Troubled care home giant Southern Cross has plunged deeper into the red on the back of big cuts in admissions from local authority, half-year results published today show.
As the company battles for survival, it revealed that it made a loss before tax and other charges of £21.1m in the six months to 31 March 2011, compared with a £1.6m loss in the same period in 2009-10. Net debts at the company have doubled to £14.4m as of 31 March from £7.3m at the end of September 2010.
The news raises further doubts over the future of the company’s 750 homes and its 31,000 residents, as councils draw up contingency plans to move them if necessary to new accommodation.
The losses reflect 15.1% cuts in admissions from local authorities, which fund a large proportion of the company’s residents. This led to a reduction in occupancy levels in the company’s homes from 90% to 87% from 2010-11. The situation is likely to worsen in 2011-12 as fees from councils are due to fall by 0.6%.
As revenues decline, the company is facing increasing rental bills from the landlords of the care homes it operates. Rent payments ate up 21.6% of the company’s revenues in the six months to 31 March, compared with 20.3% for the same period in 2009-10.
“Southern Cross is now in a critical financial position and cannot afford to meet its future rent obligations in full,” said chairman Christopher Fisher.
The results come with the company locked in negotiations with landlords to defer 30% of its rent payments from June to September, and limit future rent rises.
Fisher added: “Over the coming weeks the key stakeholders will need to agree on a comprehensive package to restructure Southern Cross’ financial affairs so that a new, stable and sustainable corporate and business model can be developed and introduced to underpin the continued successful operation of Southern Cross’ homes.”
Chief executive Jamie Buchan said: “Whilst there can be no guarantee of success, the Board believes that there are reasonable prospects of a successful conclusion to these important discussions, notwithstanding the uncertainty which remains around the exact form and timing of the restructuring.”
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