CareTech Holdings

Social care services star CareTech delivered robust half-year numbers to March and is carrying on with its hitherto successful consolidation strategy.

On sales up 5% to £41.4m, CareTech, whose services span residential care, supported living and community mental health, nurtured 32% pre-tax profit growth to £7.6m, as the benefits of its efficient model shone through. From improved earnings of 12.97p, the half-time payout was lifted 15% to 1.84p.

Strong capacity growth, remarked executive chairman Farouq Sheikh, was one highlight of the half, with capacity upped by 50 beds to 1,480 organically and occupancy levels maintained at more than 90% within established services.

Having refinanced its facilities and raised £15m at £4 in March, AIM-listed CareTech also sports an £85m war chest and is determined to continue with its consolidation brief. Since period-end, it has extended its range of services, capacity and geographic reach through the acquisition of three businesses for an initial £11m and is now running the rule over ‘a substantial pipeline’ of opportunities.

A venture with quality, high-visibility income streams (the average age of the people the company cares for is a relatively youthful 44 years old), CareTech’s growth prospects are supported by the cost-effective nature of the non-discretionary services it provides, to a local authority client base whose budgets are now coming under pressure.

Forecast to grow profits from £15.3m to £18.5m this year, giving 30.7p of earnings, the dividend-paying shares in this asset-backed business, recommended by Growth Company Investor at 303.5p a year ago, have been oversold. It is worth augmenting existing holdings at these levels.