Companies: CUK   

Healthcare outsourcing specialist Care UK is reviewing new financing options after increasing interim operating profits by 37 per cent to £15.9 million.

The fully listed company increased turnover by 41 per cent to £167 million in the six months to March, but had to take a £15.9 million ‘goodwill impairment’ charge arising from November’s cancellation of a National Health Service diagnostic contract in the West Midlands. This and a £2.4 million amortisation charge helped produce a first-half pre-tax loss of £9.6 million.

Chief executive Mike Parish says the contract loss was a ‘blow’, but insists that strategy remains the same. Care UK is focusing both on health and social care with a view to servicing the shift from hospital treatment to community health centres, of which he says 150 are to be commissioned, and home care.

The acquisitive company has five divisions: health care, social care, community care, specialist care and residential care. Of these, residential care made a £7.9 million operating profit on £49 million turnover and was the largest single contributor, with the highest margins.

Parish says Care UK has 3,500 residential beds at present and is building new homes on green field sites around the country, mostly outside the NHS sector and providing complex ‘high-dependency services’. These homes, mostly freehold, are in the company’s books at cost and Parish suggests there is £120 million of hidden value there.

With 57 homes for old people and more social care, he says the company is considering setting up a property company to support 500 or more beds and assessing a 'property-based funding’ deal. In today’s tough credit environment, this could be an alternative to using a £52 million finance facility, while Care UK also had £28 million cash in March.

Parish urges an ‘integrated approach’. He says the company’s hip-replacement team goes to patients’ homes after their operations, saving one expensive day in hospital each time.

Analysts expect Care UK to increase underlying pre-tax profits 31 per cent to £19 million for the full year. Its West Midlands problem knocked the shares from 840p to 345p last year, but the price has rallied to 457.25p, valuing the company at £258 million, and should rally further in the medium term.

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