Recommended Combination of CareTech Holdings PLC and Cambian Group plc - 16 August 2018
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Recommended Combination of CareTech Holdings PLC and Cambian Group plc 16 August 2018
Disclaimer
IMPORTANT: YOU MUST READ THE FOLLOWING BEFORE CONTINUING. NOT FOR RELEASE, PRESENTATION, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART IN, INTO OR FROM THE UNITED STATES, CANADA,
JAPAN, AUSTRALIA, SOUTH AFRICA OR ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF SUCH JURISDICTION
This presentation has been prepared by or on behalf of CareTech Holdings PLC ("CareTech") in connection with the potential acquisition of the entire issued and to be issued share capital of Cambian Group Plc
("Cambian") by CareTech (the "Proposed Acquisition"). The information set out in this presentation is not intended to form the basis of any contract. By attending (whether in person, by telephone or webcast) this
presentation or by reading the presentation slides, you agree to the conditions set out below. This presentation (including any oral briefing and any question-and-answer session in connection with it) is for information
only. The presentation is not intended to, and does not constitute, represent or form part of any offer, invitation, inducement or solicitation of any offer to purchase, otherwise acquire, subscribe for, sell or otherwise
dispose of, any securities or the solicitation of any vote or approval in any jurisdiction. It must not be acted on or relied on in connection with any contract or commitment whatsoever. It does not constitute a
recommendation regarding any securities. Past performance, including the price at which CareTech's securities have been previously bought or sold and the past yield on CareTech's securities, cannot be relied on as a
guide to future performance. Nothing herein should be construed as financial, legal, tax, accounting, actuarial or other specialist advice.
No shares are being offered to the public by means of this presentation. You should conduct your own independent analysis of CareTech, Cambian and the Proposed Acquisition, including consulting your own
independent advisers in order to make an independent determination of the suitability, merits and consequences of the Proposed Acquisition. The release, presentation, publication or distribution of this presentation in
jurisdictions other than the United Kingdom may be restricted by law and therefore any persons who are subject to the laws of any jurisdiction other than the United Kingdom should inform themselves about and observe
any applicable requirements. It is your responsibility to satisfy yourself as to the full observance of any relevant laws and regulatory requirements. Any failure to comply with applicable requirements may constitute a
violation of the laws and/or regulations of any such jurisdiction.
In the European Economic Area ("EEA"), this presentation is only intended for and directed at persons in member states who are "qualified investors" within the meaning of Article 2(1)(e) of the Prospectus Directive
(Directive 2003/71/EC) and amendments thereto, including Directive 2010/73/EU (to the extent implemented in the relevant member state of the EEA) and any implementing measure in each relevant member state of
the EEA ("Qualified Investors").In addition, in the United Kingdom, this presentation is being made available only to persons who fall within the exemptions contained in Article 19 and Article 49 of the Financial
Services and Markets Act 2000 (Financial Promotion) Order 2005 (the "Order") and Qualified Investors. This presentation is not intended to be available to, and must not be relied upon, by any other person.
This document must not be acted on or relied on (i) in the United Kingdom, by persons who do not fall within the Order and (ii) in any member states of the European Economic Area other than the United Kingdom, by
persons who are not Qualified Investors. Nothing in this presentation constitutes investment advice and any recommendations that may be contained herein have not been based upon a consideration of the investment
objectives, financial situation or particular needs of any specific recipient. None of CareTech, Jefferies International Limited (“Jefferies”) and Panmure Gordon (UK) Limited, nor any of their respective shareholders,
subsidiaries, affiliates, associates, or any of such entities’ respective directors, officers, partners, employees, representatives and advisers (the "Relevant Parties") makes any representation or warranty, express or
implied, as to the accuracy or completeness of the information contained in this presentation, or otherwise made available, nor as to the reasonableness of any assumption contained in such information, and any liability
therefor (including in respect of direct, indirect, consequential loss or damage) is expressly disclaimed. No information contained herein or otherwise made available is, or shall be relied upon as, a promise, warranty or
representation, whether as to the past or the future and no reliance, in whole or in part, should be placed on the fairness, accuracy, completeness or correctness of such information. The information contained in this
presentation relating to Cambian is derived from publicly available information only. None of the Relevant Parties has independently verified the material in this presentation.
Unless expressly stated otherwise, no statement in this presentation (including any statement of estimated synergies) is intended as a profit forecast or estimate for any period and no statement in this presentation
should be interpreted to mean that cash flow from operations, free cash flow, earnings or earnings per share for CareTech, Cambian or the combined group, as appropriate, for the current or future financial years would
necessarily match or exceed the historical published cash flow from operations, free cash flow, earnings or earnings per share of CareTech or Cambian, as appropriate.
