Feb 06, 2008
This statement covers the period from 1 October 2007 to date. Care UK Plc will hold its Annual General Meeting in London at 11.30 am today.
Good progress has been made during the first four months of the current financial year with results being in line with our expectations.
In Social Care we have continued to see good growth in revenue. The benefit of this revenue growth will to some extent be balanced by the cost impact of the additional holiday entitlements arising from the Work and Families Act 2006, which has affected providers in these market sectors from October 2007.
The management contract for a newly built care home in the London Borough of Kensington and Chelsea, awarded in 2007, has now been signed with services planned to start in March 2008. Construction of the new 120-bed greenfield care home in Chelmsford has commenced. The pipeline for further new developments of care homes for older people, both contracted and greenfield, is good.
We are continuing to progress plans to implement a property company structure for a number of existing freehold homes, with the principal purpose of creating a vehicle for further greenfield developments and, potentially, for acquisitions of existing portfolios. The feasibility and timing of this project is of course dependent on market conditions.
We have won a number of new contracts in learning disabilities, children's services and homecare, most notably a homecare contract for around 3,000 hours per week with Hertfordshire County Council. The annualised rate of growth in homecare continues to be strong through a combination of organic growth and acquisitions and the pipeline for acquisitions remains good.
The trading performance in Health Care is well ahead of the prior year and is in line with expectations at the time of the Mercury Health acquisition, completed in April 2007. This particularly reflects the annualised impact of Mercury, albeit we continue to commit considerable resource to bring performance at the Sussex Orthopaedic Treatment Centre up to the required level. The group's 50% owned joint venture, Partnership Health Group ("PHG"), has also continued to perform strongly with its four Wave 1 ISTCs all fully operational and performing well.
The decommissioning process for the West Midlands diagnostics contract, which the Department of Health ("DoH") voluntarily terminated in November 2007, will be completed by mid-February. This process has been handled very professionally by the divisional management team, with patients' interests being fully safeguarded throughout. Our compensation claim for this contract has been submitted and we are in discussion with the DoH. We are also preparing further compensation claims to the DoH for abortive bid and development costs where the Department have either withdrawn or substantially changed Wave 2 ISTC contracts for which the group was appointed preferred bidder.
We continue to work constructively with the DoH towards financial close on the four Wave 2 ISTC contracts where the group is preferred bidder - in Manchester (two projects), Essex and Southampton (PHG).
The pipeline for primary care opportunities is good. The NHS is proceeding with the procurement of 150 health centres and 100 primary care practices under the 'Equitable Access To Primary Medical Care Services' initiative and we believe that this represents a good growth opportunity for Care UK.
As at 31 January 2008 the group's net debt was c£169m compared with £170m at 30 September 2007. A further interest rate swap was effected in January 2008 for a principal amount of £30m at a rate of 4.97%, running to the group's bank facility expiry date in February 2015. The group now has effective hedging in place on a principal amount of £165m.
The group anticipates that current year performance will be in line with the Board's expectations although, as always, the seasonal orientation of profitability will be biased to the second half. We remain optimistic that the growth prospects across the health and social care markets continue to be strong.
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