocation of resources to segments and the assessment of the performance of each of the segments.

The CODM uses underlying EBITDA as reviewed at monthly Executive Committee meetings as the key measure of the segments' results as it reflects the segments' underlying trading performance for the period under evaluation.  underlying EBITDA is a consistent measure within the Group.

Inter-segment turnover between the operating segments is not material.

During the year the directors undertook a comprehensive review and re-organisation of the Group's internal management structure following the significant acquisition activity in the second half of the 2010 year end.  Internal management and financial reporting has been realigned to assess financial performance using the Group's four operating segments focused on delivering high quality services across a national platform through local relationships.  Our four segments are, Adult Learning Difficulties (ALD), Childrens and Young Persons Residential (CYP), Fostering and Family Assessments (FFA) and Mental Health (MH).  There has been no aggregation of the operating segments in arriving at these reportable segments.

The segment results for the year ended 30 September 2011 on a restated basis, for the year ended 30 September 2010 and the reconciliation of the segment measures to the respective statutory items included in the consolidated financial information are as follows:

Year ended 30 September 2011
Continuing Operations
	ALD	CYP	FFA	MH	Total
Client Capacity	1,413	108	401	134	2,056
Revenue	75,738	14,158	13,045	6,209	109,150
EBITDA	17,992	4,528	3,238	1,911	27,669

Year ended 30 September 2010
Continuing Operations
	ALD	CYP	FFA	MH	Total
Client Capacity	1,352	100	239	118	1,809
Revenue	72,225	8,156	5,905	3,411	89,697
EBITDA	19,892	2,603	1,950	977	25,422

Reconciliation of EBITDA to profit before tax;

		2011	2010
		£000	£000
Underlying EBITDA before unallocated costs		27,669	25,422
Unallocated costs		(4,460)	(2,984)
Underlying EBITDA		23,209	22,438
Depreciation		(2,680)	(2,496)
Amortisation		(3,584)	(887)
Share based payments charge		(178)	(270)
Non underlying items		(4,521)	(3,049)
Operating profit		12,246	15,736
Financial income		32	23
Financial expenses		(4,862)	(8,196)
Profit before tax		7,416	7,563

All operations of the Group are carried out in the UK, the Company's country of domicile.  All revenues therefore arise within the UK and all non-current assets are likewise located in the UK.  No single external customer amounts to 10% or more of the Group's revenues. 

No asset and liability information is presented above as this information is not allocated to operating segments in the regular reporting to the group's Chief Operating Decision Maker and are not measures used by the CODM to assess performance and to make resource allocation decisions.

3.     Restatements

Comparative information has been changed for the following:

(i)            Acquisition and development related staff costs of £1,993,000 for the year ended 30 September 2010 have been reclassified such that they are charged against administrative expenses before adjustment items in the Consolidated Statement of Comprehensive Income rather than within adjustment items.  This has resulted in a change to the disclosed non-statutory EBITDA before adjustment items as set out below.  Consequently the taxation charge before adjustment items is also restated by £558,000;

(ii)           The carrying value of derivative financial instruments of £6,314,000 previously shown within non-current liabilities as at 30 September 2010 has been reclassified into estimated current and non-current amounts of £2,877,000 and £3,437,000 respectively.  This analysis between current and non-current liabilities is in accordance with the estimated discounted contractual cash flow maturities of these derivative financial instruments.  There is no effect on profit, cash flows or basic and diluted earnings per share from these adjustments;

(iii)           At 30 September 2010 the current liability balance for deferred and contingent consideration payable of £14,735,000 included £7,500,000 in respect of a currently exercisable one-way option to acquire freehold property entered into by the Group at the same time as a business combination which was completed during the year ended 30 September 2010.  A corresponding property asset had also been recognised, reflecting the cost of the property under the option.  During the current year the directors have reconsidered the nature of the asset acquired as part of the business combination.  Since the group was under no obligation to proceed with the acquisition of the property they have concluded that the asset acquired was in fact the option to make that acquisition, rather than the property itself.  The fair value of the option at acquisition was £nil.  As a consequence an adjustment has been made to reduce both deferred and contingent consideration and property, plant and equipment by £7,500,000 in the balance sheet as at 30 September 2010.  In addition this results in the reclassification of £417,000 of finance charges into Administrative Expenses for the year ended 30 September 2010.  The disclosure of the acquisitions in the year ended 30 September 2010 has been restated for this adjustment.  The option currently remains outstanding and expires in December 2011.  There is no effect on profit before tax, cash flows or basic and diluted earnings per share from these adjustments;

