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Care home group 'hit by spending cuts'

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Government spending cuts have led to a drop in elderly residents being admitted by local authorities to the UK’s largest care home group, the company has warned.

Southern Cross Healthcare said like-for-like admissions to its elderly care business were down 7% in the three months to 31 December, after a 15% slide in local authority admissions.

The company, which houses some 37,000 residents in more than 750 homes, said: “The reduction in local authority admissions is reflective of cuts in service provision to older people in direct response to reduced central government funding.”

The decline in local authority admissions was offset by an increase in admissions from the NHS and an 18% increase in self-funded admissions but overall occupancy in the period was down to 87.6% from 90.7% a year earlier.

The decline in admissions in the first quarter represents a poor start to the financial year for Southern Cross, after it reported a more than doubling in annual losses in the year to 30 September.

The group has suffered as councils and primary care trusts, which pay for more than 70% of its customers, demanded rate reductions while rents have risen, and have sought more competitive rates from other companies.

The group said it continues to “negotiate robustly” with authorities over fees and remains concerned over the risks fee-cutting has on the level of care provided to the elderly.

The Darlington-based group, which owns the Ashbourne Senior Living brand, said adjusted underlying earnings were down to £5m from £14.4m the previous year, while revenues were down at £236.3m from £240.5m.

Shares in the firm dipped 0.04p to 20.5p after the trading update. Brokers Panmure Gordon downgraded its forecast for full year adjusted underlying earnings to £22.2m.

Panmure analyst Damian McNeela said earnings were revised as the operating environment is set to remain challenging and there was no update on the renegotiation with landlords.

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