Four Seasons’ solid year despite debt turmoil

TROUBLED care homes operator Four Seasons Health Care saw turnover rise 5% last year as earning remained stable.

The debt-laden group, revealed the figures at a meeting with creditors, some of whom are keen to force a sale of the business. 

The Wilmslow company increased turnover by 5% to £485.9m for the year to the end of December 2009, unaudited figures show.

EBITDA – which shows earnings before interest, taxes, depreciation, and amortization – remained fairly static at £100.8m (2008: £101m).

The group said the increase in turnover had been driven by record occupancy levels – up 1.7% on 2008 to 87.4% – and average fee rate increases.

It added that EBITDA had been maintained despite non-controllable payroll costs of £5.4m, which resulted from statutory holiday pay and regulatory requirements, and the high profile its financial restructuring had received.

Net cash flow, before financing and tax, remained strong at £60m, it said.

The group employs around 20,500 staff and is the third largest for-profit provider of elderly and specialist care services in the UK, operating 421 care homes and hospitals with around 16,700 beds.

Around 84% of group turnover (£409.1m) is accounted for by the care home division, with specialist care provider The Huntercombe Group taking 12.5%  (£60.9m), and the remainder coming from a portfolio of 83 investment properties which the group leases to third party care providers.

The group expects profitability to be maintained in 2010 and said first quarter performance had been in line with expectations.

Chief executive Pete Calveley said: “Public sector funding constraints and inflationary cost pressures mean it is going to be a tough year for care home and specialist operators.”

He pointed to ‘unprecedented’ low fee rate settlements in 2010, and the 2.2% increase in national minimum wage.

He added: “Despite this, the group believes that as a result of continuing focus on quality…it is well positioned compared to its competitors and expects to drive top line growth through continued occupancy increases.”

Four Seasons reduced its debt by more than 50% to around £790m in September last year.

Its remaining debt comprises £725m loans, plus £65m accrued interest.

The financial details were given at meeting held yesterday at the offices of legal advisers Macfarlanes in London, where the group aimed to negotiate the terms of a possible extension with the holders of £600m worth of notes that expire in 2013.

Four Seasons wants to extend its whole loan, due this September, so that it also matures in 2013.

However, to do this it needs consent from 75% of each of the Class A1 and the Class A2 note-holders.

Four Seasons’ adviser Gleacher Shadlock reported to noteholders that in light of the group’s strong financial and operational performance, an extension of the whole loan is “the simplest and most cost-effective way for the group to deal with the loan’ s maturity”.

It added that an extension would be offered on improved economic terms for the noteholders, where reinvestment risk, default risk and continued low margin pricing can be avoided.