Cambian Group Regulatory News (CMBN)

Cambian Group plc unaudited results for the 6 months ended 30 June 2015

Delivering on our growth plan

1 The basis of preparation is detailed in note 1 of the condensed financial statements

2 Adjusted EBITDA is Earnings before net finance costs, tax, depreciation, amortisation, profit or loss on disposal of assets, exceptional items, M&A costs, and the charge relating to Continuation Option Plan shares awarded as part of the IPO

3 Underlying EBITDA is Adjusted EBITDA adding back development losses incurred in the period, defined as losses on assets which are within 18 months of opening and are yet to reach a profitable occupancy

4 Adjusted basic EPS is defined as statutory basic EPS, adding back the impact of amortisation of acquired intangible assets, exceptional items, M&A costs, and the charge relating to Continuation Option Plan shares awarded as part of the IPO, net of the tax effect of these adjustments. 2014 EPS calculations reflect the number of shares in issue post IPO, excluding shares held in the Employee Benefit Trust, of 168,888,888

Financial

Operational

Saleem Asaria, CEO, commented "These results reflect a positive first half to 2015. We have expanded our fostering offering significantly with the acquisition of By the Bridge, and continue to make excellent progress on our organic growth plan. We have also taken advantage of opportunities presented to exceed our originally planned openings in 2015. This positions us well to deliver on our vision to be the highest quality provider of specialist behavioural health services to children and adults".

A results presentation will be held for investors and analysts at 9.00am today at the offices of JP Morgan, 60 Victoria Embankment, London EC4Y 0JP. A live audio webcast of the presentation will be available at http://edge.media-server.com/m/p/wazufnot, and the materials from the presentation will be available on the investor relations pages at http://www.cambiangroup.com from 9.00am.

Overview of the Period

We are pleased to report a positive first half for Cambian, with revenue growth of 21% and an acceleration of our growth plan with 149 places opened in the period: 68 in Adult Services and 81 in Children's Services, with 23 places re-provisioned or closed. We have significantly expanded our fostering capabilities with the acquisition of By the Bridge in order to increase focus on Children with higher acuity needs. We have rolled out new service models in both our Adult and Children's segments, and, by taking advantage of opportunities presented, we are well positioned to exceed our original plan for growth in capacity in the current year.

Overview of Business Performance

In the first half of 2015 we delivered revenue growth of 21% (H1 2014: 11%). The Group's Adjusted EBITDA margin was 19% (H1 2014: 20%), after incurring £2.1m development losses in the period (H1 2014: £0.7m). Adding back these development losses, which are due to the accelerated execution of our growth plan, Underlying EBITDA margin was 20% (H1 2014: 20%). Average occupancy was 79% (H1 2014: 81%) the change being due to the lag effect of new capacity added in the period.

Organic Growth

Cambian is in a strong position to take advantage of significant opportunities to grow the business organically. In our Adult Services we opened two Personality Disorder Units with a total of 48 places. We now have 72 places serving personality disorders and a good pipeline for further growth in this area. To complement our existing Acquired Brain Injury services we opened a 20 bed hospital in the period.

In our Children's Services we have identified Child and Adolescent Mental Health Services (CAMHS) as a key area of growth and we were pleased to open 21 places in the period with further openings planned in the second half. In addition we opened 30 education places and 30 residential children's services places in a number of smaller units. These include 20 places providing Learning Disability care services to Young Adults.

The number of places we added to our capacity was 149, with reduced capacity of 8 places in Adult services (currently being re-provisioned as a CAMHS service), and of 15 places in Children's services (representing units closing in our residential services) giving a net change in capacity of 126 places.

Since 30 June to the date of this announcement, we have opened a further 20 places in Adult services and 133 places in Children's Services, giving a total of 302 places year to date. We also have a good pipeline for further openings in the remainder of the year and expect to open approximately 370 places for the full year.