Statements of estimated cost savings and synergies relate to future actions and circumstances which, by their nature, involve risks, uncertainties and contingencies. As a result, any cost savings or synergies referred to
may not be achieved, may be achieved later or sooner than estimated, or those achieved could be materially different from those estimated. Nothing in this presentation constitutes a quantified financial benefits
statement for the purposes of Rule 28 of the CityCode on Takeovers and Mergers. No statement in this presentation should be construed as a profit forecast or interpreted to mean that the combined group's earnings in
the first full year following implementation of the Proposed Acquisition, or in any subsequent period, would necessarily match or be greater than or be less than those of CareTech or Cambian for the relevant preceding
financial period or any other period.
The Proposed Acquisition relates to the shares of two UK companies and is subject to UK procedural and disclosure requirements that are different from certain of those of the US. Any financial statements or other
financial information included in this presentation may have been prepared in accordance with non-US accounting standards that may not be comparable to the financial statements of US companies or companies whose
financial statements are prepared in accordance with generally accepted accounting principles in the US. It may be difficult for US holders of shares to enforce their rights and any claims they may have arising under the
US federal securities laws in connection with the Proposed Acquisition, since CareTech and Cambian are located in countries other than the US, and some or all of their officers and directors may be residents of countries
other than the United States. US holders of shares in CareTech or Cambian may not be able to sue CareTech, Cambian or their respective officers or directors in a non-US court for violations of US securities laws.
Further, it may be difficult to compel CareTech, Cambian and their respective affiliates to subject themselves to the jurisdiction or judgment of a US court.
2Disclaimer (cont’d)
It is proposed that the Proposed Acquisition is implemented by way of a scheme of arrangement under English law. It will be subject to the disclosure requirements and practices applicable in the UK to schemes of
arrangement which differ from the disclosure requirements of the US tender offer rules. If the Proposed Acquisition is implemented by way of a scheme of arrangement, any CareTech shares proposed to be issued to
Cambian shareholders pursuant to the terms of the Proposed Acquisition are expected to be issued in reliance upon the exemption from the registration requirements of the US Securities Act provided by Section 3(a)(10)
of the US Securities Act. Section 3(a)(10) exempts securities issued in exchange for one or more outstanding securities from the general requirements of registration where the terms and conditions of the issuance and
exchange of such securities have been approved by a court, after a hearing on the fairness of the terms and conditions of the issuance and exchange at which all persons to whom such securities will be issued have the
right to appear and be heard. The Court will hold a hearing on the scheme's fairness to Cambian shareholders, at which hearing all such shareholders will be entitled to attend in person or through counsel.
This presentation does not constitute an offer of securities for sale in the US or an offer to acquire or exchange securities in the US. Securities may not be offered or sold in the US absent registration or an exemption
from registration, and any public offering of securities to be made in the United States will be made by means of a prospectus that may be obtained from the issuer or the selling security holder and that will contain
detailed information about the company and management, as well as financial statements. No offer to acquire securities or to exchange securities for other securities has been made, or will be made, directly or
indirectly, in or into, or by use of the mails, any means or instrumentality of interstate or foreign commerce or any facilities of a national securities exchange of, the US or any other country in which such offer may not
be made other than (i) in accordance with the US Securities Act, as amended, or the securities laws of such other country, as the case may be, or (ii) pursuant to an available exemption from such requirements.
By attending the presentation to which this document relates and/or by accepting this document you will be taken to have represented, warranted and undertaken that: (i) you are a person who is not resident of, or
located in, the United States, Canada, Japan, Australia or South Africa and you are permitted by law to receive it; (ii) you have read and agree to comply with the contents of this notice; and (iii) you will not at any time
during the offer period have any discussion, correspondence or contact concerning the information in this document with any of the employees or shareholders of CareTech or Cambian or their respective affiliates nor
with any of CareTech or Cambian's suppliers or customers or any governmental or regulatory body without the prior written consent of CareTech or Cambian (as applicable).
Jefferies and Panmure Gordon (UK) Limited are acting only for CareTech and and no-one else in connection with the matters set out in this presentation and will not be responsible to anyone other than CareTech for
providing the protections afforded to clients of Jefferies or Panmure Gordon, nor for providing advice in relation to the matters set out in this presentation or any matters referred to in this presentation. Neither Jefferies
or Panmure Gordon, nor any of their respective subsidiaries, affiliates or branches owes or accepts any duty, liability or responsibility whatsoever (whether direct, indirect, consequential, whether in contract, in tort,
under statute or otherwise) to any person who is not a client of Jefferies in connection with this presentation, any statement contained herein or otherwise. This presentation is not intended to form the basis of any
investment decision and should not be considered as a recommendation by Jefferies, Panmure Gordon or any other person in relation to the Proposed Acquisition.
