19 Nov 2008 07:00
19 November 2008
Care UK Plc
("Care UK" or "the group")
Preliminary Results for the year ended 30 September 2008
Care UK Plc, the leading specialist health and social care provider, is pleased to announce preliminary results for the year ended 30 September 2008.
| Amounts in £m unless stated | 30 Sept 2008 | 30 Sept 2007 |
| Revenue: group and share of joint venture | 341.6 | 275.7 |
| Operating profit | 12.8 | 23.0 |
| Adjusted operating profit * | 36.4 | 30.4 |
| Profit before group taxation | 1.6 | 14.5 |
| Profit before group taxation, integration & restructuring costs, amortisation and impairment charges | 22.5 | 19.1 |
| Basic (LPS)/EPS | (4.98)p | 20.27p |
| Adjusted basic EPS * | 27.92p | 26.26p |
| Total dividend, paid and proposed | 4.43p | 4.02p |
| Operating cash flow | 46.9 | 32.5 |
| Total net debt | 180.2 | 170.3 |
* Including joint venture operating profit; before amortisation of intangible assets and impairment of goodwill
and intangible assets and, for 2007 only, integration and restructuring costs
A year of strong organic and acquisitive growth for Care UK, most notably from the Health Care division.
Total borrowing facilities available of £273.7m, with total funding headroom of over £80m including over £54m under the main syndicated facility, which is committed until early 2015; the group remains comfortably within key covenants with no need to raise additional finance to fund development plans.
Social Care:
Aggregate revenue increased by 10% and adjusted operating profit by 4%, with solid performances in Residential Care and much of Specialist Care
Business growth in the year includes:
Preferred bidder appointment for new care home of c100 beds (around two-thirds to be contracted for 25 years); limited Care UK capital required
Approved development of a new 74-bed greenfield care home in Crowborough, East Sussex
New and renewed home care contracts awarded in Community Care, amounting to net growth of c5,000 additional hours per week
Acquisition of new homecare branches in South Gloucestershire and the West Midlands added 3,500 hours per week in total
Several new and extended learning disabilities contracts in both England and Scotland
Health Care:
Excellent growth in revenue, up 73%, and adjusted operating profit, up 112%, driven by full year contribution from the 2007 acquisition of Mercury Health, full ownership of PHG and growth in the Primary Care business
Care UK's Health Care business now widely recognised as sector's largest and most influential independent sector provider of healthcare services to NHS patients
Strategic acquisition of 50% of Partnership Health Group not previously owned completed on 1 August 2008
Targeted bidding activity under the 'Equitable Access' initiative. Two new small primary contracts recently awarded for commencement in spring 2009
Phase 2 ISTC in Southampton reached financial close in June 2008, services commenced in late October 2008
Good progress made on the mobilisation of the Greater Manchester CATS service, which reached financial close in June 2008
John Nash, Chairman of Care UK, commented:
"Care UK's strong performance during 2008 demonstrates the resilience of the group and the benefits of investment in the emerging healthcare market.
"Both the current Government and the Conservative party have reaffirmed their strategies for the evolution of a competitive market for NHS services and we anticipate further growth in both our Health Care and Social Care businesses as a consequence. We are currently bidding for selective opportunities in the NHS' 'Equitable Access' procurement for primary care services and we anticipate a further substantial range of opportunities to flow from the NHS strategy to separate and introduce competition for PCT Provider Arms that represent expenditure of around £10bn per annum.
"Having successfully created competencies strongly aligned with the integration of secondary and primary healthcare and with social care services, Care UK is strongly positioned to benefit from further service and market reform offering good opportunities for delivering exceptional long-term value to shareholders".
- Ends -
For further information, please contact:
| Care UK Plc | 01206 752552 |
| Mike Parish, Chief Executive | |
| Paul Humphreys, Finance Director |
| Weber Shandwick Financial | 020 7067 0700 |
| Louise Robson / Stephanie Badjonat / Katie Matthews | |
19 November 2008
Care UK Plc
("Care UK" or "the group")
Preliminary Results for the year ended 30 September 2008
Chairman's statement
Care UK's strong performance during 2008 demonstrates the resilience of the group and the benefits of investment in the emerging healthcare market.
Adjusted operating profit, including joint venture operating profit and stated before amortisation and impairment charges, is up by 20% to £36.4m (2007: £30.4m) on revenue, including share of joint venture revenue, increased by 24% to £341.6m (2007: £275.7m), and adjusted profit before tax is up by 18% to £22.5m (2007: £19.1m). Adjusted basic earnings per share were up by 6% to 27.92p (2007: 26.26p). The total basic loss per share was (4.98)p (2007: earnings of 20.27p). Operating cash flow was £46.9m (2007: £32.5m), an increase of 44%, representing a cash conversion ratio of 147% (2007: 128%) measured against adjusted operating profit, excluding share of joint venture operating profit.
The most notable financial performance in the group has been in the Health Care division, reflecting both the full year effect of the Mercury Health acquisition and the part year benefit of acquiring full ownership of Partnership Health Group ("PHG"). Most existing services within this division have now reached an operational steady state and are achieving their targeted levels of returns. With total revenue and adjusted operating profit increasing by 73% and 112% respectively, the division represented around 30% of both revenue and adjusted operating profit. This share is expected to show further material increase during the coming years from the full year benefit of the acquisition of PHG and as new services are commissioned and reach their planned contribution levels.
From its start-up position in 2004, Care UK's Health Care business is now widely recognised as the sector's largest and most influential independent sector provider of healthcare services to NHS patients.
Overall, the aggregate revenue of the three Social Care divisions was 10% higher than the previous year (of which 6% was organic) with adjusted operating profit being 4% higher. Solid performances in both Residential Care and much of the Specialist Care division were partly offset by contract start-up challenges in Community Care and, within the Specialist Care division, the continuing difficulties in children's services (which represents just 4% of total revenue).
Compensation negotiations
Compensation discussions continue with the Department of Health ("DoH") regarding the termination of the West Midlands diagnostics contract, which ceased providing services in February 2008, as well as claims for wasted bid costs relating to Phase 2 Independent Sector Treatment Centre ("ISTC") contracts. As reported at the half year, our review of the consequences of the termination has resulted in certain impairment charges being made. Satisfactory resolution of these negotiations is expected in the current financial year.
Employees and quality
People that are drawn to becoming health and social care professionals are of a special nature and Care UK is extremely fortunate to have a workforce that is dedicated to providing excellent care.
As a sector leader, Care UK sets the highest standards of both care service quality and value - whether services are purchased by commissioners or directly by individuals. The group invests extensively in recruiting the right people, in training and in quality review resources to underpin this commitment. Equally important is to encourage a culture that is both open and honest so that any shortcomings are readily identified and resolved.
