Leaders in Social Care

Investor Workshop

17 October 2012

1

Agenda

• Welcome and Introduction to the workshop Stewart Wallace Strategic Director

• An introduction to CareTech Haroon Sheikh Chief Executive

• The wider context Mike Adams OBE Non Executive Director

• Adult learning disabilities Greg Lapham Chief Operating Officer

• Young people in residential care Bob Yetzes Operations Director

• Foster care and family assessment Caroline Ellis Operations Director

• Mental health Julian Spurling Operations Director

• Financing future growth Michael Hill Group Finance Director

• Future strategy and outlook Farouq Sheikh Executive Chairman

• Following each 10 minute presentation there will be a short opportunity for questions and we will be available for more general discussion over lunch

• Short career notes for each speaker may be found in an appendix

2

CareTech - The journey so far………..

Market Size at IPO

Market Size Today

One Focussed Operating Division Residential and Day Care Services

For Adults with Learning Disabilities

Four Specialist Operating Divisions Adult Learning Disability

Children’s Residential Care Fostering and Family Assessment

Mental Health

Market Size £3.0bn Capacity 423 (2005) CareTech Share <1%

Market Size £9.0bn Capacity 2116 (31 March 2012) CareTech Share <2%

3

CareTech - The journey so far………..

• The UK’s leading specialist provider of social care for children and adults with complex needs

• Founded in 1993 and floated on AIM in 2005

• Originally focussed on people with learning disabilities being discharged from long stay institutions

• Recognised that the skill base, care model and professional credibility was transferable and scalable

• Systematically grew a complementary supported living service and successfully entered the Mental Health and Children markets

• Used acquisitions as a springboard for organic growth

4

CareTech - Core Strengths

• Experienced and committed management team – A professional team with an impressive track record – Sharp market awareness and innovative care pathway approach – Our credibility is strengthened by a caring approach, integrity and sound financial

acumen

• Scalable platform – National profile supported by a local structure for service delivery – Demographics favour growth and offers market penetration opportunity – Growth stems from capacity increase not fees

• Financial stability – Highly visible long term income stream – Robust free cash flow – Strong asset backed balance sheet – High acuity care that’s non discretionary

• Care governance and high quality standards – Safeguarding is critical and our highest priority – Unique Care Governance and Safeguarding Committee at board level

5

CareTech – A serious growth prospect

Capacity 423

Revenue £23m

EBITDA £2.4m

EPS 4.1p

Capacity 2116

Revenue £109m

EBITDA £23.2m

EPS 25.35p

?

2005 2012 2017

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Our Business

CareTech Holdings PLC

Learning Disability

Residential Care

and

Community Support

Greg Lapham

Residential Care

and

Education of

children

Bob Yetzes

Fostering

and

Family

Assessment

Caroline Ellis

Mental Health

and

Specialist

Services

Julian Spurling

Corporate Direction and Support Incorporate the Financial Services Centre, Human Resources, National Training Centre, Quality, Regulation and Compliance

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8

Executive Team

Board Members highlighted in blue

Why CareTech Matters

The Wider Context

Mike Adams OBE Non-Executive Director

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Adding Value as an NED

• Leadership: – National disability positions of influence – In social care and health – Chair of the Access to Work (flagship disability employment

programme) Expert Advisory Panel – Chair of Health-Watch Essex

• A strong track record of corporate governance across all sectors • Lived experience of disability

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Why CareTech?

• Innovative approach to delivering complex social care issues

– Pathways for People

• Understand the changing market and evolve their offer accordingly

– Personalisation

– Supported living

• Understand the value of disability

• A strong focus on care governance and safeguarding issues

• An ambitious and talented team focused on delivery

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The Emerging Landscape

• Personalisation – direct payments

– Direct payments have increased by 18% (2009/10-11: £810m - £960m)

• Equates to 6% gross expenditure

• The policy of successive Governments has been to encourage self purchase of social care

• Market dynamics are shifting toward the empowerment of disabled people

• The commercial winners will be those who understand and respond rapidly with service options and types of support that users themselves value most highly

• An increasing volume of support will be required in peoples own homes but modern outward looking residential care will still be needed at the highest acuity end of the spectrum