(iv)            In the Consolidated Balance Sheet, accruals relating to minimum future lease payments (the difference between operating lease rentals on a cash and straight-line charge basis), previously disclosed within Trade and other payables as current liabilities, have been reclassified in a separate line item as non-current liabilities as they will reverse in periods which are several years in the future. There is no effect on profit, cash flows or basic and diluted earnings per share from these adjustments;

(v)             In accordance with IFRS3, revisions have been made during the measurement period to the fair values of the identifiable assets acquired and the liabilities assumed as a result of business combinations undertaken in the year ended 30 September 2010.  As a result, additional corporation tax liabilities of £700,00 were recognised, an adjustment to trade and other payables of £47,000 was made and a corresponding reduction in deferred consideration of £653,000 was recognised.

(vi)            In the Consolidated Balance Sheet, inventories amounting to £152,000 have been reclassified in a separate line item within current assets.

The effect of the above on the financial information is as follows:

	Year ended 30 September 2010
note	Previously stated £000	Adjustment £000	Restated £000
Income Statement
Administrative expenses                                                                        (iii)	(21,223)	(417)	(21,640)
Financial expenses                                                                                 (iii)	(8,613)	417	(8,196)
Profit before tax	7,563	-	7,563
Taxation	(1,042)	-	(1,042)
Profit after tax	6,521	-	6,521
Earnings per Share
Basic	13.63p	-	13.63p
Diluted	13.55p	-	13.55p
Earnings per share before non underlying items
Basic	30.77p	(3.00p)	27.77p
Diluted	30.57p	(2.98p)	27.59p
Balance Sheet
Property, plant & equipment                                                                  (iii)	191,639	(7,500)	184,139
Inventories                                                                                                 (vi)	-	152	152
Trade and other receivables                                                                  (vi)	11,434	(152)	11,282
Trade and other payables due within one year                                                                             (iv)(v)	(24,821)	11,137	(13,684)
Derivative financial instruments due within one year                                                                                  (ii)	-	(2,877)	(2,877)
Tax payable                                                                                                (v)	(2,267)	(700)	(2,967)
Deferred and contingent consideration due within one year                                                                             (iii)(v)	(14,735)	8,153	(6,582)
Minimum future lease payments                                                                                        (iv)	-	(11,090)	(11,090)
Derivative financial instruments due after more than one year                                                                 (ii)	(6,314)	2,877	(3,437)
Net assets	70,026	-	70,026

Adjustments (i) and (iii) also resulted in a change to the non-statutory EBITDA before non underlying items for year ended 30 September 2010 as follows:

	Year ended 30 September 2010 £000
EBITDA before non underlying items as previously stated	24,848
Acquisition and development related staff costs (i)	(1,993)
Reclassification of finance charges (iii)	(417)
EBITDA  before non underlying items as restated	22,438

Non underlying items are those items of financial performance that, in the opinion of the Directors, should be disclosed separately in order to improve a reader's understanding of the underlying trading performance achieved by the Group.  Non underlying items comprise the following:

	2011	2010
Note	£000	£000 As restated (ix)
Acquisition expenses	1,310	3,562
Post acquisition integration and reorganisation cost                                                      (i)	1,693	1,159
Fair value adjustments in respect of prior year acquisitions                                        (ii)	230	596
Acquisition and development costs	3,233	5,317
Bargain purchase credit (note 10)	(821)	(3,828)
Adjustments for minimum future lease payment uplift to IAS 17                                (iii)	1,463	1,560
Onerous lease provision                                                                                                     (iv)	646	-
Included in EBITDA	4,521	3,049
Amortisation of intangible assets	3,584	887
Included in administrative expenses	8,105	3,936
Loan finance costs written off on refinancing (note 5b)                                                  (v)	-	1,675
Revaluation movements relating to derivative financial instruments                         (vi)	(2,447)	139
Charges relating to derivative financial instruments  (note 5b)                                   (vi)	2,797	3,089
Included in financial expenses	350	4,903
Tax on non underlying items:
Current tax                                                                                                                             (vii)	(1,387)	(2,215)
Deferred tax                                                                                                                          (viii)	(283)	136
Included in taxation	(1,670)	(2,079)
Total non underlying items	6,785	6,760

(i)    The Group incurred a number of costs relating to the integration of recent acquisitions and reorganisation of the internal operating and management structure and comprises £760,000 of costs associated with restructuring the Learning Disabilities Division and £933,000 of costs associated with the integration of acquisitions and the associated restructuring of the finance and support functions.

