Source - RNS
RNS Number : 7513J
Cambian Group PLC
14 September 2016
 

14 September 2016

Cambian Group plc

("Cambian" or "the Group" or "the Company")

 

Unaudited results for the six months ended 30 June 2016

Summary financials

2016 H1

2015 H1

 2015 FY

Revenue

£160.0m

£140.9m

£290.1m

Adjusted EBITDA 1

£22.0m

£26.6m

£42.5m

Adjusted EBITDA margin

14%

19%

15%

Operating profit before exceptional items

£10.2m

£14.2m

£17.2m

Operating profit/(loss)

£3.8m

£14.2m

£(7.6m)

(Loss)/profit before tax

£(3.5m)

£10.0m

£(16.4m)

Adjusted basic earnings per share 2

3.0p

6.8p

10.6p

Statutory basic (loss)/earnings per share

(1.6p)

4.1p

(5.4p)

1 Adjusted EBITDA is earnings before net finance costs, tax, depreciation, amortisation, profit or loss on disposal of assets, merger and acquisition costs, IPO share option charges and exceptional items.

2 Adjusted basic earnings per share is defined as statutory basic earnings per share before amortisation of acquired intangible assets, merger and acquisition costs, IPO share option charges and exceptional items, net of the tax effect of these adjustments.

Highlights

Financial

·      Revenue growth of 14% to £160.0m (2015 H1: £140.9m) from increased occupancy.

·     Adjusted EBITDA of £22.0m reflects strong recovery over the prior six months (2015 H2: £15.9m) from increased revenue and operating efficiencies.

·      Exceptional items of £6.4m being primarily financial restructuring costs.

·      Finance costs have increased as a result of agreed amendment of the bank facilities.

·      Price negotiations with commissioners regarding National Living Wage progressing satisfactorily.

 

Operational                                                                                                                                           

·     Maintained key focus on maturing existing portfolio with total capacity of 2,942 places, with a net reduction of 47 places since the year end in line with plan.

Children's Services capacity at 1,790

Adult Services capacity at 1,152

·      Increased occupancy from referrals, backed by high quality regulatory ratings.

Children's Services average occupancy at 75% (2015 H1: 74%; 2015 FY 73%)

Adults Services average occupancy at 90% (2015 H1: 87%; 2015 FY: 87%)

·      Continued progress made in the remediation of financial and administrative processes.

 

Christopher Kemball, Chairman, commented:

 

"The Group is benefitting from the remedial actions which we have taken with both our Children and Adult Services divisions, delivering a good first half performance compared to the second half last year. Our focus on maturing the existing portfolio is progressing well and we are seeing an increase in both occupancy levels and demand for our services.

 

"We are pleased with progress in our core Children's Services business where we see further opportunities ahead. We are close to concluding our review of strategic options to ensure the optimal future shape for the business and expect to make an announcement in due course.

 

"The second half has started well and the business is performing in line with the Board's expectations."

 

Enquiries:

 

Cambian Group plc +44 (0) 208 735 6150

Instinctif Partners +44 (0) 20 7457 2020

Saleem Asaria, Chief Executive Officer

Martin Hopcroft, Chief Financial Officer

Mark Garraway

James Gray

 

A results presentation will be held for investors and analysts at 9.30am today at Cambian Churchill Hospital, 22 Barkham Terrace, London, SE1 7PW. If you would like to attend, please confirm your attendance to [email protected].

 

There will also be a live audio webcast of the presentation available at http://www.investis-live.com/cambian/57d668ab5c14c30700b341c7/ef3g. An audio recording of the presentation will be made available via the same link following the presentation later today.    

 

About Cambian:

Cambian Group is one of the UK's leading specialist behavioural health service providers. Founded in 2004, it has grown to become a significant partner to the UK Government. The Group's services have a specific focus on children and adults who present high severity needs with challenging behaviours and complex care requirements. Cambian employs approximately 7,000 people across a portfolio of over 300 purpose-designed facilities and 9 fostering offices located in England and Wales.

.

 

 

Chief Executive's Review

Overview

We began the year with a clear agenda: continue to implement our remedial action programme; ensure we meet our obligations under the amended bank facilities; and continue to deliver the highest quality specialist services our customers demand.

 

The period saw the Group trade in line with the Board's expectations following the implementation of our remedial action programme which is delivering tangible benefits.

 

It is pleasing to note that, despite the well-documented issues we faced last year, we continued to experience significant demand for our services across both divisions. Consequently, the Group's average occupancy levels increased not just over the comparable period to 81% (2015 H1: 79%) but also over 2015 FY's closing occupancy levels of 78%.

 

Results

Revenue increased by 14% to £160.0 million (2015 H1: £140.9 million). As previously advised, adjusted EBITDA was lower at £22.0 million (2015 H1: £26.6 million) with adjusted EBITDA margin down from 19% to 14% although it represents a strong recovery over the prior six months (2015 H2: £15.9 million). The operating profit was £3.8 million (2015 H1: £14.2 million) and adjusted basic earnings per share were 3.0 pence (2015 H1: 6.8 pence).