Fostering

At our full year results, we had highlighted fostering as an area that we wished to grow. To this end, we were pleased to acquire By the Bridge in March. By the Bridge operates at the high severity end of fostering and has built a reputation for providing good quality, therapeutic fostering services and for being able to place children with complex needs in a family environment. As such, it occupies a niche position between traditional fostering and residential care and now forms an integral part of our Children' Services offering. Cambian's existing fostering operation is now being integrated into By the Bridge: we expect this process to be completed by the end of the year. We have a number of marketing activities planned for the second half to increase foster carer numbers. At 30 June 2015 the Group had 697 fostering placements (30 June 2014: 181), of which 509 related to By the Bridge.

Quality and Regulatory

Our ambition is to be the highest quality provider of behavioural health services to Children and Adults. We are regulated by the CQC and Ofsted for our English services, and HIW and CSIW for our Welsh services. The sector is seeing an increasingly stringent regulatory environment, both in the rigour of inspections and the time taken in registering new sites and services which continues to be extended.

In line with our commitment to high quality services, we have appointed Philip King, who formerly worked at the CQC, as Director of Quality and Risk. Philip's role is to ensure that, as we grow, the Group has appropriate systems and processes to manage quality, as well as to enable Cambian to navigate successfully through the regulatory environment and build constructive relationships with the regulators. Our regulatory scores remained strong throughout the period; we underwent no embargoes and we currently have no facilities with compliance notices. From a governance perspective, in order to ensure an integrated approach to risk, we have now merged the Audit Committee and the Quality and Risk Committee. The re-named Audit & Risk Committee now directly oversees all elements of risk in the business.

Acquisitions

Acquisitions are a key element of our strategy, enabling us to reach new regions, or deliver new services, more quickly than we could do organically. In March we completed the acquisition of By the Bridge for a net cash consideration of £34.3m, initially funded by debt and subsequently partially financed through an issue of additional share capital raising £25.4m. Both By the Bridge and Woodleigh (acquired in December 2014) are performing well.

Election and Budget Implications

The May election result provides commissioning stability and the Government has stated its intention to continue to selectively outsource specialist services to private sector providers offering value for money and high quality outcomes. In the July budget, NHS spending was protected, an additional £10bn was committed to health, and the NHS was tasked to deliver efficiency savings through improvements in quality of care, staff productivity and procurement. The national living wage was introduced with step changes starting in 2016 and reaching £9 per hour by 2020. In addition the rate of corporation tax will be reduced to 18% by 2020.

We are supportive of the introduction of the living wage, but we recognise that the net implication of the budget will increase our cost base. We have started a consultation exercise with our customers and will seek to mitigate the net impact of the budget by corresponding fee increases. We have a high level of confidence that we will be able to demonstrate the value proposition of our services such that that there will be no material impact to our Group.

Management Team

We have further strengthened our senior management team during the period with a number of key appointments. As previously mentioned Philip King joined us as Director of Quality and Risk, Nigel Toon has joined us as HR Director (previously at Allied Bakeries and Pepsi Co), and Mark Fisher has joined us as Chief Marketing Officer, having previously held a number of senior marketing roles at Diageo.

Board Appointment

With Anne-Marie Carrie (previously an independent non-executive director) becoming CEO of our Children's Services division, in July we were pleased to announce the appointment of Dr Graham Rich as an independent non-executive director. Graham, a medical doctor, has held numerous clinical and management roles in the NHS, as well a number of consulting and advisory roles in the private sector. Graham will sit on the new combined Audit and Risk Committee.

Systems and Infrastructure

With Cambian having grown significantly in recent years, we recognise the need to continue investing in our operating infrastructure across the functions in the business, both in people and systems. To this end, we have also begun a business transformation programme covering Finance, HR and Marketing to ensure we have the right systems and processes in these areas to deliver the Group's growth. This programme is currently in the design phase and will be delivered over a two year period.

Summary and Outlook

These results reflect a positive first half to 2015. We have expanded our fostering offering significantly with the acquisition of By the Bridge, and continue to make excellent progress on our organic growth plan. We have also taken advantage of opportunities presented to exceed our originally planned openings in 2015. This positions us well to deliver on our vision to be the highest quality provider of specialist behavioural health services to children and adults.