(ii)   In accordance with IFRS 3 (as revised) adjustments to the fair value of acquisitions completed in previous financial years are recognised in the income statement.  These adjustments relate to final completion account agreements with vendors.

(iii)  Adjustments relate to non-cash additional charges under IAS 17 which incorporates recognising the effect of minimum future lease payment uplifts on a straight-line basis.

(iv)   The present value of the future cash flows receivable from the operation of a leased asset has been assessed as being lower than the present value of the rental payments to which the Group is committed.  Therefore the Group has provided for £646,000 being the present value of any onerous element of the remaining lease life.

(v)    In April 2010, the Group completed a new banking facility agreement.  As such the unamortised element of loan fee costs on the replaced debt was fully written off.

(vi)   Adjustment items relating to derivative financial instruments include the movements during the year in the fair value of the Group's interest rate swaps which are not designated as hedging instruments and therefore do not qualify for hedge accounting, together with the quarterly cash settlements, and accrual thereof.

(vii)  Represents the current tax on items (i), (ii), (iii), (iv), and (v) above.

(viii) A deferred tax charge of £803,000 (2010: £148,000 credit) arises in respect of a charge relating to derivative financial instruments in (vii) above.  In addition, a credit of £775,000 (2010: £1,251,000) arises in respect of changes in future corporation tax rates, together with a credit from the effects of full provision for deferred tax under IAS 12 amounting to £311,000 (2010: £1,535,000 charge).

(ix)   See note 3.

2011 £000

2010 £000

(a) Financial income

Interest income on financial assets not at fair value through profit or loss:
On bank deposits	32	23
	32	23

(b) Financial expenses

Interest expense on financial liabilities at amortised cost:
On bank loans and overdrafts	4,280	3,093
Finance charges in respect of finance leases	232	200
Financial expenses before adjustments	4,512	3,293
Derivative financial instruments (note 5)	350	3,228
Loan finance costs written off on refinancing (note 5)	-	1,675
	4,862	8,196

(a) Recognised in the income statement

					2011	2010
					£000	£000
						As restated
Current tax expense
Current year					3,502	3,657
Current tax on non underlying items (note 4)					(1,387)	(2,215)
Total current tax					2,115	1,442
Deferred tax expense
Current year					(539)	999
Effect of changes in future tax rate					(775)	(1,251)
Deferred tax on non underlying items (note 4)					803	(148)
Total deferred tax					(511)	(400)
Total tax in income statement					1,604	1,042

(b) Reconciliation of effective tax rate

	2011	2010
	£000	£000
Profit before tax for the year	7,416	7,563
Tax using the UK corporation tax rate of 27% (2010: 28%)	2,002	2,118
Non-deductible expenses	1,364	482
Effect of changes in future tax rate	(775)	(357)
Deferred tax adjustments in respect of prior years	-	(538)
Other deferred tax adjustments	(987)	(356)
Utilisation of tax losses	-	(307)
Total tax in income statement	1,604	1,042

The 2011 Budget on 23 March 2011 announced that the UK corporation tax rate will reduce to 23% over a period of 4 years from 2011.  The first reduction in the UK corporation tax rate from 28% to 27% (effective from 1 April 2011) was substantively enacted on 20 July 2010, and further reductions to 26% (effective from 1 April 2011) and 25% (effective from 1 April 2012) were substantively enacted on 29 March 2011 and 5 July 2011 respectively. 

This will reduce the company's future current tax charge accordingly.  The deferred tax liability at 30 September 2011 has been calculated based on the rate of 25% substantively enacted at the balance sheet date. 

It has not yet been possible to quantify the full anticipated effect of the announced further 2% rate reduction, although this will further reduce the company's future current tax charge and reduce the company's deferred tax liability accordingly.

		2011	2010
		£000	£000
Profit attributable to ordinary shareholders		5,817	6,521
Weighted number of shares in issue for basic earnings per share		49,586,656	47,829,070
Effects of share options in issue		106,227	307,898
Weighted number of shares for diluted earnings per share		49,692,883	48,136,968

Diluted earnings per share is the basic earnings per share adjusted for the dilutive effect of the conversion into fully paid shares of the weighted average number of share options outstanding during the period.

Earnings per share (pence per share)
Basic		11.73p	13.63p
Diluted		11.71p	13.55p

A measure of underlying earnings and underlying earnings per share has been presented in order to present the earnings of the Group after adjusting for non underlying items which are not considered to impact the trading performance of the Group.