 

Strategic Review

The Board announced in April 2016 that it was reviewing strategic options in light of the need to reduce borrowings as well as the wider market environment in which the Group is operating.

 

The Board is close to concluding the review which will determine the optimal future shape for the business and is evaluating a proposal to sell the Adult Services division. Adult Services is performing well, has a niche market position and could attract significant interest. Advisors have been appointed and have commenced market testing to assess potential interest in the division.

 

In the event that Adult Services were to be sold, we would be able to deleverage our business considerably and further grow our market-leading Children's Services division where we see significant opportunities.

 

The Board will make further announcements as appropriate.

 

Divisional Review

The Group's total closing capacity was 2,942 places (2015 H1: 2,876 places) reflecting a net planned reduction of 47 places since the year end.

 

Children's Services

Revenue for the period increased by 18% to £95.7 million (2015 H1: £81.4 million) reflecting an increase in average capacity to 1,802 places (2015 H1: 1,661 places) and average occupancy levels improved to 75% (2015 H1: 74%).

 

Improvements in capability and occupancy followed from our focus on addressing the previously reported recruitment and training issues.

 

The impact of these changes, together with operational efficiencies, improved the trading in the first half of the year when compared with the second half of 2015. Adjusted EBITDA was £9.3 million (2015 H2 £5.0million; 2015 H1: £12.6 million).

 

Our Children's Services are benefitting from the strategic decision we took last year to develop an integrated recovery model incorporating care, education and therapy focused on children and young people with the highest needs. We are retooling our services accordingly, including fostering, and have invested in upskilling our staff capabilities.

 

With increasing demand for our services and average occupancy at 75%, we see significant potential for the division.

 

Adult Services

Revenue for the period increased by 8% to £64.3 million (2015 H1: £59.5 million). Average capacity increased to 1,152 places (2015 H1: 1,138 places) whilst average occupancy rose to 90% (2015 H1: 87%).

 

Adjusted EBITDA at £12.7 million (2015 H2: £11.0 million; 2015 H1: £14.0 million) reflected the improved operating efficiencies.

 

Whilst the Adult Services market is more mature than the Children's market, there are opportunities across various specialist sub-segments in the Adult market and significant levels of demand for services in those areas.

 

Following on from the opening last year of four larger units in Adult Services (two Personality Disorder units, an Acquired Brain Injury unit and a unit for Adults with autism), the Group is nearing completion of two new units for people with a learning disability and these are due to open later this year.

 

Quality and Regulatory

We continue to aspire to be the highest quality provider of behavioural health services to Children and Adults. It is pleasing to report, therefore, that our regulatory scores remain strong with 83% of Children's Services and 90% of Adults Services rated good or outstanding with Ofsted or CQC as at 30 June 2016.

 

As widely reported, the sector is seeing an increasingly stringent regulatory environment with an enhanced rigour of inspections which we both welcome and are well-positioned to benefit from in this drive to improve the focus on quality of care.

 

Fees

At the beginning of this year we increased fees for new service users successfully to better align our charges with market rates for similar services.

 

As previously indicated, we support the introduction of the National Living Wage ("NLW") and have been discussing with commissioning bodies fee increases for existing service users to mitigate the cost to Cambian of its implementation. We are now finalising agreements and are seeking approval with commissioners to increase fees. We are increasingly confident that we will achieve our objective of ensuring that we are able to recover the additional costs imposed by the NLW this year through our fee increases.

 

Board and Management

The Board has been strengthened with two new appointments since the announcement of our year end results.

 

Mike Butterworth was appointed as an independent non-executive director in April 2016. Mike has extensive financial experience having worked in various finance roles, both in an executive and non-executive capacity, for a number of public companies.

 

Donald Muir was appointed as an independent non-executive director in June 2016. Donald has considerable experience in the business transformation field in both restructuring and rapid growth situations. He has also led and delivered the completion of significant savings initiatives across a number of NHS Trusts.

 

Outlook

The second half of the year has started well and the business is performing in line with the Board's expectations.

 

Saleem Asaria

Chief Executive Officer
 

Finance Review

Capacity and Occupancy

2016 H1

2015 H1

2015 FY

Children's Services

Adult Services

Average Capacity 1

1,802

 1,152

2,954

1,661

1,138

2,799

1,671

 1,158

2,829

Children's Services

Adult Services

Average Occupancy

1,356

 1,040

2,396

1,224

   989

2,213

1,212

 1,004

2,216

Children's Services

Adult Services

Average Occupancy

75%

 90%

81%

74%

 87%

79%

73%

 87%

78%

Children's Services

Adult Services

Closing Capacity 1

1,790

1,152

2,942

1,701

1,175

2,876

1,812

 1,177

2,989

Children's Services

Adult Services

Closing Occupancy

1,370

1,049

2,419

1,265

   992

2,257

1,314

 1,027

2,341

Children's Services

Adult Services

Closing Occupancy

77%

 91%

82%

74%

 84%

78%

73%

 87%

78%

Average Fostering Placements 2

658

441

556

1 Capacity is the number of separate places registered with a regulator to accept service users.

2 Fostering is excluded from the capacity and occupancy numbers and disclosed separately above.

 

Capacity and Occupancy

In line with plan, the Group reduced capacity by a net 47 places in the period reflecting planned reductions where sites have been modified to meet changing demand for services.