It is pleasing to note that across the Social Care divisions, ratings by the Commission for Social Care Inspection indicate an improvement of some 10% in services assessed 'excellent' or 'good' to 80%, ahead of market comparators. Similarly it is encouraging to note that in our Health Care treatment centres, independent patient survey data indicates that all patients are satisfied with their experience with 95% reporting this as excellent or very good. In the most recent patient satisfaction surveys undertaken, the PHG centres have out-performed the top 20% of NHS hospitals on every one of over 20 measures. All Care UK and PHG centres have continued to maintain their record of having zero hospital acquired infections for the 'superbugs' MRSA and Clostridium difficile.
Care UK is committed to developing an organisation that reflects the UK's diversity. Our aim is to attract and develop talented people who relate to the needs of our patients and service users, who aspire to develop optimal solutions and who will drive continual improvement.
Dividend
The board is recommending a final dividend of 3.10p per share (2007: 2.80p), an increase of 11%, which will be paid on 18 February 2009 to shareholders on the register on 23 January 2009. This increase is consistent with the previously stated policy of growing dividends ahead of inflation whilst maintaining a level of earnings cover appropriate to the group's growth objectives. Dividend cover in 2008 is 6.3 times, measured against adjusted basic earnings per share (2007: 6.5 times).
Outlook
The group's Social Care and Health Care businesses benefit from high levels of contracted revenue and the non-discretionary nature of our services offer relative market stability. The group is benefiting from its well managed funding arrangements. The group's core debt facilities are fully committed until February 2015 with material headroom of over £80m to facilitate further growth. In addition, the group's balance sheet is further supported by the market valuations of its property assets being substantially higher than their book values even in the prevailing market conditions.
Our immediate focus is on the continuity of service at the two Wave 1 ISTC contracts, in Plymouth and Barlborough Links, that are due to complete their initial contract term during 2010. We are encouraged by the level of engagement with both local Primary Care Trusts ("PCTs") and the DoH and we are optimistic that Care UK will be able to continue operating these centres, with acceptable financial returns, beyond their initial contract periods.
Of equal importance to the group's strategy is the continuation of our success in our well established Social Care services and the recovery of operational performance where it has fallen short of our own high expectations. For some time, Care UK has considered care home acquisition valuations to be stretched and we have chosen not to participate in recent market consolidation as a consequence. However, the board perceives that over the coming period valuations are likely to become more realistic and that a modest acquisition plan, targeted at single homes or small groups of homes, might become a part of the group's strategy in this area.
Both the current Government and the Conservative party have reaffirmed their strategies for the evolution of a competitive market for NHS services and we anticipate further growth in both our Health Care and Social Care businesses as a consequence. We are currently bidding for selective opportunities in the NHS' 'Equitable Access' procurement for primary care services and we anticipate a further substantial range of opportunities to flow from the NHS strategy to separate and introduce competition for PCT Provider Arms that represent expenditure of around £10bn per annum. Services provided range from community health care services and hospitals to mental health and learning disabilities.
Having successfully created competencies strongly aligned with the integration of secondary and primary healthcare and with social care services, Care UK is strongly positioned to benefit from further service and market reform offering good opportunities for delivering exceptional long-term value to shareholders.
John Nash
Chairman
19 November 2008
Chief Executive's review
Social Care
The group's Social Care activities comprise the Residential Care, Community Care and Specialist Care divisions, which are commented on individually below. Aggregate Social Care revenue has increased by 10% with a rise in adjusted operating profit of 4%. The reduced operating margin reflects the cost implications of the first phase of additional holiday entitlements arising under the Work and Families Act 2006, which took effect from 1 October 2007, as well as the impact of operational start up difficulties with two Community Care contracts.
| Social Care aggregate results Year ended 30 September | 2008 £m | 2007 £m |
| Revenue | 237.7 | 216.2 |
| Operating profit | 28.2 | 27.5 |
| Adjusted operating profit * | 29.4 | 28.2 |
| Operating margin * | 12.3% | 13.0% |
* Before amortisation of intangible assets of £1.2m (2007: £0.7m)
Residential Care
| Year ended 30 September | 2008 £m | 2007 £m |
| Revenue | 100.1 | 93.8 |
| Operating profit | 17.5 | 16.4 |
| Operating margin | 17.5% | 17.5% |
The Residential Care division achieved growth in both revenue and operating profit of close to 7%, maintaining operating margins. The total number of beds at the end of the financial year, including daycare places, was 3,303 compared with 3,217 at the beginning of the year. Financial occupancy ('beds paid for') was similar to the 97% level achieved in the previous year. Fee rates in the year averaged £621 per week compared with £602 per week in the previous year, an increase of 3%.
Ellesmere House, a new residential care facility in the Royal Borough of Kensington & Chelsea, commenced services in March 2008. This is a 60-bed facility operated by Care UK under a minimum 21-year management contract, with 30 of the beds being contracted.
Good progress has been made on the construction of the new care home in Slough with service provision expected to commence as planned by spring 2009. This is a 120-bed residential care facility, with 90 beds contracted for a minimum period of 15 years.
Good progress has also been made on the construction of the 'greenfield' care home in Chelmsford. This is a 120-bed home being targeted primarily at self-funding residents and is on schedule to open as planned by late spring 2009.
We are currently finalising a preferred bidder appointment for a new care home, which will have around 100 beds. The home will be operated under a 25-year contract for around two-thirds of the beds with the remaining one-third planned to be marketed either as NHS continuing care beds or to self-funding individuals. In this case, the relevant Local Authority will fund the construction of the home, with Care UK entering into a 25-year lease for the site. Consequently, our required level of capital investment for this project will be low. Services are expected to commence in this home in late summer 2010.
The Board has approved in principle the development of a new 74-bed 'greenfield' residential care home in Crowborough, East Sussex. This new home will be targeted at the self-funding market and a detailed planning application has now been submitted. We have decided to withdraw from the development of an 84-bed residential care home in Timperley, Greater Manchester, announced in May 2008, following the attempted re-negotiation of agreed lease terms by the developer.
As indicated in the Interim Management Statement released on 18 August 2008 we have decided to postpone the planned creation of a Propco structure given the current uncertain market conditions. We continue to evaluate potential 'greenfield' developments on an individual leasehold basis, but anticipate that the potential acquisition of existing individual care homes or small groups of homes may prove to offer better value than the construction of new properties in the immediate future.
Community Care
| Year ended 30 September | 2008 £m | 2007 £m |
| Revenue* | 77.3 | 63.7 |
| Operating profit | 4.3 | 4.6 |
| Adjusted operating profit ** | 5.5 | 5.3 |
| Operating margin ** | 7.1% | 8.3% |
* Before elimination of inter-segmental revenues of £nil (2007:£0.6m)
** Before amortisation of intangible assets of £1.2m (2007: £0.7m)
Community Care maintained its strong growth record with revenue up by 21% over the prior year, of which organic growth represented 9% with the balance coming from acquisitions made in the current and previous years.
