30th Jun 2008 07:06
Southern Cross Healthcare Group PLC
Trading Update, Funding Arrangements and Board Change
30 June 2008 - The Board of Southern Cross Healthcare Group PLC ("Southern Cross", the "Group" or the "Company") announces the following update in relation to its current trading, funding arrangements and management.
Trading Update
Although the overall occupancy in the Group's homes has risen since the half year from 32,900 residents to 33,450 residents (90% of all available beds) by 27 June, this increase has not happened at the speed, nor to the absolute number of residents, originally anticipated by the Company. Central government funding to Local Authorities for social care has come through later than in previous years and the seasonal admissions increase has taken longer to occur. These factors, when combined with higher than normal attrition rates of nursing residents, have resulted in lower than anticipated occupancy levels. Slightly lower occupancy spread across a large portfolio offers limited scope to reduce costs and overall financial performance in the second half has therefore fallen behind expectations. Our fourth quarter, which commences on 1 July, is traditionally the strongest and we expect occupancy to continue to improve, with a record number of residents currently in our homes and actual fee levels now averaging in excess of £530 per resident per week. Nevertheless, trading is unlikely to improve sufficiently to meet our original forecast.
In addition, financial performance in the Group's specialist subsidiary, Active Care, has remained significantly below forecast, due to lower occupancy levels and a high fixed cost base. A new management team has recently been appointed and they are conducting a full review of the business.
As a result, the Board now expects that Adjusted EBITDA is unlikely to exceed £80 million for the financial year to 30 September 2008 (2007: £66.8million).
Funding Arrangements
As part of its overall banking arrangements, the Company has two syndicated credit facilities specifically for the purpose of funding additional acquisitions. These facilities are currently drawn as to £82 million and are secured against a portfolio of 20 recently acquired and developed homes which are held for resale and leaseback.
One of these facilities, drawn as to £46 million, was originally due for repayment on 30 June 2008. It was intended that the property assets funded by this facility would have been sold prior to this date and the loan repaid. While the Company has received indicative offers in relation to certain of these assets, and is continuing actively to pursue their sale, they remain Group assets for the time being. Accordingly, the Company, which is working closely in partnership with its banking syndicate, has been granted an extension to the repayment date and a waiver of an anticipated non-compliance with a financial covenant until 28 July 2008. This period will allow the Group to pursue the potential sale of some or all of these assets and/or suitable amendments to its overall longer term funding arrangements. A further announcement will be made in due course.
Board Change
Richard Midmer, previously Finance Director of NHP plc, is joining the Company as Finance Director. Jason Lock, the current Finance Director, will leave the Company with immediate effect.
There will be a conference call for analysts at 8:30am today. For details please call Claire Rowell at Financial Dynamics on +44 (0)207 269 7285.
For further information, please contact:
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Southern Cross Healthcare Group PLC |
Today: +44 (0)207 831 3113 |
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Ray Miles, Chairman |
Thereafter: +44 (0)1325 351100 |
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Bill Colvin, Chief Executive Officer |
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Financial Dynamics |
Tel: +44 (0)20 7831 3113 |
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David Yates |
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Emma Thompson |
About Southern Cross
Southern Cross is, in terms of number of beds, the largest UK provider of care home services for the elderly and a major provider of specialist services for people with physical and/or learning disabilities. The Company's care homes for the elderly operate under two distinct brands: Southern Cross Healthcare and Ashbourne Senior Living. Both brands provide a range of social and personal care services and nursing care services for elderly people with physical frailties and differing forms of dementia. The Company's specialist services operate under the Active Care Partnerships brand and provide long-term care services for people with physical and/or learning disabilities and for younger people with complex forms of challenging behaviour.
Southern Cross is focused on providing high quality care in well invested facilities, seeking to be the home of choice in each local community in which it operates. The Company provides care services for most of the local authorities in the UK which, together with the NHS, represent over circa 70% of the Company's revenues. Its care home portfolio is largely purpose-built with a high percentage of single occupancy rooms and rooms with ensuite bathrooms. Occupancy levels in its core elderly segment are consistently in excess of 90%.
This announcement includes statements that are, or may deemed to be, "forward looking statements". These forward looking statements can be identified by the use of forward looking terminology, including the terms "believes", "estimates", "plans", "projects", "anticipates", "expects", "intends", "may", "will", or " should" or, in each case, their negative or other variations or comparable terminology. These forward looking statements include matters that are not historical facts and include statements regarding the Company's intentions, beliefs or current expectations concerning, among other things, the Company's results of operations, financial condition, liquidity, prospects, growth, strategies and the outlook on the care home industry. By their nature, forward looking statements involve risk and uncertainty because they relate to future events and circumstances.
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