Annual Report and Accounts 2006
Southern Cross Healthcare Group PLC Annual Report and Accounts 2006 1 Southern Cross Healthcare Group
2 Group at a Glance
4 Chairman’s Statement
6 Chief Executive’s Statement
9 Business Review
9 Elderly Care
11 Specialist Care
13 Corporate, social responsibility
16 Financial Review
22 Directors and Officers
24 Directors’ Report
26 Corporate Governance
30 Remuneration Report
34 Independent Auditors’ Report to the Members of 
Southern Cross Healthcare Group PLC (Group)
36 Consolidated Income Statement – IFRS
37 Consolidated Balance Sheet – IFRS
38 Consolidated Cash Flow Statement – IFRS
38 Consolidated Statement of Changes in Shareholders’
Equity/(Deficit) – IFRS
39 Notes to the IFRS Financial Information
81 Independent Auditors’ Report to the Members of 
Southern Cross Healthcare Group PLC (Company)
82 Company Balance Sheet
83 Statement of Accounting Policies
84 Notes to the Financial Statements
88 Five-year Record
89 Shareholder Information
Contents
February
Acquisition of the 
Ultima portfolio
of 39 homes
August
MBO supported
by West Private
Equity and Healthcare
Investments
October
Acquisition of 
the Eastwood 
portfolio of 
nine specialist 
homes
April
Acquisition of 
Intercare portfolio 
of five specialist
homes
April
Acquisition of 
Highfield portfolio
of 186 care homes
September
Secondary MBO
supported by 
Blackstone
Capital Partners
August
Acquisition of 
Crown Healthcare 
Care Group of 
five homes
November
Acquisition 
of five 
Rozelle 
care homes
November
Acquisition of 
Ashbourne 
portfolio of
193 homes
March
Acquisition of the 
Trinity portfolio 
of 26 homes
2001
2002
2003
2004
2005
2006
August
Acquisition 
of four 
United
care homes
July 
Initial
Public 
Offering
Southern Cross – Major Developments
Note: A summary of the growth of the underlying operating business within the current Southern Cross Group. The ultimate holding company of the Group has changed 
at different stages over the period.
  Southern Cross Healthcare is the largest provider of care homes 
for the elderly in the UK, and a major provider of specialist services
for people with physical and/or learning disabilities, operating 580
homes with 28,917 beds at 1 October 2006.
Following the listing of the Company’s shares on the London Stock
Exchange in July 2006, the Company entered the FTSE 250 index 
in September 2006. 
Southern Cross Healthcare Group
Southern Cross Healthcare Group PLC   Annual Report and Accounts 2006 1 Group at a Glance
2 Southern Cross Healthcare Group PLC   Annual Report and Accounts 2006
Operating Highlights Statutory Financial Highlights
Available Beds 
Year End
Fee Income
£m
Home EBITDAR before 
central costs
£m
28,299
17,000
7,718 7,665
5,966
Oct 06 Oct 05 Mar 04 Mar 03 Mar 02
Year End
610.9
349.5
157.8
146.8
103.6
Oct 06 Oct 05 Mar 04 Mar 03 Mar 02
Year End
385.6
Underlying
189.6
111.8
55.5
47.5
33.4
Oct 06 Oct 05 Mar 04 Mar 03 Mar 02
Year End
124.3
Underlying
Note: A summary of financial information of the underlying operating business within the current Southern Cross Group is provided in the tables above. The ultimate holding company of the
Group has changed at different stages over the period. Financial information for year ended 2 October 2005 has been calculated on an annualised basis. Adjusted EBITDA is defined as earnings
before interest, tax, depreciation and amortisation as well as exceptional charges and charges for future minimum rental increases. Adjusted earnings per share is defined as earnings before
exceptional items, charges for future minimum rental increases, and the taxation impact thereof, divided by the weighted average numbers of shares.  
Ashbourne Healthcare, acquired in
November 2005, successfully integrated,
adding 10,000 beds to Group capacity.
Other acquisitions added a further 
950 beds with another 428 beds added
through the Group’s development
programme.
Available beds increased to 28,917
beds at year end (2005 – 17,000 beds).
Average occupancy of 91.0% 
(2005 – 91.6%). Underlying occupancy
of 91.6% (2005 – 91.6%).
Average weekly fee up 8.0% 
to £478 (2005 – £443).
Efficient cost control management,
post-acquisition and integration of new
beds, has maintained operating
margins.
IPO successfully completed in July
2006, raising £175.0m. Proceeds of
issue were used to refinance the
business.
Revenue of £610.9m 
(2005: 28 weeks – £188.2m).
Operating income of £1.6m (2005: 
28 weeks – £7.5m) after a charge 
of £30.7m (2005: 28 weeks – £4.0m) 
for future minimum lease charges
under IAS 17.
Basic loss per share for the year 
of (9.4)p (2005 – (0.1)p).
Other Financial Highlights
Underlying revenues up 10.0% to
£385.6m (2005: annualised – £349.5m).
Home EBITDAR before central 
costs of £189.6m (2005: 28 weeks –
£60.2m). 
Underlying Home EBITDAR before
central costs, up 11.0% to £124.3m
(2005: annualised – £111.8m).
Adjusted EBITDA of £48.8m 
(2005: 28 weeks – £15.7m).
Adjusted earnings per share 
of 10.0p.
Home EBITDAR, before central costs,
margin of 31.0% (2005: 28 weeks –
32.0%). The comparative period
represents the most profitable part 
of the calendar year.
Net cash inflow from operations 
of £50.6m (2005: 28 weeks – £15.0m)
representing cash conversion of
Adjusted EBITDA of 103.7% (2005 –
95.6%)
First dividend of 1.1p per share,
representing pro rata dividend for
period since IP
Note: Underlying results exclude the effect of acquisitions. 2005 (annualised) numbers are calculated using the audited numbers for the 28 weeks ended 2 October 2005, dividing by 28 weeks
and multiplying by 52 weeks. Local Authority 81%
Private 19%
Local Authority 60%
Private 40%
Local Authority 99%
Private 1%
Southern Cross Healthcare Group PLC   Annual Report and Accounts 2006 3
Elderly Care
Note: Resident analysis at 1 October 2006.
Southern Cross Resident Analysis Ashbourne Resident Analysis Active Resident Split
1 As at 1 October 2006 including managed portfolio
24,027
Number of beds
1
466
Number of homes
1
£481.6m
Fee income 
£142.8m
Home EBITDAR before central costs
£455
Revenue
Bed per week
3,974
Number of beds
1
72
Number of homes
1
£94.0m
Fee income 
£38.2m
Home EBITDAR before central costs
£524
Revenue
Bed per week
916
Number of beds
1
42
Number of homes
1
£35.3m
Fee income 
£8.6m
Home EBITDAR before central costs
£873
Revenue
Bed per week
Specialist Care Chairman’s Statement
Introduction
It is with great pleasure that I welcome all new Southern Cross
Healthcare (“Southern Cross”) shareholders following the Initial
Public Offering (“IPO”) of shares earlier this year. The last 
12 months have seen the Company grow significantly to a position
where it is now the UK’s leading provider of care home services 
for the elderly and also a major provider of specialist services for
people with physical and/or learning-disabilities.
As the market leader, and primary consolidator in the UK care 
home services sector, Southern Cross has benefited from the
growing demand for high-quality, value-for-money, long-term care
services across the UK. The success of our strategy of acquiring 
and developing modern, purpose-built care homes in areas of high
demand is reflected in the financial results for the 52 weeks to 
1 October 2006.
Results and Dividends 
Turnover for the 52 weeks ended 1 October 2006 increased by 
75%, on an annualised basis, to £610.9m, primarily as a result of
the acquisition of Ashbourne Healthcare completed in November
2005. Average fees per occupied bed also increased during the year
by 8.0% and a number of individual new homes were acquired and
developed from the Company’s pipeline of growth opportunities.