The operating margin within Community Care has shown a reduction compared with the previous year as a result of the costs of additional holiday entitlements arising from the Work and Families Act 2006 along with specific operational factors relating particularly to the start-up of new contracts in Hertfordshire and the London Borough of Harrow. Services under both of these contracts commenced during the year and at the year end amounted to around 5,000 hours per week in total. Excluding the effects of these factors the operating margin within Community Care would have been similar to the level achieved in 2007. Management changes have been implemented to address the resolution of these operational issues and avoid similar recurrence, although we do expect some continuing impact on margin in the current financial year.
During the year, new and renewed contracts have been awarded in Cheshire, Surrey, St Helens, Southampton and the Royal Borough of Kensington & Chelsea; the net expected growth from newly won contracts is approximately 5,000 hours per week.
In line with our strategy of achieving growth both from selective acquisitions as well as organic development, we acquired Badminton Healthcare, based in South Gloucestershire, in February 2008 and Robnet, based in Wolverhampton & Dudley, in May 2008. These acquisitions have added around 3,500 hours per week and increase our coverage in the South West and West Midlands regions. We have currently chosen not to make further acquisitions as we expect valuations to fall in line with wider market conditions.
At 30 September 2008, the weekly total of hours of care provided amounted to around 123,000 compared with 115,000 at the start of the financial year, an increase of 7%. The total hours delivered in the year amounted to around 6.2m compared with 5.2m in the previous year, an increase of around 19%.
Community and home based care is increasingly favoured by commissioners over residential and hospital alternatives and Local Authorities are clearly tending to award larger homecare contracts to fewer providers. Consequently, this area remains of strategic importance to Care UK and we are actively seeking opportunities to extend our community based service offering. In particular, we are seeking to leverage synergy opportunities with our Specialist Care and Health Care capabilities.
Specialist Care
| Year ended 30 September | 2008 £m | 2007 £m |
| Revenue | 60.3 | 58.7 |
| Operating profit | 6.4 | 6.5 |
| Operating margin | 10.5% | 11.1% |
Specialist Care has delivered revenue growth of 3% in the year, all of which was organic.
The mental health business achieved revenue growth of 4% and an improvement in the operating margin, mainly through higher occupancy levels. We continue to review opportunities for the development of community based mental health services in response to the preferences of commissioners, whilst removing residential capacity where it no longer meets service needs.
In learning disabilities, revenue growth of around 5% was achieved following the award of a new contract in Scotland and a number of extended services in England. The growth in operating profit in the year was slightly muted following the good growth experienced in 2007. Care UK is particularly strong in the provision of 'supported living' services that are favoured by commissioners and service users and we continue to seek opportunities both to grow and to broaden our service offering in this attractive business area.
In children's services we have seen a revenue reduction of 3% as a result of challenging market conditions for residential care with commissioners increasingly placing young people for shorter term stays and seeking generally to minimise higher fee residential placements. Whilst the operating margin in this business has remained positive for the year, we are continuing to rationalise our capacity to better match prevailing demand.
The Specialist Care management team continue to be focussed on the improvement of operating performance across each of the businesses within this division and on developing our good market positions in mental health and learning disabilities supported living services.
Health Care
| Year ended 30 September | 2008 £m | 2007 £m |
| Revenue | 103.9 | 60.1 |
| Operating profit | (11.5) | 0.6 |
| Adjusted operating profit * | 10.9 | 5.2 |
| Operating margin * | 10.5% | 8.6% |
* Before amortisation of intangible assets of £3.8m (2007: £1.8m), impairment charges of £15.9m (2007: £nil) and joint venture net financing costs and taxation of £2.7m (2007: £2.8m)
The group's Health Care activities in 2008 comprised the Primary Care and Secondary Care divisions, together with Partnership Health Group ("PHG"), which has been fully owned by the group since acquiring the 50% interest not previously owned on 1 August 2008.
The Health Care business has shown good improvement in financial performance compared with 2007, with revenue increasing by 73% and adjusted operating profit increasing by 112%. The improvement has come from the full year contribution of Mercury Health, acquired in April 2007, the full ownership of PHG for the latter part of the financial year and from growing scale in the Primary Care business. Approximately 35% of the total revenue reported within Health Care in the year was derived from PHG, around 13% from the group's original Primary Care business and the balance from the former Mercury Health business.
The West Midlands diagnostics contract that was voluntarily terminated by the DoH in November 2007 contributed revenue of £9.1m during the first half of the year with a small adjusted operating profit.
With effect from 1 January 2009, services within the Health Care division will be focussed in two areas, Primary Care and Secondary Care, which are reported on further below.
Primary Care
Performance across the current range of primary care services has been encouraging. The GP practices, out of hours and walk-in services have all seen increasing patient numbers and new prison health services commenced at HMP Garth, Wymott & Preston and Brixton. New Clinical Assessment and Treatment Support services ("CATS") also commenced in the financial year in Barking & Dagenham and north Manchester along with a new 5-year contracted GP service in Greater Manchester.
A new 7-year diagnostics contract in Rotherham is on plan to commence services in spring 2009 and good progress has been made on the mobilisation of the Greater Manchester CATS service that was procured under the Phase 2 ISTC programme and reached financial close in June 2008. This service will be provided by highly sophisticated mobile units visiting seven sites around Greater Manchester and will deliver a range of services to NHS patients. Services will include assessment and treatment of minor injuries, diagnostics & scanning, endoscopies and pre-operative assessments covering a number of specialties including orthopaedic, musculoskeletal, ENT, urology and general surgery. Services under this 7-year contract are on track to commence in early 2009 as planned.
The Primary Care team has been actively engaged in bidding for various services to be provided to NHS patients under the 'Equitable Access to Primary Medical Care Services' initiative. Given that many of these opportunities are relatively small, we are being highly selective in targeting projects that offer an entry point for further potential developments. We are pleased to have recently been awarded two small new primary care contracts for commencement in spring 2009.
We believe that we are well positioned to be a leading provider in a Primary Care market that is being identified by both the Government and the Conservative Party to offer considerable scope for extended services and greater choice for patients.
Secondary Care
The GC8 Wave 1 ISTC contract acquired with Mercury Health in 2007 has continued generally to perform well and in line with our expectations at the time of the Mercury Health acquisition. In particular the centre in Portsmouth performed strongly during the year as did the smaller centre in Wycombe, which is focused on diagnostics services. We have now agreed a revised case-mix for the centre in Medway, which we believe will result in the contract utilisation for this centre becoming on a par with our other centres. The final GC8 centre, a diagnostics centre in Havant, was opened as planned in January 2008 and is also now beginning to see improved patient volumes.
