-3x Short China Discussion Threads

[bridge2far] 13/4/2011 23:13

They do need to look at previous strategy re sell and rent back ...what happened to all the cash etc .... but whats past is past and they need now to focus and to ensure they have the right team to move forward both for the sound basis financially and more importantly to ensure they provide the right care for their customers.

[mavverick] 13/4/2011 22:29

bridge2far lol and Mr Saper has made even worse vitriol!...'The company wants to blame everyone apart from itself.'

[bridge2far] 13/4/2011 18:58

I guess Mr Buchan wont be consulting with LCS then !!

[mavverick] 13/4/2011 16:26

comment here re barclays/Lloyds

Paul Saper, chief executive of LCS International, the healthcare consultants, said that the cash-strapped group had not "invested properly in some of its homes, with doors falling off the hinges at some properties". He added that, a year ago, about 40 of the company's homes faced embargos from the regulator and that several had been the target of enforcement orders linked to issues such as hygiene and standards of safety.
Southern Cross warned last month that it might breach banking covenants and that its rent bill was "unsustainable". The shares have fallen by 98% since early 2008. Its market value is less than £12m; before the recession it was worth £1.1bn.
Southern Cross has drafted in accountants KPMG to advise on talks with its landlords and lenders, Barclays and Lloyds Banking Group, which are owed £25m. The covenants that could be breached are based on the company's costs as a percentage of earnings before interest and tax.

[mavverick] 13/4/2011 16:12

Mr Buchan is understood to be holding talks with landlords this week. He is seeking to move around a third of Southern Cross's properties to monthly rents, end upward-only reviews, and allow the company to exit under-performing sites. The company wants an agreement in place by the end of June. (telegraph)

this confirms the wish to exit some care homes...the question is what proportion...i think it will be lots

[selkirk69] 12/4/2011 10:52

Mav
I can't and don't disagree with your comments, good debate.

Also lurking in the background and yet to re emerge.
A short while back a link was posted here taking you to a case where a care home took the LA (Wales) to court over the fees they were paying, the care home won the case easily with the full backing of the courts and a rap for the LA, the LA had to basically recalculate they way they came to their figures and pay up. That should help.

[mavverick] 12/4/2011 10:13

all conjecture and imho!

[mavverick] 12/4/2011 10:13

On a council by council basis some councils may well renegotiate fee levels to maintain an SC presence, but not until SC, virtually, deliver theit ultimatum.

[mavverick] 12/4/2011 10:11

selkirk

fee levels across the uk vary massively, but costs much less so...so there is a driver to close under occupied in low fee level areas where self payers are hard to find...which is scaring councils a bit.

Many parts of SC are very profitable.

The business is retrievable as a much smaller entity if they get out of locked in onerous 25 year rent contracts, asap, without too much financial penalty.

[typo56] 12/4/2011 10:11

In fact there's a fairly high departure rate from care homes and occupancy levels are not guaranteed. It's the self funders you need in order to achieve decent profitability, and SCHE will struggle to attract them at the moment.

[selkirk69] 12/4/2011 09:48

As all business has, the difference I'm talking about is not knowing from day to day whose going to walk in and spend money, they're already in there.

[typo56] 12/4/2011 09:37

SC also have guaranteed costs, every day of every week of every year!

[selkirk69] 12/4/2011 09:18

Mav
The majority are under performing let's be honest but there are many fewer that you could class as not viable, close these and more resource can be directed to the remaining, that's where I was coming from.
We'll see but I remain optimistic of a good outcome all round, afterall why shouldn't it be the case.

I also agree with Dealy, SC have guaranteed income every day of every week of every year.

[typo56] 12/4/2011 09:16

If they survive I don't think it will just be the cost base that gets restructured, it will also be the share base! A deeply discounted rescue rights issue perhaps?

[dealy] 12/4/2011 09:05

One should not lose sight of the fact that long term this is a very good place to be invested. Short term it's a nightmare but if they restructure the cost base the company could generate £100m p.a. in Ebtida on a steady state basis (it almost did that in 2008).

[mavverick] 12/4/2011 09:05

selkirk, i think the 'closing some of the bad performing homes' could be circa a quarter to half of the portfolio being divested but not with all closing imho

[stevespi] 12/4/2011 08:55

You need to be optimistic sometimes. The sun is shining and all is good. Apart from the rest of my portfolio which is shocking. So would be nice to see this end on a high today.

[selkirk69] 12/4/2011 08:52

Moving on small volume so this one is keeping everyone on their toes, I've wondered for ages just how many shares are remaining in the market.

Also don't forget that there have been a couple of inst continuing to add and one of the LL's bought a 9-10% chunk a few months back, how significant might that be in the these talks.

One way to increase occupancy is close some of the bad performing homes and move the occupants, however that would not be in the best interest of the residents imo but if needs must SC will no doubt be aware of this option.

The NHS scenario is yet to materialise too.

[mavverick] 12/4/2011 08:51

will be surprised if this finishes up today but admire your optimism!

[stevespi] 12/4/2011 08:48

onwards and upwards to 15p today.

[mavverick] 12/4/2011 08:45

agreed Selkirk ...imo fairly rapid downsizing is likely the only viable option

[mavverick] 12/4/2011 08:42

agreed Edmond this is major surgery essential...not just a tablet

'The full year profit outlook has come under further pressure, principally due to the additional disruption caused by the restructuring announcement'

the above is far from good and continues the deteriorating OCCUPANCY spiral...which means the surgery required becomes even more radical!

i'm not wholly convinced by the blaming the restructuring announcement, but clearly this does not help.

[selkirk69] 12/4/2011 08:40

Absolutely, not just about rent but imo it is the first of many hurdles (probably 20ft walls in this case) that need to be jumped and cleared before moving to the next.

Every company monitors expenditure and restructures according to changes to their environment so nothing new there. In fact SC must be some way into it already Horizons was addressing this.

[typo56] 12/4/2011 08:37

Another JJB? That's good? Surely they are a serial destroyer of value? The market values JJB at a 30% discount to the current placing!

[edmondj] 12/4/2011 08:32

Depends what are the implications *for shareholders* of this though:

"the Company now faces a period of intense financial restructuring"