 

Average occupancy has increased since the year end to 81% (2015: 78%) reflecting strong conversion of service user referrals and the small reduction in capacity.

 

Closing occupancy stood at 82% at the half year, being 77% in the growing Children's Services and 91% in the relatively mature Adult Services.

 

Revenue

2016 H1

2015 H1

2015 FY

Children's Services

Adult Services

Revenue

£95.7m

  £64.3m

£160.0m

£81.4m

  £59.5m

£140.9m

£169.1m

£121.0m

£290.1m

Fostering Revenue 1

£15.4m

£10.2m

£26.0m

1 Fostering revenue is included within Children's Services, and also disclosed separately.

 

Revenue

The Group delivered growth in revenue of 14% to £160.0 million (2015 H1: £140.9 million) from increased occupancy and improved fees, with revenue increasing by 18% to £95.7 million (2015 H1: £81.4 million) in Children's Services and by 8% to £64.3 million (2015 H1: £59.5 million) in Adult Services, which reflect their respective mix of services as well as the impact of acquisitions for the whole period.

 

Adjusted EBITDA

2016 H1

2015 H1

2015 FY

Children's Services

Adult Services

Adjusted EBITDA 1

£9.3m

 £12.7m

£22.0m

£12.6m

  £14.0m

£26.6m

£17.6m

£24.9m

£42.5m

Children's Services

Adult Services

Adjusted EBITDA margin

10%

 20%

14%

15%

 24%

19%

10%

 21%

15%

1 Adjusted EBITDA is earnings before net finance costs, tax, depreciation, amortisation, profit or loss on disposal of assets, merger and acquisition costs, IPO share option charges and exceptional items (Note 3).

 

Adjusted EBITDA

Although adjusted EBITDA has declined compared to the corresponding period last year, it has increased compared to the previous six months by 38% to £22.0 million (2015 H2: £15.9 million), reflecting increased revenue and operating efficiencies, more than offsetting the impact of the NLW.

 

Operating Profit

Likewise, compared to the previous six months, operating profit before exceptional items has increased to £10.2 million (2015 H2: £3.1 million) as the benefits of the operational efficiencies and remediation programme have become effective. After exceptional costs of £6.4 million that relate mainly to the financial restructuring, operating profit was £3.8 million in the first half.

 

Finance Charges

As a result of the financial restructuring, finance costs have increased to £7.3 million (2015 H1: £4.2 million), which reflect two months at the new funding rates that have been calculated at an effective interest rate on the basis of the Group's borrowings being treated as a single loan under IFRS.

 

Taxation

The Group's tax charge was a credit of £0.5 million (2015 H1: £2.7 million charge) which represents an effective tax rate of 25% (2015 H1: 23%). The difference between the current statutory rate of 20% and the effective tax rate is principally due to non-deductible expenditure and non-qualifying depreciation.

 

Earnings per Share

Adjusted basic earnings per share was 3.0 pence (2015 H1: 6.8 pence) and statutory basic loss per share was 1.6 pence (2015 H1: 4.1 pence earnings), reflecting the reduced profit after tax and increased number of shares.

 

Capital Expenditure

The Group incurred £7.8 million (2015 H1: £25.4 million) of capital expenditure in the first half of the year, of which £4.0 million (2015 H1: £21.4 million) was spent on development of new capacity, and £3.8 million (2015 H1: £4.0 million) was spent on the maintenance of existing units. Some new developments were delayed while discussions were ongoing with lenders to amend the bank facilities, which modestly benefited trading and cash flow in the short term.

 

Cash Flow

The reconciliation of cash flow from Adjusted EBITDA to net debt is as follows:

 

 

2016 H1

2015 H1

2015 FY

 

£m

£m

£m

Adjusted EBITDA 1

22.0

26.6

42.5

Movement in working capital

(7.1)

(21.6)

(8.4)

Interest paid

(5.0)

(3.9)

(7.9)

Tax paid

(2.7)

(3.9)

(8.3)

Exceptional items and M&A costs

(4.5)

(1.7)

(2.6)

Net cash from operating activities

2.7

(4.5)

15.3

Capital expenditure (net)

(7.5)

(25.4)

(44.3)

Acquisitions

-

(34.3)

(41.5)

Net cash flow before financing

(4.8)

(64.2)

(70.5)

Issue of share capital

-

25.4

25.4

Dividends paid

Non-cash items

-

(5.8)

(3.3)

-

(4.9)

(1.5)

Opening net debt

(242.4)

(190.9)

(190.9)

Closing net debt

(253.0)

(233.0)

(242.4)

1 Adjusted EBITDA is earnings before net finance costs, tax, depreciation, amortisation, profit or loss on disposal of assets, merger and acquisition costs, IPO share option charges and exceptional items (Note 3).