Operational performance at the Sussex Orthopaedic Treatment Centre ("SOTC") in Haywards Heath has improved significantly in the second half of the year. During this period we have significantly reduced the high patient waiting list inherited with Mercury Health and have agreed an enhancement of services in line with the NHS 18-week referral-to-treatment target. Subsequent to the year end both of these matters have been formalised in a Deed of Variation to the original GC8 contract.
As from 1 January 2009, the GC8 centres in Portsmouth, Wycombe and Havant will form part of the Primary Care business whilst the SOTC and the Medway centre will, together with the whole of the PHG business, form the basis of Secondary Care.
Independent patient survey data indicates that 95% of patients reported either an excellent or very good overall experience and that all patients were satisfied. All Care UK and PHG centres continue to experience zero hospital acquired infections for the 'superbugs' MRSA and Clostridium difficile.
During the year PHG continued to perform strongly both clinically and financially. In the most recent patient satisfaction surveys undertaken, the PHG centres have out-performed the benchmark of the top 20% of NHS hospitals on every one of over 20 measures. We completed the acquisition of the 50% of PHG not previously owned on 1 August 2008 and have subsequently integrated PHG within the group's Health Care division.
The Phase 2 ISTC in Southampton, located in part of the Royal South Hants Hospital, reached financial close in June 2008. Services under this 7-year contract have now commenced with outpatient services starting in late October 2008 and the first inpatient procedures being carried out in early November. The range of procedures to be provided covers specialties including orthopaedics, oral, urology, ENT, gynaecology, ophthalmology and general surgery as well as a number of endoscopies. This project demonstrates the benefits of independent sector development and management of existing NHS infrastructure, an area of particular interest to NHS management.
The key focus in the Health Care business is to achieve continuity of the group's Wave 1 ISTC centres beyond their initial contracted periods. In particular, we are exploring the opportunity both to recover the residual capital investment value and to continue to operate the centres through a leasehold arrangement with the respective PCTs. Since gaining full ownership of PHG we have been encouraged by the positive disposition of both the DoH and the commissioning PCTs and their clear interest in determining mutually agreeable terms. We hope to make further, substantive progress in the first half of the current financial year. As part of this process, we are also seeking opportunities to expand and enhance the services provided in each centre so that they become ever more important contributors to the local health economies.
Generally in Health Care, we are encouraged by the NHS strategy, supported by the policies of both Labour and Conservative parties, to introduce a wider range of non-NHS providers to stimulate competition and by the drive to empower patients with greater freedom to choose the provider of their choice. The intention to migrate service provision from PCT Provider Arms to non-NHS organisations is seen as the next significant step in establishing a mixed economy of service providers. This is driving behavioural change across the NHS at a remarkable rate and we are pleased to have established a number of entry points and service competencies that we expect to leverage during the coming years.
Mike Parish
Chief Executive
19 November 2008
Financial review
The 2008 financial year has seen another year of strong performance for Care UK with a growing contribution from the group's Health Care activities, a generally solid performance in Social Care and the important strategic acquisition of the 50% of PHG not previously owned. The good cash flow performance, sound property asset base and funding headroom give the group a good platform from which to continue to seek growth opportunities, both organic and through selective acquisitions.
| Summary of group performance | 2008 £m | 2007 £m | Increase % |
| Revenue (group and share of joint venture) | 341.6 | 275.7 | +24 |
| Operating profit | 12.8 | 23.0 | |
| Amortisation of IFRS 3 intangible assets | 5.0 | 2.5 | |
| Impairment of goodwill and intangible assets | 15.9 | - | |
| Integration & restructuring costs | - | 2.1 | |
| Joint venture net financing costs and taxation | 2.7 | 2.8 | |
| Adjusted operating profit | 36.4 | 30.4 | +20 |
| Share of joint venture net financing costs | (1.1) | (1.8) | |
| Net financing costs (group only) | (11.2) | (8.5) | |
| Adjusted profit before tax | 24.1 | 20.1 | +20 |
Overview
The group's results show revenue, including the group's share of joint venture revenue, of £341.6m (2007: £275.7m), an increase of 24%, and adjusted operating profit of £36.4m (2007: £30.4m), an increase of 20%. Adjusted profit before tax was £24.1m (2007: £20.1m), an increase of 20%. Overall group profit before tax was £1.6m (2007: £14.5m) reflecting the £15.9m of non-cash impairment charges taken in the first half in relation to the terminated West Midland diagnostics contract. The group's forward contracted revenue has increased to £1.5bn at 30 September 2008 (2007: £1.2bn).
Operating performance
The group's underlying operating performance is shown in the table above as "Adjusted operating profit", reflecting three adjustments for 2008. In addition, in 2007, this measure excluded the integration & restructuring costs incurred following the acquisition of Mercury Health in April 2007.
Amortisation of IFRS 3 intangible assets
Under IFRS 3 all business combinations are reviewed in order to identify any intangible assets required to be recognised. Such intangible assets are then amortised over their estimated useful lives. The non-cash amortisation charge for the year amounted to £5.0m (2007: £2.5m), the increase from the prior year reflecting the annualisation of acquisitions made in 2007, particularly Mercury Health, as well as the charge arising from acquisitions made in 2008.
Impairment of goodwill and intangible assets
All goodwill and IFRS 3 intangible assets are subject to impairment reviews carried out on an annual basis or where evidence of impairment is considered to exist. The termination of the West Midlands diagnostics contract, referred to in the Chairman's statement and below, required an impairment review to be carried out in the first half of the 2008 financial year in relation to the carrying value of those assets formerly employed in the diagnostics business. As a result of this review, impairment charges have been recognised of £13.9m in relation to goodwill arising on the acquisition of Mercury Health and £2.0m, in relation to the intangible asset originally recognised for the West Midlands diagnostics customer contract. These amounts are unchanged from those included in the group's half year results.
Joint venture net financing costs and taxation
Adopted IFRS requires that contributions from joint ventures are shown on an after-tax basis as a single line component of operating profit in the Income statement. In calculating underlying operating performance, the joint venture net financing costs and taxation have been added back; these items are fully taken into account in calculating adjusted earnings per share. Following the acquisition of the 50% of Partnership Health Group not previously owned on 1 August 2008 the group no longer has any joint venture interests.
Taxation
Under adopted IFRS the group's share of the taxation charge of joint venture interests is deducted in arriving at the net disclosed result for the group's joint venture interest. The group's headline rate of tax on pre-tax profit is not a relevant statistic for 2008 as a result of the non-qualifying nature of the goodwill impairment charge taken in the first half year and referred to above. The headline tax charge also includes the deferred tax credit accounted for under IAS 12, which arises in respect of the amortisation and impairment of other intangible assets recorded in the Income statement. The more significant tax measure is the underlying tax rate that reflects the tax charge applying to the adjusted profit before taxation. In 2008 this rate was 33.7% (2007: 29.9%), in line with the rate reported in the half year results. The underlying rate remains above the statutory rate, which averaged 29% for 2008, mainly as a result of the proportion of the group's capital expenditure that is non-qualifying for tax purposes.
