Preliminary results CareTech Holdings PLC for the year ended 30 September 2014 Preliminary Results for the year ended 30 September 2014 Farouq Sheikh – Executive Chairman Michael Hill – Group Finance Director
Extraordinary days every day
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Contents • Overview • Highlights • Core Strengths • New Initiatives • Divisional breakdown • Financial results • Summary
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Overview •
Leading specialist provider of social care for both adults and children with complex needs
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Founded in 1993
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Progressively grown from 423 places (at IPO in 2005) to 2,074 at 30 September 2014
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Long term income stream with strong asset backed balance sheet
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Freehold property portfolio of 164 homes independently valued at £275m in August 2013
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Range of services and geographical coverage
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Operating in a market valued today at over £15bn
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Specialist operating divisions: Adult Services • Adult learning disability • Mental health
Children Services • Young people residential services • Fostering care • Learning services
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Highlights Operational
Financial
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Strong organic bed growth and further reconfigurations in progress
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Revenue increased by 8% to £123.3m (2013: £114.3m)
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Margin improvement
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Extended geographical reach into Scotland
Underlying EBITDA increased by 16% to £30.7m (2013: £26.4m)
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•
Capacity 2,074 in the year + 51 residential beds
Underlying PBT increase of 13% to £19.7m (2013: £17.5m)
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Invested infrastructure and I.T. Systems
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November 2013 – EQL Solutions Acquisition
Underlying Diluted EPS increase by 13% to 31.01p (2013: 27.43p)
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High quality ratings
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Underlying Operating cash inflow of £30.3m (2013: £23.9m)
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99% cash conversion ratio
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Final dividend up by 15% to 5.40p (2013: 4.68p) making the year 8.00p (2013: 7.00p)
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Net debt at £166.1m (2013: £168.5m)
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Initiatives Underpinning Growth Winning of Contracts and Tenders across all Divisions
Reconfiguration of existing homes
Focus on Personalisation and growth in Supported Living
Targeting new geographies
Construction and opening of new services
Map of locations of services in UK
Pre-employment and apprenticeships for CareTech staff and service users by EQL
Targeting new markets Bolt on Acquisitions
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Coppice Lodge – Winning of Tender New Build and New Geography Coppice Lodge is a large six bedded bungalow offering all the amenities required to offer short breaks to young people with physical, learning and health needs. The service is fully accessible and equipped to ensure that the young people are able to further develop their skills while having fun with their peers and staff team. The home has a large lounge, sensory room and toy room, providing the children with the opportunity to explore an array of toys and the latest sensory equipment, whilst also gaining new skills through participating with in-house activities and accessing the community. This home will provide a much needed resource for the local authority and residents of the borough and will also support families within the surrounding authorities.
Selection of Tender Wins and Framework Agreements in the Year Sandwell Scotland National Norfolk County Council Essex Council Leicester County Council and Rutland Supported Living Framework for Adults
Nottinghamshire County Council Lambeth County Council Birmingham City Council Surrey County Council Staffordshire for Adults
North West Children’s Residential Framework Buckinghamshire County Council Staffordshire Supported Living Enfield Council North West Fostering Framework
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Bescot Road – Reconfiguration – New Market Bescot Road was a large CareTech owned property in Walsall. We worked with Walsall Council and agreed a model to convert Bescot Road into a Supported Living service for people with complex and challenging needs. A model was put forward which included four en-suite bedrooms on the ground floor with large communal kitchen, dining room and lounge and three flats on the first floor with a communal lounge. After a major redevelopment project the service re-opened this year. Due to the complex needs of the tenants a phased approach has been adopted. The majority of the tenants have transferred from residential services. Over the past few months with the support and diligence of the staff team the service users have developed independent living skills and enjoy the local community.
Nine Elms Lane – Reconfiguration – New Market Nine Elms Lane located in Wolverhampton was a seven bed nursing residential service. We invited the Commissioners at Wolverhampton County Council who were the host authority to visit the service and entered into a dialogue about how the service could be reconfigured and what they needed as a local authority. Wolverhampton County Council decided they would like a Supported Living Service consisting of four individual flats, staff sleep in facilities and a shared communal lounge area. They also wanted it to be a specialist Autism service. After a major redevelopment project the service re-opened this year. Two of the tenants had been living within a family setting but due to aging parents needed to start the journey of independent living. The other tenant was a young person who had been inappropriately placed in a residential setting All the tenants love their flats and their families are delighted.
