Encouraging Q1 for care homes provider

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DEBT-ridden care homes group Four Seasons which houses 20,000 elderly people across 450 establishments says its trading performance for the first quarter of 2016 was ahead of expectations.

EBITDA for the quarter of £9.2m was £3.7m higher than in the final three months of 2015 and £0.5m ahead of Q1 2015 after adjusting for the disposal of investment properties.

Initial indications from Q2 2016 suggest that EBITDA will continue to improve.

Revenue of £171m for the Cheshire-based company was £7m higher than Q1 2015, after allowing for closed and sold homes.

Occupancy across the group’s care homes at the end of March had increased to 87.5%, an increase of 2.2% compared to Q4 2015.
 
The company said the recovery is particularly encouraging because it comes at a time in the year when historically occupancy levels decrease.

Within its subsidiary The Huntercombe Group’s services, in areas of mental health and brain injury, occupancy increased to 81.7% compared to an average of 78.8% for 2015.

The operational improvements and management focus throughout 2015 have begun to improve the business cost base.  In the Group’s care homes, payroll as a percentage of turnover at 65.3% decreased by almost three percentage points compared to the previous quarter.  In The Huntercombe Group it was stable at 71.2%.

The group ended Q1 with more than £50m of cash, consistent with its cash at the preceding three quarter ends.

It continued to invest in its estate, spending £8.2m in the quarter, which was consistent with the prior year.

The company will continue to sell assets that are loss making, underperforming or not core to the business.  Six properties were sold in Q1 2016 realising more than £4.3m in proceeds.

A further closed property was sold early in Q2 for around £12m and the group is evaluating offers on a number of other sites.

Developments are continuing at two sites, a 28 new build at the Frenchay Brain Injury Rehabilitation Unit, Bristol and an eight bed extension at La Haule Care Home in Jersey.

Despite the good news, the debt-ridden company’s private equity owner is in talks with its lenders to safeguard its future.
 
Chairman Robbie Barr said: “We expect that the group’s strategic initiatives should continue to provide a positive impetus to financial performance.
 
“However future results will also be dependent on the level of public sector funding for our services.
 
“In common with other care providers we don’t yet know the full extent to which the additional costs from the National Living Wage will be funded by the flow through of the social care precept and a catch up of historical Local Authority fee rate underfunding.

“As I have previously announced, our parent company and its advisers have started the process of engaging with key stakeholders to find a long term solution for the debt and capital structure of the group, which we hope to resolve during the course of 2016.  

“In the meantime, we continue to have medium term finances for our needs and we do not see this process having any effect on the day to day care provision in our homes, hospitals and specialist care centres.”

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