Southern Cross counting the cost of council care cutbacks

Britain’s biggest private care home operator, Southern Cross Healthcare, today warned that public sector spending cuts are already cutting deep into its business as local authorities strive to save money.

It warned that headline earnings for the year which ends next month are now likely to be about £53 million, some £9 million lower than the consensus figure among City analysts and well down on the £72.5 million achieved last year.

Southern Cross said it had seen fewer elderly people being admitted to it homes by local authorities in the last three months. It said average occupancy was down 3% on a year ago at 85.4%.

The business has effectively suffered a double hit with local authorities negotiating down the amount they are prepared to pay and delaying moving people into residential care homes for as long as possible to save money.

Southern Cross said it plans to lobby strongly ahead of the Government’s comprehensive spending review and the social care funding commission chaired by Andrew Dilnot. It will claim that the private sector can still deliver the best value to the taxpayer in care homes.

Shares in Southern Care, which stood at 140p when it first warned of the likely impact of public sector cuts back in March, today dropped as low as 28p before recovering slightly to stand 1p down at 30½p.