CareTech Holdings PLC Interim Results/media/Files/C/Caretech-UK/... · 2016-06-16 · • Long term...
Transcript of CareTech Holdings PLC Interim Results/media/Files/C/Caretech-UK/... · 2016-06-16 · • Long term...
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CareTech Holdings PLC
Interim ResultsFor the six months ended
31 March 2016
CareTech Presentation Team
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• Farouq Sheikh Chairman
• Michael Hill Group Finance Director
• John Ivers Chief Operating Officer
Contents
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• Executive summary
• Strategic Intiatives
• Highlights
• Current landscape
• Care Pathways
• Organic growth initiatives
• Growth opportunities through bolt on acquisitions
• Initiatives supporting growth
• Financial results
• Divisional breakdown
• Summary
Executive Summary
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• A leading specialist provider of social care for adults and children with complex needs
• We operate in the £10bn per annum UK Social Care sector
• CareTech has a proven track record of growth, profitability and cash generation for over 20 years
• Underlying EBITDA and Diluted EPS has grown by CAGR of 30% and 25% respectively since IPO
• Long term annuity style income stream with strong asset backed balance sheet
• Specialist operating divisions with client focused care pathway approach:
Young People
• Young people residential and educational services• Fostering care
Adult Services
• Adult learning disability• Mental healthLearning services
Strategic Initiatives
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Board took a number of Strategic Initiatives in recent years – benefits of which are coming through:
• Creation of complementary care pathways focused on outcomes for Service Users
• Reconfigured existing property assets – meeting market demand
• Investment in People and IT systems
• Strengthening of balance sheet
• Acceleration of Organic Growth and Bolt-on Acquisitions
Highlights
Financial
• Revenue increased 17% to £70.8m (H1:2015: £60.7m)
• Underlying EBITDA increased by 17% to £16.9m (H1: 2015: £14.5m)
• Underlying PBT increased by 22% to £11.5m (H1:2015: £9.4m)
• Underlying diluted EPS increased by 5% to 14.75p (H1: 2015: 14.05p)
• Interim dividend up by 7% to 3.00p (H1:2015: 2.80P)
• Underlying operating cash inflow of £15.6m (H1:2015: £12.9m) 92% cash conversion ratio
• Net debt at £156.4m (H1:2015: £147.2m)
• Net assets increased by 8% to £140.9m (H1:2015: £130.8m)
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Operational
• Acquisitions
• One in December 2015 and one in March 2016
• Ground rent funds raised £29m
• Accelerated organic growth
• Good progress on acquisitions
• Further Strengthened management team
• Amend & Extend Bank Facilities
• Extended facility to 2019
• Improved terms
• Solid performance
• High quality ratings
• Extending Care Pathways through successful outcomes
• Improved occupancy rates
• EBITDA margins maintained
Targeting double digit
growth
Current Landscape
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Revenue £23m
EBITDA £2.4m
EPS 4.1p
Revenue £144m
EBITDA £37m
EPS 32.8p
Revenue £157m
EBITDA £40m
EPS 37.0p
IPO 2005 Consensus 2016 Consensus 2017
Direction of Travel
Underlying Market factors remain positive
• Growing market
• Increased outsourcing
• Regulatory burden increasing
• Shortage of specialist beds
Certain Perceived Headwinds
• National Minimum Wage and National Wage
• Staffing and staff retention
• Fee rates
Offering a broad range of services across Care Pathway
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Care Pathway – 31 March 2016 Capacity
Adult Learning
Disabilities
Residential
Independent supported living
Community support services
Transitional Services
1,527
% Growth from
Sept 2015
Adults
Mental Health Residential care
Low secure and step down
Independent supported living
Community outreach
216 1,743 8.2%
Young People
Residential
Services
Residential care of children
Transitional Services
Education and therapy
247
Children’s & Young People
Foster care Fostering 302 549 8.5%
Overall Capacity 2,292 8.3%
Learning
services
Employee Pre-employment and
apprenticeships
564
Initiatives Underpinning Growth
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• Pioneering provision of specialist social care services across the UK
• National profile with Local Engagement and Service Delivery
- Powered by CareTech with support infrastructure
- Facilitating growth
- Local ‘brands’ with high quality reputation for excellent service delivery
• Innovative Emerging Models of Care
- Extending Care Pathway (Children’s/Young People – Adults)
- Step down/Respite/Short breaks
- Transition/Leaving Care +16
- Care/Education/Therapy (Holistic Approach)
- Pre-Employment Support (Learning)
• New Partnerships Approach
- Registered Housing Providers as partners
- Health and Social Care Partnering Opportunities
- Evolving payments/funding models
Initiatives Underpinning Growth
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Our Care Pathway
• Focus on the journey of our clients across a broad spectrum of care pathways
Generating positive outcomes in a Community based setting
Increasing Independence and choice for those we care for and their families/support networks
Better demonstrable value for Commissioners and Purchasers
Case Study: Proactive Service Development
National Context
• The latest Winterbourne View report expects a 35% to 50% closure of inpatient beds in England by 2019
• This equates to a proposed reduction of 1,218-1,740 beds nationally
• Reductions in inpatient bed usage are proposed to be much greater in the North
Accelerated Hospital Discharge - Manchester
• Greater Manchester is a designated Fast Track area with £3m additional funding
• They aim to reduce their use of 130 inpatient beds by 50% by 2018/19 (see table below).
