Four Seasons: Directors move to quell care home market fears

Association of Directors of Adult Social Services
Date: Tuesday 21st February 2012
Embargo: 00.01hrs, Wednesday 22nd February 2012

The Association of Directors of Adult Social Services has moved to reassure care home residents, the public, and politicians of their faith in the long-term security of Four Seasons by circulating a second Viability Analysis* of the care home providers place in the care market. Four Seasons took over the running of some 140 Southern Cross homes after the latter failed. In all the company runs some 455 care homes.

According to ADASS President Peter Hay: We have been concerned for some time now that ill-informed comments to the media could have been at best unsettling, and at worst unnerving, for many elderly people. The Viability Study should go a long way towards reassuring all 20,000 of them that their homes, and their futures in those homes, are safe and secure.

He acknowledged that the Analysis confirmed what was already known: that Four Seasons carries substantial debt even following the rescheduling exercise it underwent recently. However, he said, the study also shows that the companys revenues are solid; occupancy rates higher than the average for the industry, and that the debt ought to be managed in an appropriate and satisfactory manner before the end of this year.

He went on: Four Seasons have been fully transparent with our analysts. They have made all relevant figures available and indeed, have posted them on their website for all to read. Throughout the exercise they could not have been more helpful, open and informative about all the main factors that impinge on operators in this market.

The company stands as a beacon of transparency, lighting the way that I wish and hope all others will follow as our sector begins the long task of solving issues concerning the proper scrutiny and regulation of company finances. These companies are relied upon by thousands upon thousands of residents both state-funded and self-funded - for peace and tranquillity as they grow older.

It is vitally important for everyone concerned to be reassured that companies providing care are financially stable. And that where instability might be on the horizons, local authorities have the means to spot the signs early, and be able to act promptly to make sure the residents involved are as safe and secure as they ought to be.


For further information contact:
Peter Hay, ADASS President, 0121 393 2992
Drew Clode, ADASS Policy/Press Adviser, 020 8348 5023/07976 837755


Executive Summary

Four Seasons has expanded rapidly from a small base, and in the mid to late 2000s took on a huge amount of debt as a result of private equity, and leveraged buyout deals. These were common at the time, but along with sale and lease back deals, they are now being questioned after the credit crunch and falling property values.

The latest published accounts for Four Seasons show an improvement in the overall financial position since the debt maturity extension in 2010. The revised level of debt (£775m) is still a risk, with a refinancing deadline of September 2012, but the risk is much reduced with a return to profitability after the 2009 financial restructuring and positive equity in the balance sheet.

The company recognises the risk of reducing fees in the sector due to the Coalition Governments public sector spending reduction plans. As well as a mature efficiency/cost reduction programme, the company is strategically moving to quality provision of high acuity care, which has an optimal profitability and steadier demand increase than more traditional residential care provision.

The Group accounts show a more positive viability after the 2010 debt maturity extension, with the caveat that the effect of the Care Principles purchase and the absorption of the ex Southern Cross homes have yet to be factored into a full set of published accounts. The effect of these is significant, with operational capacity growing 40% as a result.

Occupancy remains high at over 87% in the Care Home division, against current market trends. However this is an average occupancy rate and some regions are lower than this with the lowest occupancy region showing 76.5% at the time of writing this report.

The reduction of the companys debt from £1.5bn to £775m has undoubtedly lowered the financial risk and bolstered profitability and viability; however, it is still a key risk and is identified as such in the accounts.

The company believes that the risk related to the debt is not expected to impact on the ongoing viability of the individual care homes.

Four Seasons now has a clear strategic position in order to cope with the reduction in fees from the public sector, and the risk rating could now be defined as medium rather than high.

Read it all

* Four Seasons Viability Analysis, Barry Scarr and Paul Johnston, Impact Change Solutions ltd.

Editorial Notes

The Association of Directors of Adult Social Services (ADASS) represents directors of adult social services in local authorities in England. DASSs have statutory responsibilities for the social care of older people and adults with disabilities, while over 50 per cent also run social housing departments. ADASS members might also share a number of responsibilities for the provision and/or commissioning of housing, leisure, library, culture and arts services within their councils.