Adjusted earnings before interest, tax, depreciation, exceptional
charges and charges for future minimum rental increases (“Adjusted
EBITDA”) was £48.8m representing an increase of 67.1% compared
to the prior year on an annualised basis. The loss before taxation
was £17.4m, reflecting the impact of the IFRS adjustment for
charges for future minimum rental increases of £30.7m, exceptional
charges relating to the IPO which amounted to £3.1m, and the
financing costs of the capital structure pre-IPO.
Basic loss per ordinary share was 9.4p after a UK Corporation 
tax credit of £5.3m. Adjusted earnings per share before charges 
for future minimum rental increases and exceptional charges and
the taxation impact thereof were 10.0p.
Had the Company been listed for the whole of the 52 weeks ended
1 October 2006, the Board considers that it would have recommended
a dividend of 4.8p per ordinary share. Taking into account the 
82 days for which the Company was listed prior to the financial year
end, the Board is recommending a pro rata dividend of 1.1p per
ordinary share. Going forward the Company expects to grow
dividends from this level to reflect the growth prospects and cashflow
generation of the business, while maintaining an appropriate level
of dividend cover.
4 Southern Cross Healthcare Group PLC   Annual Report and Accounts 2006
It is with great pleasure that I welcome all new
Southern Cross Healthcare shareholders following
the Initial Public Offering of shares earlier this year.
William Colvin Chairman Management and Staff
The Board, on behalf of all shareholders, would like to thank all 
the dedicated staff working in our homes and also those supporting
the homes, as well as the management team who oversee the
entire national operation. Their hard work and commitment have
enabled us to build Southern Cross to become market leader 
in the sector.
Outlook
Care home services are playing an increasingly important role in
the overall healthcare provision across the UK. The combination 
of an ageing population and the reduction in overall bed numbers
within the NHS and the long-term care sector have resulted in the
growing demand for quality care services.
Looking ahead to the next 12 months, we believe Southern Cross is 
well placed to achieve further progress in both revenue growth and
profitability. We have secured £300m of landlord funds to enable 
us to continue our acquisition plans and we have a significantly
expanded development pipeline which will add a further 1,000 beds
to our portfolio by December 2007. At the same time, we shall
continue our drive for growth in fee and occupancy rates, as well 
as maintaining tight cost control.
The Board remains confident that there will be a growing demand
for our services and remains firmly committed to ensuring that all
our homes provide the best possible levels of care for all of our
valued clients.
William Colvin
Chairman
Southern Cross Healthcare Group PLC   Annual Report and Accounts 2006 5 Chief Executive’s Statement
Strategy Overview
I am delighted to confirm another excellent year for the Southern
Cross Group. 
During a year in which we have successfully listed the Company’s
shares on the London Stock Exchange, we have continued to grow
our market presence, by adding volume to both of our principal
business streams and expanding our development pipeline. Our
funding strategy and business model ensures that we can continue
to increase shareholder returns without recourse to additional
shareholder equity, as the last 12 months’ activity has demonstrated.
Strategically, the Group remains committed to the long-term care
market, targeting further growth in both core and specialist divisions.
The demand for long-term care services is anticipated to increase
substantially over the next 25 years. On the basis that the
percentage of elderly people currently living in residential 
care homes in each of the age groups 65 years to 74 years, 
75 years to 84 years and over 85 remains unchanged, then the
application of those percentages to forecast census figures from
2006 to 2031 suggests a need for an average of 14,000 new beds
per annum just to satisfy emerging demand. 
Given the ongoing contraction of supply in the marketplace – as 
a consequence of small providers selling their properties to realise
the land value which is often greater than the care home business
value, occupancy levels over the next few years are likely to reach
capacity in excess of the current level of 91%, a figure which
includes a portfolio of immature development homes.
We believe that the typical dependency levels of persons living 
in care homes today are such that 24-hour care is required to 
meet the range of social and nursing care needs presented. 
Whilst supportive of Government’s strategy of ensuring elderly
people have options for home care if possible, we remain
convinced that with a reducing pool of taxpayers due to an ageing
population, the residential care model continues to offer “best
economic value” for 24-hour care services. At current average
weekly fee rates, of £465 for Elderly Care this equates to a price 
of just over £2.75 per hour.
We will therefore continue to pursue our strategy of increasing
capacity via acquisition and organic growth programmes in
anticipation of the growing demand for our services. 
As the UK’s largest provider, we still have only a 6% share of a 
£12 billion revenue market, and consequently have resourced our
development and acquisition teams to ensure that we continue 
to add capacity and increase our market penetration over the next
five years.
Group Branding
With two business streams (elderly care and specialist services), 
we have redefined our marketing strategy this year to create an
additional brand, targeted specifically at clients who are funding
their own placement. Rather like the hotel sector, we now offer –
via our Ashbourne Senior Living brand – facilities with higher
accommodation standards and those additional services often
requested by self-funding residents.
6 Southern Cross Healthcare Group PLC   Annual Report and Accounts 2006
During another excellent year, we have continued
to consolidate the long-term care sector to become
the UK market leader, as well as successfully listing
our business on the London Stock Exchange.
Philip Scott Chief Executive The Southern Cross brand will continue to predominantly cater for
residents who are funded by local authorities. Those placements
are generally procured on an agreed service specification linked 
to client dependency and price. Active Care Partnerships is our
specialist services brand providing younger people with as much
support as required to maximise their ability to lead active and
independent lives. 
Acquisition Activity
During the year we acquired the Ashbourne Group adding a further
193 leasehold care homes and over 10,000 beds to group capacity.
Integration of that portfolio is now complete and I am pleased to
report that occupancy has increased in that portfolio by 2% since
acquisition in November 2005.
In addition to the Ashbourne purchase, we added a total of 950
beds via small bolt on transactions.
This includes, post-flotation, the “United A” portfolio that added 
270 beds to the Group. All beds, except for the “United A” portfolio,
were funded utilising landlord facilities in line with our current
funding strategy. We will shortly exchange contracts for the on-sale
of the “United A” freeholds to one of our landlord funds.
Development Pipeline
Our development pipeline has expanded significantly and we
currently have in excess of 2,000 beds in various stages of planning
and construction. A further 1,000 beds will be delivered and open
for business by the end of December 2007. Particular areas of focus
continue to be Northern Ireland (NI) and Scotland (SC) where
demographic pressure is increasing demand for elderly care services.
During the year we have opened a 64-bedded facility in Enniskillen
(NI), 90 beds in Wishaw and 85 beds in Renfrew (both SC). We
have also added an 80-bedded unit in York and a further 66 beds
by way of extensions to existing facilities.
In addition we have added two specialist units in Scotland under
the Active Care Partnerships brand. 
Disposal Programme
The Group continues to review the long-term sustainability of
particular homes acquired as part of material acquisitions. In the
last 12 months we have assigned the leasehold interest for three
homes that did not meet our trading performance expectations and
were unlikely to do so in the long term. As part of the Ashbourne
acquisition, we acquired a number of unencumbered freeholds. 
Two of these have been sold and a further five will be marketed
for sale given the age and limitations of the properties. We are
likely to achieve a small profit on the disposal of these businesses.
Sale and Leaseback Financing
The Group has funded its growth using sale and leaseback financing
since incorporation in 1996. That funding mechanism remains at
the core of our financing strategy and I am delighted to report that
we have secured £300m of landlord funds available for a two-year
period at a fixed initial yield, to enable us to continue our
acquisition plan unabated. These funds give us real visibility over
forward rents and over the last year we have as a consequence of
our covenant strength, continued to access new funding sources
with relatively low yield expectations.
Southern Cross Healthcare Group PLC   Annual Report and Accounts 2006 7
% millions
0
5
10
15
20
25
30
2071
2066
2061
2056
2051
2046
2041
2036
2031
2026
2021
2016
2011
2006
2005
2004
2003
2002
2001
1991
1981
1971
1961
1951
1931
1901
0
1
2
3
4
5
6
7
8
% 85+ of elderly sector 65-74 75-84 85+
n.a.
