Southern Cross

Average third-quarter occupancy rates at Southern Cross Healthcare Group, Britain’s largest care home operator, slipped from 89.8% to 87.5%.

Fully listed Southern says earnings before interest, tax, depreciation and amortisation slipped 9% to £2.2m in the 14 weeks to July, after average weekly fees increased 4.9% and revenues gained 3.7% to £255m. The company, which has upped the proportion of its homes judged good or excellent by the Care Quality Commission from 71% to 73%, says trimming running costs ‘partly offset’ a modest rise in staff costs as a proportion of revenue.

Expansive Southern, which draws some 77% of its revenue from local authorities and the National Health Service, recently finished four development projects, has opened one in Bristol and is talking to potential buyers about selling these and other freeholds. The company, steered by chief executive Jamie Buchan, says occupancy and service quality improvement remain its chief focus and suggests occupancy levels for the rest of this year will ‘continue to follow a similar, improving pattern to last year’.

Southern Cross shares fell spectacularly from grace last year when the company missed a payment deadline on a £46m banking covenant, plunging from more than £6 to 55p. Highlighted by Growth Company Investor at 86.25p last October, they have now rallied 61% further to 139p, even after today’s management statement clipped 10.75p off the price.

For the shorter term, partial profit-taking would be prudent.