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CareTech's strong cash flow reduces debt; property portfolio gets 20% uplift
CareTech (CTH:AIM) 623.5p
Gain to date: 0.7%
Original entry point: Buy at 619p, 21 July 2021
Social care and education services provider, CareTech (CTH:AIM) reported a resilient trading update for the year to 30 September, in line with market expectations.
Consensus expectations are looking for double-digit increase in revenues and EBITDA (earnings before interest, taxes, depreciation, and amortisation).
Strong cash generation supported the continued deleveraging of the group with a reduction in net debt to £259 million bringing the ratio of net debt to unaudited EBITDA to 2.7 times implying EBITDA of around £96 million.
The group’s property portfolio which comprises 407 freehold and long leasehold sites was revalued upwards by 20% to £930 million compared with the last assessment in 2018.
The company highlighted continued organic growth initiatives opening seven new developments and purchasing eight properties in the second half, while the bolt-on acquisition pipeline remained strong.
Short-term recruitment issues aside CareTech appears well positioned to continue its growth path.
SHARES SAYS: Remains a buy.