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The Key Opportunities

• Operating in a specialist and relatively protected part of the market – Primarily non-discretionary expenditure – High end support needing complex solutions

• Bespoke supported living solutions – Pathways for individuals – Cost effective solutions for LA’s

• Integration of health and social care – Personal budgets as a key driver to transcend the market/s

• Primary relationship: the individual user (or advocate) and provider

13

Reflections

• A company that has anticipated and evolved its product/service offer to meet the growing needs of the market

• A company that puts care quality at the heart of its strategy – “extraordinary days, every day”

• A strong resource base

• Innovative and ambitious senior management team

• A company that knows exactly where it is going

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Adult Learning Disability Services Residential, Supported Living & Community

Support Services

Greg Lapham

Chief Operating Officer

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Capacity: 1,417 places

Occupancy: 87.6%

Average weekly fee: £1,174

Turnover: £37.9m

EBITDA: £8.4m

31/3/2012

Adult Learning Disability

• Market

– 1.4m people in the UK have a learning disability

– 185,000 of these cannot live independently

– UK market for adult residential LD and Supported Living worth £5.9bn

– 5.5% p.a. market growth rate

– Highly fragmented

– CareTech has less than 2% market share

– High demand for community based care and high value specialist residential services

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How We Support People

• Every single person supported by CareTech has a unique service based on their care plan, their expectations, hopes and dreams

• We offer support in a wide range of settings:

– Traditional residential care

– Registered group living (a modern take on residential care)

– Transition services

– Respite services

– Group supported living – tenancy based

– Core and cluster independent supported living

– Dispersed housing with floating support

– Day opportunity programmes

• Work, leisure, education and social opportunities

• Our services are purchased by social services, the NHS and increasingly by people themselves using their own personal budgets

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Residential Supported Living Community Support

Our Services

Regions Home or DCA capacity

Geography

North Registered Homes 55 homes 430 beds

West Midlands, Staffordshire, Gloucester, Kirklees, Sheffield

North Supported Living

4 Teams 130 packages

Cheltenham, West Midlands, Trafford & Flintshire, Yorkshire

Central Supported Living

4 Teams 110 packages

North London, West London, Berkshire & Norfolk

Central Registered * Homes

30 homes 280 beds

Hertfordshire, Beds, Oxon, Cambs, Norfolk, Berks, Bucks, North London

South Registered * Homes 48 homes 385 beds

Kent, Essex, Surrey, South London

South Supported Living

4 Teams 90 packages

South London, Redbridge, Maidstone, Folkestone

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* IPO geographic area

An Evolving Market Place Example of a successful organic development

• Residential Care remains preferred option for high activity

• The successful care provider anticipates changing demand

– Morven House was a registered Learning Disability service for 12 people

• Successful but we knew it was too big for the future

– Reviewed demand and market trends; consulting widely and in partnership with commissioners

– Remodelled as a pioneering transitional service for young people who have autism and very complex needs

– The UK’s first transitional autistic service to use a supported living model

• Revenue as a care home – circa £600K

• Revenue as a supported living scheme – circa £900K

• Waiting list of young people hoping for participation next year

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Development Programme

• Drive toward smaller more specialist services with the clinical infrastructure to deliver excellence

• Pursue our current program of converting larger properties to specialist supported living schemes

• Expansion of our day centres & community based activities offering

• New supported living services in high demand areas

• Sensible tender wins in all areas

• Innovative service solutions that drive better value

• Planned growth of 250 places by 2017

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Children & Young People

Residential Services

Bob Yetzes

CTC Operations Director

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Who’s Who?

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Looked After Children

2007 2008 2009 2010 2011

England 59,970 59,360 60,890 64,410 65,520

Scotland 14,060 14,888 15,287 15,892 16,171

Wales 4,640 4,630 4,704 5,161 5,419

N Ireland 2,356 2,433 2,463 2,606 2,511

Total 81,026 81,311 83,344 88,069 89,621

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The usual definition of a ‘Looked After Child’ is one who has been taken into care by a Local Authority or Health Board for at least 24 hours.