2.7%
(0.4%)
2.0%)
0.0%
1.5%
0.3%
0.4%
85+ 75-84 65-74
CAGR
All
1986-2006
2006-2026
UK Elderly Population 1901-2071 Chief Executive’s Statement
Market Outlook 
With the anticipated demographic pressures compounded by the
continued contraction in supply and the ongoing burden of legislation
(such as the Care Standards Act and National Minimum Wage)
pushing up operating costs, we expect that fee rates will continue to
rise in excess of inflation. That is essential to reduce the number of
beds leaving the market, to encourage new development to meet
the anticipated emerging demand and to provide full cost recovery 
in respect of increased legislation. 
Given the quality of our modern, well-invested, purpose-built portfolio
and the fact that we are now compliant with most of the legislative
requirements that required material capital expenditure, we expect
our operating costs to remain relatively stable. Home payroll costs
account for the largest proportion of our operating cost base. However,
we have a recognition agreement with the GMB union and 
therefore continue to have real visibility over likely cost increases, 
as negotiation and agreement of pay awards precede fee reviews. 
In addition, we continue to recruit personnel directly from overseas
and as a consequence our reliance on agency personnel has
continued to reduce during the year.
Acquisition and development opportunities continue to present
themselves and we expect to participate in the ongoing
consolidation of the sector. We are on course to exceed our annual
target of adding 1,200 beds in 2007 and therefore our efforts are
now focused on adding to the 2008 development pipeline. 
Philip Scott
Chief Executive
8 Southern Cross Healthcare Group PLC   Annual Report and Accounts 2006
Total 580 Homes 28,917 Beds
Scotland 78 Homes 4,604 Beds
Northern Ireland 21 Homes 977 Beds
North and Yorkshire 192 Homes 9,627 Beds
Midlands 101 Homes 4,698 Beds
Wales and SW England 68 Homes 2,861 Beds
East Anglia 58 Homes 2,761 Beds
South East England 62 Homes 3,389 Beds
Note: Available beds including managed portfolio as at 1 October 2006.
Geographic Presence Southern Cross Healthcare Group PLC   Annual Report and Accounts 2006 9
Business Review
The Group’s core interest remains the provision of care services for
elderly people, complemented by a small but expanding specialist
care business. Over the last 12 months both business streams have
increased capacity as acquisition and development activity has
progressed.
Our Elderly Care business has recently been branded under two
service offerings; Southern Cross Healthcare and Ashbourne Senior
Living. The specialist business is branded under the Active Care
Partnerships identity and trades under a separate divisional
operational team. 
Southern Cross Healthcare 
The largest of the branded portfolios with 466 homes and 24,027
beds, Southern Cross provides services for clients predominantly
funded by local authority payers. The facilities are in modern
purpose built homes, with the majority of beds being in single
ensuite rooms.
The Southern Cross branded homes are located throughout the
United Kingdom, albeit with greater penetration in Scotland, and
the North of England. The average home size is 55 beds and
typically of a two storey construction. 
Over the last year we have sustained good levels of occupancy
whilst experiencing the usual seasonality, that being a marginal
increase in occupancy post-April of each year as local authorities
enter a new budget year. That gain is in part offset by a slight
reduction in occupancy over winter months as mortality rates
increase and commissioners of service have extended periods 
of vacation, thus slowing referrals.
Homes operating under the Southern Cross brand seek to cater
predominantly for high dependency residents with specific nursing
or social care needs. Average length of stay for this client group 
is 11 months. 
Average occupancy levels of 93% in our mature homes are in line
with last year’s performance. Group average occupancy remains
stable at 91%.
Quality service provision remains our key focus,
whilst progressing our branded service offerings 
to our clients.
John Murphy Group Operations Director
Elderly Care Business Review
10 Southern Cross Healthcare Group PLC   Annual Report and Accounts 2006
Ashbourne Senior Living
Currently 72 homes with 3,974 beds have been rebranded under
the Ashbourne Senior Living brand. Recognising that a number of
our clients self fund their care placement and often want additional
services and perhaps a higher standard of accommodation, homes
operating under this brand will in time be able to meet the
demand for such.
Presently, any client (except in Scotland) with a net worth in 
excess of £21,000 has to fully fund his or her own care placement.
Given the push towards home ownership in the 1970s and 1980s
combined with such a low qualifying threshold and an increasing
demand for long-term care services, this will inevitably lead to
more and more clients having to fund their own care. On that basis,
rather like the hotel sector, service users will price differentiate 
on the basis of accommodation and service standards.
Occupancy performance is in line with Group average of 91% and
average fee rates are some 15% higher than those paid by local
authorities. Southern Cross Healthcare Group PLC   Annual Report and Accounts 2006 11
Active Care Partnerships
With 42 homes and 916 beds Active Care Partnerships provides
social and healthcare support services for clients with a range 
of learning disabilities. All homes, whilst registered with the
Commission for Social Care Inspection, tend to be much smaller
than those homes within Elderly Care portfolios and discreetly
located within residential communities. The care model is much
more socially focused with an emphasis on promoting and
developing a range of skills to live as independently as possible.
Over the last year we have added two developments to the Active
portfolio, Moorpark Place and the Green Door Clinic, both located 
in Scotland. These two units are modern, purpose built in design,
providing the much needed space required by the respective client
groups.
Average fees are £873 per week, reflecting the fact that pricing is
negotiated on a case by case basis after a careful assessment of
need and costing of resource package required to meet that need.  
Personnel
Manpower availability and recruitment to the care sector has
improved significantly over the last two years, given access to
European labour markets. We continue to maintain an active 
foreign recruitment programme and we currently employ in 
excess of 2,000 staff from Eastern Europe and South-East Asia.
Those personnel are deployed across the UK during an initial 
two-year contract period and generally a high number of those
staff re-sign for a second period. 
Our staff teams have worked diligently over the last year to 
ensure that our reputation as a provider of high-quality services 
is maintained. We continue to recognise that hard work and
commitment via our care awards initiative, which is designed to
reward staff members who have consistently provided a very high
level of service in their chosen profession. We are fortunate to have
many such staff and I would like to thank all of our employees for
their commitment to our resident group and loyalty to the Company. 
Within the operational management structure, we continue to
maintain a growth overhead, anticipating further acquisition and
development activity. That overhead ensures adequate planning 
is afforded to the integration of completed acquisitions, a process
that commences immediately after transaction completion. 
The integration process is a tried and tested model and a number 
of senior managers are allocated to effect the integration in the
shortest possible timeframe.
Specialist Care
We will continue to develop our Active Care brand, mainly through
organic development as commissioners continue to request modern,
purpose-built, fully-equipped units that promote independent living.
We make every effort to increase 
the comfort level of every resident,
assisting them with a variety of
essential activities and are constantly
looking at ways to improve their
experience with us. Business Review
12 Southern Cross Healthcare Group PLC   Annual Report and Accounts 2006
Service Standards
During the year we have again revised our policies and procedures
to ensure that “best practice guidelines” as issued by the sector
regulator and the Department of Health are fully implemented into
our day-to-day service delivery. We continue to robustly monitor 
our service on a weekly/monthly basis to ensure consistency in 
the quality of service provided. Results are collated centrally 
and circulated to Executive Directors for review and comment. 
A summary of those results is included within monthly Board
Papers for all Board Directors to consider. 
We have over the last 12 months appointed two new management
positions – a Regulation and Compliance Manager and a Group
Health and Safety Manager – to ensure we have the in house
expertise to provide constant audit and review. These new
managers provide Board Directors with data to support best
practice initiatives for both disciplines.  
Regulatory Environment
Given our national geographic presence, the Group’s services are
monitored by a number of regulatory bodies. Care homes in
England have up to three regulatory inspections a year, two of
which are usually unannounced. The Commission for Social Care
Inspection (CSCI) is the regulator and their teams of inspectors are
located throughout England. We now benefit from having a Provide
Relationship Manager, within CSCI, who acts as a central single
point of contact to discuss issues. We welcome this initiative 
and are working closely with the regulator to ensure consistent
interpretation of the care standards across all of our homes.