Summary of Performance

2 Adjusted EBITDA is Earnings before net finance costs, tax, depreciation, amortisation, profit or loss on disposal of assets, exceptional items, M&A costs, and the charge relating to Continuation Option Plan shares awarded as part of the IPO

3 Underlying EBITDA is Adjusted EBITDA adding back development losses incurred in the period, defined as losses on sites which are within 18 months of opening and are yet to reach a profitable occupancy

5 Fostering is not included in the capacity and occupancy numbers, and instead is disclosed separately due to fostering's business model being different from our residential and education services

6 Capacity is defined as the number of separate places registered with a regulator to accept service users

Group performance

In the first half of 2015 we delivered revenue growth of 21% (H1 2014: 11%). Average occupancy was 79% (H1 2014: 81%) the change largely being due to the places added in the period. The Group's Adjusted EBITDA margin was 18.9% (H1 2014: 19.7%), with £2.1m development losses being incurred in the period (H1 2014: £0.7m). Adding back these development losses, which are aligned with the accelerated execution of our growth plan, Underlying EBITDA margin was 20.4% (H1 2014: 20.3%).

Cambian remains a key partner to the UK public service providers as they continue the trend towards outsourcing services. We offer excellent value for money both in terms of outcomes and as compared to the cost of Government provision of equivalent services. From 1 April 2015, we increased prices on average by 2% for the majority of new service users, and this positively impacts revenue as service users are admitted at new price levels.

Divisional Performance

Adult Services revenue grew by 22% in the period including the contribution of the acquisitions of Woodleigh and Ansel in the second half of 2014. Average occupancy was 87% (H1 2014: 89%), the reduction mainly being the impact of the new places opened in the period at the start of their maturity profile. Average occupancy of mature Adult units excluding acquisitions was 89% (H1 2014: 90%) following a strong performance in H1 2014. Adjusted EBITDA margin was 23.5% (H1 2014: 23.8%) and underlying EBITDA margin, adding back the impact of development losses was 25.1% (H1 2014: 24.2%).

Children's Services revenue grew by 21% in the period, including the contributions of the Mencap Colleges and the New Elizabethan School both acquired in 2014, and the acquisition of By the Bridge in 2015. Average occupancy in Children's Services was 74% (H1 2014: 76%), representing the same percentage for average occupancy as for the full year 2014, and this reflects the relatively immature nature of the Children's Services segment as compared to the Adult Services segment. Adjusted EBITDA margin of Children's Services was 15.5% (H1 2014: 16.7%) and underlying EBITDA margin, adding back the impact of development losses was 17.0% (H1 2014: 17.4%). The reduction in the underlying EBITDA margin includes the costs of new management team for the division. As we scale up in the future, we expect the margin of Children's Services to rise.

Operating Profit

Adjusted EBITDA reconciles to Operating Profit as follows:

2 Adjusted EBITDA is Earnings before net finance costs, tax, depreciation, amortisation, profit or loss on disposal of assets, exceptional items, M&A costs, and the charge relating to Continuation Option Plan shares awarded as part of the IPO

M&A Costs

M&A costs represent advisory fees, stamp duty and other direct costs in respect of acquisitions completed in the period.

Charge on IPO option plans

The charge on IPO option plans arises on Continuation Option Plan shares awarded as part of the IPO, the impact of which is excluded from Adjusted EBITDA. Charges on future share based awards will be included within Adjusted EBITDA.

Finance Charges

The Group incurred net finance costs of £4.2m in the period (H1 2014: £8.3m).

Taxation

The Group's tax charge was £2.7m (H1 2014: £1.7m) representing 23.38% of profit before tax and M&A costs. The difference between the current statutory rate of 20.25% and the effective tax rate is due to some expenses not being allowable for Corporation Tax purposes.

Earnings per Share

Statutory basic EPS was 4.13 pence (H1 2014: loss of 12.6 pence), and statutory diluted EPS was 4.05 pence (H1 2014: loss of 12.6 pence). Adjusted diluted EPS is defined as statutory basic EPS, adding back the impact of amortisation of acquired intangible assets, M&A costs, and the charge relating to Continuation Option Plan shares awarded as part of the IPO, net of the tax effect of these items. 