2 Prior periods have been represented to exclude client service money from net debt.

 

Net cash from operating activities was an inflow of £2.7 million (2015 H1: £4.5 million outflow), with the working capital outflow reflecting the growth in activity and termly billing in education services. Taken together with the financing costs of the amended bank facilities, net debt has increased to £253.0 million (2015 H1: £233.0 million restated).

 

The Board is not currently recommending dividends and will look to reinstate the dividend at an appropriate time.

 

Debt Facilities

On 18 May 2016, the Group entered into an amended £290 million facilities agreement, the principal provisions of which were that a fee of £2.9 million was payable immediately, with a flat rate margin of 3.75% over LIBOR payable on the amounts drawn under the Facilities, which were split into "Tranche A" of £120 million and "Tranche B" of £170 million. Additional interest of 10% per year is being accrued on Tranche A to be paid on repayment or expiry of Tranche A. Should Tranche A not be repaid by 30 April 2017, then a further fee of £4.0 million is payable. An exit fee of up to £10 million is payable on repayment of Tranche A which expires on 30 September 2017, while Tranche B expires on 31 March 2019. The Group agreed to amended covenants and information undertakings, as well as restrictions on dividends and capital expenditure. The Board is actively exploring with its advisors a number of strategic options for the Group, and the Board is confident that these will enable a successful repayment of Tranche A by 30 September 2017.

 

 

Principal risks and uncertainties

The principal risks and uncertainties facing the business are considered to be as follows:

 

Risk

Description & Impact

Quality of Service

Failure to provide a high quality and consistent level of care for the children and adults placed under our charge.

Regulatory Breach

Loss or suspension of operating licenses due to a major statutory, regulatory or contractual compliance breach.

Service Innovation

Insufficient innovation in our business model, service offerings or model of care reduces our competitiveness in the market.

Incident Response

Inability to effectively react and respond to a major incident or systematic incidents in a timely and controlled manner.

Relationships

Failure to create and maintain strong relationships with commissioners to ensure referrals and conversions at appropriate prices, or price increase to cover cost increase.

Systems & Processes

Immaturity of financial and operational systems and processes prevent effective business operations and sustainable future growth.

Attraction & Retention

Failure to attract and maintain an effective, high quality resource and talent base.

Strategy & Performance

Failure to develop, execute and operate a strategic plan that ensures continued viable growth.

Integration

Failure to realise the benefits and synergies of effectively integrating new sites and acquisitions.

Business Change

Failure to effectively deliver key business change programmes to improve controls and processes.

Government Action

Failure to anticipate or respond to changes in government policy or regulation.

Financing

Failure to meet our financing or informational obligations to our lenders.

'Brexit'

Adverse impact on the healthcare industry or the UK economy following the referendum vote to leave the EU.

 

Statement of Directors' Responsibilities

We confirm to the best of our knowledge that this unaudited consolidated interim financial information has been prepared in accordance with IAS 34 as adopted by the European Union and that the interim management report includes a fair review of the information required by DTR 4.2.7R and DTR 4.2.8R, namely:

·      an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements and a description of the principal risks and uncertainties for the remaining six months of the financial year; and

·      material related-party transactions in the first six months and any material changes in the related-party transactions described in the last Annual Report.

 

The current directors of Cambian are: Christopher Kemball (chairman), Christopher Brinsmead (senior independent director), Mike Butterworth independent non-executive director), Alfred Foglio (non-executive director), Alison Halsey, (independent non-executive director), Donald Muir (independent non-executive director), Dr Graham Rich, (independent non-executive director) and Saleem Asaria (chief executive officer). Biographical details for each of the directors are set out in the Cambian Annual Report and Accounts, and of Mike Butterworth and Donald Muir in the regulatory announcement relating to their appointments, which are available on the Company's website at www.cambiangroup.com/investors.

 

By order of the Board

 

Saleem Asaria

Martin Hopcroft

Chief Executive Officer

Chief Financial Officer

 

Cautionary Statement

Certain statements in this half yearly statement 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.

 

 

Condensed Consolidated Statement of Comprehensive Income

 

Notes

Six months

30 June

2016

£'000

(Unaudited)

 

Six months

30 June

2015

£'000

(Unaudited)

 

Year ended

31 December 2015

£'000

(Audited)

 

 

 

 

 

 

 

Revenue

 

159,969

 

140,935

 

290,118

Cost of sales

 

(98,374)

 

(85,446)

 

(179,652)

 

 

 

 

 

 

 

Gross profit

 

61,595

 

55,489

 

110,466

 

 

 

 

 

 

 

Administrative expenses

 

(57,747)

 

(41,333)

 

(118,103)

 

 

 

 

 

 

 

Operating profit/(loss)

 

3,848

 

14,156

 

(7,637)

Operating profit before exceptional items

 

10,230

 

14,156

 