		2011	2010
		£000	£000 as restated
Profit attributable to ordinary shareholders		5,812	6,521
Non underlying items (note 4)		6,785	6,760
Underlying profit attributable to ordinary shareholders		12,597	13,281
Underlying earnings per share (pence per share)
Basic		25.40p	27.77p
Diluted		25.35p	27.59p

The aggregate amount of dividends comprises:

	2011	2010
	£000	£000
Final dividends paid in respect of prior year but not recognised as liabilities in that year	1,815	1,416
Interim dividends paid in respect of the current year	987	910
Aggregate amount of dividends paid in the financial year	2,802	2,326

The aggregate amount of dividends proposed and not recognised as liabilities as at the year end is 4.00p per share,       £1,983,476 (2010: 3.66p per share, £1,814,828).

Each of the six acquisitions in the year have been accounted for as a business combinations under IFRS 3 (revised).   In view of the overall volume of acquisitions in the financial year and the similarity of each, in the Director's judgement it is appropriate to present the acquisitions information in aggregate.

The following provisional fair value table summarises the various acquisitions made during the financial year pending finalisation of completion accounts:

	Book values £000	Fair value Adjustment £000	Fair value £000
Intangible fixed assets (note 13)	-	11,341	11,341
Property, plant and equipment (note 12)	409	1,561	1,970
Debtors	1,484	(522)	962
Cash	269	-	269
Creditors:
Trade and other payables	(97)	-	(97)
Corporation tax	(369)	-	(369)
Accruals and other creditors	(578)	(350)	(928)
Deferred tax	(8)	(3,231)	(3,239)
			9,909
Satisfied by:
Cash paid			10,898
Deferred consideration			1,590
Contingent consideration			500
Gain on bargain purchase (note 5)			821
			13,809
Goodwill recognised on acquisition			3,900

The book values of the assets and liabilities were extracted from the underlying accounting records of the acquired entities on the date of acquisition.  The book value of debtors represents the gross contractual amounts receivable and the fair value adjustment has been made to reflect the best estimate of the amounts not expected to be collected.   The fair value adjustments made to intangible assets, property, plant and equipment, debtors and creditors are to reflect their value on a going concern market value basis.  The fair value adjustment to deferred tax arises due to the requirement to recognise deferred tax and goodwill on the fair value uplifts to intangible assets and property, plant and equipment.  These acquisitions contributed revenue of £6,968,000 and underlying EBITDA of £1,368,000 to the Group's result for the year ended 30 September 2011.

Goodwill which is not expected to be tax deductible arises due to the requirement to recognise deferred tax in respect of the fair value adjustments to intangible assets and property, plant and equipment, together with synergies expected to arise from combining operations, workforce in place and other intangible assets which do not qualify for separate recognition.

The gain on bargain purchase is recognised within administrative expenses in the consolidated statement of comprehensive income.  It represents the excess of assets and liabilities acquired (at fair value) compared to the fair value of consideration.

Each of the acquisitions was undertaken to enhance the Group's position in the industry.  In each case control was obtained through the acquisition of the entire issued share capital.

The following table summarises the acquisitions in the year:

Name	Date of acquisition	% of equity acquired
CareTech Foster Care Limited together with
Fostering Support Group Limited	13 December 2010	100
Phoenix Therapy and Care Limited	13 December 2010	100
Cameron Care Limited	21 February 2011	100
Selwyn Care Limited	4 March 2011	100
Professional Integrated Care Services Limited together with TLC (Wales) Limited	27 May 2011	100
Complete Care and Enablement Service Limited	13 July 2011	100

During the year the Group elected to sell the freehold title to a number of properties used in the provision of supported living services.  As part of the arrangements for service users' continuing care, the Group retained the contracts for the provision of care services.  As such the Group has accounted for the disposal of freehold land and buildings and the transfer to intangible assets of the customer contract / relationship balance associated with these contracts is included in intangible assets: customer contracts in the year.  There is no effect on comparative profit, cashflows, basic and diluted earnings per share or previous balance sheets. 

(c)        Reconciliation to Group Cash Flow

				2011	2010
				£000	£000
Cash consideration paid on acquisitions in the year				10,898	36,904
Cash consideration paid on previous year's acquisitions				2,996	-
Net cash acquired				(269)	(4,350)
				13,625	32,554

11           Copies of the Annual Report and Accounts

Copies of the Annual Report and Accounts will be sent to Shareholders in due course and will be available to members of the public from the Company's registered office located at 5th Floor, Metropolitan House, 3 Darkes Lane, Potters Bar, Herts, EN6 1AG and on the Company's website: www.caretech-uk.com.