Specialist care services are the future for Caretech as the company tries to move away from its acquisition-led care home strategy towards organic sales growth driven by services. Relying less on increasingly rationed credit to fund expansion was an important strategic move, and while progress so far has been slow but steady, enough has been done to give the shares a speculative attraction.
Comparisons with Southern Cross never really stood up to scrutiny since Caretech owns rather than leases its properties, which are valued at £225m. A more serious issue was the strain a series of takeovers put on the company's balance sheet. To address this, management has cut back on acquisitions, spending only £4.3m in the past 12 months, and focused instead on refurbishing existing properties. As a result, five refurbished care homes will come back on-stream this year.
Caretech has also been adding services that are not capital intensive, such as child fostering, but adult care is still the core of the business and revenues here rose by 3 per cent to £37.8m. Chief executive Farouq Sheikh said that despite the tough fee environment, the specialist care market is still growing by 5 per cent a year.
Investec forecasts full-year pre-tax profits of £16.3m and EPS of 24.9p (2011: £15.9m/25.3p).
CARETECH (CTH) | ||||
|---|---|---|---|---|
| ORD PRICE: | 135p | MARKET VALUE: | £ 69.1m | |
| TOUCH: | 133-137p | 12-MONTH HIGH: | 156p | LOW: 74p |
| DIVIDEND YIELD: | 4.6% | PE RATIO: | 9 | |
| NET ASSET VALUE: | 148p* | NET DEBT: | 173% | |
| Half-year to 31 Mar | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2011 | 52.2 | 3.96 | 5.84 | 2.00 |
| 2012 | 56.1 | 3.99 | 9.01 | 2.21 |
| % change | +7 | +1 | +54 | +11 |
Ex-div:04 Jul Payment:06 Aug *Includes intangible assets of £65m, or 127p a share | ||||
