Companies: SCHE   

Loss-making care home group Southern Cross Healthcare has raised its acquisition war chest 80 per cent to £108 million.

The fully listed company, market leader in the UK, increased turnover 28.2 per cent to £431.2 million in the six months to March, but hefty increases in payroll costs, charges for current rents and future rent rises helped produce a first-half pre-tax loss of £8.6 million. Although net operating cash flow was positive, at a reduced £20 million, year-end cash was down £9 million at £14.2 million and the interim dividend was lifted 50 per cent to 3.75p a share.

Southern Cross increased bed numbers 14.4 per cent to 37,084 in the first half, with the average weekly fee rising six per cent to £515 and occupancy down slightly from 91.1 per cent to 90.4 per cent. Hailing ‘a strong performance’, chief executive Bill Colvin says the fee increases were ‘ahead of our expectations’, while ‘landlords continue to show interest in financing our properties and costs remain under control’.

The company has demonstrated its confidence in the future by arranging a £32 million two-year development loan and increasing its acquisition facility from £60 million to £108 million. Late last year, several directors sold significant chunks of shares when the market price was higher than it later became, although they mostly bought some back in the new year.

At 392.75p, up 3.25p this morning, the shares have fallen 35 per cent since last November’s 606p high. They value the company at £739 million.

Save 50% off your first year’s subscription to Growth Company Investor magazine, and gain immediate access to all the recommendations online. Click here.