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Care home group's earnings fall
SOUTHERN Cross, Britain's largest care-home operator, reported a nine per cent drop in earnings after occupancy rates fell, prompting a six per cent decline in the group's share price.
The company, which has about 37 homes in Yorkshire, including facilities in York, Bradford, Leeds and Harrogate, said adjusted earnings for the 14 weeks to July 5 fell nine per cent, reflecting a 2.3 per cent drop in average occupancy for the period.
The group posted adjusted earnings before interest, tax, depreciation and amortisation of 22.4m, down from 24.4m a year earlier.
Analyst Sahill Shan, at Brewin Dolphin, described the
quarterly results as disappointing, saying they confirmed his fear of ongoing occupancy challenges and downside risk
to forecasts.
The company said the average occupancy of its mature portfolio was 87.5 per cent, down
from 89.8 per cent a year ago, but it rose by 0.6 per cent between the start of the third quarter and July 5.
The group said it expects the trend in occupancy levels for the remainder of the year to continue to follow a similar, improving pattern to last year.
But analysts were not convinced. "While we acknowledge occupancy has nudged up marginally in early Q4, it is difficult to ignore the weak Q3 showing both from a sales and EBITDA perspective," said Mr Shan.
Shares in Southern Cross fell 9.5 to 140.25p.
Revenues rose 3.7 per cent, to 254.8m, and the group said it would continue to focus on occupancy and service quality.
Charlie Menegatos, senior trader at derivatives broker Accendo Markets, said Southern Cross's figures "indicate a resilient rather than spectacular growth story with no surprises".
Southern Cross said the number of beds available over the quarter rose from 37,270 to 37,820. It added that the focus on improving service quality has produced positive results.
By the end of the quarter, 73 per cent of homes in England were rated "good" or "excellent" by the Care Quality Commission, up from 71 per cent at the half year and already meeting the target for the full year.
The rollout of Southern Cross's new internal inspection system to every home was completed, in July, and will help to accelerate the improvement in quality.
During the quarter, average weekly fee rates were 4.9 per cent higher than during the same period last year, at 556, up from 530 last year.
Fee negotiations have been completed with 95 per cent of local authorities and primary care trusts and this has led to an average fee increase of 2.8 per cent per week with effect from April 2009.
Southern Cross said it continues to hold discussions with potential purchasers regarding the freehold property assets currently held for resale.
The group said it had noted
the Government's recent Green Paper on the future of adult social care and welcomes the encouragement of a broad debate on this crucial issue.
The group said the 7p increase in the National Minimum Wage, announced in May, will increase the wage to 5.80 per hour from October 2009.
Southern cross 's range of services
Southern Cross's care homes for the elderly operate under two brands: Southern Cross Healthcare and Ashbourne Senior Living.
The group's specialist services operate under the Active Care Partnerships brand and provide long-term care for people with disabilities and for younger people with challenging behaviour.
It provides services for most local authorities. Together with the NHS, this represents 77 per cent of group revenue.
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Saturday 11 February 2012
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