Earnings per share
Adjusted basic earnings per share were 27.92p (2007: 26.26p). The total basic loss per share was (4.98)p (2007: earnings of 20.27p). Under the provisions of IAS 33, the average number of shares used for calculating diluted earnings per share does not change where basic earnings per share are negative and the calculation of any alternative diluted earnings per share measure must use the same average number of shares as the total diluted calculation. Consequently, adjusted diluted earnings per share were also 27.92p (2007: 25.97p) and the total diluted loss per share was also (4.98)p (2007: earnings of 20.04p).
Dividends
The board is proposing a final dividend of 3.10p per share (2007: 2.80p), which will be paid on 18 February 2009 to shareholders on the register on 23 January 2009. If approved by shareholders, this would result in a total dividend in respect of the year of 4.43p (2007: 4.02p) when added to the interim dividend of 1.33p per share (2007: 1.22p) paid in July 2008. At 30 September 2008 a total of 519,140 shares (30 September 2007: 532,617) were held by the group's Employee Benefit Trust, on which dividend payments are waived. The group has put in place a Dividend Re-Investment Plan to enable shareholders to choose to re-invest dividends in market purchases of further shares rather than be taken in cash.
Acquisition of Partnership Health Group
On 1 August 2008 the group announced the completion of the acquisition of the 50% of PHG not previously owned from Life Healthcare Group (Proprietary) Ltd. The initial consideration for this transaction was £14.2m, which was financed by a share placing of 4,666,666 new ordinary shares. The total funds raised from this placing amounted to £16.1m before expenses and are sufficient to fund payment of the contingent consideration of £2.0m that becomes payable to Life Healthcare in the event that any one of PHG's existing four operational centres continues to deliver services following the expiry of their initial contract. The group has provided for this payment in full as it is expected to become payable.
On acquisition, the PHG balance sheet showed net assets of £12.0m, including net debt of £25.1m. Limited fair value adjustments have been made, principally to align the acquired current and deferred tax provisions. In addition, an intangible asset of £11.1m has been recognised in relation to customer contracts in accordance with IFRS 3, together with the related deferred tax provision of £3.1m. The asset and related deferred taxation will both be amortised over the remaining lives of the underlying contracts, which average 4.8 years.
| Book value £m | Fair value adjustments £m | Fair value £m | |
| Property, plant and equipment | 47.3 | - | 47.3 |
| Intangible assets (other than goodwill) | - | 11.1 | 11.1 |
| Current assets (other than cash & cash equivalents | 6.5 | 0.2 | 6.7 |
| Cash & cash equivalents | 3.8 | - | 3.8 |
| Total assets | 57.6 | 11.3 | 68.9 |
| Financial liabilities - borrowings | (28.9) | - | (28.9) |
| Other liabilities | (15.3) | (0.7) | (16.0) |
| Deferred tax liabilities | (1.4) | (3.6) | (5.0) |
| Net assets (100% interest) | 12.0 | 7.0 | 19.0 |
| Existing 50% share of joint venture net assets | (6.0) | 0.3 | (5.7) |
| Net assets acquired | 6.0 | 6.7 | 13.3 |
| Goodwill arising on acquisition | 3.4 | ||
| Total consideration (including contingent consideration & transaction costs) | 16.7 | ||
Compensation claims
The group has been in negotiation with the Department of Health ("DoH") for some time regarding the compensation claim raised following the DoH's voluntary termination of the West Midlands diagnostics contract in November 2007. A payment of £10.0m was received in July 2008 and a further interim payment has been received in October 2008. The group is seeking to bring this matter to a final conclusion at the earliest opportunity.
In addition, compensation claims have been submitted for abortive bid and development costs where the DoH has either withdrawn or substantially changed Phase 2 ISTC contracts for which the group was appointed preferred bidder, including the Essex Electives Phase 2 ISTC contract under which Mercury Health had been appointed preferred bidder. We continue to negotiate with the DoH and anticipate a satisfactory resolution on these claims.
Financing, treasury and cash flow
Total net debt increased during the period by £9.9m to £180.2m. This increase includes the net debt of £25.1m acquired with PHG; excluding this item, the reduction in net debt arising from net positive cash flows in the year was £15.7m and other non-cash movements increased net debt by £0.5m.
The total borrowing facilities available to the group at the period end amounted to £273.7m. All but £3m of this is available under committed facilities with £221.0m under the syndicated group facility and the balance of £49.7m under the non-recourse facilities set up to fund the Wave 1 ISTC programme. The several separate facilities making up the latter amount run to various expiry dates between March 2010 and March 2012. These facilities will be partly repaid out of the cash flows that will be generated through the operation of the centres over their remaining contracted periods with the residual balance of approximately £38m structured to be repaid on the various expiry dates out of the contractually guaranteed buyback proceeds for the centres, which amount to around £54m in total.
At 30 September 2008 the total funding headroom available to the group amounted to over £80m, including the £22.9m of cash held and after taking into account performance bonds issued under the syndicated group facility. The group remains comfortably within its key covenants under the facility as set out below. It does not currently foresee the need to raise additional debt financing in order to fund its development plans. The group syndicated facility is committed until February 2015.
| Summary of cash flows and change in net debt | 2008 £m | 2007 £m |
| Adjusted operating profit (group only) | 31.8 | 25.4 |
| Depreciation and other non-cash movements | 15.6 | 10.0 |
| Change in working capital and provisions | (0.5) | (0.8) |
| Integration & restructuring costs | - | (2.1) |
| Operating cash flow | 46.9 | 32.5 |
| Net capital expenditure | (14.9) | (16.4) |
| Loan repayments from joint venture | 5.9 | 0.6 |
| Cash consideration paid for acquired businesses | (4.4) | (27.6) |
| Stakeholder cash flows (interest, tax and dividends paid, shares issued) | (17.8) | (11.7) |
| Movement in net debt arising from cash flows | 15.7 | (22.6) |
| Net debt acquired with acquired businesses | (25.1) | (31.0) |
| Other non-cash movements in net debt | (0.5) | (1.4) |
| Total movement in net debt | (9.9) | (55.0) |
| Net debt at 30 September | (180.2) | (170.3) |
| Cash conversion ratio (operating cash flow/adjusted operating profit) | 147% | 128% |
Adjusted operating cash flow for the year was £46.9m, an increase of 44% over the equivalent figure in 2007 of £32.5m. This represents a cash conversion ratio, measured against adjusted operating profit excluding share of profit of joint venture, of 147% (2007: 128%). This compares favourably with the group's target for this measure, of around 120%.
