TIDMCMBN
RNS Number : 4645G
Cambian Group PLC
04 March 2015
Wednesday 4 March 2015
Cambian Group plc audited results for the year ended 31 December
2014
A year of significant progress for Cambian
Overview of results 2014(3) 2013(3)
---------------------------------------- ----------- ----------
Revenue GBP240.6m GBP214.3m
Adjusted EBITDA(1) GBP48.4m GBP41.1m
Adjusted EBITDA margin % 20.1% 19.2%
Operating profit pre-exceptional costs GBP29.4m GBP27.9m
Operating profit GBP7.1m GBP24.9m
Pre-tax (loss) / profit GBP(4.2m) GBP7.8m
Adjusted basic earnings per share(2) 11.0 pence 8.7 pence
---------------------------------------- ----------- ----------
(1) Adjusted EBITDA is Earnings before net finance costs, tax,
depreciation, amortisation, profit or loss on disposal of assets,
exceptional items, M&A costs, and the charge relating to
Continuation Option Plan shares awarded as part of the IPO
(2) Adjusted basic EPS is defined as statutory basic EPS, adding
back the impact of amortisation of acquired intangible assets,
exceptional items, M&A costs, and the charge relating to
Continuation Option Plan shares awarded as part of the IPO, net of
the tax effect of these adjustments. All Adjusted EPS calculations
reflect the number of shares in issue post IPO, excluding shares
held in the Employee Benefit Trust, of 168,888,888
(3) The basis of preparation is detailed in note 1 of the
financial statements
Highlights
-- 12% revenue growth in the period
-- 18% increase in Adjusted EBITDA(1)
-- Average occupancy of 80% (2013: 80%), with 2,145 service
users at 31 December 2014 (2013: 1,718), plus 197 fostering
placements (2013: 168)
-- 580 places added to capacity in the period, including 451
from acquisitions. Total capacity at 31 December 2014 of 2,750
places, an increase of 27% on 31 December 2013
-- 4 acquisitions completed in the year, including acquisition
of Woodleigh Community Care, strengthening Cambian's position in
the adult intellectual disability sector
-- Net debt of GBP188.7m (31 December 2013 GBP215.7m), with
strong cash generation in the year
-- Advanced Childcare ("ACL") integration completed
-- Maiden final dividend announced of 1.8p per share, in line
with commitment outlined at IPO
Saleem Asaria, CEO, commented "These results reflect a good
performance in 2014, a year in which we also made significant
progress in positioning ourselves for future growth. We are pleased
with the acquisitions we made in the period, including that of
Woodleigh in December which strengthens our position in the adult
intellectual disability sector. The quality of care and value for
money we offer continues to be appreciated by our customers, and we
are well positioned to deliver on our vision to be the highest
quality provider of specialist behavioural health services to
children and adults."
Results presentation
A results presentation will be held for investors and analysts
at 8.45am today at the offices of JP Morgan, 60 Victoria
Embankment, London EC4Y 0JP. Materials from this presentation will
be available online on the investor relations pages at
http://www.cambiangroup.com from 8.45am.
Enquiries:
Cambian Group plc +44 (0) 208 Tulchan Communications +44 (0)
735 6150 20 7353 4200
Saleem Asaria, Chief Executive Tom Buchanan
Andrew Griffith, CFO Camilla Cunningham
Performance Review
Overview of performance in the period
We are pleased to report that Cambian has continued to make
significant progress measured against the priorities we set out at
the start of the year, and at IPO in April 2014. At the same time,
we achieved our financial objectives for 2014, and have further
strengthened our platform for future growth. Our vision is to be
the highest quality provider of specialist behavioural health
services to children and adults, and our priorities for 2014
support this vision.
In relation to our priorities for 2014:
-- We have now fully integrated Advanced Childcare into Cambian,
with operations, quality, and support functions now combined. At
the same time we have re-focussed our Children's Services to be
more aligned with our customers' needs.
-- In a year when our customers' demands for greater
specialisation and quality have increased, we have launched new
specialist services in the areas of children's mental health and
sexual trauma, and launched a programme in our Adult Services
division for people with a personality disorder.
-- We have invested significantly in both training and in our
facilities during the year, particularly in Children's Services, in
support of our vision to be the highest quality provider in our
market. At the same time we have maintained strong regulatory
ratings in an increasingly tough regulatory environment.
-- We have continued to grow our business and capabilities
through making selective acquisitions which complement our existing
services or bring new services to the group. In the year we made
four acquisitions, the largest being Woodleigh Community Care,
based in Yorkshire and Humberside. Woodleigh brings to the Group an
innovative model for people with intellectual disabilities, aligned
to the Government's Transforming Care agenda which can be expanded
geographically across the country.
Our strategy for growing Cambian is: first, business
optimisation, through the maturation of our existing sites and
margin accretion on the current business; secondly, organic
development, by the roll out of existing services and increasing
capacity in high-demand areas; thirdly, innovation in the
development and roll out of new services; and finally, growth
through making value-accretive acquisitions which complement our
current business and help drive us towards achieving our
vision.
Business optimisation
In 2014 we delivered growth of 12% in revenue and 18% in
Adjusted EBITDA. In our Adult Services business, where we saw the
commissioning environment continue to improve following the recent
changes in the NHS, and where our net organic capacity increased by
just 3 places over the year, average occupancy increased to 89%
(2013: 85%). In our Children's Services business, with a less
mature portfolio of units, including the 126 places we added
organically and 47 places we re-provisioned in the year, average
occupancy was 74% (2013: 77%). The Group's Adjusted EBITDA margin
was 20.1% (2013: 19.2%), as a result of leveraging our growth on
the existing shared costs infrastructure, and a reduction in
development losses in 2014 compared to 2013. Underlying EBITDA
margin, after adding back development losses, was 20.9% (2013:
20.4%).
Organic growth
The underlying dynamics of our market - population growth,
increasing diagnosis and incidence of the conditions we serve, and
the increase in outsourcing of services - provides a significant
opportunity for Cambian to grow organically. In the year we added
129 net places organically, including the re-provisioning of 47
places for children in larger homes into 29 places in smaller
units. The organic places added in the year were principally in our
education services. The number of new places added in our sexual
trauma services was somewhat below our target for the year, where
we spent time re-focussing our service offering, and therefore
delayed some planned openings. However, we currently have a strong
opening pipeline for 2015, with 200 places currently under our
ownership due to open during the year. In total we have 260
openings planned for 2015 including a personality disorder clinic,
a residential intellectual disability unit, a day school for
autistic children, and a number of facilities for children who have
suffered sexual trauma.
Fostering
During 2014 we reviewed our therapeutic fostering offering, and
we are looking to increase our investment in fostering in 2015, and
in addition have identified potential acquisition opportunities in
this area. We think fostering is an essential part of a complete
and differentiated service offering for Looked After Children.
Given that fostering has different characteristics from our
residential and education services, from 31 December 2014 onwards
we will no longer include fostering in our capacity and occupancy
numbers and instead we will be reporting fostering revenue and
placements separately. Accordingly, 2014 revenue from fostering was
GBP6.8m (2013: GBP5.7m) from an average of 185 placements (2013:
152 placements).
Innovation
A key benefit that Cambian brings to our customers is the
ability to innovate and respond to changing demands. In Children's
Services we have developed new services for treating mental health
conditions in children and adolescents ("CAMHS"), including a step
down from current CAMHS services, and we have refocussed our sexual
trauma services on the needs of higher severity children. In Adult
Services, we have developed a service offering treatment for
patients with personality disorders, supported by the acquisition
of Ansel, with plans for a new unit to open in the first half of
2015.
Acquisitions
An important element of our growth strategy is to undertake
selective acquisitions which complement our existing business by
enabling us to reach new regions, or deliver new services, more
quickly than we could do organically. In the first half of 2014 we
completed the acquisition of three further education colleges from
Mencap, as well as a day school for autistic children. In September
2014 we acquired Ansel, a 24 bed clinic for men suffering from
personality disorders, supporting our growth strategy in this area.
