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Southern Cross announces £44m operating loss

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The country’s largest care-home provider Southern Cross has reported an operating loss of £44.1m for the period ending 30 September, and warned councils there can be “no justification” for reducing fees.

Its operating loss last year was £12.7m, and the company is currently in preliminary talks with potential buyers – as well as lobbying the government and the Dilnot Commission over longer-term funding issues.

Some 80% of residents at the operator’s  752 homes across the UK are funded by local authorities or the NHS, and chief executive Jamie Buchan said forthcoming fee negotiations would be critical.

“Given the cost pressures facing our industry, including the reasonable expectations of the people who work within it and the increasing acuity of residents placed in its care, it is very clear that no local authority can justify reductions in fee levels at this time,” he said.

Southern Cross’ preliminary results warned that the business faced “continued pressure” on occupancy levels and on margin “as a direct consequence of local authority budget restrictions and the lack of current definition from central government on long term funding for the care of older people”.

It said that from April to October this year the group had achieved an average weekly fee rate of £558, up 2.2% on 2009.

However fees in England increased just 1% on average, compared with 2% in Scotland and Northern Ireland and 1.6% in Wales.

Self-funding residents faced fees increases of £3.7%.

Mr Buchan said that while the past 12 months had been “difficult”, the company had been successful in reducing borrowings and had made major progress  in its business re-engineering programme.

The group’s interim statement said it “remained deeply concerned” that local authorities would react to the 26% budget cuts in the comprehensive spending review by “depressing fees to increasingly unsustainable levels”.

It said it had lobbied the government ahead of October’s review, highlighting concerns about inefficient commissioning, and the “true cost” of alternatives to residential care.

Group chairman Ray Miles said Southern Cross had made “an early initial submission” to the Prof Andrew Dilnot’s Commission on the Funding of Care and Support.

“In particular, we believe the commission should play a crucial role in encouraging local authorities, the NHS and care providers such as ourselves to work together in developing the services required to meet the future needs of an ageing population,” he said.

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