This presentation contains forward-looking statements concerning the financial condition, results of operations and businesses of CareTech and of the Proposed Acquisition. All statements other than statements of
historical fact are, or may be deemed to be, forward-looking statements. Forward-looking statements are statements of future expectations that are based on management's current expectations and assumptions and
involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in these statements. Forward-looking statements include,
among other things, statements concerning the potential exposure of CareTech to market risks and statements expressing management's expectations, beliefs, estimates, forecasts, projections and assumptions including
as to future potential cost savings, synergies, earnings, cash flow, return on average capital employed, production and prospects. These forward-looking statements are identified by their use of terms and phrases such
as "anticipate", "believe", "could", "estimate", "expect", "intend", "may", "plan", "objectives", "outlook", "probably", "project", "will", "seek", "target", "risks", "goals", "should" and similar terms and phrases. There are a
number of factors that could affect the future operations of CareTech and could cause those results to differ materially from those expressed in the forward-looking statements included in this presentation, including
(without limitation): (a) changes in demand for CareTech's products; (b) currency fluctuations; (c) loss of market share and industry competition; (d) risks associated with the identification of suitable potential acquisition
properties and targets, and successful negotiation and completion of such transactions; and (e) changes in trading conditions. All forward-looking statements contained in this presentation are expressly qualified in their
entirety by the cautionary statements contained or referred to in this section. Readers should not place undue reliance on forward-looking statements. Each forward-looking statement speaks only as at the specified
date of the relevant document within which the statement is contained. Neither CareTech nor Cambian undertake any obligation to publicly update or revise any forward-looking statement as a result of new information,
future events or other information. In light of these risks, results could differ materially from those stated, implied or inferred from the forward-looking statements contained in this presentation.
IMPORTANT INFORMATION
Each of the CareTech directors, whose names are set out on the "Board of Directors" page of the CareTech website at http://www.caretech-uk.com/about-us/our-people/plc-board.aspx (the "CareTech Directors"),
accepts responsibility for the information contained in this presentation, provided that the only responsibility accepted by them in respect of information relating to Cambian and the Cambian directors, which has been
compiled from published sources, is to ensure that such information is correctly and fairly reproduced and presented.
To the best of the CareTech Directors' knowledge and belief (who have taken all reasonable care to ensure that such is the case), the information contained in this presentation is in accordance with the facts and, where
appropriate, does not omit anything likely to affect the import of such information.
Certain financial data has been rounded. As a result of this rounding, the totals of date presented in this presentation may vary slightly from the actual arithmetic totals of such data.
Unless stated otherwise, defined terms relate to the Rule 2.7 announcement published by CareTech on 16 August 2018.
3Agenda
1 Transaction Summary 5
2 Strategic Rationale 8
3 Financial Highlights 18
4 Indicative Transaction Timetable 24
4Transaction Summary
5Transaction Summary
Recommended combination of CareTech and Cambian
Headline Offer of 0.267 of a new CareTech share and 100p in cash for each Cambian share. Based on the closing price
of 374.5 pence per CareTech share on 15 August 2018 (being the last practicable date prior to the announcement of a
firm offer for Cambian):
‒ The Headline Offer, representing a value of 200.0 pence per Cambian share, values the entire issued and to be
issued ordinary share capital of Cambian on a fully diluted basis(1) at approximately £372 million and approximately
£289 million on an enterprise value basis(2)
‒ Premium of approximately 35% to the closing price of 148.2 pence per Cambian share on 9 July 2018(3)
Key Terms
Full Cash Alternative at 190 pence in cash for each Cambian share:
‒ A value of approximately £354 million for Cambian’s share capital on a fully diluted basis(1) and approximately £271
million on an enterprise value basis(2)
‒ Premium of approximately 28% to the closing price of 148.2 pence per Cambian share on 9 July 2018(3)
Irrevocable undertakings to vote in favour received from Cambian Directors and shareholders in respect of 80% of
Cambian’s issued share capital
‒ Cambian shareholders representing, in aggregate, approximately 61% of Cambian’s issued share capital have
irrevocably undertaken to not elect for the Full Cash Alternative in respect of any of their Cambian shares
The Transaction (on the basis that only the GI Shareholders elect for the Full Cash Alternative) will result in Cambian
Shareholders owning approximately 34% of the issued share capital of the Enlarged Group
Cash consideration to be funded by new banking facilities for the Enlarged Group
Ownership, Funding In the medium term, CareTech remains committed to maintaining leverage at between approximately 3-4x net debt to
& Financial Impact EBITDA
The CareTech Directors have identified recurring pre-tax cost synergies of approximately £6 million per annum
Expected to be significantly accretive to CareTech's earnings in the first full financial year following Completion, with a
return on invested capital above CareTech's cost of capital in the first full financial year following Completion
(1) On the basis of 186.1 million shares issued and to be issued.