In December 2014, we acquired Woodleigh Community Care, a 152 bed
service for adults with complex needs, challenging behaviours and
learning disabilities, in the Yorkshire and Humber region. The net
cash consideration for these acquisitions was GBP73.1m, which were
funded out of the Group's bank facilities.
Quality and regulatory
In order to deliver on our strategy and vision, and build a
sustainable business, our overriding focus remains on the quality
of the services we provide to those in our care. We are regulated
by the CQC and Ofsted for our English services, and HIW and CSIW
for our Welsh services. The sector has seen an increasingly
stringent regulatory environment in the year, both in the rigour of
inspections and the time taken in registering new sites and
services.
To drive our quality programme we have appointed Philip King,
who formerly worked at the CQC, as Director of Quality and Risk,
and Philip will join Cambian in April 2015. Our regulatory scores
remained strong in the year and we currently have no facilities
with compliance notices. A new scoring methodology for both Ofsted
and the CQC is currently being rolled out, and a key role for our
Director of Quality and Risk will be to ensure that Cambian
navigates successfully through the new regulatory environment.
Organisation and people
In a year of transition from private to public ownership, we
recruited a new Board who bring significant corporate and sector
experience to Cambian.
We are pleased to report that, with effect from 4 March 2015,
Anne Marie Carrie has accepted a full-time executive position with
the Group as CEO of our Children's Services division. Anne Marie
(previously a non-executive director of Cambian) brings
considerable experience to the role, having previously been Chief
Executive of Barnardo's (the UK's largest children's charity
providing fostering, education and counselling services to
vulnerable young people) and, prior to that, Director of Children's
Services and Deputy Chief Executive of The Royal Borough of
Kensington and Chelsea. Consequently, Anne Marie has stepped down
from the Board and from the Quality and Risk Committee and Alison
Halsey will chair the latter on an interim basis. We have already
commenced a search for a suitable replacement as independent
non-executive director and chair of the Quality and Risk
Committee.
In 2014 we strengthened our senior team with the recruitment of
an HR director and a Company Secretary & Head of Legal. In
addition we now have a commercial function dedicated to finding and
pursuing acquisitions and the execution of our organic growth
plan.
First and foremost, it is the 6,800 people who provide care and
support to our service users on a day by day basis who are the
heart of Cambian. With the UK economy performing well and a growing
demand for healthcare services, we have seen an increasingly
competitive market for employees and skills in the UK. In the year
we undertook a review of the recruitment and retention of staff,
and the overall employment proposition that Cambian offers, and we
will be launching new initiatives in response to this review in
2015.
ACL integration
Having merged with ACL on IPO in April 2014, we have now fully
integrated ACL into Cambian. This has involved re-structuring the
leadership team, upgrading the risk and quality function, and
integrating the operating platform including support services such
as IT and finance. In a dynamic market, we have also aligned
Children's Services more closely to customer needs; upskilling
staff in order to accept higher severity service users, investing
in our ESD education provision, and enhancing the therapeutic
services provided. Anne Marie Carrie's responsibilities as CEO of
Children's Services will include the businesses formerly part of
ACL.
Summary and outlook
The strong results reflect a good performance in 2014 with
progress made against the objectives set out at the start of the
year and on IPO. This good performance demonstrates the quality of
care and value for money we provide to our customers, and the Board
is confident that Cambian is well positioned to grow and looks to
the year ahead with confidence.
Operating Review
Summary of performance
Adult Services Children's Services Total
2014 2013 2014 2013 2014 2013
Revenue GBP100.6m GBP91.0m GBP140.0m GBP123.3m GBP240.6m GBP214.3m
Adjusted EBITDA(1) GBP24.6m GBP22.6m GBP23.7m GBP18.4m GBP48.4m GBP41.1m
Margin % 24.5% 24.8% 17.0% 14.9% 20.1% 19.2%
Underlying EBITDA(4) GBP25.2m GBP23.4m GBP25.0m GBP20.4m GBP50.2m GBP43.7m
Margin % 25.0% 25.7% 17.9% 16.5% 20.9% 20.4%
Average Capacity(5,6) 958 914 1,474 1,167 2,432 2,081
Average Occupancy(5) 853 773 1,094 895 1,947 1,668
Average Occupancy
% 89% 85% 74% 77% 80% 80%
Closing Capacity(5,6) 1,115 936 1,635 1,234 2,750 2,170
Closing Occupancy(5) 984 820 1,161 898 2,145 1,718
Closing Occupancy
% 88% 88% 71% 73% 78% 79%
Average fostering
placements 185 152 185 152
Fostering revenue GBP6.8m GBP5.7m GBP6.8m GBP5.7m
----------------------- ---------- --------- ----------- ---------- ---------- ----------
(1) Adjusted EBITDA is Earnings before net finance costs, tax,
depreciation, amortisation, profit or loss on disposal of assets,
exceptional items, M&A costs, and the charge relating to
Continuation Option Plan shares awarded as part of the IPO
(4) Underlying EBITDA is Adjusted EBITDA adding back development
losses incurred in the period, defined as losses on sites which are
within 18 months of opening and are yet to reach a profitable
occupancy
(5) Fostering is no longer included in the capacity and
occupancy numbers, and instead is disclosed separately due to
fostering's business model being different from our residential and
education services
(6) Capacity is defined as the number of places registered with
a regulator to accept service users
Group performance
The Group delivered revenue growth of 12% (2013: 16%) with
average occupancy of 80% (2013: 80%) in the year. Our Adult
Services division, with relatively mature units, increased
occupancy to 89% (2013: 85%). In our Children's Services division,
where significant capacity was added in the year, average occupancy
was 74% (2013: 77%).
As a key partner to the UK public service providers, we offer
excellent value for money both in terms of outcomes and as compared
to the cost of Government provision of equivalent services. After a
period where prices have been held stable, we increased prices on
average by 2% for new service users in April 2014, and this
positively impacted revenue as service users were admitted at new
price levels.
Adjusted EBITDA margin was 20.1% (2013: 19.2%) with tight cost
control and a reduction in development losses in 2014 compared to
2013. Underlying EBITDA margin, adding back development losses, was
20.9% (2013: 20.4%).
Divisional performance - Adult Services
Overview of performance
Adult Services revenue grew 11% in the year; including the
contribution of the acquisition of Ansel from September and
Woodleigh Community Care in December. Excluding these acquisitions,
growth was 8%. Average occupancy increased to 89% (2013: 85%),
driven by the fill up of maturing sites. Overall, our Adult
business performed well in 2014. This was partly a result of the
commissioning environment improving (following changes to the NHS
in 2012 which had impacted the structure of commissioning
healthcare), and partly with a number of maturing units filling up,
such as our adult brain injury and residential autism services.
The Adjusted EBITDA margin of our Adult Services division was
24.5% (2013: 24.8%), reflecting the benefit of improved operational
leverage offset by a higher allocation of shared costs to Adult in
2014 than in 2013. This change followed a review of our allocation
methodology, and excluding the impact of this higher shared cost
allocation, Adult Adjusted EBITDA margin increased by 2.0
percentage points. Underlying EBITDA, adding back development
losses incurred, was GBP25.2m (2013: GBP23.4m).
Organic growth
Our Adult net organic capacity increased by just 3 places in the
year, but with growth capex of GBP5.8m in the year relating to
Adult Services, we now have a strong pipeline of 80 places under
our ownership expected to open in 2015. The places to be opened
include services for personality disorders, acquired brain injury
and residential autism. Whilst Adult Services is a more mature
market than Children's Services, we believe good opportunities
exist for continued growth, particularly in specialist
sub-segments.