Net stakeholder cash flows (interest, tax, dividends and equity issues) represented a net outflow of £17.8m (2007: £11.7m). Maintenance and infrastructure capital expenditure absorbed £6.2m (2007: £4.1m), disposal proceeds were £1.8m (2007: £0.7m) and loan repayments totalling £5.9m (2007: £0.6m) were received from PHG prior to the acquisition of the 50% of the business not previously owned. The free cash flow available for discretionary investment consequently amounted to £30.6m (2007: £18.0m).
Against this available free cash flow the discretionary investment in the year in new services amounted to £14.9m (2007: £40.6m). This comprised capital expenditure of £10.5m (2007: £13.0m) and cash consideration for the acquisition of businesses of £4.4m (2007: £27.6m). In addition, net debt of £25.1m (2007: £31.0m) came with the business acquired during the year. The project related capital expenditure in the year was lower than expected largely as a result of timing factors on the ISTC Phase 2 projects, particularly the Manchester CATS service. Two small homecare acquisitions, Badminton Healthcare and Robnet, were completed during the year for combined consideration of £2.8m and approximately £1.0m was paid as contingent consideration for businesses acquired in prior years.
The group continues to follow a policy of having a high proportion of its borrowings subject to interest rate hedging arrangements. At 30 September 2008 the total drawn debt, excluding cash and cash equivalents and finance leases was £203.7m, split between the group's syndicated facility (£154.0m) and the ring-fenced non-recourse facilities set up to finance the Wave 1 ISTC programme (£49.7m). Of this, a total of £192.4m (95%) was subject to effective hedging arrangements with £131.4m swapped into fixed rates, at an average LIBOR rate of 5.09%, and £61.0m in 'collar' arrangements with an average LIBOR floor of 4.31% and an average LIBOR cap of £5.82%.
The group's interest cover, measured in accordance with the group's syndicated facility agreement using earnings before interest, tax, depreciation and amortisation ("EBITDA") increased to 3.7 times for the year ended 30 September 2008 (2007: 3.2 times) compared with the group's covenant requirement of a minimum of 3.0 times. The ratio of facility utilisation to EBITDA, again as measured under the group's syndicated facility agreement, reduced to 4.2 times as at 30 September 2008 (2007: 5.5 times) compared with the covenant requirement of a maximum of 6.25 times (this covenant requirement reduces to a maximum of 5.75 times by March 2010).
Future changes to adopted IFRS
IFRS is subject to ongoing review and revision by the International Accounting Standards Board and subsequent endorsement by the EU. Care UK is continuing to monitor proposed changes to IFRS, assessing how best practice develops, and gauging their impact on the group financial statements. Shareholders will be kept informed as to how such changes may impact the group's financial statements.
Paul Humphreys
Finance Director
19 November 2008
Care UK Plc
Unaudited consolidated income statement
for the year ended 30 September 2008
| 2008 | 2007 | |||||||||
| Group excl. Diagnostics contract termination | Diagnostics contract termination 2 | Total | ||||||||
| £m | £m | £m | £m | |||||||
| Revenue: group and share of joint venture | 341.6 | - | 341.6 | 275.7 | ||||||
| Less: share of joint venture | (25.8) | - | (25.8) | (27.2) | ||||||
| Group revenue | 315.8 | - | 315.8 | 248.5 | ||||||
| Cost of sales | (250.4) | - | (250.4) | (199.5) | ||||||
| Gross profit | 65.4 | - | 65.4 | 49.0 | ||||||
| Administrative expenses | (38.6) | (15.9) | (54.5) | (28.2) | ||||||
| Share of profit of joint venture | 1.9 | - | 1.9 | 2.2 | ||||||
| Operating profit/(loss) before financing expenses | 28.7 | (15.9) | 12.8 | 23.0 | ||||||
| Adjusted operating profit 1 | 36.4 | - | 36.4 | 30.4 | ||||||
| Integration & restructuring costs | - | - | - | (2.1) | ||||||
| Amortisation of intangible assets | (5.0) | - | (5.0) | (2.5) | ||||||
| Impairment of goodwill and intangible assets | - | (15.9) | (15.9) | - | ||||||
| Joint venture net financing costs and taxation | (2.7) | - | (2.7) | (2.8) | ||||||
| Operating profit before financing expenses | 28.7 | (15.9) | 12.8 | 23.0 | ||||||
| Financial income | 2.0 | - | 2.0 | 1.6 | ||||||
| Financial expenses | (13.2) | - | (13.2) | (10.1) | ||||||
| Net financing costs | (11.2) | - | (11.2) | (8.5) | ||||||
| Profit/(loss) before taxation | 17.5 | (15.9) | 1.6 | 14.5 | ||||||
| Taxation | (5.1) | 0.6 | (4.5) | (3.7) | ||||||
| Profit/(loss) for the period | 12.4 | (15.3) | (2.9) | 10.8 | ||||||
| Attributable to: | ||||||||||
| Equity holders of the parent | 12.4 | (15.3) | (2.9) | 10.8 | ||||||
| (Loss)/Earnings per share | ||||||||||
| Basic | (4.98)p | 20.27p | ||||||||
| Diluted | (4.98)p | 20.04p |
1 Adjusted operating profit is stated before amortisation of intangible assets, impairment of intangible assets and goodwill and joint venture net financing costs and taxation (2007: before integration and restructuring costs, amortisation of intangible assets, impairment of goodwill and joint venture net financing costs and taxation).
2 The Financial Review contains a full description of the accounting treatment adopted in relation to the West Midlands diagnostics contract which was terminated by the Department of Health in November 2007.
