Living wage and care home pressures see BUPA profits slump 39%

By The Press Association3rd March 2016News EnglandCare Homes, News England, Workforce

Private healthcare firm Bupa has seen its profits tumble after being hit by almost GBP235 million of writedowns due to the introduction of the national living wage, pressure on care home costs and new legislation in Spain.

The firm said its pre-tax profit slumped by 39% to GBP374.3 million in the 12 months to the end of December compared with a year ago as it was impacted by “challenging economic conditions and political and regulatory changes in a number of our markets”.

Bupa covers 32 million customers in 190 countries and runs hospitals, care homes and health insurance schemes.

The business said profits fell because it had to write down GBP181.9 million due to the impact of the national living wage in the UK in April.

Chancellor George Osborne said in his July Budget that the UK’s hourly minimum wage from April next year will lift to GBP7.20 for over-25s from its current level of GBP6.50, and to at least GBP9 an hour by 2020.

Bupa said its hit in the UK was also caused by “significant margin pressures” in the care home market as it negotiates new contracts with local authorities who are under tough funding constraints.

It said: “Although we are actively renegotiating fees to ensure that they cover the true costs of care, we cannot at this stage be confident we will mitigate the impact in its entirety.”

Bupa runs 280 homes in the UK, which care for around 40,000 people.

In the UK the firm said customer numbers jumped 28% to 5.1 million, due to a growth of health insurance customers, while underlying profit lifted by 4% to GBP182.6 million.

The healthcare business, which was formed in 1947, also said that changes to its public-private partnerships in Spain would result in a GBP52 million non-cash adjustment as the profits from these contracts are reassessed.

The group said its underlying profit before tax fell 2% to GBP582.5 million.

It added that in 2016 it expected that “market conditions will remain challenging” in the UK, Australia and Spain.

Chief executive Stuart Fletcher said: “We made steady progress this year, despite challenging economic conditions and political and regulatory changes in a number of our markets.”