Acquisitions
We undertook two acquisitions in the year in Adult Services: the
Ansel Clinic in September for a net cash consideration GBP4.1m and
Woodleigh Community Care in December for a net cash consideration
of GBP61.4m. Ansel is a unique service for people with personality
disorders, and has a strong reputation in the industry through the
specialist model of care it has developed. The acquisition of Ansel
has also helped Cambian to strengthen its relationship with NHS
England, and provides expertise to further expand this
relationship. Woodleigh provides a full pathway for specialist,
community-based, high severity care for adults with complex needs,
challenging behaviours and learning disabilities. The business
operates 152 beds, across 13 residential homes and supported living
units and one hospital in the Yorkshire and Humber region. The care
and approach of Woodleigh is well aligned to the Department of
Health's Transforming Care agenda and provides Cambian with a
platform to replicate these services and approach in additional
sites in neighbouring regions.
Divisional performance - Children's Services
Overview of performance
Children's Services revenue grew by 14% in the year, supported
by the acquisition of three Further Education colleges from Mencap
and the New Elizabethan School. Excluding these acquisitions,
revenue growth was 5%. Average occupancy was 74% (2013: 77%), with
a net of 126 places being added organically in the year. The
performance of our schools for children with special educational
needs, such as Autism, was good with high demand from our
customers, and our newer sexual trauma services (the SACCs business
that was part of ACL) and mental health units grew well in the
year. Revenue from our complex care residential business (also part
of ACL) was broadly flat on the prior year with a number of units
re-provisioned in the year; we expect this business to grow in the
future as units mature. Our fostering business grew well, and as
stated above, we reviewed our fostering offering in the year and
will be increasing our investment in 2015 in this area.
The Adjusted EBITDA margin of our Children's Services segment
was 17.0% (2013: 14.9%) with good cost control in the year, a
reduction in development losses in 2014 compared to 2013 and the
benefit of a lower allocation of shared costs in 2014 than in 2013.
This change followed a review of our allocation methodology, and
excluding the impact of this lower shared costs allocation,
Children's Adjusted EBITDA margin increased by 0.3%. Underlying
EBITDA, adding back development losses incurred, was GBP25.0m
(2013: GBP20.4m).
Organic growth
We added a net total of 126 places organically in the year,
including the impact of re-provisioning 47 places for children in
larger homes into 29 places in smaller units. These increases were
mainly in our children's residential services including the
associated education provision. In addition to adding places to
capacity, we also expanded our 52 week education provision in
certain of our education facilities, and added a further education
service (similar to the colleges we acquired) into an existing
Cambian unit. Of our total growth capex of GBP18.2m in the year,
GBP12.4m related to Children's Services and we now have a strong
pipeline of 120 places under our ownership and due to open in 2015.
These include a day school for children with autism, and
residential services for children suffering from mental health
conditions, or sexual trauma.
Acquisitions
In the Children's Services division, we completed the
acquisition of three further education colleges from Mencap, and a
day school for autistic children, for a net cash consideration of
GBP7.6m. The integration of these acquisitions has been completed
and we are very positive about the opportunities they bring to the
Group. An additional GBP0.3m of deferred consideration was paid in
the year on a prior year acquisition.
Financial Review
Summary
Revenue in the year was GBP240.6m (2013: GBP214.3m), an increase
of 12% on the prior year. Adjusted EBITDA was GBP48.4m (2013:
GBP41.1m), giving a margin of 20.1% (2013: 19.2%). Operating profit
was GBP7.1m (2013: GBP24.9m), after exceptional items in the year.
Operating profit before exceptional items grew 5% to GBP29.4m
(2013: GBP27.9m). A reconciliation of Adjusted EBITDA to operating
profit is set out below:
2014 GBPm 2013 GBPm
=============================== =========== ==========
Adjusted EBITDA(1) 48.4 41.1
Depreciation and amortisation (15.3) (13.2)
M&A costs (2.1) -
Charge on IPO option plans (1.6) -
Exceptional items (22.3) (3.0)
=============================== =========== ==========
Operating profit 7.1 24.9
=============================== =========== ==========
(1) Adjusted EBITDA is Earnings before net finance costs, tax,
depreciation, amortisation, profit or loss on disposal of assets,
exceptional items, M&A costs, and the charge relating to
Continuation Option Plan shares awarded as part of the IPO
M&A costs
M&A costs represent advisory fees, stamp duty and other
direct costs in respect of acquisitions completed in the
period.
Charge on IPO option plans
The charge on IPO option plans arises on Continuation Option
Plan shares awarded as part of the IPO, the impact of which is
excluded from Adjusted EBITDA. Charges on future share based awards
will be included within Adjusted EBITDA.
Exceptional items
Exceptional items of GBP22.3m (2013: GBP3.0m) were incurred in
the year and comprised the following items: GBP9.1m costs
associated with raising capital, GBP7.7m for the cost of share
schemes vesting on IPO (of which GBP3.6m was non cash), GBP5.7m in
respect of business integration costs, and a GBP0.2m gain on
acquisitions made.
Costs associated with raising capital are advisory fees and
other costs related to the IPO of Cambian in April 2014. Share
schemes vesting on IPO relate to the value of shares from prior
incentive plans which vested on IPO. The majority of shares vesting
were satisfied by the award of new shares in Cambian Group plc
(effectively management rolling their shareholdings into Cambian
Group plc shares). Of the GBP7.7m charge, GBP3.6m was non-cash, and
GBP4.1m was payroll taxes due on the value of the shares
vesting.
Business integration costs refer to costs associated with the
merger and integration of ACL. The principal items included are
external consultancy costs, retention bonuses for certain staff due
to leave the business but whose services were required during the
integration process, redundancy and recruitment costs for roles
changing as a result of the integration, exit costs for certain
redundant leases and contracts (such as a data centre agreement),
and legal and advisory costs on a corporate entity reorganisation.
We now consider the integration of ACL to be complete and do not
anticipate any further one-off costs in 2015 in relation to the
integration.
The gain on acquisition is the difference between the fair value
of the assets acquired and the consideration on certain
acquisitions in the year. See page 18 for more details.
Finance charges
The Group incurred net finance costs of GBP11.3m in the period
(2013: GBP17.1m). Of this total, GBP4.4m related to the financing
of the Group from the date of IPO to the 31 December 2014, and this
post IPO cost is more representative of the cost of financing the
Group under its new capital structure.
Taxation
The Group's tax charge was GBP4.1m (2013: GBP2.4m credit)
representing 21% of profit before tax, M&A costs and
exceptional charges. The difference between the current statutory
rate of 22% and the effective tax rate is due to some expenses not
being allowable for Corporation Tax purposes, in particular
depreciation being in excess of capital allowances. AG
Earnings per share
Statutory basic EPS was a 6.1 pence loss. Adjusted basic EPS is
defined as statutory basic EPS, adding back the impact of
amortisation of acquired intangible assets, exceptional items, and
the charge relating to Continuation Option Plan shares awarded as
part of the IPO, net of the tax effect of these items. All Adjusted
EPS calculations reflect the number of shares in issue post IPO,
excluding shares held in the Employee Benefit Trust, of
168,888,888.
Statutory basic EPS reconciles to Adjusted basic EPS as
follows:
2014 pence 2013 pence
============================================ ============ ===========
Statutory basic EPS (6.1) 16.1
-------------------------------------------- ------------ -----------
EPS amended to reflect post IPO share
count in both years (5.0) 6.0
Amortisation of acquired intangible assets 1.1 1.0
Charge on IPO option plans 0.8 -
Exceptional items and M&A costs 14.1 1.7
============================================ ============ ===========
Adjusted basic EPS 11.0 8.7
============================================ ============ ===========
Capital expenditure
The Group incurred GBP24.5m (2013: GBP14.3m) of capital
expenditure in the period, of which GBP18.2m related to organic
growth (2013: GBP9.5m). This capital expenditure has supported the
129 net new places we opened organically in the year, and also the
pipeline of 200 places under our ownership and planned to open in
2015. Maintenance capital expenditure of GBP6.3m (2013: GBP4.8m)
was incurred, relating to investment in our existing facilities
which included a programme of quality improvements in the portfolio
of our complex care and sexual trauma children's services units in
the year. In addition, maintenance capital expenditure includes an
investment in our IT systems particularly relating to HR and
Payroll.