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TypeCurrent IP
BedsProposed IP
BedsReduction % Reduction
Secure 53 35 18 34%
Non-Secure 77 30 47 60%
Total 130 65 65 50%
How we Maximise Opportunities for Growth
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• Strengthened Management Team
• Regional Business Development focus
- Team strengthened
• Focus on Greater Manchester plus emerging new ‘hot spot’ opportunity areas
• Project/Bid Team Strengthened to support/deploy
• Enhanced Commissioner/Purchaser Engagement
• Development & Housing partner relationships to further expansion
• Monthly regional development meetings to review progress
Greater Manchester Growth and Service Development
2014/15 2015/16 Maturity
Schemes 4 10 15
Beds 15 45 73
Income £5m
EBITDA £1m
Key Focus Areas to Generate Growth
Organic Initiatives
• Continued growth of capacity and occupancy of existing services
• Reconfiguring existing services
- 7 projects when completed creating 23 extra beds
- Average pay back under 2 years
New Services and Developments
• Community and Supporting Living Projects
- 6 new projects when completed creating 37 extra beds
- Average pay back under 1 year
• New Development Projects
- 3 completed with 7 further nearing completion
- Average pay back under 3 years
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Selection of Tender Wins and Framework Agreements in Half Year
Staffordshire Council Manchester Council
White Rose Rochdale Council
Skills for Funding All Wales Fostering
All Wales Children's Gloucester County Council
Birmingham Council West London Alliance
West Midlands Fostering Framework NHS Midlands and Lancashire
Essex County Council East Midlands Childrens Framework
Expanding our Geographic Coverage and Care Pathway through Tender Wins
• Bidding for more tenders/frameworks (+32% on H2:2015)
• Increasing our new business win rate 54% (H1:2016) vs 25% (H2:2015)
Reconfiguring Existing Services
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Minstead House
• Reconfigured from a Children’s residential service
• Client group 16-25 year old LD/Autistic Behaviours with complex needs
• Developed in conjunction with Birmingham City Council
• The building has separate male and female wings 4 bed each
• Opened December 2015
• Average weekly fees £2-3k
• Payback under 1 year
New Services and Developments – Community Living
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• 9 Supported Living flats• Highly supported individuals with LD/MH• Partnership with Registered Housing Provider• £2,000 weekly fee • Full by end of 2015• Payback under 1 year
Hampton Court – Greater Manchester
New Service Opening Built on Strong Reputation in Local Community
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• Oak Tree is 5 Bed Learning Disability Home in Huddersfield
• Accommodation for Young People
• Currently awaiting Ofsted Registration visit which is due anytime
• Opening July 2016
• Local services strong reputation outstanding rated (Ofsted)
• £3,000 weekly fee
• Pay back 3 to 4 years
Oak Tree – An Inspire Development
Acquisitions Update
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• Spark of Genius/Dawn Hodge Associates completed July 2015
• ROC North West completed 1st December 2015
• Oakleaf completed 14th March 2016
• Post Acquisition Plans working well
• Excellent start – all on track and performing to plan
• Projects underway with each of our acquisitions
- Spark of Genius - 4 new projects underway
- ROC North West - 2 new projects underway
- Oakleaf - 1 new project opened on acquisition
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ROC North West Ltd
Acquisitions
• Acquired 1 December 2015• North West based provider of residential care and
education services for Young People with complex needs
• Currently has capacity for 41 residential places in 7 residential homes in Lancashire and 25 education places in its school in Preston
• Strong reputation and quality ratings• Excellent geographic and Care Pathways fit with
CareTech• Management retained
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The OakLeaf Group
Acquisitions
• Acquired 14 March 2016• Northamptonshire based provider of specialist
brain injury rehabilitation for men over 18 • Currently has capacity for 102 residential and
nursing places in three different service levels across 8 accommodation units
• Strong reputation and quality ratings• Excellent geographic and Care Pathways fit with