(2) Adjusted for the net cash reported by Cambian as at 31 December 2017 of £82.8 million.
(3) Being the last date prior to the commencement of the Offer Period.
6Transaction Summary (cont’d)
CareTech’s AIM listing will be retained following completion of the transaction (Ticker: AIM:CTH)
Within the medium term following Completion, it is CareTech's ambition to apply for admission to the premium listing
HQ & Listing
segment of the Official List and to trading on the Main Market
The Enlarged Group will retain CareTech’s headquarters in Potters Bar, United Kingdom
Enlarged Group Board will include:
‒ Farouq Sheikh – Executive Chairman
‒ Haroon Sheikh – CEO
‒ Michael Hill – CFO
Governance &
Management John Ivers will be the COO of the CareTech operations within the Enlarged Group. Joining the senior management
team of the Enlarged Group from Cambian will be Anne Marie Carrie (as COO of the Cambian operations within the
Enlarged Group)
Karl Monaghan, James Cumming and Michael Adams will remain as non-executive directors on the Board of CareTech
It is CareTech’s intention to add two additional Non-Executive Directors to its Board within three months of Completion.
Alongside, it is expected that Michael Adams will become an executive director of the Enlarged Group
16 August 2018: Rule 2.7 Announcement
Indicative
September 2018: Transaction documentation posted to Shareholders
Timetable
Q4 2018: Expected Completion / Admission of Enlarged Group share capital to AIM
7Strategic Rationale
A Combination that Presents Opportunity for Strong Value Creation
Unique opportunity for investors to enhance exposure to the growing UK market for social care services for children and
1
adults
Highly complementary service offering and geographical coverage providing a nationwide integrated care pathway
2
focused on higher acuity social care
Combined operational expertise to better service local authority partners, deliver strong user outcomes, implement
3
positive staff engagement and improve care quality
4
Opportunity to unlock significant value through a compelling strategic fit, tangible near-term synergies and enhanced
trading liquidity
9We Operate in One of the High Growth Segments of the UK Healthcare
Services Market
Social Care Sector in UK Key Drivers
Sector Growth (%) • Increased public outsourcing of care
5.7% 5.5%
5.2%
• Opportunity to improve outcomes of current interventions
2.9%
• Increasing numbers of Looked After Children
Children and Fostering Adults UK Healthcare(2)
• Increasing prevalence of learning disabilities, mental health
Young People and special education needs
• Government support and with high reaching ambitions for
UK Social children’s care services and mental health
Care
Market
£1.5bn(1) £1.6bn(1) £9.5bn(1) £12.6bn(1)
Size
• Fragmented sector with room for consolidation
Note:
(1) CareTech 2017 annual results.
(2) As per PwC report “Capture the growth”, representing 2017-2020 CAGR for total public and private healthcare spending.
10Enlarged Group Provides Public Investors with Unique Access to the Social Care
Market
Creation of the #2 UK Social Care Operator and the Only One with a UK Listing… ...With Significant Scale Across Every Metric
Ranking by Revenue(1) (£m) Illustrative Metrics Based on Latest Reported Figures(3)
Beds / Places
797 (Ex-Fostering)
2,271 1,643
Foster Care(4) 301 634
(2)
359
321
Facilities(5)
205 222
(Illustrative)
213 206 196 191 179 177 166
44
Employees 4,744 4,539
Note:
(1) Per last reported revenue. Source: Priory as per Acadia 2017 annual report; Cygnet as per Orbis 2016; VoyageCare as per the 2017 annual report; St. Andrews as per the 2017 annual report; Cambian standalone as per the 2017 annual report; NFA as per Orbis 2016, including Acorn as per Orbis
2016; CoreAssets as per Orbis 2016; Elysium as per 2017 financials from the March 2018 public lender presentation; CareTech standalone as per the 2017 annual report; Witherslack Group as per Orbis 2016.
