Care UK

Health and social care provider Care UK is acquisitive and could gain from public spending constraints after lifting annual profits 25%.

The fully listed company increased pre-tax profits by £5.6m to £28.1m, on turnover up 20% to £410m, in the year to September, while earnings gained 13% to 31.46p a share and a 10% dividend hike is proposed to 4.85p a share.

Care UK grew fastest in residential healthcare, where turnover rose 54% and operating profits advanced 44% and growth was stimulated by the £14m buy-out of the owner of the other half of Partnership Health Group. Chief executive Mike Parish says Care UK established itself as the leading independent provider of ‘enhanced’ primary and secondary care to National Health Service patients, providing specialist surgery, chemotherapy, hip replacements and other services, shortening hospital stays, cutting the average number of consultant visits to patients in hospital from three to 1.2 per stay and making 24% savings here for the NHS.

In social care, where 70% to 80% of Care UK’s beds are for dementia sufferers and other acute patients, turnover increased a lesser 5% and operating profit fell 4%. Parish blames this on under-performance in community care, the result of growing faster than the company could deliver, and says ‘recovery is on the way’ after investment in new management and systems.

With most income coming from local authorities, he says the company is considering building new care homes ‘in more affluent areas’ for self-paying patients as public provision becomes restricted to those with higher needs. ‘We are only scratching the surface’, declares Parish, as he contemplates potential acquisitions, in social care and elsewhere.

With bank facilities till 2015 and cash of its own, he says Care UK has £94m of headroom’ for takeovers or other purposes. The company owns most of its assets outright and Parish suggests they are together worth from £75m to £90m more than historic book value.

Analysts see pre-tax profits reaching £32.5m to £33m this financial year, with earnings approaching 35p a share. In September, the company rejected a bid approach from private equity buy-out group Bridgepoint.

Now 355p, between a 12-month high of 403.25p and a low of 228p, Care UK’s shares should make further progress.