CareTech, platform for growth of brain injury services
• Management retained
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Spark of Genius
Acquisitions
• Acquired July 2015• Operates 9 residential homes in Scotland representing 48 beds
and 3 schools for Young People with complex needs catering for up to 100 service users
Dawn Hodge Associates
• Acquired July 2015• DHA provide training, coaching and consultancy across a range
of sectors• Ofsted Grade 1 outstanding rating retained• Best Provider of Learning and Development (Skills for Care
Accolades 2015/16) winner
Initiatives Supporting Our Growth
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Our People – Staff recruitment and retention
• positive trend on new hires
• Staff turnover 18% below sector average of 26.3%
• 564 employees on inhouse apprenticeship (aspire) programme
• 72 managers on our Leadership and Management Care Programme
• 200+ participants in Sharesave Scheme
• National Care Awards 2015 10 categories with National and Regional Winner
National Living Wage
• Fully Implemented across our business with a review of role differentials• Impacted under half our operational team• Costs inline with budgeted expectations
Fee Uplifts and Reviews• Contact programme in process for all purchasers/commissioners
• To date 60% have responded
• On track to cover the costs of NLW through uplifts (averaging 1.8%)
Systems and Processes
• Time and Attendance – fingerprint recognition live in services generating accurate and timely rota management and real time costing/payroll analysis
• Launch of ‘Line of Sight’ RAG Reporting for each home and service across KPI areas that support continuous improvement and growth
Quality and Compliance
• Ofsted rating over 80% of our services are outstanding or good (March 2016)
• CQC inspection ratings for our services are 65% good and 33% requires improvement (up to March 2016)
• We undertake regular operational audits of services and independently monitor and inspect services through a national compliance team
Divisional breakdown
23Extraordinary days every day
Financial Resultsfor the half ended 31 March 2016
Financial Highlights
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• Revenue increased 17% to £70.8m (H1:2015: £60.7M)
• Underlying EBITDA increased 17% to £16.9m (H1:2015: £14.5m)
• Underlying profit before tax increased 22%
• Interim year dividend increased 7% to 3.00p (H1:2015: 2.80p)
• Strong operating cash flow with 92% cash conversion
• Net Assets increased by 8% to £140.9m
• Ground rent transaction raised £29m in February
• Two acquisitions in the half year – ROC and Oakleaf
Six months ending2016
Revenue£m
2016Underlying
EBITDA£m
2015Revenue
£m
2015 Underlying
EBITDA£m
Adult Learning Disabilities 38.7 11.3 37.5 10.4
Mental Health 3.4 1.1 3.3 1.0
Sub Total 42.1 12.4 40.8 11.4
Young People Residential Services 17.7 5.6 10.1 4.0
Foster Care 5.2 1.3 5.3 1.4
Sub Total 22.9 6.9 15.4 5.4
Learning Services 5.8 0.5 4.5 0.4
Sub Total 70.8 19.8 60.7 17.2
Less Unallocated Group Costs (2.9) (2.7)
Total 70.8 16.9 60.7 14.5
Margin 23.8% 23.8%
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Service Revenue & EBITDA Splitfor the six months ended 31 March 2016
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Cashflow Highlightsfor the six months ended 31 March 2016
2016£m
2015£m
Operating Cash flow before Adjustments 16.9 14.3
Movement in working capital (1.2) (1.4)
15.7 12.9
Capital Expenditure (6.1) (4.0)
Proceeds from sale of ground rents 29.7 -
Interest, Dividend & Tax Paid (6.1) (5.1)
Share Placing funds 0.1 19.8
Acquisitions (27.6) -
Treasury & Acquisition Related Costs (3.6) (4.7)
Decrease In Net Debt 2.1 18.9
Opening Net Debt (158.5) (166.1)
Closing Net Debt (156.4) (147.2)
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Balance Sheet Highlightsas at 31 March 2016
2016
£m
2015
£m
Tangible Fixed Assets - £303m Valuation 263.4 248.5
Goodwill and Intangibles
Net Debt
87.7
(156.4)
65.6
(147.2)
Other Liabilities (Net) (53.8) (36.1)
Net Assets 140.9 130.8
Actual 2016 Actual 2015
EBITDA: INTEREST 5.4 times 4.8
NET DEBT: EBITDA 3.8 times 4.9
LOAN: VALUE 51% 54%
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Non Underlying Items• The disclosure of certain current and non-current liabilities has been enhanced and more clearly demonstrates their future
impact on net debt. IFRS also requires changes in acquisition fair values to be restated for the prior period.