(2) Pro Forma CareTech and Cambian revenue presented as financial year-ending September 2017 in line with CareTech’s financial reporting year, with Cambian’s revenue calendarized to September 2017 year-end.
(3) CareTech based on 2018 interim presentation; Cambian based on 2017 Annual Report. Average number of employees for the year ended 30 September 2017 for CareTech and 31 December 2017 for Cambian.
(4) CareTech represents available capacity on the basis of the children that carers are able to look after. Cambian represents average foster placements in the period.
(5) CareTech represents freehold properties as per 2018 interim results; Cambian represents total facilities as per 2017 Annual Report.
11Stronger Diversification of Service Offering
CareTech(1) Cambian(1) Pro-Forma Combination(1)
(Calculated by reference to revenue) (Calculated by reference to revenue) (Calculated by reference to revenue)
Young People &
Young People Young People &
Children – 100%
Adult – 62% & Children – Adult – 29% Children – 71%
38% (44% calculated by (56% calculated by
9% 15% reference to EBITDA)(2) 4% reference to EBITDA)(2)
26%
24% 36%
45%
6%
40% 10%
53% 5%
24%
High complementary of the service
Diversified portfolio of care services offering
Leading positions in Young People and
with strong focus on the Adult
Children Services segments Cambian to contribute 32% of the
segment
Enlarged Group EBITDA
Young People & Children - Young People & Children – Young People & Children – Adult – Learning Disabilities Adult – Specialist Services
Residential Education & Learning Services Foster Care
(1) CareTech breakdown based on revenue as per 2017 annual report. Financial year-end September 2017; Cambian revenue based on 2017 annual results. Financial year-end December 2017, assuming same revenue breakdown as per Capital Markets Day presentation; Pro-forma represents
the sum of Cambian and CareTech values.
(2) CareTech underlying EBITDA reported pre-unallocated central costs. For the purpose of this analysis, unallocated central costs are allocated to CareTech’s adult and children’s divisions according to contribution to EBITDA.
12Complementary Operational Fit Enhancing Care Pathways
Adult Services Young People & Children Services
Young People & Children
Adult Learning Disability Specialist Services Foster Care(3) Specialist Education Learning Services
Residential
Beds /
Places(1) 1,732 214 325 301 411 509
Facilities(1)
64 11
Residential care Residential care Residential care of Fostering Special Educational Employee Pre-
children Needs (SEN) Schools employment and
Independent supported Independent supported apprenticeships
living living Transitional Services
Community support Community outreach Education and therapy
services
Low secure and step
Transitional services down
Young People & Children
Therapeutic Fostering Specialist Education
Residential
Beds /
Places(2) 578 641 1,062
Facilities(2) 179 37
(excludes schools)
Social, Emotional and Therapeutic Fostering Special Educational Needs
Mental Health (SEMH) day (SEN) Schools and Further
schools Education (FE) Colleges, Day
and Residential Schools
Sexual Trauma day schools
Social, Emotional & Mental
Child and Adolescent Health (SEMH) Schools, Day
Mental Health (CAMHS) day Schools
schools
(1) Based on CareTech interim 2018 presentation. Young People & Children Residential facilities as per Ofsted database. Learning Services as per CareTech 2017 annual report.
(2) Based on Cambian’s Capital Markets Day 2018 presentation; beds / facilities as at 30 June 2017.
(3) CareTech represents available capacity on the basis of the children that carers are able to look after. Cambian represents average foster placements.
13Improved National Scale and Local Reach Providing Full Pathways
CareTech(1) Cambian(2)
Creates a true nationwide integrated
care pathway focused on higher acuity
Access to new key regions for Cambian
2
6
6
Ability to grow in areas with
established brands and reputation
Local reach to better serve partners
Specialist education services
Adult Learning Disabilities Specialist residential care services and communities
Specialist Services Foster care services
Foster Care
Young People & Children Residential Services Specialist mental health services
Schools
Note: There may be more than one location within an area highlighted on the map.
(1) Illustrative map based on locations disclosed in the interim 2017 results presentation.
(2) Illustrative map based on locations disclosed on Cambian’s website.