Acquisitions
The Group made four acquisitions in the year, being the Mencap
Colleges, the New Elizabethan School, the Ansel Clinic and
Woodleigh Community Care. The net cash consideration for these
acquisitions was GBP73.1m, with an additional GBP0.3m deferred
consideration being paid in the year on a prior year
acquisition.
Dividend
As stated at the time of the IPO and subject to performance, the
Board intends to pay an interim and final dividend in each
financial year, which will be in the approximate proportions of
one-third and two-thirds respectively of the total expected annual
dividend.
As stated at the time of the IPO, the Directors intend that the
first dividend to be paid by Cambian would be a final dividend
amounting to not less than GBP3 million in respect of the period
from Admission to December 2014. Consistent with this statement,
the Board is proposing a single dividend of 1.8 pence per ordinary
share, payable to shareholders on the register on 7 April 2015 and
which will be paid on 23 April 2015, subject to approval by
shareholders at the Annual General Meeting to be held on 15 April
2015.
Cash flow
A reconciliation of cash flow from Adjusted EBITDA to the
movement in net debt is set out below.
2014 GBPm
============================================ ===========
Adjusted EBITDA 48.4
Movement in working capital 0.6
Cash interest paid (7.6)
Tax paid (1.3)
Cash exceptional items (20.9)
Other items (0.3)
-------------------------------------------- -----------
Net cash from operating activities 18.9
Capital expenditure (24.5)
Acquisitions (73.4)
Movement in cash held on behalf of clients 0.2
-------------------------------------------- -----------
Net cash flow before financing (78.8)
Opening net debt (215.7)
Issue of share capital 21.0
Shareholder loans capitalised/other items 84.8
============================================ ===========
Closing net debt (188.7)
============================================ ===========
Net cash from operating activities was GBP18.9m, the reduction
being mainly a result of the exceptional items in 2014 which is
described above. Within the movement in working capital,
approximately GBP1m relates to year end debtors on the further
education colleges acquired from Mencap, which were zero on
acquisition (as Cambian did not acquire working capital).
Debt facilities
On 31 March 2014, the Group signed a five year GBP200m
facilities agreement with a syndicate of banks consisting of a
GBP75m term loan and a GBP125m revolving credit facility. The
facilities carry interest at between 2.00% and 2.75% over LIBOR
depending on the level of leverage. The principal covenants are net
debt to Adjusted EBITDA (initially set at a maximum ratio of 4.5:1
and reducing over time to 3.75:1) and interest cover (calculated as
the ratio of Adjusted EBITDA to finance charges) of not less than
4:1. For both covenants, Adjusted EBITDA is calculated after adding
back development losses of up to GBP3m per year. On 3 December 2014
the Group's facilities were extended by GBP55m to finance the
acquisition of Woodleigh Community Care, giving the Group total
facilities of GBP255m.
At 31 December 2014 the Group had drawn GBP216.5m on these
facilities. Together with cash on the balance sheet, net debt was
GBP188.7m at the year end. Including the pre-acquisition profits of
Woodleigh in the calculation (as prescribed under the facilities
agreement), the Group's net debt to Adjusted EBITDA was 3.4x at 31
December 2014, and Adjusted EBITDA to interest payable was
9.5x.
Statement of Directors' Responsibilities
The following statement will be contained in the 2014 Annual
Report and Accounts.
Each of the directors, whose names and functions are listed in
the annual report for the year ended 31 December 2014 confirm that,
to the best of their knowledge:
-- the annual report and financial statements, taken as a whole,
are fair, balanced and understandable and provide the information
necessary for shareholders to assess the company's performance,
business model and strategy;
-- the Group financial statements, which have been prepared in
accordance with IFRSs as adopted by the EU, give a true and fair
view of the assets, liabilities, financial position and profit of
the Company and the undertakings included in the consolidation
taken as a whole; and
-- the Directors' Report includes a fair review of the
development and performance of the business and the position of the
Company and its subsidiary undertakings, together with a
description of the principal risks and uncertainties that they
face.
By order of the Board
Saleem Asaria Andrew Griffith
Chief Executive Officer Chief Financial Officer
Cautionary Statement
Certain statements in this preliminary announcement are
forward-looking. Although the Group believes that the expectations
reflected in these forward-looking statements are reasonable, we
can give no assurance that these expectations will prove to have
been correct. Because these statements contain risks and
uncertainties, actual results may differ materially from those
expressed or implied by these forward-looking statements. We
undertake no obligation to update any forward-looking statements
whether as a result of new information, future events or
otherwise.
Consolidated Income Statement
For the year ended 31 December 2014
Note 2014 2013
GBP'000 GBP'000
Revenue 240,596 214,305
Cost of sales (142,917) (132,997)
Gross profit 97,679 81,308
Administrative expenses (90,582) (56,421)
Operating profit 7,097 24,887
Exceptional items included within
administrative expenses 2 (22,260) (2,978)
Operating profit before exceptional
items 29,357 27,865
------------------------------------- ----- ---------- ----------
Finance income 3 22 41
Finance costs 4 (11,359) (17,158)
(Loss)/profit before tax (4,240) 7,770
Tax (4,146) 2,448
---------- ----------
Total comprehensive (loss)/income (8,386) 10,218
---------- ----------
Total comprehensive (loss)/income for
the year attributable to:
Equity owners of the Company (8,386) 10,074
Non-controlling interests - 144
---------- ----------
(8,386) 10,218
---------- ----------
(Loss)/earnings per share:
-- Basic (pence per share) (6.1) 16.1
-- Diluted (pence per share) (6.1) 16.1
---------- ----------
Consolidated Balance Sheet
At 31 December 2014
Note 2014 2013
GBP'000 GBP'000
Non-current assets
Goodwill 101,516 60,224
Other intangible assets 49,245 25,377
Property, plant and equipment 354,738 324,623
505,499 410,224
---------- ----------
Current assets
Trade and other receivables 28,579 25,811
Cash and cash equivalents 5 27,399 24,883
Prepayments and accrued income 4,523 3,422
60,501 54,116
---------- ----------
Total assets 566,000 464,340
---------- ----------
Current liabilities
Trade and other payables (32,230) (33,109)
Deferred revenue (28,851) (20,361)
Current tax liabilities (7,877) (2,815)
Obligations under finance leases (24) (83)
Borrowings 6 (750) (20,556)
Derivative financial instruments - (62)
(69,732) (76,986)
---------- ----------
Net current liabilities (9,231) (22,870)
---------- ----------
Non-current liabilities
Borrowings 6 (214,200) (219,896)
Obligations under finance leases (1,094) (46)
Derivative financial instruments - (186)
Deferred tax liabilities (48,842) (41,561)
(264,136) (261,689)
---------- ----------
Total liabilities (333,868) (338,675)
---------- ----------
Net assets 232,132 125,665
---------- ----------
Equity
Share capital 7 1,723 634
Share premium 386,653 145,123
Convertible equity instrument 8 - 129,362
Retained earnings (12,086) (3,700)
Other reserves 9 (144,158) (145,756)
Equity attributable to owners of
the Company 232,132 125,663
---------- ----------
Non-controlling interests - 2
Total equity 232,132 125,665
---------- ----------
Consolidated Statement of Changes in Equity
For the year ended 31 December 2014
Equity attributable to owners of the ultimate controlling
party
Share Share Convertible Other Retained Total Non-controlling Total
Capital Premium Equity reserves Earnings Interest Equity
Instrument
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1
January 2013 634 145,123 129,362 (145,756) (13,774) 115,589 (142) 115,447
-
Total
comprehensive
income
for the year - - - - 10,074 10,074 144 10,218
-
Balance at 31
December
2013 634 145,123 129,362 (145,756) (3,700) 125,663 2 125,665
--------- ---------- ------------ ---------- ---------- -------- ---------------- ----------
-
Total
comprehensive
loss
for the year - - - - (8,386) (8,386) - (8,386)
Issue of share
capital 526 112,731 - - - 113,257 - 113,257
Purchase of
shares by
employee
benefit trust - - - (34) - (34) - (34)
Adjustment
arising from
change in
non-controlling
interest - - - - - - (2) (2)
Conversion of
equity
instrument 563 128,799 (129,362) - - - - -
Credit to equity
for equity
settled share
based payments - - - 1,632 - 1,632 - 1,632
Balance at 31
December
2014 1,723 386,653 - (144,158) (12,086) 232,132 - 232,132
--------- ---------- ------------ ---------- ---------- -------- ---------------- ----------
Non-controlling interests relate to the equity held by management and ex-employees in Cambian
Holdings Limited, Cambian Developments Limited, Care Aspirations Holdings Limited and Advanced
Childcare Holdings Limited prior to the IPO.