Care UK Plc
Unaudited consolidated statement of recognised income and expense
for the year ended 30 September 2008
| 2008 | 2007 | ||
| £m | £m | ||
| Cash flow hedge reserve movement | (1.8) | 1.8 | |
| Deferred taxation on cash flow hedge reserve | 0.5 | (0.5) | |
| Deferred taxation on equity-settled share-based payments | (0.1) | (0.1) | |
| Actuarial gains on defined benefit pension plan | 0.1 | 0.9 | |
| Deferred taxation on actuarial gains and losses | - | (0.2) | |
| Net (expense)/income recorded directly in equity | (1.3) | 1.9 | |
| (Loss)/profit for the period | (2.9) | 10.8 | |
| Total recognised income and expense for the period | (4.2) | 12.7 | |
| Attributable to: | |||
| Equity holders of the parent | (4.2) | 12.7 |
Care UK Plc
Unaudited consolidated balance sheet
as at 30 September 2008
| 2008 | 2007 | ||
| £m | £m | ||
| Assets | |||
| Property, plant and equipment | 247.8 | 202.5 | |
| Intangible assets | 92.9 | 91.4 | |
| Investment in joint venture | - | 9.8 | |
| Financial assets - derivative financial instruments | 0.9 | 2.0 | |
| Total non-current assets | 341.6 | 305.7 | |
| Inventories | 1.7 | 0.8 | |
| Trade and other receivables | 54.1 | 34.6 | |
| Cash and cash equivalents | 22.9 | 17.7 | |
| Properties classified as held for sale | 0.4 | 0.4 | |
| Total current assets | 79.1 | 53.5 | |
| Total assets | 420.7 | 359.2 | |
| Liabilities | |||
| Financial liabilities - borrowings | (8.6) | (8.7) | |
| Financial liabilities - derivative financial instruments | (0.3) | - | |
| Trade and other payables | (70.7) | (43.0) | |
| Current tax liabilities | (5.1) | (2.5) | |
| Total current liabilities | (84.7) | (54.2) | |
| Financial liabilities - borrowings | (194.5) | (179.3) | |
| Other non-current liabilities | (5.6) | (3.2) | |
| Deferred tax liabilities | (19.1) | (14.9) | |
| Total non-current liabilities | (219.2) | (197.4) | |
| Total liabilities | (303.9) | (251.6) | |
| Net assets | 116.8 | 107.6 | |
| Equity | |||
| Issued share capital | 6.1 | 5.7 | |
| Share premium | 55.3 | 40.1 | |
| Retained earnings | 55.4 | 60.5 | |
| Hedging reserve | - | 1.3 | |
| Total equity attributable to equity holders of the parent | 116.8 | 107.6 |
Care UK Plc
Unaudited consolidated cash flow statement
for the year ended 30 September 2008
| 2008 | 2007 | ||||
| £m | £m | ||||
| Cash inflow from operating activities | |||||
| (Loss)/profit for the period | (2.9) | 10.8 | |||
| Depreciation | 15.3 | 9.6 | |||
| Amortisation of intangible assets | 5.0 | 2.5 | |||
| Impairment of goodwill | 15.9 | - | |||
| Profit on disposal of fixed assets | (0.2) | (0.2) | |||
| Increase in inventory | - | (0.4) | |||
| Increase in receivables | (13.6) | (1.3) | |||
| Increase in payables | 13.1 | 0.9 | |||
| Equity-settled share-based payments | 0.5 | 0.6 | |||
| Share of profit of joint venture | (1.9) | (2.2) | |||
| Financial income | (2.0) | (1.6) | |||
| Financial expense | 13.2 | 10.1 | |||
| Tax expense | 4.5 | 3.7 | |||
| Cash generated from operations | 46.9 | 32.5 | |||
| Income taxes paid | (5.5) | (4.7) | |||
| Net cash from operating activities | 41.4 | 27.8 | |||
| Cash flows from investing activities | |||||
| Payments to acquire property, plant and equipment | (16.7) | (17.1) | |||
| Proceeds from sales of property, plant and equipment | 1.8 | 0.7 | |||
| Interest received | 2.3 | 1.6 | |||
| Investment in joint venture | - | - | |||
| Repayments from joint venture | 5.9 | 0.6 | |||
| Payments to acquire subsidiary undertakings and businesses (net of cash acquired) | (0.6) | (26.2) | |||
| Net cash from investing activities | (7.3) | (40.4) | |||
| Cash flows from financing activities | |||||
| Proceeds from issue of share capital | 1.5 | 3.1 | |||
| Repurchase of own shares | (0.4) | - | |||
| Proceeds from new secured loans | - | 42.0 | |||
| Repayments of amounts borrowed | (14.0) | (4.0) | |||
| Interest paid | (13.4) | (9.7) | |||
| Payment of capital element of finance lease payments | (0.3) | (0.1) | |||
| Dividends paid | (2.3) | (2.0) | |||
| Net cash from financing activities | (28.9) | 29.3 | |||
| Net increase in net cash and cash equivalents | 5.2 | 16.7 | |||
| Cash and cash equivalents brought forward | 17.7 | 1.0 | |||
| Cash and cash equivalents carried forward | 22.9 | 17.7 | |||
Care UK Plc
Notes to the preliminary announcement
1. Accounting policies
The results for the year ended 30 September 2008 have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union, International Financial Reporting Interpretations Committee ("IFRIC") interpretations and with those parts of the Companies Act 1985 applicable to companies reporting under IFRS.
2. Segment reporting
| 2008 | Residential Care | Community Care | Specialist Care | Health Care | Central costs | Consolidated |
| £m | £m | £m | £m | £m | £m | |
| Total revenue - from external customers | 100.1 | 77.3 | 60.3 | 103.9 | - | 341.6 |
| Less: group share of revenue of joint venture | - | - | - | (25.8) | - | (25.8) |
| Group revenue | 100.1 | 77.3 | 60.3 | 78.1 | - | 315.8 |
| Adjusted operating profit 1 | 17.5 | 5.5 | 6.4 | 10.9 | (3.9) | 36.4 |
| Amortisation of intangible assets | - | (1.2) | - | (3.8) | - | (5.0) |
| Impairment of goodwill and intangible assets | - | - | - | (15.9) | - | (15.9) |
| Group share of joint venture net financing costs and taxation | - | - | - | (2.7) | - | (2.7) |
| Operating profit before financing expenses | 17.5 | 4.3 | 6.4 | (11.5) | (3.9) | 12.8 |
| Net financing costs | (11.2) | |||||
| Taxation | (4.5) | |||||
| Loss for the period | (2.9) | |||||
| Share of profit of joint venture | 1.9 | |||||
| Segment assets | 122.7 | 45.1 | 57.6 | 185.8 | - | 411.2 |
| Investment in joint venture | - | - | - | - | - | - |
| Unallocated assets | - | - | - | - | 9.5 | 9.5 |
| Total assets | 122.7 | 45.1 | 57.6 | 185.8 | 9.5 | 420.7 |
| Total liabilities | (106.5) | (38.3) | (46.8) | (145.5) | 33.2 | (303.9) |
| Capital expenditure | ||||||
| Property, plant and equipment: | ||||||
| - additions | 9.9 | 0.3 | 0.9 | 2.9 | 3.4 | 17.4 |
| - acquisitions | - | - | - | 47.4 | - | 47.4 |
| Intangible assets: | ||||||
| - acquisitions | - | 1.4 | - | 11.2 | - | 12.6 |
| Total capital expenditure | 9.9 | 1.7 | 0.9 | 61.5 | 3.4 | 77.4 |
| Depreciation | (5.4) | (0.3) | (1.0) | (8.0) | (0.6) | (15.3) |
| Amortisation | - | (1.2) | - | (3.8) | - | (5.0) |
| Impairment | - | - | - | (15.9) | - | (15.9) |
| Total depreciation, amortisation and impairment | (5.4) | (1.5) | (1.0) | (27.7) | (0.6) | (36.2) |
1 Adjusted operating profit is stated before amortisation of intangible assets, impairment of goodwill and intangible assets and joint venture net financing costs and taxation.