In Scotland the regulator is the Scottish Care Commission that
operates in a similar manner to its English counterpart. In Wales,
the agency is Care Standards Inspectorate Wales (CSIW) and in
Northern Ireland it is Registration and Inspection Units (RIUs). 
All of these regulatory agencies operate under the Care Standards
Act legislation and the associated Care Home Regulations. That
legislation gives the regulator very material powers including
enforcement action which may be implemented against rogue
providers.
The results of the regulatory inspections are public documents and
therefore act as a continual benchmark of our service.
As a result of these inspections and our own rigorous internal
compliance review procedures, we are confident that our services
continue to meet regulatory standards and that our policies and
procedures fully comply with care home regulations.
From April 2007 we are likely to see the regulators introduction 
of a star rating system akin to that of the hotel sector. We remain
hopeful that this initiative will in time lead to price differentiation
based on the quality of services provided. Should that be the case,
clearly those providers gaining a higher star award can expect to
achieve higher fee rates. Given the quality of our portfolio and high
standard of service provided we anticipate our homes being star
rated at the top end of the awards range.  
John Murphy
Group Operations Director
We have a wide range of vehicles 
and equipment which assist in the
day-to-day lives of our residents, 
and maintain frequent senior
management meetings to discuss
potential improvements in 
our services. Southern Cross Healthcare Group PLC   Annual Report and Accounts 2006 13
Community
Southern Cross provides financial support to our Care Centres so
they can consolidate their position in the local community for the
benefit of service users, staff and the local community.
Each of our individual Care Centres has its own ideas for community
integration based on its knowledge of the local community. Our
service users and staff work together to raise funds from raffles,
fetes and coffee mornings all for good causes. This money has
gone to improve the lives of our service users and a variety of 
local causes championed by our Care Centres across the United
Kingdom. Our sponsorship of local primary school football teams
has been particularly successful. Our approach is designed to
encourage confidence building, competitiveness and healthy 
living amongst young children.
During 2006, our people supported a number of charities including
Alzheimer's Society, Children in Need, Macmillan Cancer Support,
Royal National Institute for the Blind, Multiple Sclerosis Society and
Action on Elder Abuse, which was the featured charity for Southern
Cross in 2006. Our people raised £16,770 from various local events
around the country. This was increased with a £50,000 donation
from Southern Cross.
Our community involvement is focused on local initiatives where
we can really make a difference to children and their schools and
where we can bring communities together across the generations.  
Workplace
Southern Cross is committed to the principle of equal opportunity
and opposes all forms of unfair or unlawful discrimination. We
intend to provide an environment that gives equality to all,
irrespective of race, gender, disability, religion or sexual orientation.
Southern Cross has formed a partnership with the Royal College 
of Nursing in a special project aimed at internationally-recruited
nurses. The objective of the project is to enhance the opportunities
and potential for development for such staff. Through local colleges
we have been able to help our staff develop their skills and to train
nurse mentors to pass these skills on to their colleagues.
At the end of October 2006 10.0% of our workforce were 
non-UK nationals and 82.5% of our workforce were female.
By understanding and valuing diversity, we are better placed to
meet the needs of our service users. Equal opportunities for all 
are embedded in all of our principles and practices.
Harassment, bullying or any form of intimidation of our employees,
clients, customers or suppliers is not acceptable at Southern Cross.
We are committed to providing a safe, secure and attractive
environment for both our service users and our staff.
Corporate, Social Responsibility
Our local focus helps us to deliver a quality service to our residents,
support our staff and interact with the local community.
As the UK’s leading provider of elderly
care services, we are supportive of a
number of charities, including Action
on Elder Abuse. Business Review
14 Southern Cross Healthcare Group PLC   Annual Report and Accounts 2006
Health and Safety
The Chief Executive has overall responsibility for the health, safety
and welfare of staff and service users. The Group Operations
Director has responsibility at Board-level, for the Statement of
Intent to implement the Health and Safety Policy.
The Senior Operations Team (SET), comprising the Group Operations
Director, Managing Directors and other departmental heads, meets
regularly and reviews the Health and Safety Strategy and Standards
for the Group as set by the Central Health and Safety Committee.
This group reviews the organisation’s health and safety performance
regularly, ensuring that effective monitoring and reporting
procedures are in place to meet all relevant legislation and
standards.
Environmental Issues
On a number of levels, we are working with our suppliers to
develop a “greener” approach to the way we run our business. To
that end, we have put in place a number of initiatives to decrease
our energy consumption. For example, we have installed smart
metering and on line energy reporting for the vast majority of our
Care Centres with a commitment to have all of our sites included
by December 2006. This system allows each site to be monitored
and adjusted where necessary in our efforts to establish an
efficient, structured energy management programme. In addition,
by the end of 2007 it is our plan to have one third of all of our
sites on “green energy”. As a matter of practice, when our Care
Centres require replacement lighting bulbs they are automatically.
sent low energy versions.
We have also made significant efforts to improve the amount 
of recycling that we undertake as a company. We comply with
regulations on the disposal of electrical and other materials. We 
are also making progress in how we dispose of our clinical waste,
managing the transition from reliance on landfill disposal to
incineration. We have recently appointed a national supplier for the
collection of our trade waste and establishing a programme for 
the responsible disposal and recycling of cardboard. The variety of
initiatives we have put in place reflects the scope of our business.
From recyclable products for our copiers and printers, to recycling
waste cooking oil from our kitchens, we believe in doing what we
can to protect the environment.
We will continue to make efforts to reduce the impact of the Group
on the environment and to integrate environmental issues into our
existing business practices.
Marketplace
Southern Cross is committed to providing a quality service to our
service users and their families. We are committed to extending the
level of accessibility to our services and communications regardless
of an individual’s physical characteristics.
Our service users’ needs are central to the services we provide. 
We actively look for their feedback and conduct regular surveys 
to ensure we incorporate their views when defining our service.
Our suppliers are regarded as partners. Without our partners, we
would be unable to provide the quality of service that we do. They
are a vital part of our service delivery.
We know that the best care comes
from a continuous commitment to
training and creating a motivated and
knowledgeable team. Understanding
and valuing diversity within our
people puts us in a much better
position to understand the needs 
of our clients. Southern Cross Healthcare Group PLC   Annual Report and Accounts 2006 15
Professional Ethics
Our philosophy of care is to provide the highest standard of person
specific care through a range of specialist services. Our core values 
of privacy, dignity, independence, choice, rights and fulfilment are
central to this philosophy.
The objective of the Southern Cross Practice, Ethics, Education and
Research Review Group is to ensure that all research and
procedures operate under and maintain the highest standards of
ethics. The protection of the rights of our service users remain
paramount.
Employment Policy
We are committed to recruiting, retaining and motivating suitably
qualified employees at all levels within the Group to ensure we
meet our business objectives. Our employment policies and
procedures are designed to support these objectives.
To that end, we have put together a competitive remuneration
package which is reviewed regularly.
Training and professional development are also part of this 
package and all employees are encouraged to undertake suitable
and appropriate training relevant to their individual needs and roles.
All managers are expected to undertake a programme of continued
professional development which includes the Registered Managers
Award. In addition, all staff undergo a rigorous training programme
to ensure that they are able to comply with all regulatory
requirements. 
Regular staff reviews and feedback are incorporated into our
employment policies as standard.
Our aim is to provide a supportive environment that recognises
diversity and encourages people to reach their full potential. 
Employees’ Corporate Responsibility
Our staff works hard to deliver a top-quality service and we
recognise this contribution each year with the Southern Cross Care
Awards. Awards are presented at both a regional and national level
to individuals that demonstrate excellence in a number of categories.
Their colleagues, service users and service users’ families nominate
individuals for awards.