Options

England Number Percentage

Return to Family 3,970 6%

Kinship Placement 7,430 11%

Independent Living 2,460 4%

Residential Employment 2,460 4%

Residential Placement 7,910 12%

Placed for Adoption & Other 2,650 4%

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* Not including the fostering option

Young People Residential Services

• Markets

– 16,000 children in England looked after outside foster care

– Residential children’s market across England worth £1.0bn

– 5.7% p.a. market growth rate

– Highly fragmented

• Fees range considerably

– The higher the specialism and staffing ratios, the higher the weekly fee

– Many placements at ACAD, Branas and Greenfields are at £4500+ per week

Capacity: 125 places

Occupancy: 77.6%

Average weekly fee: £3,306

Turnover: £7.6m

EBITDA: £2.5m

31/03/2012

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• A highly specialised service providing care,

education and therapy to adolescent boys placed

from around the UK who have shown

inappropriate sexualised behaviour

• 7 homes

• Providing services for most Scottish Authorities

• Merged with a Domiciliary Care and Nursing Agency

in Edinburgh and an established children’s home

• 11 homes plus DCA

• A new concept providing an intake and

assessment facility for Local Authorities

• 1 service • Transitional services for

young people and adults

• 6 homes plus DCA

• Works with young people with physical

and/or learning difficulties

• 7 homes

• High end challenging behaviour services

• 10 homes

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Specialist and Expert

• None of the services are generic children’s homes

• A national catchment

• We never “warehouse” children or young people

– Everything we do is focussed on successful outcomes

• Specialisms and high levels of staff training ensure competency

– We retain external experts with recognised credibility

• The highest standards for care and really nice places to live, located in some of the most beautiful parts of the UK.

• An integrated service provider working closely with the adult care divisions delivering on-going support for young adults

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Poppy Lodge – an example of excellence

• Surplus land utilised to meet Local Authority demand – low capital cost

• Specialist 6 bed new build led by in house project team – built on time to the highest standard

• High needs residential service with respite care provision – flexible to market demand

• Midlands Local Authority have requested the same services – market analysis correct

28

Development Programme

• Homes in Scotland and Northern England under ACAD

• Development of the Nursing and Care Agency

• A new ‘Branas’ in England

• Greenfields homes in Somerset, on the M4 corridor and in London

• New partnerships for Inspire and Linx services

• Tenders for contracted Local Authority placements

• A second Intake & Assessment Service

• Grow our residential school provision, particularly for mental health and children with very complex behavioural issues

• Planned growth of 150 beds by 2017

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Fostering & Family Support & Assessment Division

Caroline Ellis

Fostering & FSAU Operations Director

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What is Fostering?

• Foster care is almost always the first choice for children who cannot live at home

• Provided through Local Authorities or Independent Fostering Agencies (IFA’s)

• Placements are usually made with IFA’s through a Local Authority

• Core tasks

– Recruit high quality foster carers

– Safeguarding checks

– Train, support and supervise

– Match carers to the needs of children and young people

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Types of Foster Placement

• Top commercial driver - a wide range of service types

- Emergency placements - Specialist placements

- Short term placements - Breaks for disabled children

- Long term placements - Remand placements

- Respite placements - Parent and child placements

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Family Support & Assessment Unit

Undertaking residential assessment of families

on behalf of the court

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Market Data

• Every 22 minutes a child comes into care

• 67,050 “Looked After” Children in England (and rising)

• 50,260 placed in foster care (An increase of 3.7%

from 2011) • 35,260 placed within Local Authority foster care (A

reduction of 3% from 2011) • The Independent Fostering market is worth approx

£1.1bn • CareTech is a top 5 provider with a 2% market share

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Capacity: 442 places

Occupancy: 88.7%

Average weekly fee: £794

Turnover: £7.7m

EBITDA: £1.9m

31/03/2012

Market Trends

• Local Authorities have been using independent fostering agencies (IFAs) since the mid-1990s

• Placements with Independent Fostering Agencies up to 15,000 (A 25% increase from 2011)

• This highlights the urgent need for foster carers with an estimated shortfall of 10,000 to meet the increasing demand for placements

• Clear policy steer towards commissioning of children’s services

• Fostering is a preferred option for all, but the most complex children

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Park’s Parenting Approach

• Park Foster Care has developed a unique training programme for its foster carers, which reflects the different learning styles of individuals

– The course provides ‘Reflective Practice’, where there is an opportunity to learn from the experiences that each carer has had with their placement be it positive or negative

