Care homes firm Four Seasons reports best quarterly earnings in two years
Britain's biggest care homes group Four Seasons has reported a better-than-expected set of results in the second quarter as the company's private equity owner continues crunch talks with lenders aimed at securing the firm's future.
Four Seasons, which has 20,000 elderly residents across 450 homes, said earnings rose 25% to £13.6 million in the period, which was its best quarterly performance since 2014.
The firm, which has been stung by a cut in local authority fees and rising costs, said it has secured "fair fee rate" agreements with a large number of councils, helping boost its results. Occupancy also increased to 87.5%, which is another two-year high and compares to an average of 85.3% during 2015.
Four Seasons chairman Robbie Barr said: "In common with all care providers, we continue to feel pressure resulting from the challenging market environment and underfunding of care. However, there have been positive developments.
"Performance for the second quarter of 2016 was ahead of expectations. We have continued to build on the turnaround which began at the end of 2015 and the quarter-on-quarter decline of last year has been replaced by quarter-on-quarter improvements."
However, the firm's £525 million debt pile and annual £50 million interest payments continue to be a concern.
The group, owned by City financier Guy Hands's private equity vehicle Terra Firma, admitted in April that it does not have enough money to meet its long-term needs, adding that it is exploring its options.
Mr Barr added: "As I have said previously, the group has been engaging with key stakeholders to find a long-term solution for the group's debt and capital structure, which we aim to resolve during the course of 2016.
"Meanwhile, we continue to have sufficient financing for the medium term and we do not see this process having any effect on day-to-day care provision."
The options thought to be under consideration include refinancing the debt, a sale, or a debt-for-equity swap with lenders - where borrowings are waived in exchange for control of a company.
It is understood that a number of hedge funds have stepped up efforts over the past month to buy into the firm's debt in anticipation of a debt-for-equity swap. The company's lenders include US investment giants HCP and H/2 Capital Partners.