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Sunnyside Road – Reconfiguration – New Market The Sunnyside care home was originally purchased in 2006 as a learning disability centre. The home is located in Ilford approximately half of a mile away from the town centre and it is situated on a good bus route with service users having easy access to a full range of local facilities which they are encouraged to use. Reconfigured to adapt to market demand. Reopened as a specialist mental health 11 bed service.
Morven House – Reconfiguration – New Market Morven House is a safe and welcoming environment for young adults aged between 18 and 35 with learning disabilities and Autistic Spectrum Disorder. With our support, the tenants can begin to take steps towards making the transition to independent living. At Morven House we want to see the young people attain their true potential so they can live their lives as fully as possible. The tenants also have access to large and spacious communal area and gardens for opportunities to socialise and entertain. Set in its own large picturesque garden, Morven House is a stunning Grade 2 listed building fully equipped to cater for the needs of the tenants. The atmosphere at the centre is lively and social and this helps the residents to really grow. and develop as individuals.
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Cwlach Road – Bolt-on to an Acquisition – New Services We are excited to have a new Registered service recently opened in Prestwood, North Wales. Cwlach Road is a residential home situated in Llandudno Town overlooking the most spectacular views of Llandudno and the beach. It is a three storey Victorian House, which has been converted into five separate flats and a communal room. The home is registered for up to five service users who can be male or female and the ages between 18-64 years. The category of service users that the house is registered for is Mental Health Problems and associated Learning Difficulties.
Springfield – Bolt-on to an Acquisition – New Services – New Geography Springfield is located within the Fife region of Scotland and is registered as a residential child care service for young people aged 12-17 years. Springfield can accommodate up to four young people with social, emotional and behavioural difficulties. The service is delivered within a detached farmhouse within a beautiful rural setting. We chose this area in part because of the setting and also because of our strong and effective working relationship with the local authority in the area. As a result, the local authority have made several referrals and all current placements have been from the region. The service works effectively in accordance with the principles of Getting it Right for Every Child (GIRFEC) and the Safe, Healthy, Achieving, Nurtured, Active, Respected, Responsible and Included (SHANARRI) framework while ensuring that young people remain at the centre of decisions made relating to them. Springfield’s approach to working with young people in relation to their experiences of trauma and impaired attachment is considered to be particularly effective in improving outcomes for them.
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Divisional breakdown Divisional breakdown for the year ended 30 September 2014
Extraordinary days every day
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Range of services and geographical coverage Care Pathway – 30 September 2014 Capacity
• • • •
Residential care Independent supported living Community support services Transitional Services
1,450
• • • •
Residential care Low secure and step down Independent supported living Community outreach
151
Young People Residential Services
• •
Residential care of children Transitional Services
153
Foster Care
•
Fostering
320
Adult Learning Disabilities
Mental Health
1,601
473 2,074
Learning services
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Pre-employment and apprenticeships
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Adult Learning Disabilities •
1.4m people in the UK have a learning disability
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13.2% (185,000) of these cannot live independently
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UK market for adult residential learning disability and supported living worth £5.9bn annually, growing at 5.5% per annum
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Highly fragmented market
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High demand for community based care and high value specialist residential services
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Long average length of stay Capacity: Occupancy: Average weekly fee: Turnover: EBITDA:
Insert chart on growth of ALD market/map of service locations
1,450 spaces 86% £1,187 £74.2m £22.6m
*Figures correct at 30/09/2014
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Mental Health •
2.4% of UK population will be referred to specialist psychiatric service
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NHS/Local Authority spend in 2010 on mental health was £14.4bn
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Independent sector counts for 7.6% of the market
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70% of the prison population have mental health problems
Capacity: Occupancy: Average weekly fee: Turnover: EBITDA:
151 spaces 85% £1,090 £7.3m £2.5m
Insert chart on growth of MH market/map of service locations
