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Cambian deleveraged, but challenges remain

The social care company has sold its adult services division to repay its debt and focus on its children's business
April 26, 2017

This time last year, social care provider Cambian (CMBN) was on the cusp of breaching its banking covenants and we questioned whether it had reached rock bottom. Looking at these numbers, the answer appears to be yes. In December the group sold its adult care division for £379m, which has allowed management to repay borrowings. Shareholders will also benefit from the sale: £50m is expected to be paid back this year.

IC TIP: Sell at 156p

But investors who stayed patient during the turbulence of last year now hold shares in a less impressive company. The children's services division which remains (and to which these numbers relate) has lower occupancy rates and cash profit margins than the adult business. The former has work to do in reducing costs: children's services adjusted cash profit fell 12 per cent to £16.2m, but cash profit from the combined group was up 6 per cent to £45m.

Improving cost control and realigning the business to pursue higher-margin specialist children's care are two key objectives for 2017. Broker Numis thinks this will allow the group to swing into a pre-tax profit of £13.9m in the year to December 2017, giving adjusted EPS of 5.8p, from £37.4m of losses in 2016.

CAMBIAN (CMBN)

ORD PRICE:156pMARKET VALUE:£287m
TOUCH:156-157p12-MONTH HIGH:170pLOW: 49p
DIVIDEND YIELD:nilPE RATIO:na
NET ASSET VALUE:202p*NET CASH:£116m

Year to 31 DecTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20121842.7nana
20132147.816.1nil
2014241-4.2-6.11.8
2015**161-10.7-8.1nil
2016182-37.4-17.2nil^
% change+13---

Ex-div:na

Payment:na

*Includes intangible assets of £122m, or 66p a share

**Restated to account for disposal of adult services

^Excludes £50m cash from the disposal to be returned to shareholders in 2017