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Care UK’s figures are not quite so grim as they seem. Strip out various exceptionals, including £15.9m written-off for a terminated Department of Health diagnostics contract, and pre-tax profit increased 18 per cent to £22.5m.
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Reflecting the Mercury Health acquisition and the part-year benefit of acquiring Partnership Health Group, the health care division - offering both primary and secondary care services - reported that adjusted operating profit had more than doubled to £10.9m. Going forward, chief executive Mike Parish thinks that the company is well placed to snatch a meaningful share of the £1bn in primary care trust business that he believes is up for grabs in the next four years.
Management also remain confident that the government will reimburse Care UK's centre construction costs of £54m and will renew its contracts on a leasehold basis, all of which should help to repay the hefty debt pile. Meanwhile, the residential care unit saw operating profit rise 7 per cent to £17.5m, while the community care operations reported 4 per cent rise in adjusted profits to £5.5m.
Brewin Dolphin left its forecasts largely unchanged and expects 2009 pre-tax profit of £28.9m, with EPS of 32.2p.
| CARE UK (CUK) | ||||
|---|---|---|---|---|
| ORD PRICE: | 240p | MARKET VALUE: | £ 146.5m | |
| TOUCH: | 225-240p | 12-MONTH HIGH: | 507p | LOW: 200p |
| DIVIDEND YIELD: | 1.8% | PE RATIO: | NA | |
| NET ASSET VALUE: | 191p* | NET DEBT: | 154% | |
| Year to 30 Sep | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2004 | 136 | 10.7 | 13.5 | 3.05 |
| 2005 | 157 | 13.5 | 17.5 | 3.33 |
| 2006 | 183 | 14.2 | 18.0 | 3.65 |
| 2007 | 249 | 14.5 | 20.3 | 4.02 |
| 2008 | 316 | 1.60 | -4.98 | 4.43 |
| % change | +27 | -89 | - | +10 |
Ex-div:21 Jan Payment:18 Feb *Includes intangible assets £92.9m or 152p a share |
||||
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It's likely that the government will continue to outsource healthcare services. Care UK looks well placed to take advantage of the significant growth opportunities here. So, on an undemanding forward PE of 7, the shares are good value in the long-term.
Last IC View: Good value, 346p, 20 August 2008
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