Consolidated Statement of Cash Flows
For the year ended 31 December 2014
Note 2014 2013
GBP'000 GBP'000
Net cash inflow from operating activities 14 18,933 35,426
---------- ---------
Investing activities
Proceeds on disposal of property,
plant and equipment - 475
Purchases of property, plant and equipment (24,526) (14,314)
Acquisition of subsidiaries, net of
cash (73,400) (5,325)
Net cash used in investing activities (97,926) (19,164)
---------- ---------
Financing activities
Repayments of borrowings (155,819) (18,808)
New bank loans raised, net of issue
costs 215,241 7,223
Proceeds from sale and leaseback 1,094 -
Repayments of obligations under finance
leases (105) (107)
Proceeds on issue of shares 20,945 -
Net cash flow from/(used in) financing
activities 81,356 (11,692)
---------- ---------
Net increase in cash and cash equivalents 2,363 4,570
Net increase in cash held on behalf
of clients 153 188
Cash and cash equivalents at beginning
of the year 24,883 20,125
Cash and cash equivalents at end of
the year 27,399 24,883
---------- ---------
Notes to the Financial Information
For the year ended 31 December 2014
1. General Information
Basis of Preparation
Cambian Group Plc (the "Company") is a company incorporated in
the United Kingdom under the Companies Act. The principal activity
of the Company and its subsidiaries (collectively, the "Group") is
the provision of high quality behavioural health services to
children and adults.
The preliminary announcement is based on the Group's financial
statements for the year ended 31 December 2014 which are prepared
in accordance with International Financial Reporting Standards
(IFRS) as adopted for use in the European Union. The accounting
policies adopted in the preparation of the consolidated financial
statements are consistent with those applied by the Group in its
prospectus for the years ended 31 December 2013, 31 December 2012
and 31 December 2011. The prospectus is publicly available, and can
be obtained on request from the Company. Whilst the financial
information included in this preliminary announcement has been
computed in accordance with IFRS, this announcement does not itself
contain sufficient information to comply with IFRS.
The financial information set out in this announcement does not
constitute statutory accounts within the meaning of Sections 434 to
436 of the Companies Act 2006 and is an abridged version of the
Group's financial statements for the year ended 31 December 2014
which were approved by the directors on 4 March 2015. Statutory
accounts for the year ended 31 December 2014 will be delivered to
the Registrar of Companies in due course. The auditor has reported
on those accounts, the report was unqualified and did not contain
statements under Section 498 of the Companies Act 2006. Statutory
accounts for Cambian Group plc have not previously been prepared as
the Company was incorporated on 8 March 2014.
Going concern
The directors have, at the time of approving the financial
statements, a reasonable expectation that the Company and the Group
have adequate resources to continue in operational existence for
the foreseeable future. Accordingly, they have adopted the going
concern basis of accounting in preparing the financial statements.
The directors have considered the Group and Company's forecasts and
projections, taking account of reasonably possible changes in
trading performance, and are satisfied that the Group and Company
should be able to operate within the level of its current
facilities.
Exceptional items
Exceptional items reflect expenditure which in the judgement of
the directors, individually or, if of a similar type, in aggregate,
need to be disclosed separately due to their size or incidence in
order to obtain clear and consistent presentation of the Group's
performance.
Business combination under common control
On 15 April 2014 (the "Transfer Date"), the Company legally
acquired Cambian Capital Limited, Care Aspirations Capital Limited
and Advanced Childcare Capital Limited, together with their
underlying subsidiaries (collectively the "Holding Companies") (the
"Transaction").
Prior to the Transfer Date, the Company and Holding Companies
were ultimately owned by funds advised by GI Partners. Cambian
Capital Limited's ultimate owner was GI GP LLC. The ultimate owner
of Care Aspirations Capital Limited and Advanced Childcare Capital
Limited was GI GP III LLC. The legal entities constituting the
Group have not together constituted a legal group prior to the
Transfer date.
Management has considered IFRS 10 Consolidated Financial
Statements and concluded that the Holding Companies were under the
common control of the funds ultimately controlled by GI Partners
prior to the Transfer date. In making its judgement, management
considered the definition of control in IFRS 10 and the detailed
guidance contained therein.
The Transaction has been accounted for under the pooling of
interest method, where the consolidated financial statements of the
Company are presented as a continuation of an existing group, on
the basis of ultimate common control and, therefore, outside the
scope of IFRS 3 Business Combinations. The following accounting
treatment has been applied in these consolidated financial
statements:
a) the year ended 31 December 2013 and the information presented
for the period commencing 1 January 2014 up until the Transfer Date
are the combined results and financial position of the Holding
Companies;
b) the assets and liabilities of the Holding Companies are
recognised and measured at the pre-transaction carrying amounts,
without restatement to fair value;
c) The share capital and share premium of the Company at the
Transfer Date have been presented to 1 January 2013 and equally
offset by a negative "other reserve" of GBP145.8m; and the retained
earnings and other equity reserve balances presented prior to the
Transaction are those of the Holding Companies as the Company did
not trade prior to the Transaction; and
d) For the period up to the Transfer date, combined financial
information incorporates the financial performance and position of
Cambian Capital Limited, Care Aspiration Capital Limited, and
Advanced Childcare Capital Limited.
2. Exceptional items
The following table provides a breakdown of exceptional
items:
2014 2013
GBP'000 GBP'000
Costs associated with raising
capital 9,113 2,308
Business integration 5,605 670
Gain on acquisition (158) -
Share schemes vesting
on IPO 7,700 -
-------- --------
22,260 2,978
-------- --------
Costs associated with raising capital are advisory fees and
other costs related to the IPO of Cambian Group plc in April
2014.
Business integration costs are costs associated with the merger
with Advanced Childcare Group. The principal items included are
external consultancy costs, retention bonuses for specific staff
due to leave the business but whose services were required during
the integration process, redundancy and recruitment costs for roles
required as a result of the integration, exit costs for certain
redundant leases and contracts, and legal and advisory costs on a
corporate entity reorganisation.
The gain on acquisition is the difference between the fair value
of the assets acquired and the consideration on certain
acquisitions in the year. See note 11 for more details.
Share schemes vesting on IPO relate to the value of shares from
prior incentive plans which vested on IPO. The majority of shares
vesting were satisfied by the award of new shares in Cambian Group
plc (effectively management rolling their prior shareholdings into
Cambian Group plc shares). Of the GBP7.7m charge, GBP3.6m was
non-cash, and GBP4.1m was payroll taxes due on the value of the
shares vesting.
The majority of the exceptional costs are capital in nature and
therefore do not attract a tax deduction. The Group estimates that
GBP2.5m of the exceptional costs will be deductible, and this is
reflected in a GBP0.5m reduction in the tax charge for the
year.
