Profits at Cross increase by 37%

Dec 11 2007 by Andrew Mernin, The Journal

THE UK’s biggest care home operator Southern Cross reported a 37% surge in profits and said it expects to add up to 3,000 new beds to its portfolio next year.

Darlington-based Southern Cross Healthcare Group saw its earnings before interest, tax, depreciation and amortisation jump to £66.8m in the year to September 30, up from £48.8m in 2006.

The firm boosted available beds by 18.6% to 34,304 while revenue soared from £610.9m in 2006 to £731.9m this year.

And the company is gearing up for another year of growth in 2008 through a mixture of acquisitions and developments.

Chairman Bill Colvin, who will replace Philip Scott as chief executive next month, said: “It depends how successful we are with acquisitions next year but we should be adding between 2,000 and 3,000 new beds. We will be making our best efforts to buy a number of target companies we have in our sights and we have offers outstanding on three small regional deals.

“Next year promises to be to be another year of significant growth for the Company as our results will benefit from the full year impact of the acquisitions we completed in 2007.”

Southern Cross, which operates 8% of Britain’s care home market, has had a busy 2007 on the acquisition front.

In September the business added 2,100 beds to its portfolio through an agreement with Bondcare Group for the management of 39 care homes and the acquisition of a 106-bed home in Harrogate.

Meanwhile, Mr Colvin yesterday urged the Government to review its spending process in the care sector in light of the increasing pressures of an ageing population. He said, according to independent estimates, the UK’s care home sector will need 14,000 more beds a year for the next 20 years.

He said: “The sector requires a funding overhaul and needs investment from Government and co-operation with the independent sector to ensure a sustainable, cost-effective solution is reached for our growing elderly population. As a clear market leader we would be very keen to be involved in this review process.”

The care home industry in the UK is believed by some analysts to be worth £12bn with around 450,000 beds.