Four Seasons battles on in a tough market

CARE homes operator Four Seasons saw earnings fall 2% in 2010, but continued to build its brand, acquiring around 900 extra beds during the year.

Wilmslow-based Four Seasons Health Care Limited, the UK operating arm of FSHC (Guernsey) Holdings group, employs more than 21,000 staff.

It operates 323 care homes with 16,500 beds under the Four Seasons brand and 26 specialised care facilities, with 811 beds under the Huntercombe brand.

The company increased turnover by 3.9% to £478.8m (2009: £460.7m) for the year to the end of December 2010. Gross profit stood at £16.6m (2009: £27.8m) but it made a pre-tax loss of £12.1m (2009: £928,000 profit).

A spokesperson for the company explained that the loss was primarily a function of intercompany transactions and payments within the wider group.

He said: “As an internal intra-group transaction, it pays rents on the homes to other companies within the wider group that have ownership of the properties. Only its post rental profit is included in this sub-consolidation.”

He added that Four Seasons Health Care Limited represented the homes operations, while earnings also arise from companies that hold the group’s property assets.

However, EBITDARM – which shows earnings before interest, taxes, depreciation, and amortization but then also takes off rent and management costs – were down 2% on the previous year at £126.6m (2009: £129.3m).

The company had net assets of £294.5m with a cash balance of £47.6m.

In the company accounts directors said this was a “considerable achievement against a backdrop of declining occupancy across the industry combined with reductions in fees from local authorities as a result of the government’s Comprehensive Spending Review.”

During the year Four Seasons  added 900 beds, through the acquisition of Care Principles and Eton Square Healthcare, as well as the ‘in-housing’ of six care homes and two specialised units that were previously leased to Craegmoor Ltd by the group’s investment property portfolio.

“The group is actively investigating further growth opportunities both externally and through internally funded expansion and development,” the directors’ report said.

The spokesperson told TheBusinessDesk: “We are on course to grow our beds capacity by 40% by the end of this year. Occupancy in our homes is around 88% and up on last year, against a declining trend in the sector.”

Group company FSHC (Guernsey) Holdings does not produce publicly available accounts but its spokesperson said the group had an EBITDA of around £100m in 2010 and that the group was profitable.

He added that for the first six months of 2011, earnings were £2.8m ahead of last year.

He also said that the latest valuation of the group’s properties by Knight Frank was more than £950m, despite the current depressed property market.

The Four Seasons group was close to failure several years ago after struggling to renegotiate a massive debt burden of £1.7bn.

A major refinancing in 2009 saw its main lender, Royal Bank of Scotland, take a 38% stake in the business in a deal which reduced its debts to £790m. In September 2010 a deal was agreed to extend the maturity date of its debt by two years to 2012.

In their report directors said they are considering a number of possible capital structures to ensure that funds will be in place after September 2012 to match the group’s financing requirements.

“These include various debt facilities available to the group, new equity from existing shareholders, as well as potential funding from new investors,” it said.