17,224

Exceptional items

3

(6,382)

 

-

 

(24,861)

Operating profit/(loss)

 

3,848

 

14,156

 

(7,637)

 

Finance income

 

6

 

29

 

77

Finance costs

 

(7,327)

 

(4,217)

 

(8,853)

 

 

 

 

 

 

 

(Loss)/profit before tax

 

(3,473)

 

9,968

 

(16,413)

 

Tax

4

497

 

(2,739)

 

6,775

 

 

 

 

 

 

 

(Loss)/profit for the year

 

(2,976)

 

7,229

 

(9,638)

 

 

 

 

 

 

 

Other comprehensive loss

 

 

 

 

 

 

Items that may be reclassified subsequently to profit or loss

 

 

 

 

 

 

Fair value loss arising during the year from cash flow hedge

 

(1,752)

 

-

 

(1,133)

Deferred tax relating to fair value loss from cash flow hedge

 

315

 

-

 

216

Other comprehensive loss for the year

 

(1,437)

 

-

 

(917)

 

 

 

 

 

 

 

Total comprehensive (loss)/income for the period

 

(4,413)

 

7,229

 

(10,555)

 

 

 

 

 

 

 

(Loss)/earnings per share

 

 

 

 

 

 

Basic

5

(1.6)p

 

4.1p

 

(5.4)p

Diluted

5

(1.6)p

 

4.1p

 

(5.4)p

 

Condensed Consolidated Statement of Financial Position

 

Notes

30 June

2016
£'000

(Unaudited)

 

30 June
2015
£'000

(Unaudited)

 

31 December 2015
£'000

(Audited)

 

 

 

 

 

 

 

Non-current assets

 

 

 

 

 

 

Goodwill

 

114,272

 

116,042

 

114,272

Other intangible assets

 

69,293

 

74,800

 

72,187

Property, plant and equipment

 

363,560

 

371,927

 

363,988

 

 

 

 

 

 

 

 

 

547,125

 

562,769

 

550,447

Current assets

 

 

 

 

 

 

Trade and other receivables

 

49,046

 

44,829

 

48,412

Cash and cash equivalents

 

13,848

 

21,997

 

18,047

Prepayments and accrued income

 

4,806

 

4,110

 

4,837

 

 

 

 

 

 

 

 

 

67,700

 

70,936

 

71,296

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Trade and other payables

 

(36,662)

 

(29,744)

 

(37,436)

Deferred revenue

 

(29,759)

 

(26,280)

 

(35,125)

Current tax liabilities

 

(1,574)

 

(7,687)

 

(3,590)

Obligations under finance leases

 

(199)

 

-

 

(248)

Borrowings

6

(2,778)

 

(755)

 

(255,354)

 

 

 

 

 

 

 

 

 

(70,972)

 

(64,466)

 

(331,753)

 

 

 

 

 

 

 

Net current (liabilities)/assets

 

(3,272)

 

6,470

 

(260,457)

Non-current liabilities

 

 

 

 

 

 

Borrowings

6

(257,100)

 

(251,122)

 

-

Deferred tax liabilities

 

(42,451)

 

(54,283)

 

(43,948)

Derivative financial instruments

 

(2,945)

 

-

 

(1,133)

Obligations under finance leases

 

(475)

 

(1,006)

 

(574)

 

 

(302,971)

 

(306,411)

 

(45,655)

 

 

 

 

 

 

 

Net assets

 

240,882

 

262,828

 

244,335

 

 

 

 

 

 

 

Equity

 

 

 

 

 

 

Share capital

 

1,842

 

1,842

 

1,842

Share premium

 

386,653

 

386,653

 

386,653

Cash flow hedging reserve

 

(2,354)

 

-

 

(917)

Other reserves

 

(115,629)

 

(117,557)

 

(116,589)

Retained earnings

 

(29,630)

 

(8,110)

 

(26,654)

Total equity

 

240,882

 

262,828

 

244,335

 

Condensed consolidated statement of changes in equity

 

 

Share capital

£'000

Share premium

£'000

Hedging

 reserve

£'000

Other reserves

£'000

Retained earnings

£'000

Total

£'000

 

 

 

 

 

 

 

Balance at 1 January 2015

1,723

386,653

-

(144,158)

(12,086)

232,132

Total comprehensive loss for the period

-

-

-

-

7,229

7,229

Issue of share capital

119

-

-

25,305

-

25,424

Dividends paid

-

-

-

-

(3,254)

(3,254)

Credit to equity for equity settled share-based payments

-

-

-

1,296

-

1,296

Balance at 30 June 2015

1,842

386,653

-

(117,557)

(8,111)

262,827

Total comprehensive income for the period

-

-

-

-

(16,867)

(16,867)

Dividends paid

-

-

-

-

(1,676)

(1,676)

Loss on effective portion of cash flow hedge, net of deferred tax

-

-

(917)

-

-

(917)

Credit to equity for equity settled share-based payments

-

-

-

968

-

968

Balance at 31 December 2015

1,842

386,653

(917)

