Residential and social care has proved to be a tough sector in which to turn a profit in recent years, not least because achieving growth requires huge capital investment. The stark choice facing social care specialist Caretech (CTH) was to either mitigate risk by offering capital-light social services such as foster care, or take on even more debt to fund buildings. There was evidence at the half-year stage that the risk averse approach adopted is having an effect. Underlying cash profits grew faster than revenues, rising by 3 per cent rise to £11.8m on the back of improved margins.
So far, fee negotiations for social care have been better than had been feared. They were expected to be flat this year, but the final outcome looks likely to be slightly more positive. Caretech will also be helped by a small net increase in capacity to 2,198 places, with occupancy rates in mature services running at 92 per cent. Among the operating divisions, the unit providing residential services for young people reported a notable increase in revenues, up from £7.6m to £9.2m, due to first contribution from the ACAD acquisition early last year, which has given Caretech a foothold in Scotland.