• Adjustment items charged / credited in the Income Statement are as follows:
Six months ended 31 March 2016
£’m
Six months ended31 March 2015
£’m
Acquisition Costs (1.5) -
Integration, Reorganisation Costs and Redundancy costs (0.7) (1.3)
Profit on sale of fixed assets 5.6 -
Amortisation of Intangibles (2.9) (2.4)
Charges Relating to Derivative Financial Instruments (0.8) (1.6)
PBT Adjustment Items (0.3) (5.3)
(i) EBITDA is operating profit stated before depreciation, share-based payments charge and adjustment items(ii) Profit before tax and diluted earnings per share are stated before adjustment items
Key Investment MeritsAn investment in CareTech offers investors
Strong defensive characteristics– Visibility of contracted revenue
– Length of resident stay measured in decades
– Strong asset backing
Strong organic growth opportunity– There is an undersupply of places
– A highly scalable model – reinforced through improved organisational structure
Strong acquisition growth opportunity– Highly fragmented market to consolidate – geographical and service fragmentation
– Many small operators unable to cope with regulation
Proven business model– Strength and depth of management team to operational level
– Demonstrable track record of delivering growth
– Ahead on quality standards
– Strong cash generation
– Solid strategic position
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Continuing our growth……
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Revenue £23m
EBITDA £2.4m
EPS 4.1p
Market size £2.1 bn
Market Share 1%
Revenue £144m
EBITDA £37m
EPS 32.8p
Market size £10 bn
Market Share 2%
Next 2 to 3 years
IPO 2005 Consensus 2016
p
1p
2p
3p
4p
5p
6p
7p
8p
9p
10p
x
1x
2x
3x
4x
5x
6x
7x
Net debtto EBITDA
0
10
20
30
40
50
60
70
80
90
0
20
40
60
80
100
120
140
160
180
2005 A 2007 A 2009 A 2011 A 2013 A 2015 A 2017 C
RevenueCAGR 40% A
EBITDACAGR 30% A
EPS CAGR25% A
Key:A: ActualC: Consensus estimates
Summary
• Results in line with expectations
• Profitable growth through organic development and reconfigurations
• Market is large, growing and fragmented
• Platform for growth
– Ground rent raised funds of £29m
– Further strengthened management team
– Accelerated organic developments and reconfigurations
– Bolt on acquisition opportunities
• Targeting double digit growth over the next few years
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Appendix
• Service Developments
- Reconfigurations existing homes
- New Properties
• Divisional Summaries
- Adult
- Mental Health
- Young People Residential
- Fostering
- Learning
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New Organic Beds - Residential
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Mallards Annexe
• Completed beginning of April 2016• Addition of a ground floor extension to create a wheel chair disabled unit.• The new service now comprises of 3 individual self contained units, (2 at
ground floor level with a third 1st floor unit. Each unit comprises of its own lounge, bedroom, kitchen & bathroom. There is additionally, a shared utility area / small reception area + the addition of a staff sleep in ground floor bedroom.
Cunningham Avenue
• Opened in January 2016 in Hertford under Linx care.• Accommodation for 5 Young People.• We currently have 4 expectant Mums living here and a new mum with her baby
Joseph.• The team at Cunningham support teenage Mums preparing for independent
living, assisting with day to day skills and supporting with the lead-up to motherhood.
• The weekly fee is: £1,000 per week for shared staff support.