Statutory basic EPS reconciles to Adjusted basic EPS as follows:

Acquisitions

During the period, the Group acquired By the Bridge for a net cash consideration of £34.3m, initially funded by debt and subsequently partially refinanced through an issue of additional share capital raising £25.4m. In addition, the Group purchased the share capital of Interact Care Limited, a portfolio of assets providing Learning Disability services to Children, for a net cash consideration of £3.4m. This is included within organic capital expenditure for the purposes of the analysis in this press release as the assets were acquired at rebuild cost and meet our organic growth capital expenditure hurdle rates of return.

Capital Expenditure

The Group has incurred £25.4m (H1 2014: £9.9m) of capital expenditure in the period, of which £21.4m has been spent on the execution of our organic growth plan and £4.0m (H1 2014: £1.6m) has been spent on the maintenance of our existing units and investment in our IT infrastructure. Within our growth capital expenditure, the most significant areas of investment in Adult services were the Personality Disorder and Acquired Brain Injury Units we opened in the period plus an Adult Learning Disability unit opened in July. In our Children's Services, the growth capital expenditure primarily related to our Education Services including an Autism school opening in September and adding capacity to our existing schools, first half and planned second half openings in our Sexual Trauma and CAMHS services, and 20 places added in Children's Learning Disability services.

Cash Flow

A reconciliation of cash flow from Adjusted EBITDA to the movement in net debt is set out below.

2 Adjusted EBITDA is Earnings before net finance costs, tax, depreciation, amortisation, profit or loss on disposal of assets, exceptional items, M&A costs, and the charge relating to Continuation Option Plan shares awarded as part of the IPO

7 As outlined in this release, although presented in the IFRS financial statements as an acquisition, the portfolio of assets acquired through Interact Care Limited is being treated as capital expenditure for the purpose of the analysis above.

The working capital outflow in the period of £21.6m is comprised of a £16.6m outflow on debtors (H1 2014: £6.9m outflow), a £3.0m outflow (H1 2014: £0.3m inflow) on M&A and ACL integration costs accrued in 2014 but paid in early 2015 and a £2.0m outflow (H1 2014 £0.5m inflow) on trade creditors. The movement on debtors relates to the cycle of stronger cash collection in the second half compared to the first half (particularly related to the timing of billing for our Education services), and is expected to substantially reverse in the second half of 2015.

During the period, the Group made tax payments of £3.9m which all related to tax due on prior period taxable profits. In the prior period, under a different corporate structure, no corporation tax payments were due.

Debt Facilities

The Group extended its facilities agreement in March 2015 by £35m initially to fund the acquisition of By the Bridge. The facilities carried interest at between 2.50% and 2.75% during the period. The principal covenants are net debt to Adjusted EBITDA set at 4.95:1.00 and interest cover (calculated as the ratio of Adjusted EBITDA to finance charges) of not less than 4.50:1.00. For both covenants, Adjusted EBITDA is calculated after adding back development losses of up to £3m per year.

Following the end of the period, the Group entered into £80m of interest rate swaps until April 2019 at a blended rate of 1.6% over LIBOR. The Board regularly reviews the mix of fixed and floating rate debt for the Group.

At 30 June 2015, the total facilities available to the Group were £290m of which £253.5m was utilised. Together with cash and other debt like items on the balance sheet, net debt was £230.9m (30 June 2014: £131.7m). Including the pre-acquisition profits of acquisitions in the calculation (as prescribed under the facilities agreement), the Group's net debt to Adjusted EBITDA was 3.77x and Adjusted EBITDA to interest payable was 8.42x at 30 June 2015. 

Dividend

At the time of the IPO, the Board stated that it would adopt a progressive dividend policy whilst maintaining an appropriate level of dividend cover. For 2015 the Board expects to increase the dividend by 10% on the full year equivalent of the 2014 dividend declared. With this in mind the Board has declared an interim dividend in respect of 2015 of 0.91 pence per ordinary share, representing one third of the expected full year dividend. The interim dividend will be paid in accordance with the following timetable:

Since the publication of the annual report and accounts for the year ended 31 December 2014, the Group has undertaken a thorough review of its risk management framework, including a review of the principal risks and uncertainties facing the business. The key risks areas for the remainder of the current financial year are as follows:

· Quality of Service: failure to provide a high quality and consistent level of care for the children and adults placed under our charge.

