Childrens care and education provider Acorn Care 1 reported significant losses for the year ending 31 August 2012. Despite increasing turnover from £76.3m to £110.6m, the business saw its operating losses soar from £10.7m in 2011 to £15.7m last year. And, after net interest expenses of £27.2 million, the company posted a whopping loss before tax of £43m (2011: loss of £34m). But thankfully things are not as bad as they appear at first sight because of the very large non-cash items which contribute to the loss, £16m of interest expenses is carried interest on loan notes, which does not have to be paid to the private equity parent (Ontario Teachers Pension Plan Board) until the whole of the loan (in effect, disguised equity) is discharged, and a further £2.5m of preference share dividends does not have to be paid either. Biggest of all, there is an amortisation and depreciation charge of £36.1m (2011: £28.7m) bundled up under the Administrative Expenses, nearly all of which is amortisatiion of acquired goodwill. Writing these and other items back brings EBITDA up to +£21.3m (2011: £18.1m), or 19.3% of revenue. Though below the best in class amongst special education and childrens service providers, it is a healthy enough level of underlying profitability.