14Care Pathway Focused on High Acuity Care Which Attracts Higher Fees
Well Positioned to Meet the
Requirements for Greater Acuity Strengthening the integrated care pathway
Services
Better Engagement with the Local Outcome-based specialist care for services users
Authorities Ability to accommodate local placements
Industry Leading Quality of
All acuity levels across the care pathway resourced by highly trained professionals
Resources
Leveraging CareTech’s dedicated reconfiguration programme aimed at fee uplifts/high acuity
Fee Management Opportunities provision
Positioning new placements on revised ‘best fees’ approach
15Leverage Deep Operational Expertise Across the Group
High Occupancy Levels(1) Strong Staff Retention Levels(2) High Quality Estate(3)
Estimated Quality Ratings (Good and/or Outstanding)
86% 81-91%
78% 79% 80%
71%
CareTech
CareTech Cambian CareTech
CareTech Cambian CareTech
CareTech Cambian
Deep operational expertise is enabled by continuous strong investment in back office and I.T. infrastructure
(1) Blended occupancy estimates based on 2017 annual results for CareTech and Cambian.
(2) Estimates based on staff turnover for Cambian as per Investec report (published 8 February 2018); CareTech as per the 2018 interim results.
(3) Estimates for CareTech based on 2018 interim report presentation (87% - Adult Services CQC rating, 91% - Specialist Services CQC rating, 81% Children’s Services Ofsted rating); estimates for Cambian based on combined CQC and Ofsted quality ratings taken from 2017 annual results.
16Unique Platform with Strong Commitment to Workforce Engagement
Recruitment
Shared
Best
Practices
Fostering Positive
Workforce Culture
Promoting Staff
Continuity
Leveraging CareTech’s
Learning Services Division
Retention Development
500+ Employees on
c.79%(1) Staff Retention c.2.2%(2) Agency Staff Employee Sharesave Scheme(3)
Development Programmes(3)
(1) Based on CareTech annual results 2017 presentation.
(2) CareTech information.
(3) Based on CareTech annual report 2017.
17Financial Highlights
Enhanced Enlarged Group’s Financial Profile
Cambian Standalone Medium Term
Revenue (£m)(1) EBITDA (£m)(1)
Ambition and KPIs(3)
Revenue CAGR
‘15-17A
%
16% 10% EBITDA Margin
%(2)
24% 10%
>5% >16%
Revenue CAGR EBITDA Margin
196
166 40 >85% >85%
Quality Regulatory Average
Score Occupancy
19
Increasing >20%
Average Daily Fee ROCE
2017A 2017A
>85%
Operating Cash Conversion
CareTech (Sep’17 YE) Cambian (Dec’17 YE)
(1) CareTech 2017A revenue and underlying EBITDA based on the September year-ending 2017 annual results; Cambian 2017A revenue and adjusted EBITDA based on the December year-ending 2017 annual results.
(2) Standalone margins excluding combination synergies.
(3) As announced at Cambian Capital Markets Day on 30 January 2018. Note: ambitions includes contribution from growth in new capacity from planned capital expenditure.
19Tangible Near Term Synergies and Alignment of Depreciation Procedures
c.£6m in annual run-rate synergies expected to be achieved by FY2021, with c.£3m expected in FY2019.
Further upside from operational synergies not quantified in these numbers
c.£5.3m
1 Corporate Overheads ▪ Reduction in combined central costs through rationalised head office, IT, board,
management and other costs
c.£6 million pre-tax run-rate
synergies per annum by end
FY2021:
c.£0.4m
‒ c.£3 million in FY2019
2 Corporate Support Functions ▪ Reduction in combined central costs through rationalised support function staff
costs ‒ c.£5 million in FY2020
‒ c.£6 million in FY2021
c.£7.6 million one-off
c.£0.3m implementation cost
3 Procurement
▪ Procurement savings from scale efficiencies
‒ c.£3.0 million in FY2019
‒ c.£3.1 million in FY2020
‒ c.£1.5 million in FY2021
▪ Cambian's depreciation charge following Completion is expected to be lower
4
Depreciation Procedures per annum as a result of the alignment of depreciation procedures between
Cambian and CareTech
Note: Synergies have been reported under Rule 28.1 of the Takeover Code: reports can be found in the Rule 2.7 Announcement made by CareTech on 16 August 2016.
