Southern Cross sees fee rates beating hopes

By Ben Deighton

LONDON (Reuters) - Care home group Southern Cross (SCHE.L) said on Monday that it expects local authorities to raise payments more than anticipated, helping to drive shares up 8 percent.

However the country's biggest care home operator also cautioned that it was exposed to potential rises in the minimum wage that could impact profit margins.

"About half of our costs are in staff payroll ... normally by now we would have expected to have guidance on minimum wage," Chief Executive Jamie Buchan told Reuters during an interview.

The company predicted local authority fee rates would rise 2.7 percent, outstripping analysts expectations but much lower than last year's increase of over 4 percent.

EBITDA sank by 7.5 percent to 28.5 million pounds in the first half, subdued by lower occupancy numbers, while revenue rose 6.9 percent to 460.8 million pounds.

"The shares are probably up a little bit on relief that they've hit their numbers ... there are no nasty surprises," said analyst Chris Glasper at Brewin Dolphin, adding that he believed shares were slightly overdone.

Last year the company failed to sell properties bought with a bank loan, and it replaced its entire management team during the year.

(Reporting by Ben Deighton, editing by Jon Loades-Carter)