(116,589)

(26,654)

244,335

Total comprehensive profit for the period

-

-

-

-

(2,976)

(2,976)

Loss on effective portion of cash flow hedge, net of deferred tax

-

-

(1,437)

-

-

(1,437)

Credit to equity for equity settled share-based payments

-

-

-

960

-

960

Balance at 30 June 2016

1,842

386,653

(2,354)

(115,629)

(29,630)

240,882

 

 

Condensed Consolidated Statement of Cash Flows

 

Notes

 Six months

30 June

2016

£'000

(Unaudited)

Six months

30 June

2015

£'000

(Unaudited)

Year ended

31 December 2015

£'000

(Audited)

 

 

 

 

 

 

 

 

 

 

Net cash inflow/(outflow) from operating activities

9

2,656

(4,549)

15,386

 

 

 

 

 

Investing activities

 

 

 

 

Proceeds on disposal of property, plant and equipment

 

336

-

329

Purchases of property, plant and equipment

 

(7,790)

(21,936)

(44,329)

Acquisition of subsidiaries, net of cash acquired

 

-

(37,681)

(41,521)

 

 

 

 

 

Net cash used in investing activities

 

(7,454)

(59,617)

(85,521)

 

 

 

 

 

Financing activities

 

 

 

 

New bank loans raised, net of issue costs

 

548

36,630

39,630

Repayments of obligations under finance leases

 

(182)

(112)

(287)

Dividends paid

 

-

(3,253)

(4,930)

Proceeds on issue of shares

 

-

25,424

25,424

 

 

 

 

 

Net cash from financing activities

 

366

58,689

59,837

 

 

 

 

 

 

 

 

 

 

Net decrease in cash and cash equivalents

 

(4,432)

(5,477)

(10,298)

 

 

 

 

 

Net increase in cash held on behalf of clients

 

233

75

946

 

 

 

 

 

Cash and cash equivalents at beginning of period

 

18,047

27,399

27,399

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents at end of period

 

13,848

21,997

18,047

 

 

 

 

 

 

 

 

 

Notes to the condensed set of financial statements

1. Accounting policies

 

General information

Cambian Group plc. (the "Company") is a company incorporated in Great Britain under the Companies Act 2006 and its registered office is at 4th Floor, Waterfront Building, Chancellors Road, Hammersmith Embankment, London W6 9RU. The Company is listed on the London Stock Exchange. 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.

 

Basis of preparation

The financial information contained in this Half-Yearly Financial Report does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. The results for the year ended 31 December 2015 are an abridged version of the full accounts for that year, which received an unqualified report from the auditor, did not contain a statement under section 498(2) or (3) of the Companies Act 2006 or include a reference to any matter to which the auditor drew attention by way of emphasis without qualifying the auditor's report, and have been filed with the Registrar of Companies. The annual financial statements of the Company are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this Half-Yearly Financial Report has been prepared in accordance with IAS 34 Interim Financial Reporting, as adopted by the European Union. The same accounting policies, presentation and methods of computation are followed in the condensed set of financial statements as applied in the latest audited annual financial statements.

 

Going concern

The directors have, at the time of approving the financial statements, considered the financial resources available to the Group, in particular those available under the terms of the Amended Facilities Agreement and the Group's ability to meet the revised terms of that agreement. The directors believe that these facilities will continue to be available to finance the Group's forecast cash requirements. Accordingly, the directors have a reasonable expectation that the Group and the Company have adequate resources to continue in operational existence for at least 12 months from the date of approval of these financial statements and 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 items which 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.

 

 

 

2. Segmental analysis

 

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 of directors (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 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 customer:

 

Children's Services - provision of specialist behavioural science healthcare services for children.

Adult Services - provision of specialist behavioural science healthcare services for adults.

 

The following is an analysis of the Group's revenue and results by reportable segment.

 

 

Six months

30 June

2016

£'000

Six months 30 June

2015

£'000

Year ended

31 December 2015

£'000

Revenue

 

 

 

Children's Services

95,730

81,416

169,070

Adult Services

64,239

59,519

121,048

 

 

 

 

 

159,969

140,935

290,118

 

 

 

 

Adjusted EBITDA 1

 

 

 

Children's Services

9,306

12,601

17,569

Adult Services

12,663

14,011

24,963

 

 

 

 

 

21,969

26,612

42,532

Depreciation

(7,911)

(7,041)

(15,060)

Amortisation

(2,894)

(2,555)

(5,408)

Profit on disposal of property, plant and equipment

27

2

(320)

Merger and acquisition costs

-

(1,747)

(2,256)

IPO share option charge 2

(961)

(1,115)

(2,264)

 

 

 

 

Operating profit before exceptional items

10,230

14,156

17,224

 

 

 

 

Exceptional items

(6,382)

-

(24,861)

 

 

 

 

Operating profit/(loss)

3,848

14,156

(7,637)

 

 

 

 

Net financing costs

(7,321)

(4,188)

(8,776)

 

 

 

 

(Loss)/profit before tax

(3,473)

9,968

(16,413)

 

 

 

 

Tax

497

(2,739)

6,775

 

 

 

 

(Loss)/profit after tax

(2,976)

7,229

(9,638)

 

 

 

 

1 Adjusted EBITDA is earnings before net finance costs, tax, depreciation, amortisation, profit or loss on disposal of assets, merger and acquisition costs, IPO share option charges and exceptional items (Note 3).

