Southern Cross losses widen

 
City A.M. Reporter
SOUTHERN Cross Healthcare, the British care homes operator in takeover talks, posted a wider full-year operating loss after cuts in government spending hit admissions and put pressure on fees.

Chief executive Jamie Buchan said the group, which has 38,600 beds across 752 care homes, was being squeezed by spending constraints at local authorities and was having to fight to maintain fee levels.

“Our position is there is no justification for a decrease in fees,” he said. “We have cost pressures from the minimum wage and utilities, and there are more and more frail people with increasing needs.”

The company posted an annual operating loss of £44.1m, after a non-cash charge, on 2.3 per cent higher revenue of £959m.

The company remains in takeover talks, with private equity firm Blackstone said to be the the potential bidder, after negotiations with Towerbrook Capital, another private equity investor, broke down.

Buchan did not confirm the Blackstone talks but said the group needed new capital to invest in the business.
The board was looking at strategic options that could include a sale, he said, and was also talking to its landlords about restructuring its rents.

Buchan said he was focused on further improvements to care standards, increasing the number of self-funded residents and making more cost savings against a tough trading backdrop.

“We anticipate another challenging year involving continuing pressure on fee levels and placements which, when combined with fixed and variable cost inflation, have the potential to impact profitability,” he said.