Companies: SCHE   

Expansionist Southern Cross Healthcare Group seeks more acquisitions after buying 368 beds from Durham-based Portland Group for £42 million.

The fully listed company says the deal brings it not only the 368 ‘high-quality’ elderly care beds, but 126 day-care placements in seven ‘modern, purpose-built’ care homes. Southern Cross, the UK’s largest provider of care home services for the elderly, already operates 36,823 beds at 723 care homes, and chief executive officer Bill Colvin has a current target of adding 2,000 beds by acquisition.

To this end, the company, which has bought a ‘high-quality’ 54-bed care home in Worcester, has agreed terms with its banks to extend its present acquisition facility from £46 million to £106 million.

In the year to last September, Southern Cross turned a £17.4 million loss into a £3 million pre-tax profit on revenue up nearly 20 per cent at £732 million. In the first quarter of 2007/08, the company says its earnings before interest, tax, depreciation and amortisation rose 61 per cent to £18.2 million on turnover 30 per cent ahead at £263 million.

Shares in Southern Cross surged from 262p in mid-2006 to 606p last November. They have fallen back significantly since then, though they rose 6.5p this morning to 397.75p, valuing the company at £750 million.

They should fair better than some others in the sector.

Growth Company Investor subscribers have full access to all our AIM and small-cap share recommendations. To subscribe today with a half-price offer, and gain immediate access to all the recommendations, click here.