-3x Short China Regulatory News (SCHE)

14 Feb 2008 07:00

Southern Cross Healthcare Grp PLC14 February 2008 Q1 2008 Interim Management Statement -- Care home demand drives strong Q1 at Southern Cross Healthcare -- Thursday, 14 February 2008 - Southern Cross Group PLC (LSE:SCHE) ("SouthernCross" or the "Company"), the largest provider of UK care home services, todayreports its first Interim Management Statement for the 16 week period ended 20January 2008 ("Q1"). • Q1 revenue up 29.6% to £262.6m (2007: £202.6m) • Q1 Adjusted EBITDA up 61.1% to £18.2m • Underlying occupancy rate in mature business of 90.7% (2007: 91.4%) • Bed capacity increased by 2,025 beds at 20 January 2008 • Additional banking facility of £30m agreed with Barclays Bank to finance future developments • Demand for UK care home services remains strong There will be a conference call for analysts and investors today at 9.30a.m.Please call Claire Rowell at Financial Dynamics for dial-in details on +44(0)207269 7285 or email her at claire.rowell@fd.com. Q1 Review Trading remains strong and in line with our expectations and we are pleased withthe outcome during this seasonally affected period. Revenue for Q1 increased by29.6% to £262.6m compared to the same period in the last financial year.Adjusted EBITDA increased 61.1% to £18.2m for the period. Expansion of Portfolio The number of income generating beds leased or owned has grown from 34,304, asat 30 September 2007, to 36,329 beds at 20 January 2008. The growth issummarised in the table below including new beds under construction. Number Number of available beds of Homes Acquired Developed Managed Divested Under Total ConstructionAs at 30 September 2007 712 36,215Managed for third parties 39 1,911 ______ ______Leased/owned 673 34,304 ______ ______Bondcare 39 1,911 - - - - 1,911Acquisition 1 46 - - - - 46New developments opened 1 - 68 - - - 68 ______ ______ ______ ______ ______ ______ ______Leased/owned 714 1,957 68 - - - 36,329Under construction 13 - - - - 700 700 ______ ______ ______ ______ ______ ______ ______As at 20 January 2008 727 1,957 68 - - 700 37,029 ______ ______ ______ ______ ______ ______ ______ During the period, the Group completed the assignment of the leasehold interestsand business transfer of 39 homes and 1,911 beds previously owned by Bondcare,but managed by the Group. The integration of this acquisition has now beencompleted and the portfolio is trading in line with our expectations. Subsequent to 20 January 2008, the Group opened a new-build home (72 beds) fromthe development pipeline, subject to registration. The Group now operates36,401 beds in 715 care homes. We remain confident that we will add at least an additional 2,000 beds thisfinancial year from a mix of acquisitions and new developments. During Q1 we completed the sale of £117.2m of freehold property to our portfolioof landlords at an average yield of 5.6%, retaining the operating business fornominal consideration. Development Pipeline During Q1, we opened one new development in Windsor adding 68 beds. We expect toopen a further thirteen facilities with 700 beds by the end of the currentfinancial year, adding to our bed portfolio and increasing employmentopportunities across the UK. We have agreements in place for the development ofa further 1,400 new beds to be delivered by September 2009. As a consequence ofthe expected pressure on future quality bed capacity in the UK market in futureyears, we believe that nationwide development programmes must increasesignificantly. The Group also announces today that it has agreed terms with Barclays Bank foran additional banking facility of £30m, to be used specifically to financefuture developments. The facility is for a period of two years and will allow usto fund our own developments and thereby complement our existing model wherebydevelopments are held off balance sheet and funded by our landlords. Thefacility is a key part of our plan to capture some of the economic upsideinherent in our development pipeline. We believe that this will allow greaterflexibility to accelerate the growth of our own development pipeline. Thisfacility will fund new homes currently being built in Portsmouth, Taunton,Faversham, Portishead and Copthorne. Group Management Structure Changes John Murphy will become Group Managing Director from 1 March 2008 withresponsibility for all Group acquisitions and new developments as well as theNorthern operating division and Active Care. The Southern division will reportdirectly to Bill Colvin, CEO. As previously announced, Jason Lock takes over as Group Finance Director on 1March 2008. Performance Share Plan On 17 January 2008, the Group granted 3,719,808 performance share plan awards toemployees with an exercise price of £nil. Awards were issued to our homemanagers for the first time reflecting their commitment to the growth and futuresuccess of the business. Vesting of the awards occurs after three years and isdependant upon the attainment of agreed performance targets set in relation tofinancial year ended 30 September 2010. Financial Highlights Revenue Revenue for the quarter increased by £60m to £262.6m. Excluding the impact ofacquisitions, revenue of the underlying business increased by 5.4% to £212.2m. Group average weekly fee rates increased by 5.3% to £512 per week (2007: £486per week). Excluding the impact of acquisitions completed during the second halfof the last financial year, underlying fee rates increased by 5.5% from £487 perweek to £514 per week. Private client fee