*Figures correct at 30/09/2014
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Young People Residential Services •
16,000 children in England looked after outside of foster care
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Residential children’s market in England worth £1.0bn per annum
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Market growth rate of 5.7% per annum
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Highly fragmented market
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Fees range considerably
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Certain placements at more specialist centres cost over £4,000 per week
Capacity: Occupancy: Average weekly fee: Turnover: EBITDA:
Insert chart on growth of YPRS market/map of service locations
153 spaces 76% £3,708 £21.9m £7.4m
*Figures correct at 30/09/2014
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Foster Care •
Every 22 minutes a child comes into care
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67,050 “Looked after” children in England, and growing
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51,340 children placed in foster care, up from 49,800 in 2012
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The independent fostering market is worth c. £1.1bn per annum
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CareTech is a top 5 provider with a 2% market share
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The Children and Families Bill in England gives local authorities funding to 21 for young people in foster care Capacity: Occupancy: Average weekly fee: Turnover: EBITDA:
Insert chart on growth of FC market/map of service locations
320spaces 92% £788 £12.0m £3.0m
*Figures correct at 30/09/2014
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Learning Services •
Acquired EQL Solutions in November 2013 out of the administration of Elmfield Training
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Business Overview
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Market leading provider of pre-employment training and work based learning (WBL)
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Revenue Sources for 2013/14 and 2014/15 • Skills Funding Agency (SFA) contracts • Employer contracts with the SFA – Barclays, Phones 4 U and Weatherspoons; recent gain with Paddy Power • Skills Development Scotland + Welsh Assembly Two major streams are being developed • Pre-employment and Apprenticeships for CareTech staff (3,500) • Pre-employment and Apprenticeships for CareTech service users (2,000) Income in the 11 months to 30 September 2014 £7.9m Turnover: EBITDA:
£7.9m £0.1m
*Figures correct at 30/09/2014
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Divisional breakdown Financial Results for the year ended 30 September 2014
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Financial Highlights • Revenue increased 8% to £123.3m (2013: £114.3m) • Underlying EBITDA increased 16% to £30.7m (2013: £26.4m) • Underlying profit before tax increased 13% • Strong operating cash flow
• Full year dividend increased 15% to 8.00p (2013: 7.00p) and dividend cover 3.87 times
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Service Revenue & EBITDA Split for the year ended 30 September 2014
Adult Learning Disabilities Mental Health Sub Total Young People Residential Services Foster Care Sub Total Learning Services Sub Total
2014 Revenue £m 74.2 7.3 81.5
2014 Underlying EBITDA £m 22.6 2.5 25.1
2013 Revenue £m 73.9 6.5 80.4
2013 Underlying EBITDA £m 18.5 2.2 20.7
21.9 12.0 33.9
7.4 3.0 10.4
19.6 14.3 33.9
6.2 4.3 10.5
7.9 7.9
0.1 0.1
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Less Unallocated Group Costs Total Margin
Underlying Margin (pre EQL) up by 3.4% to 26.5%
(4.9) 123.3
30.7
24.9%
(4.8) 114.3
26.4
23.1%
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Cashflow Highlights for the year ended 30 September 2014
2014 £m
2013 £m
Operating Cashflow before Adjustments
30.7
26.4
Decrease/(Increase) in working capital
(0.2)
(2.5)
30.5
23.9
(10.3)
(44.0)
Interest, Dividend & Tax Paid
(9.8)
(10.7)
Treasury & Acquisition Related Costs
(8.0)
(6.5)
2.4
(37.3)
Opening Net Debt
(168.5)
(131.2)
Closing Net Debt
(166.1)
(168.5)
Acquisitions & Capital Expenditure
Decrease / (Increase) In Net Debt
Leasing increased by £1.8m in 2014 as company fleet was renewed and improved
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Balance Sheet Highlights as at 30 September 2014
Tangible Fixed Assets - £275m Val’n Goodwill and Intangibles Net Debt Other Liabilities (Net) Net Assets
Key Bank Covenant requirements
2014 £m
2013 £m
243.3 66.9 (166.1) (35.8) 108.3
238.6 62.1 (168.5) (33.5) 98.7
2014
EBITDA: INTEREST
3.93 times
NET DEBT: EBITDA
5.23 times
LOAN: VALUE
61%
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Divisional breakdown Summary
Extraordinary days every day
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Initiatives Underpinning Growth Winning of Contracts and Tenders across all Divisions
Reconfiguration of existing homes
Focus on Personalisation and growth in Supported Living
Targeting new geographies
Construction and opening of new services
Targeting new markets
Map of locations of services in UK
Pre-employment and apprenticeships for CareTech staff and service users by EQL
Bolt on Acquisitions
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Summary
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Experienced management team whose interests are aligned with shareholders
