East Anglia: Care homes group Southern Cross reports half-year loss

THE chairman of troubled care homes group Southern Cross said yesterday it had a “reasonable” chance of agreeing a rescue deal, despite plunging into the red following a squeeze on revenues.

The group, which runs 750 homes across the UK, including nearly 30 in Suffolk and Essex, is locked in talks with landlords over a reduction in rents which it says it can no longer afford to pay in full.

Yesterday, it posted losses of �311million for the six months to March 31, mostly as a result of goodwill and property write-offs totalling nearly �268m.

However, the group also recorded an operating loss of �6.8m, compared with a �15m profit for last year’s first half, which it said reflected a “progressive squeeze” on its revenues.

First-half revenues fell by 3% to �464m, with some councils having stopped placing residents with Southern Cross as a result of its financial problems. Overall occupancy fell by 3% to just under 87%, with local authority admissions declining by 15% although there were more NHS referrals and private patients.

Southern Cross, which looks after 31,000 elderly or ailing patients, was recently given until the end of June to agree a deal by its banks.

The talks with landlords are based on a temporary 30% rent deferral, to come in from June, before a longer-term deal that could see some form of rent-for-shares swap.

Most Read

Chairman Christopher Fisher said yesterday: “Southern Cross is a low margin business and the progressive squeeze on its revenues over the last 12 months, while facing many upward pressures on its costs, means Southern Cross is now in a critical financial position and cannot afford to meet its future rent obligations in full.

“Reflecting this reality, it has taken a major book write off of its goodwill and certain other assets through these interim accounts.”

He 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.

“In the view of the directors, there are reasonable grounds for believing that such an outcome can be secured and it is the responsibility of all stakeholders to work to that end.”

Southern Cross has four care homes in Suffolk, in Ipswich, Bury St Edmunds, Long Melford and Nayland, and 24 in Essex, at locations including Lexden and Great Horkesley near Colchester, Clacton, Maldon, Witham, Braintree and Stansted Mountfitchet.