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Four Seasons Health Care reviews finances amid debt fears Four Seasons Health Care reviews finances amid debt fears
(35 minutes later)
Fours Seasons Health Care, Britain’s biggest care home operator, has launched a financial review after second-quarter losses surged to £26m, raising fresh fears over the indebted group’s viability.Fours Seasons Health Care, Britain’s biggest care home operator, has launched a financial review after second-quarter losses surged to £26m, raising fresh fears over the indebted group’s viability.
Owned by Terra Firma, the buyout firm controlled by Guernsey-based financier Guy Hands, Four Seasons is paying more than £50m a year in interest on debts of £500m. But its earnings before interest, tax and other charges were just £51.5m in the last 12 months, according to the latest accounts.Owned by Terra Firma, the buyout firm controlled by Guernsey-based financier Guy Hands, Four Seasons is paying more than £50m a year in interest on debts of £500m. But its earnings before interest, tax and other charges were just £51.5m in the last 12 months, according to the latest accounts.
Pointing to the introduction next year of an “unfunded” compulsory “national living wage”, Four Seasons chief financial officer Ben Taberner has told bondholders that the group is reviewing its finances, with “all options” considered. Terra Firma and Four Seasons declined to comment.Pointing to the introduction next year of an “unfunded” compulsory “national living wage”, Four Seasons chief financial officer Ben Taberner has told bondholders that the group is reviewing its finances, with “all options” considered. Terra Firma and Four Seasons declined to comment.
Four Seasons, which employs 30,000 staff to look after 20,000 residents and patients, was among a group of five providers that wrote to George Osborne this month over the chancellor’s national living wage. They warned the policy introduced in the July budget could lead to the collapse of a major care provider within two years if there is no additional funding from the government.Four Seasons, which employs 30,000 staff to look after 20,000 residents and patients, was among a group of five providers that wrote to George Osborne this month over the chancellor’s national living wage. They warned the policy introduced in the July budget could lead to the collapse of a major care provider within two years if there is no additional funding from the government.
Four Seasons said its profits will take a further £10m hit from the compulsory £7.20-an-hour minimum pay for the over 25s, which comes into effect in April next year and should rise to £9 an hour in 2020. Four Seasons said its profits will take a further £10m hit from the compulsory £7.20-an-hour minimum pay for the over-25s, which comes into effect in April next year and should rise to £9 an hour in 2020.
Related: National living wage threatens UK care sector, George Osborne toldRelated: National living wage threatens UK care sector, George Osborne told
Terra Firma bought Four Seasons in 2012 for £825m, its largest investment since a disastrous multibillion-pound bet on the music major EMI. The deal took place shortly after the collapse of previous care homes market leader Southern Cross in 2011. Terra Firma bought Four Seasons in 2012 for £825m, its largest investment since a disastrous multibillion-pound bet on the music major EMI. The deal took place shortly after the collapse of previous care homes market-leader Southern Cross in 2011.
Taberner blamed the losses on the need to supplement staff with costly agency nurses and a fall in occupancy rates after a high number of deaths over the winter. Losses rose to £26m in the three months to the end of June, from £17m in the same period last year. Winter deaths meant occupancy rates fell from nearly 87% last year to 85% in the spring.Taberner blamed the losses on the need to supplement staff with costly agency nurses and a fall in occupancy rates after a high number of deaths over the winter. Losses rose to £26m in the three months to the end of June, from £17m in the same period last year. Winter deaths meant occupancy rates fell from nearly 87% last year to 85% in the spring.
Underlying earnings – before debt interest payments, tax and other charges – increased from £9.7m in the first quarter of 2015 to £11.1m in the second quarter. However, they are still down from last year’s second quarter total of £17.5m.Underlying earnings – before debt interest payments, tax and other charges – increased from £9.7m in the first quarter of 2015 to £11.1m in the second quarter. However, they are still down from last year’s second quarter total of £17.5m.
The group, which runs 450 care homes as well as 50 specialist care units in hospitals, set out plans to conserve its cash. While maintenance budgets are protected, refurbishments and extensions are being delayed and loss-making homes are being sold.The group, which runs 450 care homes as well as 50 specialist care units in hospitals, set out plans to conserve its cash. While maintenance budgets are protected, refurbishments and extensions are being delayed and loss-making homes are being sold.
Taberner said the group was confident these measures would enable it to “maintain liquidity”. But he added that in the context of the business performance and the national living wage, the group would conduct a review of its financing over the coming months to enhance flexibility, and as part of this the board would consider all options.Taberner said the group was confident these measures would enable it to “maintain liquidity”. But he added that in the context of the business performance and the national living wage, the group would conduct a review of its financing over the coming months to enhance flexibility, and as part of this the board would consider all options.
Four Seasons has growing numbers of private customers but is still heavily reliant on local authorities, whose spending on social care for the elderly has fallen by 17% in real terms over the last five years, according to charity the King’s Fund.Four Seasons has growing numbers of private customers but is still heavily reliant on local authorities, whose spending on social care for the elderly has fallen by 17% in real terms over the last five years, according to charity the King’s Fund.
Unions have backed the industry’s call for emergency funds from government, with the GMB national officer, Justin Bowden, saying: “The crisis in care is not the result of the rates of pay staff receive. It is the product of chronic underfunding by successive governments and society’s failure to face up to its responsibility to care for those who paid tax and national insurance all their lives, in their times of need.”Unions have backed the industry’s call for emergency funds from government, with the GMB national officer, Justin Bowden, saying: “The crisis in care is not the result of the rates of pay staff receive. It is the product of chronic underfunding by successive governments and society’s failure to face up to its responsibility to care for those who paid tax and national insurance all their lives, in their times of need.”
A government spokesman has said the overall costs of providing social care will be considered as part of the November spending review this year.A government spokesman has said the overall costs of providing social care will be considered as part of the November spending review this year.