Southern Cross provides a number of services to our people to help
them in their daily lives. The Company benefits scheme provides a
range of special offers and discounts available to our people. This
includes special discounts on holidays, health club membership, car
purchase and hire schemes, cinema visits and insurance services.
Our employee assistance line is available to all of our staff and 
their families to offer them advice on stress related issues 24 hours
a day.
As part of the local community, our staff organises and takes part in
local fund raising opportunities generating funds for both local and
national charities. Southern Cross actively encourages this activity. Business Review
16 Southern Cross Healthcare Group PLC   Annual Report and Accounts 2006
Overview
Acquisition and Development Activity
This has been another year of significant growth and development
for the Group. November 2005 saw the acquisition of the Ashbourne
portfolio, increasing the size of the Group by 193 homes and over
10,000 beds. Outside of that major acquisition, the Group has
continued to grow through its development programme (428 new
beds opened) and through bolt-on acquisitions (950 new beds via
eight transactions). It is the Group’s intention to continue with this
two-pronged strategy and the completion of dedicated landlord
funds totalling £300.0m will enable us to facilitate this growth.
Initial Public Offering (“IPO”)
On 12 July 2006, the shares of the Company were admitted to the
Official List of the London Stock Exchange. The primary share offer
raised £175.0m which was used to refinance debt, redeeming
shareholder deep discounted bonds and loan notes and reducing
bank indebtedness. Approximately £20.0m of the proceeds were
used to meet the costs of flotation.
In September 2006, the Company entered the FTSE 250 list. The
IPO has strengthened our financial position, simplified our capital
structure and given the Group a solid base to further consolidate
the UK care home sector.
Integration and Restructuring
During the year we have completed the integration of the
operations and back-office support systems of Highfield (acquired
in late March 2005) and Ashbourne (referred to above). These
two acquisitions added some 380 care homes and 18,000 beds 
to the Group. This has resulted in significant synergy savings for
procurement at home level but in particular we have reduced 
the level of central costs required to manage the enlarged Group.
These savings are only partly reflected in the current financial
year. A full year impact will be recorded in 2007.
International Financial Reporting Standards (IFRS)
As a listed group, the financial statements have been prepared 
in accordance with applicable IFRS and are effective at 1 October
2006. The primary effects of the transition to IFRS on the Group
were in relation to rental charges, in respect of operating leases,
in accordance with IAS 17. The application of IAS 17 meant that
rental charges included in the income statement increased 
by £30.7m and £4.0m in the periods to 1 October 2006 and 
2 October 2005, respectively, representing an incremental 
charge for future minimum rental increases.
Trading Activities
During the 52 weeks ended 1 October 2006, we have experienced
strong business growth through acquisitions combined with
improvements in revenue and earnings of the underlying
business. Both factors contributed to the Group’s strong operating
performance, which is summarised in the table overleaf:
The Group recorded significant growth during 
the year, through acquisition activity and organic
development. Fee income increased by 75%, on an
annualised basis, to a total for the year of £610.9m.
Graham Sizer Group Finance Director
Financial Review
  Southern Cross Healthcare Group PLC   Annual Report and Accounts 2006 17
52 weeks 28 weeks Underlying
2006 2005 Growth
2
growth
3
£’m £’m % %
Revenue 610.9 188.2 75 10
Operating income 1.6 7.5 (89) –
Adjusted EBITDA
1
48.8 15.7 67 11
Loss before taxation (17.4) (2.4) (287) –
Average number of 
available beds 27,008 16,575 63 3
Cash generated from 
operating activities 50.6 15.0 – –
1 Adjusted EBITDA before exceptional central costs and charge for future minimum
rental increases.
2 Growth and underlying growth has been calculated based upon the annualised
results of 2005.
3 Underlying growth excludes the impact of acquisitions.
The impact of acquisitions upon the Group’s revenue and Home
EBITDA before central costs in the year amounted to £225.3m and
£65.3m respectively.
The Group results, set out in the consolidated income statement 
on page 36, show a decrease of £5.9m of operating income, 
but an increase in earnings before interest, tax, depreciation and
amortisation of goodwill (“EBITDA”) from £10.6m to £12.9m.
Excluding the charge for future minimum rental increases under
IAS 17 and exceptional central costs, Adjusted EBITDA increased by
67.0% on an annualised basis, from £15.7m to £48.8m. The loss
for the year before taxation amounted to £17.4m (2005 (28
weeks) – £2.4m).
Earnings per Share
Basic loss per share for the year was (9.4)p (2005 – (0.1)p).
Earnings per share for the year before future minimum rental
increase charges, and exceptional costs and the taxation impact
thereof, was 10.0p (2005 – 0.0p). This adjusted measure excludes
non-recurring and non-cash-based charges, however it does not
reflect a full-year impact of the new capital structure of the
Company.
Segmental Results
The Group has two distinct segments within its operations, 
namely Elderly Care and Specialist. Both segments noted
significant growth in the year primarily through acquisitions.
Elderly Care
Elderly Care recorded an increase in average available beds 
from 15,874 beds to 26,109 beds and revenue on an annualised
basis from £321.1m to £575.6m. The growth in this segment was
predominantly as a result of acquisition activity with associated
average available beds and revenue of 10,606 beds and £218.8m
respectively. The average weekly fee for Elderly Care increased by
£41.3 per week (9.7%) to £465.1 per week. The operating margin
of Elderly Care decreased slightly from 31.8% to 31.4% for the
period ended 1 October 2006. However, the decrease is
predominantly due to the comparative period being the most
profitable part of a calender year. Total Home EBITDAR before
central costs on an annualised basis increased from £102.3m 
to £181.0m. Business Review
18 Southern Cross Healthcare Group PLC   Annual Report and Accounts 2006
Specialist Care
The Specialist segment also recorded an increase in average available
beds, increasing from 701 beds to 899 beds. Revenue for the
segment increased from £28.4m on an annualised basis to £35.3m
for the 52 weeks ended 1 October 2006. The average weekly fee 
for this segment was in line with expectations at £872.6. Acquisition
activity within this sector accounted for increased average available
beds and revenue of 206 beds and £6.5m respectively. Total Home
EBITDAR before central costs on an annualised basis decreased from
£9.5m to £8.6m. Further details of acquisitions during the year are
shown in note 29.
Rent
The rent charge for the year amounted to £146.8m (2005: 28 weeks
– £40.5m). Excluding the non-cash charge under IAS17 for leases
with fixed or minimum annual increases, the rental charge for the
year was £116.1m giving a rent cover of Home EBITDAR before
central costs: cash rent of 1.63 times (2005 – 1.65 times).
Central Costs
Total central costs for the year amounted to £30.8m, an increase
of £12.8m on an annualised basis compared to central costs 
of £9.7m for the 28-week period ended 2 October 2005. The
increase is a reflection of increased central overhead as a result 
of the acquisition of the Ashbourne Group. Also included within
total central costs for the current year are exceptional costs 
of £5.2m. Excluding these non-recurring charges, central costs
amounted to £25.6m.
This adjusted central cost charge is still in excess of current
recorded levels on an annualised basis, as it does not incorporate
a full year’s cost savings as a result of synergy and restructuring,
relating to the acquisitions completed throughout the year. The
central support function of the Group has been relocated to a new
purpose-built head office in Darlington. The transition including the
integration of Ashbourne’s central support function was completed
before the year end.
Exceptional Central Costs
The Group incurred significant, non-recurring, exceptional costs
during the year, primarily as a result of restructuring following 
the acquisition of Ashbourne (£1.8m) and costs incurred in relation
to the Listing of the Company’s shares on the London Stock
Exchange (£3.1m). A full analysis of exceptional costs is disclosed
in note 4 on page 49.
Finance Income and Costs
Total net financing costs for the year amounted to £19.0m and
predominantly related to charges based on the financing structure
prior to flotation. Of the total charge, £7.0m related to interest
payable upon deep discount bonds and £5.1m related to bank
term loans in issue prior to refinancing during July 2006. The
charge for amortisation of loan arrangement fees on bank facilities
repaid in the period amounted to £3.2m.