· Regulatory Breach: loss or suspension of operating licenses due to major breach of statutory, regulatory or contractual obligations.

· Service Innovation: insufficient innovation in our business model, service offerings or model of care reduces our competitiveness in the market.

· Incident Response: inability to effectively react and respond to major incidents in a timely and controlled manner.

· Relationships: failure to create and maintain strong relationships with commissioners to ensure referrals.

· Systems & Processes: immaturity of systems and processes prevent effective business operations and sustainable future growth.

· Attraction & Retention: we fail to attract and maintain an effective, high quality resource and talent base.

· Strategy & Performance: failure to develop, execute and operate a strategic plan that ensures continued growth.

· Integration: failure to realise the benefits and synergies of integrating new sites and acquisitions effectively.

· Business Change: we fail to deliver key business change programmes

· Policy risk: changes in Government policies in relation to health and social care impact our business model and outlook

The work on the risk management framework and principal risks and uncertainties is continuing and will be reported on fully in the Cambian annual report for the year to 31 December 2015

We confirm to the best of our knowledge that this unaudited consolidated interim financial information has been prepared in accordance with IAS 34 as adopted by the European Union and that the interim management report includes a fair review of the information required by DTR 4.2.7R and DTR 4.2.8R, namely:

· an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements and a description of the principal risks and uncertainties for the remaining six months of the financial year; and

· material related-party transactions in the first six months and any material changes in the related-party transactions described in the last Annual Report.

The current directors of Cambian are: Christopher Kemball (Chairman), Christopher Brinsmead (Senior Independent Director), Alison Halsey, (independent non-executive director) Dr Graham Rich, (independent non-executive director), Alfred Foglio (non-executive director), Saleem Asaria (CEO) and Andrew Griffith (CFO). Biographical details for each of the directors, other than Dr Rich are set out in the Cambian Annual Report and Accounts and of Dr Rich in the regulatory announcement relating to his appointment, both of which are available on the Company's website at www.cambiangroup.com/investors.

By order of the Board

Cautionary Statement

Certain statements in this half yearly statement are forward-looking. Although the Group believes that the expectations reflected in these forward-looking statements are reasonable, we can give no assurance that these expectations will prove to have been correct. Because these statements contain risks and uncertainties, actual results may differ materially from those expressed or implied by these forward-looking statements. We undertake no obligation to update any forward-looking statements whether as a result of new information, future events or otherwise.

7 Non-controlling interests relate to the equity held by management and ex-employees in Cambian Holdings Limited, Cambian Developments Limited, Care Aspirations Holdings Limited and Advanced Childcare Holdings Limited prior to the IPO

1. Accounting policies

General Information

Cambian Group plc. (the "Company") is a company incorporated in the United Kingdom under the Companies Act 2006 and its registered office is at 4th Floor, Waterfront Building, Chancellors Road, Hammersmith Embankment, London W6 9RU. The Company is listed on the London Stock Exchange. The principal activity of the Company and its subsidiaries (collectively, the "Group") is the provision of high quality behavioural health services to children and adults.

Basis of Preparation

The financial information contained in this Half-Yearly Financial Report does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. The results for the year ended 31 December 2014 are an abridged version of the full accounts for that year, which received an unqualified report from the auditor, did not contain a statement under section 498(2) or (3) of the Companies Act 2006 or include a reference to any matter to which the auditor drew attention by way of emphasis without qualifying the auditor's report, and have been filed with the Registrar of Companies. The annual financial statements of Cambian Group plc are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this Half-Yearly Financial Report has been prepared in accordance with IAS 34 Interim Financial Reporting, as adopted by the European Union. The same accounting policies, presentation and methods of computation are followed in the condensed set of financial statements as applied in the latest audited annual financial statements.

For the period ending 31 December 2015, the Company plans to transition to reporting under FRS 101 as issued by the Financial Reporting Council, and therefore take advantage of the disclosure exemptions permitted by the standard, unless an objection is served by any shareholder or shareholders holding in aggregate 5% of more of the allotted shares. Objections may be served in writing to the Company Secretary at the registered office, 4th Floor, Waterfront Building, Chancellors Road, Hammersmith Embankment, W6 9RU, no later than 13 November 2015.