2 IPO share option charges arise 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 are included within Adjusted EBITDA.

 

 

3. Exceptional items

 

The following table provides a breakdown of exceptional items:

 

 

Six months

30 June

2016

£'000

Six months

30 June

2015

£'000

Year ended

31 December 2015

£'000

 

 

 

 

Refinancing costs

3,526

-

-

Capitalised finance costs written off

1,854

-

-

IT project costs written off

130

-

2,757

Redundancy costs

872

-

285

Impairment of property, plant and equipment

-

-

21,730

Business integration

-

-

155

Gain on acquisition

-

-

(66)

 

 

 

 

Exceptional items before tax

6,382

-

24,861

Tax effect on exceptional items

(1,233)

-

(4,993)

 

 

 

 

Exceptional items after tax

5,149

-

19,868

 

 

 

 

 

Refinancing costs include the engagement of legal and financial specialists to assist in the refinancing (Note 6). Capitalised finance fees written off relate to the previously capitalised finance fees included in the carrying value of the borrowings prior to refinancing (Note 6). IT project costs written off relate to a decision taken in late-2015 to cancel a project to integrate Finance, HR and CRM system. Redundancy costs relate to senior management who were made redundant in the second half of 2015 and in the first half of 2016.

 

4. Tax

 

The tax charge not including tax on exceptional and other items is £0.7million, which equates to an effective tax rate 25.3%.

 

In March 2016, the UK Government announced its intention to reduce the corporation tax rate to 17% with effect from 1 April 2020. This change was not substantively enacted at the balance sheet date and has therefore not been reflected in the deferred tax provisions. The reduction in the rate is likely to reduce the value of deferred tax assets and liabilities held by the Group.

 

 

5. (Loss)/earnings per share

 

The (loss)/earnings and weighted average number of ordinary shares used in the calculation of basic and diluted earnings per share are as follows:

 

 

 

Six months

30 June

2016

£'000

Six months

30 June

2015

£'000

Year ended

31 December 2015

£'000

 

 

 

 

 

(Loss)/profit attributable to shareholders

 

(2,976)

7,229

(9,638)

 

 

 

 

 

 

 

 

Six months

30 June

2016

Number

Six months

30 June

2015

Number

Year ended

31 December 2015

Number

 

 

 

 

 

Weighted average ordinary shares used in the calculation of basic earnings per share

 

180,797,857

174,853,478

177,827,244

Weighted average ordinary shares used in the calculation of diluted earnings per share

 

180,797,857

178,299,700

177,827,244

Weighted average of share options under the Continuation Option Plans

 

3,400,889

3,446,222

3,446,222

 

The weighted average of share options under the Continuation Option Plans has been excluded from the calculation of diluted earnings per share as they were anti-dilutive for the periods presented but could dilute earnings per share in the future.

 

Adjusted basic earnings per share reconciles to statutory basic earnings per share as follows:

 

 

 

Six months

30 June

2016

Pence

Six months

30 June

2015

Pence

Year ended

31 December 2015

Pence

 

 

 

 

 

Adjusted basic earnings per share

 

3.0

6.8

10.6

Amortisation of acquired intangibles

 

(1.3)

(1.2)

(2.4)

Merger and acquisition costs

IPO share option charges

 

-

(0.5)

(1.0)

(0.5)

(1.2)

(1.2)

Exceptional items

 

(2.8)

-

(11.2)

 

 

 

 

 

Basic (loss)/earnings per share

 

(1.6)

4.1

(5.4)

 

 

 

 

 

Diluted (loss)/earnings per share

 

(1.6)

4.1

(5.4)

 

 

 

 

 

 

 

6. Borrowings

 

 

30 June

2016

£'000

30 June

2015

£'000

31 December 2015

£'000

Secured borrowing at amortised cost

 

 

 

Bank loans

(260,000)

(253,500)

(256,500)

Accrued interest and amortised issue costs

122

1,623

1,146

 

 

 

 

Total borrowings

(259,878)

(251,877)

(255,354)

 

 

 

 

Amount due for settlement within 12 months

(2,778)

(755)

(255,354)

Amount due for settlement after 12 months

(257,100)

(251,122)

-

 

 

 

 

 

(259,878)

(251,877)

(255,354)

 

 

 

 

 

On 18 May 2016, the Group entered into an amended £290 million facilities agreement (the "Amended Facilities Agreement"), the principal provisions of which were that a fee of £2.9million was payable immediately, with a flat rate margin of 3.75% over LIBOR payable on the amounts drawn under the Facilities, which were split into "Tranche A" of £120 million and "Tranche B" of £170 million. Additional interest of 10% per year is being accrued on Tranche A to be paid on repayment or expiry of Tranche A. Should Tranche A not be repaid by 30 April 2017, then a further fee of £4.0 million is payable. An exit fee of up to £10 million is payable on repayment of Tranche A which expires on 30 September 2017, while Tranche B expires on 31 March 2019. The Group agreed to amended covenants and information undertakings, as well as restrictions on dividends and capital expenditure.

