Shares in Southern Cross Healthcare, Britain’s largest care home operator, soared by nearly 10 per cent after an increase in fees-per bed drove interim revenues up 28 per cent.

The company said it has negotiated average weekly fee increases of 5 per cent for 85 per cent of its beds so far this year, above a rise of between 4 per cent and 4.5 per cent expected by analysts. The number of beds in Southern Cross care homes rose by 14 per cent ot 37,084 beds in the first half.

Turnover rose from £336.3 million in the first six months of last year to £431.2 million.

Southern Cross reported a pre-tax loss of £8.6 million due to a £25.4 million non-cash accounting provision made to meet IFRS standards relating to future minimum property rental increases. However, the company increased its interim dividend by 50 per cent to 3.75p, sending its shares up 9.32 per cent, or 35.5p, to 397p.

Bill Colvin, chief executive of Southern Cross, told Times Online that the increases in fees were necessary to pass on rising wage, food and energy costs incurred by the group.

The company derives 70 per cent of its revenues from the provision of care services on behalf of UK local authorities. However, Mr Colvin said local authorities in England needed to pay significantly more going forward.

Mr Colvin said Southern Cross was interested in buying Craegmoor which is Britain’s fifth-largest provider: "We are looking at it, that's all we can say." Craegmoor was put up for sale by the private equity arm of Legal & General last month.

Commenting on the results, Mr Colvin said: "Fee increases have been agreed ahead of our expectations, landlords continue to show interest in financing our properties and costs remain under control."

While Mr Colvin said there were many opportunities for increasing market share, he warned: "The credit crunch is a long protracted affair that could slow our growth a little."

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