3. Finance income
2014 2013
GBP'000 GBP'000
Interest income on bank
deposits 22 41
-------- --------
22 41
-------- --------
4. Finance costs
2014 2013
GBP'000 GBP'000
Interest on bank overdrafts and
loans 7,364 5,785
Amortised loan issue
costs 1,302 1,366
Interest on shareholder loans 2,937 9,450
Total borrowing costs 11,603 16,601
Interest on obligations under
finance leases 3 9
Change in the fair value of derivative financial
instruments (247) 548
-------- --------
Total finance costs 11,359 17,158
-------- ----------
5. Cash and cash equivalents
2014 2013
GBP'000 GBP'000
Cash and bank balances 25,252 23,604
Cash held on behalf of clients 2,147 1,279
-------- --------
27,399 24,883
-------- --------
Cash and cash equivalents include cash held on behalf of
clients. All interest earned on these funds are returned back to
the client and are not included in the Group's statement of
comprehensive income. An equivalent liability of GBP2.1m (2013:
GBP1.3m) exists for this amount.
6. Borrowings
2014 2013
GBP'000 GBP'000
Unsecured borrowing at amortised
cost
Shareholder loans - 85,951
Secured borrowing at amortised
cost
Bank loan 214,950 154,501
-------- --------
Total borrowings 214,950 240,452
-------- --------
Amount due for settlement within
12 months 750 20,556
-------- --------
Amount due for settlement after
12 months 214,200 219,896
-------- --------
The borrowings above are shown net of loan issue costs incurred
at inception of the loan.
Prior to the IPO, the Group had four principal secured bank
loans and an unsecured loan from its majority shareholder. On IPO,
the Group refinanced all of its debt with a new senior term loan of
GBP75m and revolving facilities agreement of GBP125m ("the
facilities"), totalling GBP200m, provided by a syndicate of banks,
and secured over the assets of the Group. The facilities were
subsequently extended by GBP55m on 5 December 2014 to fund the
acquisition of the Woodleigh Community Care. The facilities expire
on 31 March 2019 and, loans drawn under the facilities carry an
interest rate of between 2.00% and 2.75% above LIBOR.
At 31 December 2014, GBP75m was drawn under a fixed term loan
and GBP141.5m was drawn under a revolving credit facility, both
expiring on 31 March 2019.
7. Share capital
2014 2013 2014 2013
Number of Number of GBP'000 GBP'000
shares shares
Issued and fully paid
- ordinary shares of
1p each:
Balance at 1 January 63,415,000 63,415,000 634 634
Allotted during the
year 52,638,410 - 526 -
Conversion of equity
instrument 56,281,700 - 563 -
------------ ----------- -------- --------
Balance at 31 December 172,335,110 63,415,000 1,723 634
------------ ----------- -------- --------
Following admission to the London Stock exchange the ordinary
shares rank equally for voting purposes. Each ordinary share holds
one vote and ranks equally for any dividend declared.
On IPO, net cash proceeds received by Cambian Group plc from the
issue of new share capital were GBP20.9m. The remaining shares were
issued in a share for share exchange with the previous majority
shareholders and conversion of an equity instrument issued by the
majority shareholders.
8. Convertible equity instrument
2014 2013
GBP'000 GBP'000
Balance at 1 January 129,362 129,362
Conversion of equity instrument (129,362) -
---------- --------
Balance at 31 December - 129,362
---------- --------
The convertible equity instrument relates to the initial
injection of funds into the Group by funds advised by GI Partners
for the purposes of investment in the Group's operations which was
converted to equity on 16 April 2014.
9. Other reserves
2014 2013
GBP'000 GBP'000
Balance at 1 January 145,756 145,756
Purchase of shares by employee benefit
trust 34 -
Credit to equity for equity settled share
based payments (1,632) -
Balance at 31 December 144,158 145,756
--------- ---------
Other reserves of GBP145.8m arose at the date of the IPO, when
the Group was formed and accounted for under the pooling of
interest method. As a result, the consolidated financial statement
of the Company was presented as a continuation of an existing
Group, under the basis of ultimate control. Other items in other
reserves includes the purchase of Cambian Group plc shares by the
Employee Benefit Trust and the credit to equity for equity settled
share based payments.
10. Share based payments
Number of Fair value
shares of grant
GBP'000
At 31 December 2014
Outstanding at beginning of
the year - -
Granted during the
year 3,446,222 7,754
Outstanding at the end of the
year 3,446,222 7,754
---------- -----------
The entity has a forfeitable share scheme for the executive
directors and qualifying employees ("participant"). The participant
will forfeit the forfeitable shares if they cease to be an employee
of the Group before the vesting date, unless otherwise determined
by the Board.
During the year, and prior to IPO, nil-cost options were awarded
to certain employees and executives of the Group under Continuation
Option Plan 1 and Continuation Option Plan 2. 3,199,997 nil-cost
options over ordinary shares were awarded under Continuation Option
Plan 1, and a third of these become exercisable on each of the
third, fourth and fifth anniversaries of the date of IPO and remain
exercisable until the tenth anniversary of the date of IPO. 246,225
nil-cost options over ordinary shares were awarded under
Continuation Option Plan 2, and these become exercisable eighteen
months from the date of IPO and remain exercisable until the tenth
anniversary of the date of IPO. All of the nil-cost options awarded
under these plans were awarded at the then fair value market price
of GBP2.25.
The total fair value charge of GBP7.8m will be expensed over the
vesting periods, ranging between 18 months and 5 years. The total
expense recognised in the year was GBP1.6m.
11. Acquisition of subsidiaries
Year ended 31 December 2014
(a) New Elizabethan School
On 17 April 2014 the Group acquired the trade and assets of The
New Elizabethan School ("NES") for GBP0.7m. NES is a day school for
children with autism and complex needs. The transaction has been
accounted for by the acquisition method of accounting in accordance
with IFRS 3 (2008).
The following table summarises the consideration paid for NES,
the provisional fair value of assets acquired and liabilities
assumed at the acquisition date:
Date acquired 17 April 2014
GBP'000
Property, plant and equipment 24
Identifiable intangible assets 990
Deferred tax liabilities (198)
Total identifiable
assets 816
Gain on acquisition (recognised in administrative
expenses) (158)
--------------
Cash consideration
paid 658
Less: Cash and cash equivalents in subsidiary -
--------------
Cash flow on acquisition 658
--------------
The acquisition resulted in a gain to the income statement as
the previous owners were focussed on selling the business to a high
quality acquirer and as a result the Group was able to agree the
purchase on favourable terms.
Acquisition related costs (included in administrative expenses
in Cambian Group plc consolidated income statement) amounted to
GBP0.2m.
NES contributed revenue of GBP0.4m and GBPNil to the Group's
profit before tax for the period between the date of acquisition
and the balance sheet date.
(b) Mencap colleges
On 3 June 2014 the Group acquired the trade and assets of three
Mencap further education colleges, Lufton, Dilston and Pengwern for
GBP6.9m. The colleges provide a specialised environment to support
the education of young people with complex health and behavioural
needs. The transaction has been accounted for by the acquisition
method of accounting in accordance with IFRS 3 (2008).
The following table summarises the consideration paid for the
three Mencap colleges, the provisional fair value of assets
acquired and liabilities assumed at the acquisition date:
Date acquired 3 June 2014
GBP'000
Property, plant and
equipment 6,000
Identifiable intangible
assets 1,500
Deferred tax liabilities (1,548)
Total identifiable assets 5,952
Goodwill 963
------------
Cash consideration paid 6,915
Less: Cash and cash equivalents in subsidiary -
------------
Cash flow on acquisition 6,915
------------
The goodwill of GBP1.0m arising from the acquisition consists of
the value of the assembled workforce, potential synergies gained
from combining the head office functions and expansion potential.
None of the goodwill is expected to be deductible for income tax
purposes.