Going concern

The directors are satisfied that the Group has sufficient resources to continue in operation for the foreseeable future, a period of not less than 12 months from the date of this report. Accordingly, they continue to adopt the going concern basis in preparing the condensed financial statements.

Exceptional items

Exceptional items reflect items which individually or, if of a similar type, in aggregate, need to be disclosed separately due to their size or incidence in order to obtain clear and consistent presentation of the Group's performance. Examples of items which may give rise to disclosure as exceptional items include: the costs associated with raising capital and restructuring costs. These items are 'non-recurring'.

2. Segmental Analysis

Products and services from which reportable segments derive their revenues

Management has determined the operating segments based on the monthly management pack reviewed by the board of directors (the "Board"), which is used to assess both the performance of the business and to allocate resources within the Group. Management have identified the Board as the chief operating decision maker ("CODM") in accordance with the requirements of IFRS 8 Operating segments. The operating and reportable segments are in reference to the category of customer:

Adult Services - Provision of specialist behavioural science healthcare services for adults

Children's Services - Provision of specialist behavioural science healthcare services for children

The following is an analysis of the Group's revenue and results by reportable segment for the six months ended 30 June 2015, 30 June 2014 and year ended 31 December 2014:

2 Adjusted EBITDA is Earnings before net finance costs, tax, depreciation, amortisation, profit or loss on disposal of assets, exceptional items, M&A costs, and the charge relating to Continuation Option Plan shares awarded as part of the IPO

3 Underlying EBITDA is Adjusted EBITDA adding back development losses incurred in the period, defined as losses on assets which are within 18 months of opening and are yet to reach a profitable occupancy

8 Development losses are defined as losses on sites which are within 18 months of opening and are yet to reach a profitable occupancy

9 The charge on IPO option plans arises on Continuation Option Plan shares awarded as part of the IPO, the impact of which is excluded from Adjusted EBITDA. Charges on future share based awards will be included within Adjusted EBITDA

2. Segmental Analysis (continued)

2. Segmental Analysis (continued)

3. Tax

The effective income tax rate, on profit before tax and before exceptional and M&A costs, for the six months ended 30 June 2015 is 23.38% (H1 2014: 25%), representing the best estimate of the annual effective income tax rate expected for the full year, applied to the profit before tax and exceptional and M&A costs for the period.

In July 2015, the UK Government announced its intention to reduce the corporation tax rate to 19% with effect from 1 April 2017 and 18% with effect from 1 April 2020. These changes were not substantively enacted at the balance sheet date and therefore have not been reflected in the deferred tax provisions. The reduction in the rate is likely to reduce the value of deferred tax assets and liabilities held by the Group. Further information in relation to this will be included in the full year financial statements.

4. Dividends

A dividend of 1.8 pence per ordinary share was paid in April 2015 in respect of the period from IPO to 31 December 2014. This represented a cash payment of £3.3m. The Board has declared an interim dividend for 2015 of 0.91 pence per ordinary share (H1 2014: nil), representing one third of an expected full year dividend. The interim dividend will be paid on 4 November 2015 to shareholders on the register on 16 October 2015.

5. Earnings per Share

Basic earnings per ordinary share is based on the weighted average of 174,853,478 ordinary shares in issue during the period (H1 2014: 107,653,269 and year ended 31 December 2014 138,522,731) and are calculated by reference to the profit attributable to shareholders of £7.2m (H1 2014: loss of £13.6m: year ended 31 December 2014 loss of £8.4m).

Diluted earnings per ordinary share is based upon the weighted average of 178,299,700 ordinary shares (H1 2014: 107,653,269 and 31 December 2014 138,522,731), which in H1 2015 includes the effect of the weighted average of share options under the Continuation Option Plans of 3,446,222. In 2014, the weighted average number of share options under the Continuation Option Plans (H1 2014: 1,427,993 and year ended 31 December 2014: 2,445,401) were anti-dilutive.

Diluted earnings per share is calculated by reference to the profit attributable to shareholders of £7.2m (six months ended 30 June 2014: loss of £13.6m: year ended 31 December 2014 loss of £8.4m).

