First-half loss at Southern Cross

11/05/2009 Robert Tyerman

Care home provider Southern Cross partly blames cold winter deaths for pre-tax interim losses up 45 per cent to £12.5 million.

Turnover at the fully listed UK market leader rose 6.9 per cent to £461 million in the six months to March, as available bed numbers grew 4.4 per cent to 37,575. However, like-for-like ‘mature’ occupancy slid 1.1 per cent, which the company says was in part due to ‘an increase in resident mortality over the cold winter months’.

Southern Cross, which has grown by acquisition and last year pulled off a £137.4 million refinancing after an earlier loan default, says the economic downturn has affected demand for its services. Even in a sector widely perceived as defensive, local authorities, which provide 69 per cent of the company’s revenues, are imposing ever stricter controls on whom they will fund, says chief executive Jamie Buchan, and as a result ‘the average age and frailty of residents on admission is increasing’.

On the other hand, he argues that Southern Cross expects to benefit from moves by local authorities to link fees they pay to service quality, ‘once we have achieved initiatives to improve the quality of care we offer our residents’. Latest published figures for England, where 75 per cent of the company’s estate is located, show 71 per cent of the company’s homes assessed as ‘good or excellent’, but 29 per cent as ‘adequate or poor’, which ‘is not acceptable to management’.

With net debt down by £23.1 million to £74.4 million, Southern Cross ended the first half-year with £29 million cash. Its shares, which plunged from 606p in 2007 to 55p last October and were highlighted by Growth Company Investor at 86.25p later that month, have now rallied to 117.25p, valuing the company at £220.15 million.

Hold on for now.

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