 

Borrowings are initially measured at fair value, net of transaction costs and are subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an effective yield basis on the basis of the Group's borrowings being treated as a single loan under IFRS.

 

7. Net debt

 

 

 

30 June

2016

£'000

30 June

2015

£'000

31 December 2015

£'000

 

 

 

 

 

Total borrowings 1

 

(259,878)

(251,877)

(255,354)

Derivative financial instruments

 

(2,945)

-

(1,133)

Amounts due under hire purchase obligations

 

(674)

(1,006)

(822)

Cash and cash equivalents 1

 

10,522

19,826

14,954

 

 

 

 

 

Net debt

 

(252,975)

(233,057)

(242,355)

 

 

 

 

 

1 Cash and equivalents excludes cash held on behalf of clients of £3.3m (30 June 2015: £2.2m; 31 December 2015: £3.1m) and have been represented as at 30 June 2015 and 31 December 2015.

 

 

8. Derivative financial instruments

 

 

30 June

2016

£'000

30 June

2015

£'000

31 December

2015

£'000

Derivatives designated and effective as hedging instruments carried at fair value:

 

 

 

Interest rate swaps

(2,945)

-

(1,133)

 

 

 

 

             

 

The derivative financial instruments were entered into to manage the Group's exposure to interest rate risk on its external borrowings. All derivative financial instruments are non-current and classified as Level 2 in accordance with the IFRS 13 hierarchy. Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as a price) or indirectly (i.e derived from prices).

 

9. Notes to the cash flow statement

 

 

Six months 30 June

2016

£'000

(Unaudited)

Six months 30 June

2015

£'000

(Unaudited)

Year ended 31 December 2015

£'000

(Audited)

 

 

 

 

(Loss)/profit before tax

(3,473)

9,968

(16,413)

 

 

 

 

Adjustments for:

 

 

 

Finance income

(6)

(29)

(77)

Finance costs

7,327

4,217

8,853

Loss on impairment of property, plant and equipment

-

-

21,730

Depreciation of property, plant and equipment

7,911

7,041

15,060

Amortisation of intangible assets

2,894

2,555

5,408

(Profit)/loss on disposal of property, plant and equipment

(27)

(2)

3,077

Other non-cash items

2,815

1,115

2,264

 

 

 

 

Operating cash flows before movements in working capital

17,441

24,865

39,902

 

 

 

 

Increase in receivables

(603)

(16,572)

(17,605)

(Decrease)/increase in payables

(6,453)

(5,026)

9,229

 

 

 

 

Cash generated by operations

10,385

3,267

31,526

 

 

 

 

Income taxes paid

(2,703)

(3,948)

(8,276)

Interest paid

(5,026)

(3,868)

(7,864)

 

 

 

 

Net cash generated from/(utilised in) operating activities

2,656

(4,549)

15,386

 

 

 

 

 

Other non-cash items relate to the charge to the income statement on the IPO share option plans shares under Continuation Option Plan 1 and Continuation Option Plan 2, and non-cash exceptional items.

 

 

 

10. Related party transactions

 

Balances and transactions between Group companies have been eliminated on consolidation and are not disclosed in this note. Other than remuneration of executive and non-executive directors and members of the senior executive team, there were no related party transactions except for:

 

·      Expenses paid to GI Partners (being a shareholder with representation on the Board) of £20,000 (six months ended 30 June 2015: £40,000, year ended 31 December 2015 £40,000). There were no balances outstanding at the period ends.

All related party transactions are considered to be on an arm's length basis, and in the ordinary course of business.

 

In addition to these related party transactions, the Group uses the services of PHS Group Limited, a hygiene business chaired by Christopher Kemball, our Chairman. The total cost of these services amount to £176,000 (six months ended 30 June 2015: £164,000, year ended 31 December 2015: £329,000) and Mr Kemball took no part in the contract negotiations.

 

Independent review report to Cambian Group plc (the "Company")

 

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2016 which comprises the condensed consolidated statement of comprehensive income, the condensed consolidated statement of financial position, the condensed consolidated statement of changes in equity, the condensed consolidated cash flow statement and related notes 1 to 10. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the Company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. Our work has been undertaken so that we might state to the Company those matters we are required to state to it in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our review work, for this report, or for the conclusions we have formed.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

As disclosed in note 1, the annual financial statements of the Group will be prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting", as adopted by the European Union.

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of Review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2016 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

Deloitte LLP

Chartered Accountants

London, United Kingdom

14 September 2016


This information is provided by RNS
The company news service from the London Stock Exchange
 
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