Southern Cross says it will miss profit forecast

City A.M. Reporter
SHARES in Southern Cross Health Care fell sharply yesterday after the care-home operator says it will miss analyst earnings forecasts for the year as public sector spending is scaled back.

Shares fell 2.4 per cent in the first half-hour of trading, but pared losses to close one per cent down at 31.25p. The stock has lost 78 per cent of its value since the beginning of the year.

Investec analyst Sebastien Jantet said says the main problem is occupancy, as the group is not seeing the usual seasonal uplift.

“There’s a lot of risk left in the forecasts,” he said. “From an investment perspective, whether there’s an equity value left in this is finely balanced.”

The company said yesterday that average occupancy in its established homes fell in the third quarter, to 85.4 per cent from 87.5 per cent a year ago, and it saw no recovery in demand in the short term.

“Whilst the longer-term fundamentals for residential care remain positive, the short-term outlook is challenging as pressure grows to reduce overall public sector spending,” the company said.

It now expected core earnings of about £53m for the year, short of an average of £61.14m expected.