20CareTech: Highly Structured and Well Invested Platform For Growth
Significant recent investments in group and back office infrastructure
Back Office Stable and sustainable processes designed for scalability
+
IT Infrastructure Fully-integrated reporting suite and management systems
“Line of sight” reporting for each home and services across KPIs
Strong quality and clinical ratings across the group
Care quality aimed at achieving superior outcomes for service users
Care
Quality Dedicated in-house compliance team and dedicated board level Care Governance
Better positioned as a partner of choice for local authorities and care
commissioners
21Integration Plan
CareTech has a proven track-record of accretive and successfully integrated acquisitions since IPO
CareTech’s strengths in staff retention, I.T., control of agency staffing, and compliance to be applied to Cambian’s services
Reporting Structure
Joining the senior management team of the Enlarged Group from Cambian will be
Anne Marie Carrie (as COO of the Cambian operations within the Enlarged Group)
Branding In line with previous CareTech acquisitions, the Cambian brand is to be retained
Operating
Infrastructure Efficient integration process expected for financial and I.T. functions
22Strong Enlarged Group Capital Structure
Key Financing Terms
Short Term Revolving
Facility Term Loan Term Loan
Bridge Loan Credit Facility £334m committed financing arranged by long-term
banking partners Lloyds Bank and NatWest
Short term bridge loan to facilitate cash
confirmation ahead of utilising Cambian’s significant
net cash position(1)
Principal £80m £167m £167m £25m Underpinned by a large property portfolio
CareTech intends to apply its existing progressive
dividend policy to the Enlarged Group
In the medium term, CareTech remains committed
to maintaining leverage at between approximately
Maturity
Shortly following
3.5 years 5 years 5 years
3-4x net debt to EBITDA
Completion
(1) Net cash reported by Cambian as at 31 December 2017 of £82.8 million.
23Indicative Transaction Timetable
Indicative Timetable
Date Event
16 Aug 18 Rule 2.7 announcement
Transaction documentation (Scheme Document / AIM admission document /
Prospectus) posted to CareTech and Cambian shareholders and/or published
Sep 18
Expected Completion / Admission of Enlarged Group share capital to AIM
Q4 18
Nov 18
25Conclusion
Unique opportunity for investors to enhance exposure to the growing UK market for social care services for children and
1
adults
Highly complementary service offering and geographical coverage providing a nationwide integrated care pathway
2
focused on higher acuity social care
Combined operational expertise to better service local authority partners, deliver strong user outcomes, implement
3
positive staff engagement and improve care quality
4
Opportunity to unlock significant value through a compelling strategic fit, tangible near-term synergies and enhanced
trading liquidity
26Q&A
Appendix
Appendix – Overview of CareTech
CareTech Overview
Operational Snapshot(1) Historical Financials L3Y (£m)
EBITDA
26% 25% 24%
205 2,271 Margin %(3)
166
Freehold facilities Bed / Places 149
(Ex-Fostering) 124
301 86% 33 37 40
Foster Care Blended
Occupancy 2015A 2016A 2017A
Revenue Underlying EBITDA
93% 21% Key Strategic Priorities
Mature Estate Staff Turnover
Occupancy Tangible bolt-on opportunities: expand geographical coverage and care
✓ pathways
4,744 81% ✓ Reconfigure existing property assets to meet market demand
Employees Quality Ratings
Ofsted (Children)(2) ✓ Digital applications to assist with care provision
87-91% ✓ Exploring international opportunities
Estimated Quality ✓ Continue staff development initiatives
Ratings CQC(2)
(1) 2017 annual report and 2018 interim presentations where available. Facilities number represent freehold properties.
(2) Estimates based on 2018 interim report presentation (87% - Adult Services CQC rating, 91% - Specialist Services CQC rating, 81% Children’s Services Ofsted rating).
(3) Underlying EBITDA based on the September year-ending annual results.
30CareTech Offers an Integrated Care Pathway Focused on Higher Acuity Social
Care
Children and Young People Fostering Adults Learning Services
▪ Learning disability ▪ Children and Young People with ▪ Learning disabilities ▪ Pre-employment training
challenging and complex
▪ Mental Health Issues ▪ Mental Health ▪ Work based learning
behaviours
▪ Autism Spectrum Conditions ▪ Autism and Asperger’s ▪ CareTech Aspire Programme
▪ Children and Young People with
▪ Complex social, emotional and disabilities ▪ Physical disabilities
Areas of specialism ▪ Behavioural difficulties ▪ Sensory Impairment
▪ Young people in crisis ▪ Dual Diagnosis
▪ Special education needs and mental ▪ Brain Injury Rehabilitation (ABI)
health (new 2016)
▪ Residential care ▪ Residential
▪ Transitional services ▪ Fostering placements ▪ Independent supported living
Care Provided n/a
▪ Education and therapy ▪ Family placements ▪ Community support services
▪ Short breaks / respite ▪ Transitional Services
£1.5bn £1.6bn £9.5bn
Addressable market size n/a
(+5.7% p.a.) (+5.2% p.a.) (+5.5% p.a.)
Market Share 3% 1% 2% n/a
Source: CareTech presentation for the year ended 30 September 2017.
