Good morning!

It was a Duvet Day yesterday, so my apologies for any inconvenience. Perhaps the whole market needs a duvet day, given how negative things have been so far this year?


Cambian (LON:CMBN)

Share price: 74.4p (down 37.8% today)
No. shares: 184.2m
Market cap: £137.0m

Trading statement - this company has slipped through my net, in that it floated in Apr 2014, yet I haven't reviewed its numbers here before. The company seems to deliver outsourced care services for Govt & Local Authorities;

The Cambian Group is one of the UK's leading specialist behavioural health service providers. Founded in 2004, it has grown to become a significant partner to the UK Government. The Group's services have a specific focus on children and adults who present high severity needs with challenging behaviours and complex care requirements. Cambian employs approximately 7,000 people across a portfolio of over 300 purpose-designed facilities and 10 fostering offices located in England and Wales.

I normally run a mile from shares like this, after a bad experience a few years ago with Southern Cross Healthcare (I tried to bottom-fish, and thankfully realised just in the nick of time that it was doomed, getting out days before it went bust).

This situation doesn't look anywhere near as bad as that, but with public spending being squeezed, profit margins must be under pressure. Plus it has a lot of debt, although Cambian seems to own the freeholds of most of its sites - which makes it potentially interesting, so I'll dig a bit deeper (it was leases with ratcheted rents, combined with LAs refusing to agree to fee increases, and inadequate occupancy (combined with fixed costs) which killed off Southern Cross).

Profit warning - today's announcement has quite a few moving parts, this is the key section;

On 22 October 2015, the Group indicated that adjusted EBITDA for the year to 31 December 2015 would be not less than £49m.  Cambian now expects that, subject to audit, revenue and adjusted EBITDA for the year will be approximately £292m and £46m respectively.  During the year ended 31 December 2015 occupancy increased by approximately 260. Since the previous announcement, revenues and wages have been broadly in line with expectations, but due to weaknesses in our cost management processes, it took longer to identify and manage down other costs.   

So the EBITDA reduction doesn't look too bad, from £49m to…

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