The underlying central cost overhead has been
reduced significantly compared to the current year,
through the completion of restructuring. A full year
impact of lower central costs will be recorded in 2007. Southern Cross Healthcare Group PLC   Annual Report and Accounts 2006 19
Taxation
The tax credit on earnings before taxation of £5.3m (2005 – £1.0m
charge) represents a headline rate of 30.5% (2005 – 41.6%).
However, this headline rate is significantly affected by the tax
effect, amounting to £8.1m credit of translation adjustments to
IFRS. Such effects predominantly relate to the future tax benefit of
the additional-rental charge under IAS17. This amounts to £9.2m.
The pre-exceptional, pre-goodwill amortisation tax charge under
UK GAAP of £4.2m (2005: 28 weeks – £3.1m) represents an
effective tax rate of 25.6% (2005: 28 weeks – 55.7%) of earnings
before goodwill amortisation and exceptional costs. Excluding the
tax impact of prior year credits, predominantly a credit of £0.8m
arising from enhanced capital allowance claims, the effective rate
is 30.5%. The cause of the variance of the effective rate to the
standard rate of 30.0% is the disallowance of non-qualifying
depreciation.
Going forward, the Group expects the pre-exceptional, pre-
goodwill UK GAAP effective tax rate to remain below the standard
rate of tax.
Dividends
Total dividends paid during the year amount to Nil (2005 – Nil).
The Group has proposed a dividend of £2.1m, being 1.1p per
ordinary share, to be paid on 9 February 2007, to those
Shareholders on the register of members at close of business 
on 12 January 2007.
Non-current Assets
Non-current assets increased by £126.8m over the year to 
£310.1m, predominantly as a result of goodwill increasing to 
£196.0m through acquisitions. Property, plant and equipment
increased by £57.4m primarily as a consequence of acquisitions over
the year. However, the balance at 1 October 2006 included £27.9m
of freehold property which will be disposed after the year end. 
Financing
The Group renegotiated its borrowing facilities as part of the
refinancing process. It currently has a £60.0m term loan facility,
£50.0m development facility and £30.0m revolving credit facility
plus a £8.3m mortgage facility. The Group used the revolving
credit facility to issue £15.1m of guarantees to landlords and loan
note holders. At 1 October 2006, the total unutilised portion of
these facilities amounted to £48.5m.
Group net debt decreased during the year by £91.0m to £67.6m,
as a consequence of refinancing through the Listing process when
proceeds from the primary issue of shares plus new bank funding
were used to repay deep discount bonds, plus accrued interest
amounting to £107.1m, existing bank loans amounting 
to £121.3m and £1.7m of management loan notes.
Group net debt decreased by £91m over the year
following refinancing at IPO. AS full year impact of
reduced finance costs will be recorded in 2007. Business Review
20 Southern Cross Healthcare Group PLC   Annual Report and Accounts 2006
Group borrowings at 1 October 2006 consist of £60.0m of bank term
loans, £18.1m of bank development loans and £6.5m of mortgage
debt. The development loan is expected to be repaid shortly after the
year end through the sale of freehold properties to which it relates. 
In addition to bank borrowings the Group had £6.7m of loan notes
and £0.4m of finance lease borrowings in issue at the year end.
In July 2006 the Group entered into a three-year interest rate
swap for £30.0m, at a fixed rate of 5.07%. Under the Group’s
treasury policy, this position will be reviewed on a regular basis.
Equity
As part of its public offering process, the Group completed a bonus
issue of 240 shares: one share followed by a primary issue of 77.8m
shares. The process raised £175.0m. Issued share capital increased
to £1.9m with a share premium account of £173.1m. In addition,
£11.6m of legal and professional costs directly attributable to 
the primary issue of shares have been offset against the share
premium account.
Cash Flow
52 weeks 28 weeks
ended ended
1 October 1 October
2006 2005
£’m £’m
Cash flows from operating activities 50.6 15.0
Interest and taxation (28.7) (7.0)
Investing activities (72.0) 30.4
Financing activities 67.8 (34.2)
Net increase in cash 17.7 4.2
Net cash inflow from operations was £50.6m (2005 – £15.0m),
representing a cash conversion ratio compared to Adjusted 
EBITDA of 103.7% (2005 – 95.6%).
Net cash flow from investing activities amounted to £72.0m
outflow (2005 (28 weeks) – £30.4m inflow). Gross investing
activities amounted to £123.9m, being £94.8m investment on
acquisition of subsidiaries, £14.2m representing development
capital, predominantly freeholds, and £14.9m representing
maintenance capital. Excluding the acquisition of Ashbourne, the
Group invested £55.4m on new subsidiaries. Disposal proceeds
relating to the disposal of subsidiary undertakings and freehold
properties amounted to £51.9m (2005 (28 weeks) – £97.3m). 
This frequency of acquisition and disposal of subsidiary entities 
is consistent with our sale and leaseback funding model.
The business continues to benefit from stable and
predictable cash flows with a cash conversion ratio
of Adjusted EBITDA of 104%. The net cash outflow from interest charges amounted to £27.1m
(2005: 28 weeks – £5.7m). The increase was primarily due to
settlement of £11.0m of accrued interest upon the redemption of
shareholder deep discount bonds and £6.5m upon loan notes. The
remainder relates to increased bank borrowings for the Ashbourne
acquisition (see below).
As described earlier, the capital structure has now been changed
and future interest payments will be significantly reduced as a
result.
The net cash flow from financing for the year amounted to
£67.8m inflow (2005: 28 weeks – £34.2m outflow). In November
2005, the Group initially increased bank borrowings by £40.7m
and issued deep discount bonds amounting to £32.3m as part of
the Ashbourne acquisition. Existing loan notes within Ashbourne
amounting to £18.0m were repaid as part of the acquisition. 
As part of the Listing upon the London Stock Exchange, £175.0m
was raised through a primary issue of shares and £67.2m through
new bank loan finance which was used to redeem £96.1m of
deep discount bonds in issue plus associated accrued interest 
of £11.0m. Existing bank loan finance amounting to £121.3m 
and management loan notes of £1.7m were also repaid.
The increase in cash and cash equivalents during the year was
£17.7m (2005: 28 weeks – £4.2m) resulting in a year end 
balance of £21.9m (2005 – £4.2m).
Conclusion
2006 has been another strong year for Southern Cross Healthcare.
The integration of acquisitions is complete and we have seen
strong underlying growth and cash generation in our existing
businesses. Refinancing as part of the Listing on the London 
Stock Exchange has strengthened our balance sheet and we have
new banking facilities in place. The Group is well positioned for
future growth.
Graham Sizer
Group Finance Director
Southern Cross Healthcare Group PLC   Annual Report and Accounts 2006 21
With the integration of acquisitions now complete,
combined with a strong balance sheet through
refinancing during the year, the Group is well
positioned for continued future growth. Committees
Audit Committee:
Christopher Fisher (Chairman)
Ray Miles
Baroness Morgan of Huyton
Nominations Committee:
William Colvin (Chairman)
Ray Miles
Baroness Morgan of Huyton
Remuneration Committee:
Ray Miles (Chairman)
Joseph Baratta
Christopher Fisher 
22 Southern Cross Healthcare Group PLC   Annual Report and Accounts 2006
William Colvin, Non-Executive Director and Chairman
William Colvin was appointed Non-Executive Chairman of the
Company in March 2005, when the Group acquired the Highfield
Group. He joined NHP PLC in 2000 and became chief executive
later that year. Prior to 2000 he was group finance director of
British Borneo Oil & Gas PLC for seven years. Mr Colvin currently
holds non-executive directorship positions at, Scottish Care Limited,
Energy XXI PLC and Sondex PLC. Mr Colvin is a business and
economics graduate from Edinburgh University and he qualified 
as a Scottish Chartered Accountant in 1982 at Ernst and Young.