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An expanded range of specialisms that have increased market opportunity
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Knowledge of how to develop and deliver services to meet customer and client demand
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A business model that is flexible, scalable and in a position to grow
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Divisional breakdown Appendices
Extraordinary days every day
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About CareTech •
The leading specialist provider of social care for children and adults with complex needs
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Founded in 1993
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Floated on AIM in 2005 and progressively grown from 423 places (at float) to 2,074 on 30 September 2014
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Highly visible long term income stream with strong asset backed balance sheet o
Freehold property portfolio of 164 homes independently valued at £275m in August 2013
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National profile supported by a strong regional structure for service delivery
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Client focused innovative care pathway approach
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Strategy of investment in organic growth and selective acquisitions which enhance core services
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Dedicated specialist support growth
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The Journey so far… At IPO
Today
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Market size of £3.0bn
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Market size of £9.0bn
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Capacity of 423
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Capacity of 2,074
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CareTech market share of less than 1%
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CareTech market share of less than 2%
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One focused operating division – residential and day care services for adults with learning disabilities
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Five specialist operating divisions: •
Adult services – incorporating adult learning disability and mental health
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Children services – incorporating young people residential services, fostering care and learning services
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Learning Services
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Growth since IPO September 2005 to September 2014
Capacity
Revenue
3000 2,074
2000
40
423
0
2005
Underlying EBITDA
2005
2014
Diluted EPS
40 £30.7m
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£23m
2014
40
31.01p
30 20
20 10 0
120 80
1000 0
£123.3m
160
10 £2.4m
0 2005
2014
40% Annual Compound Growth Rate
4.1p 2005
2014
31% Annual Compound Growth Rate
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Direction of Travel
Young People 10%
Fostering 8%
Mental Health 4%
EBITDA
2010
£22.4m
25.0 2014
20.0
2010
Adults LD 78%
15.0
10.0
Fostering 12%
Mental Health 7%
EQL 1%
2014
2014
EBITDA £30.7m
2014
5.0
2010
2010
2014 2010
2014
Adults LD Young People 20%
Adults LD 60%
Growth
18%
Young People 173 %
Fostering 115 %
Mental Health 140 %
EQL 100%
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Core Strengths •
Experienced management team with an impressive track record
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National profile supported by a local structure for service delivery
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Demographics favour growth and further opportunity for market penetration
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Growth stems mainly from capacity increase, not fee increases
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Financial stability including strong asset backed balance sheet
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High acuity care non-discretionary high acuity care
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Care governance and high quality standards where safeguarding is crucial
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Non Underlying Items • •
The disclosure of certain current and non-current liabilities has been enhanced and more clearly demonstrates their future impact on net debt. IFRS also requires changes in acquisition fair values to be restated for the prior period. Adjustment items charged / credited in the Income Statement are as follows:
Twelve months ended 30 September 2014 £’m
Twelve months ended 30 September 2013 £’m
Acquisition Fees and Stamp Duty
(0.3)
(2.4)
Integration, Reorganisation Costs and Redundancy costs
(2.1)
(1.4)
(2.4)
(3.8)
Gain recognised in respect of business combination Adjustments for Minimum Future Lease Payment Uplifts Onerous Lease Provisions Reorganised EBITDA Adjustment Items Amortisation of Intangibles
0 0 0 (2.4) (4.4)
18.5 (1.2) (0.1) 13.4 (3.7)
Charges Relating to Derivative Financial Instruments
(0.4)
0.9
PBT Adjustment Items
(7.2)
10.6
(i) EBITDA is operating profit stated before depreciation, share-based payments charge and adjustment items (ii) Profit before tax and diluted earnings per share are stated before adjustment items
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