| 2007 | Residential Care | Community Care | Specialist Care | Health Care | Central costs/ Eliminations | Consolidated |
| £m | £m | £m | £m | £m | £m | |
| Total revenue - from external customers | 93.8 | 63.7 | 58.7 | 60.1 | (0.6) | 275.7 |
| Less: group share of revenue of joint venture | - | - | - | (27.2) | - | (27.2) |
| Group revenue | 93.8 | 63.7 | 58.7 | 32.9 | (0.6) | 248.5 |
| Adjusted operating profit 1 | 16.4 | 5.3 | 6.5 | 5.2 | (3.0) | 30.4 |
| Integration and restructuring costs | - | - | - | - | (2.1) | (2.1) |
| Amortisation of intangible assets | - | (0.7) | - | (1.8) | - | (2.5) |
| Group share of joint venture net financing costs and taxation | - | - | - | (2.8) | - | (2.8) |
| Operating profit before financing expenses | 16.4 | 4.6 | 6.5 | 0.6 | (5.1) | 23.0 |
| Net financing costs | (8.5) | |||||
| Taxation | (3.7) | |||||
| Profit for the period | 10.8 | |||||
| Share of profit of joint venture | - | - | - | 2.2 | - | 2.2 |
| Segment assets | 119.0 | 38.7 | 60.9 | 129.0 | - | 347.6 |
| Investment in joint venture | - | - | - | 9.8 | - | 9.8 |
| Unallocated assets | - | - | - | - | 1.8 | 1.8 |
| Total assets | 119.0 | 38.7 | 60.9 | 138.8 | 1.8 | 359.2 |
| Total liabilities | (101.1) | (31.7) | (39.9) | (100.5) | 21.6 | (251.6) |
| Capital expenditure | ||||||
| Property, plant and equipment: | ||||||
| - additions | 7.1 | 0.5 | 1.6 | 8.6 | 0.4 | 18.2 |
| - acquisitions | - | 0.1 | - | 53.2 | - | 53.3 |
| Intangible assets: | ||||||
| - acquisitions | - | 13.5 | (1.3) | 42.9 | - | 55.1 |
| Total capital expenditure | 7.1 | 14.1 | 0.3 | 104.7 | 0.4 | 126.6 |
| Depreciation | (4.8) | (0.3) | (1.1) | (3.0) | (0.4) | (9.6) |
| Amortisation | - | (0.7) | - | (1.8) | - | (2.5) |
| Total depreciation and amortisation | (4.8) | (1.0) | (1.1) | (4.8) | (0.4) | (12.1) |
1 Adjusted operating profit is stated before integration and restructuring costs, amortisation of intangible assets, impairment of goodwill and joint venture net financing costs and taxation.
3. Dividends
| 2008 | 2007 | |
| £m | £m | |
| Ordinary dividends | ||
| Final paid of 2.80p per share (2007: 2.53p) | 1.6 | 1.3 |
| Interim paid of 1.33p per share (2007: 1.22p) | 0.8 | 0.7 |
| 2.4 | 2.0 |
The directors are recommending a final dividend in respect of the financial year ended 30 September 2008 of 3.10p per ordinary share, subject to shareholders' approval. If approved, this will absorb an estimated £1.7m of shareholders' funds. If approved, this dividend will be paid on 18 February 2009 to shareholders on the register at 23 January 2009. The final dividend proposed was not included as a liability as at 30 September 2008, in accordance with 'IAS 10 - Events after the Balance Sheet Date'.
4. Earnings per share
| 2008 | 2007 | |
| Basic (LPS)/EPS | (4.98)p | 20.27p |
| Diluted (LPS)/EPS 2 | (4.98)p | 20.04p |
| Additional disclosures: | ||
| Adjusted Basic EPS 1 | 27.92p | 26.26p |
| Adjusted Diluted EPS 1,2 | 27.92p | 25.97p |
1 Adjusted EPS is calculated before amortisation of intangible assets and impairment of goodwill and intangible assets. The tax effects of these items have also been excluded from these calculations.
2 In accordance with 'IAS 33 - Earnings Per Share', potential ordinary shares have not been included in the September 2008 diluted and adjusted diluted EPS calculations. Potential ordinary shares are only treated as dilutive when they increase loss per share and additional disclosures are required to the use the same denominator as the IAS 33 required disclosures.
Profit attributable to ordinary shareholders
The profit attributable to ordinary shareholders before and after adjustments, for both basic and diluted earnings per share, is:
| 2008 | 2007 | |
| £m | £m | |
| (Loss)/profit attributable to shareholders | (2.9) | 10.8 |
| Adjustments: | ||
| Integration and restructuring costs (net of taxation) | - | 1.5 |
| Amortisation of intangible assets (net of taxation) | 3.5 | 1.7 |
| Impairment of goodwill and intangible assets (net of taxation) | 15.3 | - |
| Adjusted profit attributable to shareholders | 15.9 | 14.0 |
Weighted average number of ordinary shares
The calculation of earnings per share is based on a weighted average of ordinary shares in issue during the period. The diluted earnings per share figure is based on a weighted average of ordinary shares calculated in accordance with 'IAS 33 - Earnings per share', which assumes that all dilutive options will be exercised. The adjusted basic and diluted EPS use the same weighted average number of ordinary shares as the basic and diluted EPS.
| 2008 | 2007 | |
| In thousands of shares | ||
| Weighed average number of shares in issue | 57,118 | 53,343 |
| Adjustment: Weighted average number of dilutive shares and share options | - | 612 |
| Weighted average number of shares for calculating diluted earnings per share | 57,118 | 53,955 |
731,654 anti-dilutive shares were not included in the above earnings per share calculation (2007: 81,044).
5. Comparative information
The financial information set out above does not constitute the group's statutory financial statements for the years ended 30 September 2008 or 2007. Statutory consolidated financial statements for the group for the year ended 30 September 2007, prepared in accordance with adopted IFRS, have been delivered to the Registrar of Companies. The auditors have reported on the 2007 accounts; their report was (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of any emphasis without qualifying their opinion and (iii) did not contain a statement under Section 237 (2) or (3) of the Companies Act 1985.
6. Financial statements
The statutory consolidated financial statements for 2008 will be finalised on the basis of the financial information presented by the directors in this preliminary announcement and will be delivered to the Registrar of Companies in due course.
Copies of the 2008 statutory financial statements will be sent to shareholders when available. Further copies may be obtained from the company's registered office, Connaught House, 850 The Crescent, Colchester Business Park, Colchester, CO4 9QB.
Our website address is www.careuk.com. From this site you may access our financial reports and presentations, recent press releases and details about the company and its operations.