• Outcomes:

– Improved placement stability

– Improved carer retention

• PPA has been based on research and accredited by London King’s College

36

Development Programme

• Organic growth in existing and new areas • An increase of just 20 foster carer households could deliver on additional turnover

of £1.2m pa, based on an initial investment of only £10k per foster carer household • The divisional growth strategy is underpinned by our carer recruitment strategy

and is supported by a team of experienced staff • Tendering for preferred provider frameworks and contractual arrangements • Developing new service types

– ACAD (Applied Care and Development) Foster Care Scotland, Residential Migration (organic growth through residential partnerships)

• Bolt-on in new geographical regions • Grow 300 foster carers which is 450 new foster placements by 2017

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Mental Health & Specialist Services

Julian Spurling

Mental Health Operations Director

38

Market Dynamics

39

• Commissioning strategies focused on services that create positive steps towards independent living

– Uplands – Step down from secure hospitals and/or criminal justice system

– Community based nursing and residential services

– Independent living / supported living

H

High secure

Medium secure

Low secure/PICU

Open rehab/recovery

Support in the community

Working adults

Criminal justice system

Patient flow

Target market

Market

40

• 2.4% of the UK population will be referred to a specialist psychiatric service

• NHS/LA total spend on mental health is £14.4bn (2010)

• Independent sector share is £1.2bn representing 7.6% market share

• 70% of prisoners have mental health problems

Capacity: 132 places

Occupancy: 83.3%

Average Weekly fee: £1,066

Revenue: £2.9 million

EBITDA £0.9 million

31/03/2012

Mental health services

Open Rehabilitation Hospital • Uplands, Fareham 30

Step down rehabilitation care home

• Roborough House Nursing home, Plymouth

• Lyndhurst care home, North London

• Sunningdale care home, Harrogate

• Bethany care home, Harrogate

• Montagu Road, North London

• Park Lane , Fareham *

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21

13

7

6

4

Supported Living • Franklin DCA, Harrogate *

• Sunnyside, North East London *

(both with 500 hours per week)

* Organic growth 2012

9

11

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Quality focus and positive outcomes

offer a solid growth platform

• Evidencing positive outcomes and pathways for individuals through personalised ‘Recovery’ care plans

• Creating positive occupancy churn creates opportunity for fee growth

• Refining service configurations to maximise bed fill in residential services

• Maximising fill rate in Supported Living and securing new funding streams

• Organic development of services

– Higher acuity = higher fees

– Extend pathway into community

– Positive occupancy and fee churn

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Uplands - an Example of Organic Growth

• Acquisition of Uplands Independent Hospital

– 30 bed independent hospital registration

– Open rehabilitation/recovery model

– Full multi disciplinary team approach

– Strong platform for growth in non secure provision for prison population and ex offenders with mental health problems

• Development of step forward rehabilitation model, extending reach into the community

– Introduction of Recovery Star Model

– Sharper focus on enabling positive outcomes, leading to step forward into community...

– 66 Park Lane – Four bed intensive rehab opened

– Further small bed schemes plus supported living

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Development Programme

• Specific service offerings where demand is proven and we have established relationships – Forensic mental health – Dual diagnosis

• mental health and learning disability • substance misuse

– Young people and mental health • transition from Child and Adolescent Services

– Early on-set dementia

• Growth of community based services in target areas

• Selective buy & build programme

• Planned growth of 150 beds by 2017

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Financing Future Growth

Michael Hill

Group Finance Director

45

Recent Announcements

• Announcements since our Interim results in June 2012

– New banking facilities July 2012

– Change of broker August 2012

– Trading statement Today

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Financing Future Growth

• New banking facility completed July 2012

– Term loan/ revolving credit/ overdraft - £149.4m

– Expires January 2017

• All in debt service charge less than 4.5%

• 4 banks - Allied Irish, Lloyds TSB, Santander UK and RBS

– Independent freehold property valuation - £225.0m

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Financing Future Growth

2010

Actual

2011

Actual

2012

Market

Consensus

2013

Market

Consensus

EBITDA £22.4m £23.2m £24.9m £26.5m

Net Debt £113.2m £127.3m £131.4m £125.9m

Free Cash £17.0m

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Financing Future Growth

“Growth through acquisition, followed by organic development”

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Financing Future Growth

+ 450

+ 150

+ 150

+ 250

+ 1,000

50

2017

Management

Aspirations

Financing Future Growth

• So how will Adult Learning Disabilities grow by a net 250 Capacity?