Philip Scott, Chief Executive
Philip Scott was appointed Chief Executive Officer in February
2002. Mr Scott has more than 15 years’ experience in the
healthcare industry having previously worked in senior
management roles for a number of corporate healthcare
providers, including Crestacare PLC and Tamaris PLC, before joining
the Group. He is a trained nurse holding both RGN and RMN
qualifications and holds a Diploma in Professional Nursing
Development from the University of Ulster. 
Graham Sizer, Group Finance Director
Graham Sizer joined the Company as Group Finance Director 
in December 2002. Having previously worked at Grant Thornton,
Mr Sizer has ten years’ experience within the care homes sector, 
as group financial controller for Tamaris PLC as well as group
financial director for Idun Health Care Limited. Mr Sizer graduated
from Southampton University with a degree in accounting and
statistics and qualified as a chartered accountant in 1995 at
Morgan, Brown & Spofforth before joining Grant Thornton.
John Murphy, Group Operations Director
John Murphy joined the Company as Group Operations Director 
in March 2005. Mr Murphy has more than 19 years’ experience 
in operational management in the care sector and his experience
includes working as the group operations director for Tamaris PLC,
managing director of Caledonian Nursing Homes, chief executive
of Idun Health Care Limited, chief executive of Highfield Care and
a member of the board of NHP PLC.
Directors and Officers Company Secretary
William McLeish, was appointed as Company Secretary on 
25 May 2006 and is a chartered accountant. Before joining the
Group, William was the company secretary of Rozelle Healthcare
Limited, an operator of care homes which was acquired by the
Group in November 2005.
From left:
William Colvin
Philip Scott
Graham Sizer
John Murphy
Ray Miles
Joseph Baratta
Baroness Morgan of Huyton
Christopher Fisher
Southern Cross Healthcare Group PLC   Annual Report and Accounts 2006 23
Ray Miles, Senior Independent Non-Executive Director
Ray Miles became a Non-Executive Director of the Company 
in June 2006 and is the Senior Independent Director. Mr Miles 
has spent most of his career in the shipping and transport
industry. From 1988 until December 2005, Mr Miles was chief
executive officer of CP Ships Limited and was also the senior
independent director of Stelmar Shipping Limited from 2004 to
2005. He has been a non-executive director of Provident Financial
PLC since 2003 and its senior independent director since October
2004. He is chairman of the Devon Community Foundation and
joined the advisory board of Stena AB in 2006.
Joseph Baratta, Non-Executive Director
Joseph Baratta became a Non-Executive Director of the Company
in September 2004. Mr Baratta is a senior managing director in
the private equity group of The Blackstone Group, having joined
the firm as an associate in 1998. Mr Baratta has also worked in
the mergers and acquisitions department at Morgan Stanley. 
Mr Baratta currently also serves as a director of Merlin
Entertainments Group Ltd and Center Parcs. Mr Baratta 
graduated magna cum laude from Georgetown University.
Baroness Morgan of Huyton, Non-Executive Director
Baroness Morgan of Huyton became a Non-Executive Director 
of the Company in June 2006. A former teacher, Baroness Morgan
worked as a senior aide to the British Prime Minister from 1997 
to 2005. In 2001, she was made a peer and served as Minister 
in the Cabinet Office. From 2001 to 2005, she was Director 
of Government Relations, Downing Street, working closely with
the Prime Minister. Baroness Morgan is now working as an 
adviser to a children’s charity, serving on the board of the 
Olympic Delivery Authority and is a non-executive director 
of Carphone Warehouse PLC.
Christopher Fisher, Non-Executive Director
Christopher Fisher was appointed a Non-Executive Director 
of the Company in June 2006. He has since become a partner 
in Penfida Partners, a new firm providing independent corporate
finance advice to pension fund trustees. He is also a non-
executive director of Kelda Group and a trustee of the Imperial
War Museum. He has spent most of his career in investment
banking principally at Lazard, where he was a managing director
until 2003, and subsequently at KPMG, where he served as 
vice chairman, corporate finance, until taking up his appointment
with Penfida. Directors’ Report
The Directors present their report and the audited financial statements for the 52-week period ended 1 October 2006.
Activities of the Group
The Group’s principal activities are the development and operation of care homes for the elderly and the provision of specialist services 
for people with physical and/or learning disabilities.
A detailed review of the Group’s activities, development of its business and future developments are provided in the Business Review.
Results and dividends 
The consolidated income statement, showing the results for the period, is set out on page 36. A detailed review of the Group’s results 
is provided in the Financial Review.
The Directors recommend that a final dividend of 1.1p (2005 – Nil) per ordinary share be paid on 9 February 2007 to those Shareholders
on the register of members at the close of business on 12 January 2007. No interim dividends have been paid.
International Financial Reporting Standards (IFRS)
The consolidated financial statements included within this Annual Report are the first the Group has prepared under IFRS. The impact, 
upon the Group’s consolidated income statement and balance sheet, of translation from UK Generally Accepted Accounting Principles 
to IFRS is included in note 37 to the consolidated financial statements. 
The financial statements of the Company continue to be prepared under UK Generally Accepted Accounting Principles.
Directors
The names and biographical details of the Directors who currently hold office are given on pages 22 and 23.
The beneficial interests of Directors in the shares of the Company, details of service contracts and remuneration are shown in the 
report of the Remuneration Committee on pages 30 to 33.
Acquisitions
Details of acquisitions in the period are given in note 29 to the consolidated financial statements.
Issue of Shares 
Details of the changes to the ordinary share capital during the period are given in note 25 to the consolidated financial statements.
Employment
The Group gives full and fair consideration to applications for employment from disabled persons, with regard to their particular aptitudes
and abilities. Efforts are made to continue the employment of those who become disabled during their employment. The Group seeks to
recruit, develop and employ throughout the organisation, suitably qualified, capable and experienced people, irrespective of age, race,
religion or sexual orientation.
Supplier Payment Policy
It is Group policy to pay suppliers in accordance with agreed terms and conditions, provided that suppliers also comply with all relevant
terms and conditions. At 1 October 2006 the Group’s supplier payment period was 45 days (2005 – 60 days). The Company is a holding
company and does not have trade suppliers. 
Financial instruments
Information on the Group’s financial risk management objectives and policies and on the exposure of the Group to relevant risks in respect
of financial instruments is set out in note 23 to the consolidated financial statements.
24 Southern Cross Healthcare Group PLC   Annual Report and Accounts 2006
  Substantial Shareholdings
At 16 November 2006 the Company had been notified of the following interests which exceed 3% of the Company’s issued share capital:
%
Blackstone Capital Partners 43.12
Landsdowne Partners Limited 4.73
Legal and General Group plc 4.19
Charitable and Political Donations
During the period the Group made donations to charities totalling £50,000 (2005 – £57,000), no political donations were made.
Annual General Meeting 
The notice convening the Annual General Meeting of the Company together with explanatory resolutions is included in a separate
document sent to shareholders. The meeting will be held at 11am on 30 January 2007 at the offices of our advisers, UBS, 1 Finsbury
Avenue, London EC2M 2PP .
Independent Auditors
A resolution to reappoint PricewaterhouseCoopers LLP as Auditors to the Company, and authorising the Directors to determine their
remuneration, will made at the Annual General Meeting.
Statement of Directors’ Responsibilities
Company law requires the Directors to prepare financial statements for each financial period that give a true and fair view of the 
state of the affairs of the Company and the Group as at the end of the financial period and of the profit or loss of the Group for 
the financial period.
The Directors consider that in preparing the consolidated financial statements and the Company financial statements, the Group and
Company have used appropriate accounting policies, consistently applied and supported by reasonable and prudent judgements and
estimates, and that all applicable accounting standards have been followed.
Each person who is a Director at the date of approval of this report confirms that:
l so far as the Director is aware, there is no relevant audit information of which the Company’s Auditors are unaware; and
l each Director has taken all the steps that he/she ought to have taken as a Director to make himself/herself aware of any relevant
audit information and to establish that the Company’s Auditors are aware of that information.
