UPDATE: CareTech Plans Expansion On Resilient Outlook

17th Jun 2010 12:42

(Adds executive comments, analyst comments, share price.) By Rachael Gormley Of DOW JONES NEWSWIRES LONDON (Dow Jones)--U.K. social care provider CareTech Holdings PLC (CTH.LN) Thursday upped its interim dividend 15% on a bullish outlook for the resilience of its services in the face of cuts to government spending, and said it is looking to expand after buying three new businesses. "No-one knows what the budget will bring next week but our services look after the vulnerable people in society and the local authorities have a statutory obligation to look after them," Finance Director David Pugh told Dow Jones Newswires. CareTech, which provides care and housing support services for people with learning and physical disabilities, raised its interim dividend after first-half pretax profit rose 32%. Executive Chairman Farouq Sheikh added that, with GBP85 million of funds available due to a share placing and a recent refinancing, CareTech is ready to speed up its consolidation strategy. And the company's major expansion plans are already underway, having recently bought three businesses providing specialist social care services for an initial combined cost of around GBP11 million. The three new businesses are Greenfields Care Group Ltd., which cares for children with emotional and behavioral disorders; North London-based supported living business St. Michael's Support and Care Ltd.; and fostering services company Outlook Fostering Services Ltd. The company said the acquisitions increase capacity by 140 places and are expected to add to earnings in the first full year of operation. Pugh added that the firm currently has a pipeline of 15 potential acquisition opportunities at various stages, and is particularly interested in purchases in cities in northern England such as Newcastle, Manchester and Liverpool, as well as in Scotland. It is also looking at acquisition opportunities in foster care services and in acquired brain injury services. It doesn't currently offer the latter to its local authority customers. For the six months to March 31, CareTech posted pretax profit of GBP7.6 million, compared with GBP5.7 million a year earlier. Revenue increased 5% to GBP41.4 million from GBP39.5 million, while the interim dividend was upped to 1.84 pence a share from 1.6 pence. CareTech added that it also increased capacity by 50 beds in the first half through organic growth and maintained occupancy levels of 93% in established services. Pugh said the firm is on track to meet the market forecast of 80 new beds over 2010 through organic growth. Analysts at Goldman Sachs, Brewin Dolphin and Investec all kept "buy" ratings Thursday, with Brewin increasing its target price to 477 pence from 457 pence. At 1128 GMT, shares were flat at 347.5 pence, while the wider AIM index was up 0.2%. -By Rachael Gormley, Dow Jones Newswires; 44-20-7842-9308; [email protected] (END) Dow Jones Newswires June 17, 2010 07:42 ET (11:42 GMT)