New Organic Beds – Supported Living
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Martello
• Art deco building, which looks out to sea• 7 self-contained, newly converted flats• Each has a living room/ kitchen, a bedroom, bathroom and entrance hallway• The flats have been planned with supported needs in mind, with the provision
of induction hobs and adapted curtain tracking• Each person has a package of support individualised to them and there is
waking night support• Opened April 2016
Lindisfarne
• Situated in Leverington near Wisbech, Cambridgeshire• Six self contained flats within the building• Fully functioning kitchen where tenants are supported to learn new daily living
skills.• There are plans to make a sensory area and vegetable patch in the large
communal garden• The staff have their own room and stay overnight in the house
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West Cottage
• Freehold property in Bishopton, Renfrewshire• Previously private home• Reconfigured into 5 bedded residential children’s home• Children and young people between ages 8-18• Service caters for SEBN, diagnoses of Autism, ADHD• Due to open October 2016
Brandy Burn Cottage
• Freehold property in Paisley, Renfrewshire• Previously private home• Reconfigured into 5 bedded residential children’s home• Children and young people between ages 8-18• Service caters for SEBN, diagnoses of Autism, ADHD• Due to open October 2016
Organic Growth – New beds
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Organic Growth – New bedsBeatrice Road
• One person supported living service, situated in Wisbech-Cambridgeshire.
• The service supports one lady with learning disabilities and complex needs.
• It is a detached two bedroom bungalow, and the second bedroom is used as the staff sleeping in room.
• The service opened on 11th April 2016.
Croft House, Bradford
• 7 supported living apartments• Service developed to capitalise on new Bradford tender framework
placing Client group LD/MH Behaviours with complex needs.
Gayton Road, Kings Lynn, Norfolk
• Developing service due to high demand from Norfolk social services for supported living services.
• Client group – Moderate to severe learning disabilities, associated conditions and some mobility issues.
• All tenants for this service will require 24 hour support.
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Organic Growth – New beds
Eastmead
• Situated in Woking• 4 double bedrooms for tenants• Staffed accommodation• Large garden to the rear of the property• Opened April 2016
Vancouver Road
• A six bedroom detached house made into individual purpose built flats spread over three stories for adults with learning disabilities, autism and severe challenging behaviour.
• There is also a separate one bedroom flat with separate bathroom which can be found at the rear of the property.
• Opened December 2015
Adult Learning Disabilities
• 1.4m people in the UK have a learning disability
• 13.2% (185,000) of these cannot live independently
• UK market for adult residential learning disability and supported living worth £6.6bn annually, growing at 5.5% per annum (Laing & Buisson)
• Highly fragmented market
• High demand for community based care and high value specialist residential services
• Long average length of stay
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Insert chart on growth of ALD market/map of
service locations
Capacity: 1,527 spacesOccupancy: 89%Average weekly fee: £1,186Turnover: £38.7mEBITDA: £11.3m
*Figures correct at 31/03/2016
Mental Health
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Capacity: 216 spacesOccupancy: 82%Average weekly fee: £1,144Turnover: £3.4mEBITDA: £1.1m
*Figures correct at 31/03/2016
Insert chart on growth of MH market/map of
service locations
• 2.4% of UK population will be referred to specialist psychiatric service
• Mental Health Care Homes and non acute NHS provision is £1.6bn annually (Laing & Buisson)
• Independent sector counts for 9% of the care home market and 6% of the non residential market
• 70% of the prison population have mental health problems
• Includes Oakleaf ABI acquired March 2016
Young People Residential Services
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Capacity: 247 spacesOccupancy: 69%Average weekly fee: £3,512Turnover: £17.7mEBITDA: £5.6m
*Figures correct at 31/03/2016
Insert chart on growth of YPRS market/map of
service locations
• 17,500 children in England “Looked after” outside of foster care
• Residential children’s market in England worth £1.1bn per annum
(Department for Education Statistics)
• Market growth rate of 5.7% per annum
• Highly fragmented market
• Fees range considerably
• Certain placements at more specialist centres cost over £4,000 per week
• Every 22 minutes a child comes into care
• 68,840 “Looked after” children in England at March 2014, and growing year on year
• 51,340 children placed in foster care, being 75% of “Looked after” children(Department for Education Statistics)
• The independent fostering market is worth c. £1.4bn per annum
• CareTech is a top 5 provider with a 1% market share
• The Children and Families Bill in England gives local authorities funding to 21 for young people in foster care
Foster Care
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Capacity: 302 spacesOccupancy: 88%Average weekly fee: £731Turnover: £5.2mEBITDA: £1.3m
*Figures correct at 31/03/2016
Insert chart on growth of FC market/map of service
locations
Learning Services
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Turnover: £5.8mEBITDA: £0.5m
*Figures correct at 31/03/2016
• Acquired EQL Solutions in November 2013 and acquired Dawn Hodge Associates July 2015
• Market leading provider of pre-employment training and work based learning (WBL)
• Two major streams are being developed as part of the CareTech Aspire Programme
• Income in the half year £5.8 million