Newspaper article The Journal (Newcastle, England)

Care Home Firm on Brink of Collapse; Families Fear the Worst as Company Reveals Operating Loss of Pounds 6.8m

Newspaper article The Journal (Newcastle, England)

Care Home Firm on Brink of Collapse; Families Fear the Worst as Company Reveals Operating Loss of Pounds 6.8m

Article excerpt

Byline: Karen Dent

UNDER-PRESSURE care home giant Southern Cross says raising extra cash is essential if it is to weather the financial storm surrounding it.

Britain's biggest care home operator, which is based in Darlington, yesterday revealed it had plunged further into the red as it tried to thrash out a deal with its landlords to reduce its pounds 200m annual rent bill.

The future of the company has become a cause for concern for thousands of families across the region who have loved-ones resident in one of their 106 North East homes.

Councils could face being called in to rescue pensioners if Southern Cross's position becomes precarious.

Analysts have said the business, which employs 44,000 staff in 750 homes, caring for 31,000 people, is too big to fail and a compromise will be reached.

Southern Cross also trades as Ashbourne Senior Living and has around 1,780 residents in its 106 homes in Tyneside and County Durham.

The group plunged into the red in the six months to the end of March with an operating loss of pounds 6.8m compared to a pounds 15m profit a year ago.

Pre-tax losses jumped to pounds 310.9m from pounds 22.9m, most of which was down to write-offs of almost pounds 268m on past acquisitions and property.

Its revenues slumped to pounds 464.3m from pounds 480.7m as occupancy levels in its 750 homes dipped from 90% to 86.9%.

Southern Cross is known to be struggling with high rent payments and has asked its landlords for a breathing space by deferring 30% of charges for four months over the summer.

The company's bankers have given it until the end of June to agree a deal.

Chairman Christopher Fisher said: "Southern Cross is a low margin business and the progressive squeeze on its revenues over the last 12 months, while facing many upward pressures on its costs, means Southern Cross is now in a critical financial position and cannot afford to meet its future rent obligations in full."

He said it was vital all stakeholders involved in the business agree to a major restructure. …

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