6. Property, Plant and Equipment

During the period, the Group acquired plant, property and equipment of £24.2m of which £0.4m was acquired with the acquisition of By the Bridge and £1.9m with the acquisition of Interact Care Limited. The depreciation charge for the period was £7.0m (H1 2014: £6.2m).

7. Borrowings

The Group extended its facilities agreement in March 2015 by £35m initially to fund the acquisition of By the Bridge. The facilities carried interest at between 2.50% and 2.75% during the period. At 30 June 2015, the total facilities available to the Group were £290m of which £253.5m was utilised.

8. Net Debt

9. Called up share capital

During the period, the Group underwent an issue of new share capital through which net proceeds of £25.4m were raised.

Voting Rights

Following admission to the London Stock Exchange the ordinary shares rank equally for voting purposes. On a show of hands each Shareholder has one vote and on a poll each Shareholder has one vote per ordinary share held. Each ordinary share ranks equally for any dividend declared. Each ordinary share ranks equally for any distributions made on a winding up of the Group. Each ordinary share ranks equally in the right to receive a relative proportion of shares in the event of a capitalisation of shares.

10. Acquisitions of subsidiaries

On the 25th March 2015 the Group acquired 100% of the share capital of By The Bridge Holdings Limited and its subsidiaries ("By the Bridge") and on the 9th June 2015 the Group acquired 100% of the share capital of Interact Care Limited ("Interact"). The transactions have been accounted for by the acquisition method of accounting in accordance with IFRS 3 (2008). The provisional information on the acquisitions are provided below:

The goodwill of £14.5m arising from the acquisitions consists of the value of the assembled workforce, potential synergies gained from combining the head office functions and expansion potential. None of the goodwill is expected to be deductible for income tax purposes.

Acquisition related costs (included in administrative expenses in Cambian Group Plc. consolidated income statement for the period ended 30 June 2015) amounted to £1.7m.

The acquisitions contributed revenue of £6.9m and £1.3m to the Group's profit before tax for the period between the date of acquisition and the balance sheet.

11. Notes to the cash flow statement

Other non-cash items relate to the charge to the income statement on the IPO share option plans shares under Continuation Option Plan 1 and Continuation Option Plan 2.

12. Share-based payments

The charge for share based payment relates to shares under Continuation Option Plan 1 and Continuation Option Plan 2 awarded as part of the IPO. On 15 April 2014, 3,446,222 shares were awarded under these plans, at the then current market price of £2.25. The total fair value charge of £7,754,000 will be expensed over the vesting periods, ranging between 18 months and 5 years. The total expense recognised in the six months ended 30 June 2015 was £1.1m (30 June 2014: £0.4m and 31 December 2014: £1.6m).

13. Related party transactions

Balances and transactions between Group companies have been eliminated on consolidation and are not disclosed in this note. Other than remuneration of executive and non-executive directors and members of the senior executive team, there were no related party transactions except for:

· Expenses paid to GI Partners (being a shareholder with representation on the Board) of £41,000 (six months ended 30 June 2014: £58,000, year ended 31 December 2014 £130,000). There were no balances outstanding at the period ends.

· Rental payments of £nil (six months ended 30 June 2014: £22,500) for a property owned by Riz Khan, a former key manager who left the Group in the prior year. There were no balances outstanding at the period ends.

All related party transactions are considered to be on an arm's length basis, and in the ordinary course of business.

In addition to these related party transactions, the Group uses the services of PHS Group Limited, a hygiene business chaired by Christopher Kemball, our Chairman. The total cost of these services amount to £163,950 in the period, and Mr Kemball took no part in the contract negotiations.

We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2015 which comprises the condensed consolidated statement of comprehensive income, the condensed consolidated statement of changes in equity, the condensed consolidated statement of financial position, the condensed consolidated cash flow statement and related notes 1 to 13. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. Our work has been undertaken so that we might state to the company those matters we are required to state to it in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our review work, for this report, or for the conclusions we have formed.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

As disclosed in note 1, the annual financial statements of the group will be prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting", as adopted by the European Union.

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of Review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2015 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

Deloitte LLP

Chartered Accountants and Statutory Auditor

London, United Kingdom

26 August 2015