Four Seasons battles rising costs as lender talks ongoing

EMBATTLED care home operator Four Seasons has disclosed that higher wage costs and a shortage of nurses squeezed profits last year as crippling debt repayments threaten to plunge it into insolvency.

The group, owned by Terra Firma, Guy Hands’s private equity firm, said revenue was down 3.8pc to £660.4m and earnings before interest, tax, depreciation and amortisation slipped 3.1pc to £53.7m last year.

Staff payroll costs were £2.9m higher in the year to December than in the year to September, which it said reflected an extra three months of increased national living wage and national minimum wage costs.

Agency spend also came in £2m higher, as Four Seasons had to hire more agency staff, particularly in its Huntercombe Group homes, to cope with the “continuing difficulties in the nurse and carer recruitment market”.

The higher wage costs came despite Four Seasons slashing the size of its care home portfolio, reducing the number of beds it holds from 17,446 to 15,229 over the course of last year.

Occupancy held up well over the year, partly because there were fewer beds to occupy overall, though Four Seasons said there had been a “very high level of winter deaths” since the end of the year, causing occupancy to slip. The group said its net debt had increased to £539m at the end of December, and it managed to generate just £26m in cash.

News that Four Seasons is battling mounting costs comes as Terra Firma continues talks over a debt-for-equity restructuring deal with US hedge fund H/2 Capital. H/2, which holds most of the care home group’s £525m bond debt, has agreed to a standstill on bond interest payments while a restructuring plan is being fleshed out.

The deadline for a deal to be agreed was pushed back earlier this month, throwing Four Seasons a lifeline, but if an agreement cannot be reached next month it could plunge the care home operator into crisis.

Terra Firma bought Four Seasons in 2012 in a £825m bet that the care sector would boom due to the UK’S ageing population, not anticipating the public funding squeeze that government cuts have brought about.