Southern Cross is a star as profits soar 24%

Published on Monday 11 August 2008 21:36

SHARES in Southern Cross Healthcare rose nearly 4.5 per cent yesterday after the firm announced a 24 per cent rise in underlying profits for the first 40 weeks of the year.

The nursing home operator, which recently snapped up a 35-bed facility in Troon, added that trading was in line with its expectations and said that the outlook for the year remains unchanged.

The company said adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) – a measure of underlying profit – for the 40 weeks to 6 July rose to 55.2 million.

Analysts have forecast that Southern Cross will report full year turnover of 900.1m and pre-tax profits of 53m – a 1,665 per cent increase on last year's full-year profits of 3m.

Shares closed yesterday up 5.5p, or 4.4 per cent, at 129.5p.

Revenue in the 40 week period to 6 July grew to 676.8m – up from 543.9m in the same period the previous year.

In May, Southern unveiled market-beating interim profits, with EBITDA rising 41 per cent to 30.8m on the back of a 28 per cent hike in revenues to 431.1m.

The group said yesterday that it had added 145 beds to its portfolio during the period – including the Belhaven Nursing Home in Troon. A further 304 beds are expected to be added by the end of the financial year.

Southern Cross, which is headquartered in Darlington in the north of England, said earlier this year it was looking to acquire more homes in Scotland, where it already has a 15 per cent market share.

Southern Cross already operates about 100 of its 700-plus nursing homes north of the Border.

The group's Scots-born chief executive, Bill Colvin, said in May that he did not have an absolute target on growth but felt that, over a five-year term, the number of beds UK-wide could be increased from 37,000 to about 50,000.

Southern Cross in June issued a profit warning and said at the time it was seeking an extension to its loan agreements.

The profit warning and loan extension arose after a deal to sell properties acquired with borrowed money fell through.

At the time it said it had received indicative offers for part of the assets, although they are currently unsold.

Southern Cross is in talks with several potential buyers of the freehold properties being sold and said it was encouraged by progress made to date.

The firm added in yesterday's statement that group operations director John Murphy was to retire after 20 years working in the care homes industry. He is to step down on 30 September.

Chairman Ray Miles said: "John has made a huge contribution in a very demanding role. Without him, Southern Cross would not have become the UK's leading provider of elderly care."