31A Nationwide Care Pathway Offering
CareTech’s Geographic Footprint(1) Revenue Breakdown by Service Line(2)
Adult Learning Disabilities
Specialist Services Young People &
Foster Care
Children – 38%
Young People & Children
Residential Services
9%
Schools 26%
3
Young People & Children
12 Residential
6% Young People & Children –
2 Education & Learning Services
53% 5% Young People & Children –
4
Adult – 62% Foster Care
Adult – Learning Disabilities
20 Adult – Specialist Services
Capacity by Service Line(3)
10
2
Capacity (Places / Beds)
4 3
6
Young People & Children Residential Services 325
4 4
2 2
2
17 6
2 Young People & Children - Foster care 301
2 11
4 10
2
4
6
15 7
2 Adult - Learning Disabilities 1,732
2 2
2
4 2
2
2
Adult - Specialist Services 214
17
3 2
7 2
5
2
4
22 Total Places / Beds 2,572
5
31
2
2
People(4)
2
Learning Services 509
(1) Illustrative analysis based on locations disclosed per the H1 2017 interim results presentation.
(2) CareTech breakdown based on revenue as per 2017 annual report; Financial year-end September 2017.
(3) CareTech presentation for the 2018 interim results.
(4) Number of people receiving learning services.
32Appendix – Overview of Cambian
Cambian Overview
Operational Snapshot(1) Historical Financials L3Y (£m)
EBITDA
Margin %
11% 9% 10%
222 1,643 161
182
196
Facilities Bed / Places
(Ex-Fostering)
1,920 634 18 16 19
Young People & Avg. Foster Placements 2015A 2016A 2017A
Children in Care Revenue Adjusted EBITDA
130 78% Therapeutically-led Integrated Care Model
Therapeutic Staff Blended Occupancy
29% 4,539 Safety Stabilisation
Staff Turnover Employees Residential Specialist
Care Education Therapeutic Education
(Average) Intervention
1 80% >190 Parenting
Experience
Quality Ratings(2) Local Authority Partners, Therapeutic
Fostering
CCGs and Health Boards
(1) Based on Capital Markets Day presentation. Facilities, young people & children in care, employees and local authority partners as per Cambian Annual Report 2017.
(2) Estimates based on combined CQC and Ofsted quality ratings for Cambian taken from 2017 annual results
34Broad Care Offering Across England and Wales
Cambian’s Geographic Footprint(1) Revenue Breakdown by Service Line(2)
Specialist education services
Children – 100%
Specialist residential care services
Foster care services
Specialist mental health services
15%
45% Young People & Children -
Residential
Young People & Children –
Education
40% Young People & Children –
Foster Care
Capacity by Service Line(3)
Capacity (Places / Beds)
Young People & Children - Residential 578(4)
Young People & Children – Education 1,062(4)
Young People & Children – Excl. Fostering 1,640
Young People & Children – Foster care 641
Total Places / Beds 2,281
(1) Illustrative analysis based on locations disclosed on website.
(2) Cambian revenue based on 2017 annual results (financial year-ending December 2017) assuming the same revenue breakdown as disclosed in the Capital Markets Day presentation.
(3) Cambian numbers based on Capital Markets Day 2018 presentation; as at 30 June 2017.
(4) Based on Capital Market Day presentation, referring to Cambian data as at 30 June 2017
35Cambian Offers a Comprehensive Young People & Children Social Care
Young People & Children – Residential Young People & Children – Therapeutic Young People & Children – Specialist
Care Fostering Education
▪ Social, Emotional and Mental
Health (SEMH) including complex needs,
challenging behaviours, abuse and neglect ▪ Special Educational Needs (SEN) including
▪ Children and young people with challenging autism, Asperger’s syndrome
Areas of specialism
▪ Sexual Trauma (CSA / CSE) behaviour
▪ Social, Emotional & Mental Health (SEMH)
▪ Child and Adolescent Mental
Health (CAMHS) – Tier 4 and Tier 3.5
▪ Solo homes (1-bed) ▪ Residential & Day Schools (schools / colleges)
▪ Dual homes (2-beds) ▪ Therapeutic fostering ▪ Day schools (supporting residential care
homes, SEMH Schools)
Care Provided ▪ Complex needs homes (3-4 beds) ▪ Emotional support
▪ Further education colleges
▪ Small group homes (5-6 beds) ▪ Foster family training and support
▪ Day Schools
▪ Learning difficulties homes (3-4 beds)
Addressable market size(1) £1.1bn p.a. £1.6bn £3.7bn
Market Position(1)
#1 #5 #1
By no. of services By no. of fostered children By no. schools
Source: (1) Cambian Capital Market Day presentation.
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