reviews for 2008 have been completed with an average increaseof 5.6% from 1 February 2008. Our annual fee negotiations with Local Authoritiesare at an early stage and an update will be given with our interim report. Group occupancy during the period averaged 89.8%, reflecting the seasonallylower rates over the winter period combined with the impact of a number of newdevelopments that were recently opened. Excluding immature beds (newlydeveloped homes or refurbished homes that have been trading for less than 12months) the average underlying occupancy in the mature business was 90.7% (2007:91.4%). Consistent with previous years we expect to see a recovery from thewinter seasonal occupancy downturn over the coming months. Payroll and operating costs National minimum wage increases and the impact of additional holiday entitlementunder the Working Time Directive took effect from 1 October 2007, with anestimated increase in overall payroll costs of 4.2%. Increases in the cost of food and medical supplies have been partially offset bysavings made under a fixed contract on utility charges and by insurance premiumreductions. Adjusted EBITDA The home level EBITDAR before central costs margin for Q1 increased to 29.4%(2007: 28.2%) reflecting effective control of running costs and the operationalleverage of the business which translates revenue growth into proportionallygreater EBITDAR growth. In absolute terms, home level EBITDAR before centralcosts increased by £20.2m to £77.2m. Home level EBITDAR before central costs ofthe underlying business increased by 10% to £62.4m. Rent cover in Q1 increased to 1.51 times (2007: 1.47 times) which was in linewith expectations. Adjusted EBITDA for the period increased by £6.9m to £18.2m(2007: £11.3m). The second half of the financial year is typically characterised by higheroccupancy levels during the summer and annual fee rate increases in February andApril. Dividends On 11 February 2008, the Group paid its final dividend for the 52 weeks ended 30September 2007 amounting to £9.4m for the last financial year, being 5p perordinary share (2007: 1.1p per ordinary share). Financing The Group had net debt amounting to £65.2m as at 20 January 2008 (2007: £52.0m).Included within this total amount are acquisition facility bridging loans of£26.0m (2007: £nil) relating to acquisitions from previous periods. The facilitywas drawn for the purchase of £29.8m of freehold properties that are includedwithin non-current assets for resale. Adjusted net debt excluding bridging loanswas £39.2m (2007: £52.0m). Cash Flow The Group generated a net cash inflow from continuing operations in the quarterof £20.3m (2007: £14.2m) representing a cash conversion of adjusted EBITDA of112% (2007: 126%). Period end cash of £22.9m increased by £8.0m across Q1(2007: £(4.8)m). Outlook Demand for UK care home services remains strong. Demographic trends suggest thatmany thousands of new long term care beds are required across the UK over thenext 25 years to satisfy growing demand. We are confident that our businessmodel and prospects remain sound. Enquiries: Southern Cross Healthcare Group PLC +44(0)1325 351100Bill Colvin, Chief ExecutiveJason Lock, Group Financial Controller Financial Dynamics +44(0)20 7831 3113Deborah Scott/David Yates/Emma Thompson About Southern Cross Southern Cross is, in terms of number of beds, the largest UK provider of carehome services for the elderly and a major provider of specialist services forpeople with physical and/or learning disabilities. The Company's care homes forthe elderly operate under two distinct brands: Southern Cross Healthcare andAshbourne Senior Living. Both brands provide a range of social and personalcare services and nursing care services for elderly people with physicalfrailties and differing forms of dementia. The Company's specialist servicesoperate under the Active Care Partnerships brand and provide long-term careservices for people with physical and/or learning disabilities and for youngerpeople with complex forms of challenging behaviour. Southern Cross is focused on providing high quality care in well investedfacilities, seeking to be the home of choice in each local community in which itoperates. The Company provides care services for most of the local authoritiesin the UK which, together with the NHS, represent over circa 70% of theCompany's revenues. Its care home portfolio is largely purpose-built with ahigh percentage of single occupancy rooms and rooms with ensuite bathrooms.Occupancy levels in its core elderly segment are consistently in excess of 90%. This announcement includes statements that are, or may deemed to be, "forwardlooking statements". These forward looking statements can be identified by theuse of forward looking terminology, including the terms "believes", "estimates","plans", "projects", "anticipates", "expects", "intends", "may", "will", or "should" or, in each case, their negative or other variations or comparableterminology. These forward looking statements include matters that are nothistorical facts and include statements regarding the Company's intentions,beliefs or current expectations concerning, among other things, the Company'sresults of operations, financial condition, liquidity, prospects, growth,strategies and the outlook on the care home industry. By their nature, forwardlooking statements involve risk and uncertainty because they relate to futureevents and circumstances. This information is provided by RNS The company news service from the London Stock Exchange