Acquisition related costs (included in administrative expenses
in Cambian Group plc consolidated income statement) amounted to
GBP0.5m.
The three Mencap colleges contributed revenue of GBP8.0m and
GBP2.1m to the Group's profit before tax for the period between the
date of acquisition and the balance sheet date.
(c) Cambian Ansel Limited
On 5 September 2014 the Group acquired 100% of the share capital
of Ansel Limited ("Ansel") for GBP4.4m. Ansel is a 24 bed clinic
for men suffering from personality disorders. The transaction has
been accounted for by the acquisition method of accounting in
accordance with IFRS 3 (2008).
The following table summarises the consideration paid for Ansel,
the provisional fair value of assets acquired and liabilities
assumed at the acquisition date:
Date acquired 5 September 2014
Percentage acquired 100.00%
GBP'000
Cash and cash equivalents 209
Trade and other receivables 445
Property, plant and
equipment 4,236
Identifiable intangible
assets 610
Trade and other payables (629)
Deferred tax liabilities (900)
Total identifiable assets 3,971
Goodwill 385
-----------------
Cash consideration paid 4,356
Less: Cash and cash equivalents in subsidiary (209)
-----------------
Cash flow on acquisition 4,147
-----------------
The goodwill of GBP0.4m arising from the acquisition consists of
the value of the assembled workforce, potential synergies gained
from combining the head office functions and expansion potential.
None of the goodwill is expected to be deductible for income tax
purposes.
Trade and other receivables include receivables with a gross
contractual value of GBP0.4m. As at the acquisition date, the best
estimate of contractual cash flows not expected to be collected was
GBPNil.
Acquisition related costs (included in administrative expenses
in Cambian Group plc consolidated income statement) amounted to
GBP0.2m.
Ansel contributed revenue of GBP1.2m and GBP0.2m to the Group's
profit before tax for the period between the date of acquisition
and the balance sheet date.
(d) Woodleigh Community Care
On 5 December 2014 the Group acquired 100% of the share capital
of Woodleigh Community Care Group for GBP65.5m ("Woodleigh").
Woodleigh is a residential service for adults with complex needs,
challenging behaviours and learning disabilities. The transaction
has been accounted for by the acquisition method of accounting in
accordance with IFRS 3 (2008).
The following table summarises the consideration paid for
Woodleigh, the provisional fair value of assets acquired and
liabilities assumed at the acquisition date:
Date acquired 5 December 2014
Percentage acquired 100.00%
GBP'000
Cash and cash equivalents 4,105
Trade and other receivables 1,067
Property, plant and
equipment 8,183
Identifiable intangible
assets 23,240
Trade and other payables (3,901)
Deferred tax liabilities (5,915)
Current tax liabilities (941)
Total identifiable
assets 25,838
Goodwill 39,671
--------
Cash consideration
paid 65,509
Less: Cash and cash equivalents in subsidiary (4,105)
--------
Cash flow on acquisition 61,404
--------
The goodwill of GBP39.7m arising from the acquisition consists
of the value of the assembled workforce, potential synergies gained
from combining the head office functions and expansion potential.
None of the goodwill is expected to be deductible for income tax
purposes.
Trade and other receivables include receivables with a gross
contractual value of GBP1.1m. As at the acquisition date, the best
estimate of contractual cash flows not expected to be collected was
GBPNil.
Acquisition related costs (included in administrative expenses
in Cambian Group plc consolidated income statement) amounted to
GBP1.4m.
Woodleigh contributed revenue of GBP1.4m and GBP0.4m to the
Group's profit before tax for the period between the date of
acquisition and the balance sheet date.
Year ended 31 December 2013
(a) Whinfell School
On 13 June 2013 the Group acquired 100% of the share capital of
Whinfell School Limited ("Whinfell") for GBP5.7m. The transaction
has been accounted for by the acquisition method of accounting in
accordance with IFRS 3 (2008).
The following table summarises the consideration paid for
Whinfell, the fair value of assets acquired and liabilities assumed
at the acquisition date:
13 June
Date acquired 2013
Percentage acquired 100.00%
GBP'000
Cash and cash equivalents 400
Trade and other receivables 330
Property, plant and
equipment 1,013
Identifiable intangible
assets 3,452
Trade and other payables (504)
Deferred tax liabilities (1,006)
Total identifiable
assets 3,685
Goodwill 2,040
Cash consideration
paid 5,725
Less: Cash and cash equivalents in subsidiary (400)
Cash flow on acquisition 5,325
----------
The goodwill of GBP2.0m arising from the acquisition consists of
the value of the assembled workforce, potential synergies gained
from combining the head office functions and expansion potential.
None of the goodwill is expected to be deductible for income tax
purposes.
Trade and other receivables include receivables with a gross
contractual value of GBP0.3m. As at the acquisition date, the best
estimate of contractual cash flows not expected to be collected was
GBPNil.
Acquisition related costs (included in administrative expenses
in Cambian Group plc consolidated income statement) amounted to
GBP0.2m.
Whinfell contributed GBP1.3m revenue and GBP0.1 to the Group's
profit before tax for the period between the date of acquisition
and the balance sheet date.
12. Business and geographical segments
Products and services from which reportable segments derive
their revenues
Management has determined the operating segments based on the
monthly management pack reviewed by the Board, which is used to
assess both the performance of the business and to allocate
resources within the Group. Management have identified the Board of
Directors as the chief operating decision maker ("CODM") in
accordance with the requirements of IFRS 8 - Operating segments.
The operating and reportable segments are in reference to the
category of the customer:
Adult Services - Provision of specialist behavioural
science healthcare services for adults
Children's Services - Provision of specialist behavioural
science healthcare services for children
The Group assesses segment performance using Adjusted EBITDA and
Underlying EBITDA as its primary and supplementary measures,
respectively.
Adjusted EBITDA is defined as earnings before net finance costs,
tax, depreciation, amortisation, profit or loss on disposal of
assets, exceptional items, acquisition costs, and the charge
relating to Continuation Option Plan shares awarded as part of the
IPO.
Underlying EBITDA is Adjusted EBITDA adding back development
losses incurred in the period, defined as losses on sites which are
within 18 months of opening and are yet to reach a profitable
occupancy.
All revenue for the Group is generated from within the UK and
there are no inter-segment revenues.
Segment revenues and results
The following is an analysis of the Group's revenue and results
by reportable segment in 2014:
Adult Child Consolidated
2014 2014 2014
GBP'000 GBP'000 GBP'000
Revenue 100,636 139,960 240,596
Underlying EBITDA 25,231 24,983 50,214
---------- ------------- -------------
Development losses (603) (1,258) (1,861)
---------- ------------- -------------
Adjusted EBITDA 24,628 23,725 48,353
---------- ------------- -------------
Depreciation, amortisation and impairment (15,282)
Loss on disposal of property, plant and equipment (46)
Merger and acquisition costs (2,036)
Share based payment charge (1,632)
Exceptional items (22,260)
Operating profit 7,097
Finance income 22
Finance costs (11,359)
-------------
Loss before tax (4,240)
-------------
The following is an analysis of the Group's revenue and results
by reportable segment in 2013:
Adult Child Total
2013 2013 2013
GBP'000 GBP'000 GBP'000
Revenue 91,015 123,290 214,305
Underlying EBITDA 23,370 20,351 43,721
-------- -------- ---------
Development losses (721) (1,932) (2,653)
Adjusted EBITDA 22,649 18,419 41,068
-------- -------- ---------
Depreciation and amortisation (13,298)
Profit on disposal of property, plant and
equipment 95
Exceptional items (2,978)
Operating profit 24,887
Finance income 41
Finance costs (17,158)
Profit before tax 7,770
=========
Segment assets and liabilities, including depreciation,
amortisation and additions to non-current assets, are not reported
to the CODM on a segmental basis and are therefore not disclosed.
Goodwill has been allocated to reportable segments.