– Reconfiguration of schemes in anticipation of shifts in the market dynamic

– Supported living

• No capital

• Housing benefit to landlord

• Looking at mortgage scheme with Bank partner

– Reconfiguration and back land Schemes

• capital required plus bolt-ons (e.g. Morven House)

– Capital for maintenance and vehicles

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Financing Future Growth

• Both Mental Health and Young People Residential growth of 150 capacity each

– Organic development through reconfiguration (e.g. Sunnyside), back land (e.g. Poppy Lodge) and extension of care pathways (e.g. Park Lane)

– Capital requirement plus bolt-ons

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Financing Future Growth

• Foster Care growth of 450 capacity (i.e. 300 carers)

– Organic growth through new carers – revenue expenditure (e.g. North West and Scotland)

– Bolt-ons - capital required

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Financing Future Growth

• Budgeted Group total capital requirement £10m p.a.

– Expenditure includes fleet costs and maintenance capital

– Net debt to reduce during the new facility to 2017

– No major acquisitions are assumed in our ‘2017 Management Aspirations’

– Capital to be covered by free cash, market consensus for 2013 is £17.0m

– Assumes zero annual fee uplift

• Underlying EBITDA has grown from £2.4m to £23m and management focus is to repeat this growth

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Summary Farouq Sheikh

Executive Chairman

55

Reinforcing a great story

Revenue £23m

EBITDA £2.4m

EPS 4.1p

Revenue £109m

EBITDA £23.2m

EPS 25.35p ?

2005 2012 2017

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Summary

• An executive team that inspires confidence and whose interests are closely aligned with shareholders

• A range of specialisms that have opened massive market opportunity

• Developing and delivering the right services in the right way and just where they are wanted

• An organisational model that is flexible, scalable and competent

• Funding that’s already in place to facilitate our growth trajectory

• A track record of successful delivery

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Career notes for each speaker

Mike Adams

• A significant track record in the social care and disability sectors.

• Awarded an OBE earlier this year

• For 5 years he was Director of the National Disability Team responsible for policy and practice for disabled students in higher education.

• Director of the Disability Rights Commission for 2 years

• Currently Chief Executive of Essex Coalition of Disabled People

• Mike has recently been acting Chair of a large acute hospital trust in Essex

• Visiting professor at Leeds Metropolitan University

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Greg Lapham

• Greg has been with CareTech for 10 years

– A positive, highly dynamic Chief Operating Officer who is proactive, self-driven and results orientated with a highly successful background in the achievement of profitable business growth

• Background and training in development and project management

• Successfully managed the transition from being CareTech’s Development Director to a series of operational management positions within the company

• Became Chief Operating Officer shortly after the company listed and now has day to day responsibility for all services

• Continues his leadership of the development process

60

Bob Yetzes

• Started in CareTech - April 2011

– Qualified Teacher

• Deputy and then Headmaster

– Ofsted Inspector

• Education and Social Care

• Seconded to DoH for work on National Minimum Standards

• Contributor to The Education Act

– Participated in an MBO after leaving the public sector

– Worked in

• Elite

• Continuum

• Barchester

– Developing and Managing educational services and working as a freelance consultant

61

Caroline Ellis

• Started at CareTech in October 2011

• Qualified Social Worker (1991) with a current practice certificate

– Worked in

– Residential Care

– Family Resource Centre

– Mental Health services

– Subsequently specialised in Child Protection and Adoption

– For the past 12 years Caroline has focussed on Fostering

• Moved to the National Fostering Agency and eventually became a Regional Manager for London and the south east

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Julian Spurling

• Joined Caretech in November 2010

• Working in the care sector since 2001

– Strategy consultant - advised LGV on the acquisition of Craegmoor Healthcare and subsequently management on strategy and organizational development.

– Group Marketing & Development Director, - Craegmooor

– Divisional Managing Director at Craegmoor, responsible for Adult Services across the UK including Independent hospitals, Care Homes and Supported Living schemes for people with Learning Disabilities and Mental Health problems.

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