The accounting policies of the reportable segments are the same
as the Group's accounting policies. Segment profit represents the
profit earned by each segment without allocation of the share of
profits of associates, central administration costs including
directors' salaries, investment revenue and finance costs, and
income tax expense. This is the measure reported to the Group Chief
Executive for the purpose of resource allocation and assessment of
segment performance.
13. Earnings per share
Basic earnings per ordinary share is based on the weighted
average of 138,522,731 ordinary shares in issue during the period
(2013: 63,415,000) and are calculated by reference to the loss
attributable to equity holders of the Company of GBP8.4m (2013:
GBP10.2m profit).
Diluted earnings per ordinary share is based upon the weighted
average of 138,522,731 ordinary shares (2013: 63,415,000), which
excludes the effects of the weighted average of share options under
the Continuation Option Plans of 2,445,401 (2013: nil) that were
anti-dilutive for the periods presented but could dilute EPS in the
future and are calculated by reference to the loss attributable to
equity holders of the Company of GBP8.4m (2013: GBP10.2m
profit).
Basic earnings per share (pence) (6.1) 16.1
Diluted earnings per share (pence) (6.1) 16.1
------ -----
14. Net cash generated from operations
2014 2013
GBP'000 GBP'000
(Loss)/profit before
tax (4,240) 7,770
Adjustments for:
Finance income (22) (41)
Other gains and losses (248) 548
Finance costs 11,607 16,610
Depreciation of property, plant
and equipment 12,809 11,180
Amortisation of intangible
assets 2,473 2,118
Loss/(profit) on disposal of property,
plant and equipment 46 (95)
Other non-cash items 4,804 -
--------
Operating cash flows before movements
in working capital 27,229 38,090
(Increase)/decrease in receivables (2,357) 3,100
Increase in payables 2,920 4,535
27,792 45,725
Income taxes paid (1,300) (3,461)
Interest paid (7,559) (6,838)
-------- --------
Cash generated by operations 18,933 35,426
-------- --------
15. Net debt
2014 2013
GBP'000 GBP'000
Cash at bank and in
hand 27,399 24,883
Loan due:
In one year or less (750) (20,556)
In more than one year (216,500) (222,338)
---------- ----------
Total borrowings (217,250) (242,894)
---------- ----------
Unamortised issue costs 2,300 2,442
Amounts due under hire purchase
obligations (1,118) (129)
Net Debt (188,669) (215,698)
---------- ----------
16. Dividends
For 2014, the Board recommends a final dividend of 1.8 pence per
ordinary share (a total cost of GBP3.1m) to be paid in April 2015.
The proposed dividend is payable to all shareholders on the
Register of Members on 7 April 2015. The proposed dividend is
subject to approval by shareholders at the Annual general Meeting
on 15 April 2015 and has not been included as a liability in the
financial statements.
Group Risk Factors
Key risk Description and impact Mitigation
--------------- ---------------------------------- --------------------------------
Strategic Risk
--------------- ---------------------------------- --------------------------------
Regulatory Regulatory failures with The Group has segregated
Failures any of CQC, Ofsted, HIW duties between operations
or CSIW could materially and clinical teams, introduced
and adversely impact the a quality & assurance
level of referrals to the function, holds quarterly
Group's services and/or internal quality meetings
could lead to legal claims and appointed a Quality
for negligence or breach & Risk Director to oversee
of statutory duties against and manage operational
the Group. risk and report to the
Quality & Risk Committee
of the Board
The Group also maintains
insurance in respect
of claims for medical
malpractice and, professional
negligence.
--------------- ---------------------------------- --------------------------------
Legislative Changes may occur in the The Group maintains awareness
changes regulations governing the of all proposed legislative
services that the Group changes in its areas
provides, making the cost and maintains links with
of providing such services both the NHS and other
more expensive. Changes government departments
in political sentiment to monitor changes so
towards the outsourcing that it can plan to minimise
of the services the Group the impact of changes.
provides may reduce demand.
--------------- ---------------------------------- --------------------------------
Growth The Group's growth plan All new projects for
may be misdirected either the development of new
towards services for which sites require a detailed
there is insufficient demand investment case to be
or not managed properly presented to the executive
leading to underutilisation directors, so that demand
of new capacity. is fully evaluated. The
property team project
manage each development
closely and work with
marketing to ensure that
new capacity is sold
to commissioning bodies
looking for the appropriate
service.
--------------- ---------------------------------- --------------------------------
Competition Pressure from competitors Focus on quality and
leads to either price cutting value will act as a barrier
or loss of contracts or to competitors and increasing
increases pressures to regulatory requirements
hire qualified staff or act as a barrier to new
the price of suitable facilities entrants.
for new services.
--------------- ---------------------------------- --------------------------------
Operational
--------------- ---------------------------------- --------------------------------
Staffing Staffing levels and/or Weekly calls and meetings
skills are not sufficient to ensure proper levels
to ensure high quality of staffing, use of agency
of care, leading to poor staff when required,
quality assessments by detailed training required
the Group's key regulators for all new joiners and
and associated loss of continuing learning for
contracts from commissioning staff members to obtain
bodies. further professional
qualifications.
--------------- ---------------------------------- --------------------------------
Acquisition Part of the Group's growth The Group has a dedicated
& Integration strategy depends on acting team with experience
as a consolidator in a in integrating acquisitions.
fragmented market. Integrating Through the quality function,
a number of acquisitions the Group is rapidly
poses additional risk. able to assess the quality
Acquisitions may lead to of service provided by
the Group inheriting past a new acquisition and
liabilities, including a training function to
those for past regulatory improve any areas of
failures or breach of duties weakness identified
of care, leading to fines, The Group seeks to protect
damages and reputational its position on acquisition
damage. through warranties and
indemnities and thorough
insurance, as appropriate.
However, such mitigations
do not provide complete
protections against claims
arising.
--------------- ------------------------------------ ------------------------------------
Property The Group operates a portfolio The Group has a comprehensive
of mainly freehold properties set of policies and procedures
valued at over GBP600 million. relating to health &
Patients and staff may safety issues, both for
be at risk from accidents our staff and clients
if facilities are poorly which is backed up by
maintained. regular audits conducted
Given the nature of challenging by an independent third
behaviours associated with party contractor, In
many of the persons under addition, the Group has
care of the Group, Staff commercial insurances
or others may be at risk in place. However, these
of assault and injury. may not be sufficient
to meet any claim that
may arise, or continue
to be available at the
current levels or for
the current rates.
In 2014 the Group spent
GBP6.3m on maintenance
and improvement of its
property portfolio.
--------------- ------------------------------------ ------------------------------------
IT/Data loss The group is dependent The Group has in place
on an efficient and secure a substantial capital
IT infrastructure in order expenditure programme
to run its operations and for the upgrading of
in particular to protect the IT systems and infrastructure,
sensitive personal data including measures to
from loss or damage that improve the security
may lead to fines or penalties of its systems and data,
as well as reputational as well as policies and
damage resulting in loss procedures to protect
of confidence from commissioning confidentiality of sensitive
authorities. data.
--------------- ------------------------------------ ------------------------------------
Financial
--------------- ------------------------------------ ------------------------------------
Financing The Group may not have The Group has a committed
sufficient finance available syndicated bank facility
to enable it to expand through to 31 March 2019
its services to take advantage and has reduced the interest
of growth opportunities; rate payable during the
interest rates may increase year.
in future, reducing profitability.
--------------- ------------------------------------ ------------------------------------
Pricing Changes may occur both The Group's emphasis
in the nature of the bodies on high quality outcomes
that commission the Group's enables it to articulate
services and in the level a value for money proposition
of funding available for with regard to its services;
them due to organisational Cambian keeps in close
and political changes. contact with commissioning
bodies at all levels
in order to foster good
relations and anticipate
any changes in the commissioning
environment.
--------------- ------------------------------------ ------------------------------------
This information is provided by RNS
The company news service from the London Stock Exchange
END
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