This confirmation is given and should be interpreted in accordance with the provisions of Section 234 ZA of the Companies Act 1985.
The Directors are responsible for keeping proper accounting records that disclose with reasonable accuracy the financial position of the
Company and the Group and to enable them to ensure that the financial statements comply with the Companies Act 1985. They are also
responsible for safeguarding the assets of the Group and Company and for taking reasonable steps for the prevention and detection of
fraud and other irregularities.
The Annual Report will also be published on the Company’s website. The Directors are responsible for the maintenance and integrity of 
the Company’s website, the work performed by the Auditors does not include consideration of these matters. Accordingly the auditors
accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the
website.
Legislation in the UK concerning the preparation and publication of financial statements may differ from legislation in other jurisdictions.
Southern Cross Healthcare Group PLC   Annual Report and Accounts 2006 25 Corporate Governance
The Board supports the principles of corporate governance set out in the Combined Code on Corporate Governance issued by the Financial
Reporting Standards Council in July 2003 (“the Combined Code”). This statement describes how the principles of the Combined Code have
been applied to the Group. 
The Group was admitted onto the London Stock Exchange on 12 July 2006. Prior to this date the Group was privately held and operated a
corporate governance system that the Directors considered to be appropriate for a privately-held Group. As part of the process of preparing
for admission onto the London Stock Exchange the Group commenced a rigorous and continuous corporate governance project, using the
provisions of the Combined Code. The information below details how the principals of the Combined Code have been applied from the
date of admission up to the period ended 1 October 2006, the “Post-Admission Period”.
The Board
The Board currently comprises four Non-Executive and three Executive Directors, in addition to the Non-Executive Chairman. As Joseph
Barratta is nominated by the Blackstone Shareholders, the most significant Shareholder, he is not regarded as “independent” for the
purposes of the Combined Code. 
Accordingly, independent Non-Executive Directors, excluding the Chairman, make up less than half of the Board. It is the Board’s opinion,
however, that the current Board membership is the most appropriate to the circumstances and that no individual, or small group of
individuals can dominate the Board’s decision making.
The roles of the Chairman and Chief Executive Officer are clearly defined, approved by the Board and separate. The Chairman 
is responsible for leading the Board in determining the Group’s strategy, achieving its objectives and organising the business of 
the Board. The Chief Executive Officer is responsible for the executive management of the Group’s operations and day-to-day activities.
The Board meets, formally, bi-monthly and additional meetings are arranged as necessary to consider urgent business. The Chairman also
holds meetings with the Non-Executive Directors.
The table below summarises the total number of Board, Audit Committee, Nomination Committee and Remuneration Committee meetings
during the Post-Admission Period and the attendance by each Director.
Board Audit Nomination Remuneration
Total number of meetings 22 –2
Meetings attendance
William Colvin 2–
Philip Scott 2
Graham Sizer 22
John Murphy 2
Ray Miles 22 –2
Joseph Baratta 2 2
Baroness Morgan of Huyton 1 1 –
Christopher Fisher 22 2
The Board is responsible for setting the Group’s strategy, assessing and managing risk and monitoring the financial performance of the
Group. To assist in the effective running of the Board a comprehensive set of documents, including financial performance, operational
issues, reports on developments and acquisitions and compliance matters are provided to the Board on a timely basis. The Board has 
a formal schedule of matters reserved for its approval, these matters include approval of the annual strategic plan and budgets and 
the review of overall corporate governance arrangements.
26 Southern Cross Healthcare Group PLC   Annual Report and Accounts 2006 The Chairman has responsibility for the induction process in respect of new Directors. The process includes industry specific presentations
from third parties and management presentations. Directors can take independent advice on matters relating to their duties, at the
expense of the Company, and have access to the advice and services of the Company Secretary. The removal from office of the Company
Secretary is a matter reserved for the whole Board.
The Board is committed to the principle that there should be an annual evaluation of its own performance and of individual Directors. 
The Non-Executive Directors, led by the senior independent Non-Executive Director are responsible for evaluating the performance of 
the Chairman and the executive members of the Board.
Committees of the Board
The Board has Audit, Remuneration and Nomination Committees, the roles and terms of reference of each are summarised below.
Audit Committee
During the period the Board has established a formal Audit Committee, comprised of three independent Non-Executive Directors (namely
Christopher Fisher, Ray Miles and Baroness Morgan of Huyton). Mr Christopher Fisher, the Committee’s Chairman, was formerly Vice
Chairman of Corporate Finance at KPMG and a Managing Director of Lazard and brings financial expertise to the committee.
The committee meets formally at least three times a year and otherwise as required. The external Auditors, Group Finance Director 
and Group Financial Controller are invited to attend the Audit Committee meetings. Part of each meeting is held in private between 
the Non-Executive Directors and the external Auditors.
The committee has clearly defined terms of reference; these are set out on the Group’s website. Its responsibilities include: assisting the
Board in the effective discharge of its duties in respect of Corporate Governance; financial reporting; risk management and internal control.
The independence and objectivity of the external Auditors is reviewed by the Audit Committee, with specific consideration of the level of
non–audit fees. Information on non-audit fees is given in note 6 to the consolidated financial statements. During the period the Auditors
provided significant services in respect of the listing of the Company’s shares on the London Stock Exchange. The committee does not
consider the non-audit fees paid to the external Auditors to have affected their independence or objectivity.
The committee also receives an annual independence confirmation from the external Auditors.
The committee is responsible for making recommendations to the Board in relation to the appointment, reappointment and any matters 
of resignation or dismissal of the external Auditors as well as the approval of fees for external Auditors.
The committee also has responsibility for reviewing the Group’s procedures by which employees may, in confidence, raise concerns about
improprieties in matters of financial reporting or other matters and to ensure these arrangements allow for independent investigation and
appropriate follow up. 
Remuneration Committee 
During the period the Board has established a Remuneration Committee comprised of three Non-Executive Directors (namely Ray Miles,
Christopher Fisher and Joseph Baratta). The Chairman of the committee is Ray Miles.
The Combined Code suggests that the Remuneration Committee should consist of at least three Directors who are all independent 
Non-Executive Directors. As Joseph Baratta is not considered to be independent the Group does not comply with provision B2.1 of 
the Combined Code. It is the Board’s opinion that, as the nominee of the Blackstones Shareholders, Joseph Baratta’s views are 
desirable to assist the Remuneration Committee to assess the remuneration packages for the senior executives. 
Southern Cross Healthcare Group PLC   Annual Report and Accounts 2006 27 Corporate Governance
Remuneration Committee continued
The composition and role of the Remuneration Committee are set out in the report of the Remuneration Committee on pages 30 to 33. 
Full details of Directors’ remuneration and shareholdings are also given in the report.
Nominations Committee
During the period the Board has established a Nominations Committee comprised of three independent Non-Executive Directors (namely
William Colvin, Ray Miles and Baroness Morgan of Huyton). The Chairman of the committee is William Colvin. The committee meets
formally at least twice a year and otherwise as required.
The committee assists the Board in discharging its responsibilities relating to the composition and make up of the Board. It is responsible
for evaluating the balance of skills, knowledge and experience on the Board, identifying potential candidates to be appointed as Directors,
as the need may arise, and determining succession planning for the Chairman and Chief Executive. External executive recruitment agencies
are used to assist in the identification of suitable candidates. 
The committee’s terms of reference are set out on the Group’s website.
Internal Control and Risk Management
The Board has overall responsibility for the Group’s system of internal controls and risk management. The system includes an ongoing
process for identifying, evaluating and managing significant risks faced by the Group. The process is designed to manage rather than
eliminate the risk of failure to achieve business objectives. As with, any system of internal control it can only provide reasonable, 
but not absolute, assurance against material misstatement or loss.
The key elements of the Group’s system of internal control are:
Risk Management
The Board is responsible for risk assessment and management within the Group. During the period the Board has established the Group
Risk Management Committee (“GRMC”) and has delegated the responsibility to this committee. Included within the GRMC’s responsibilities
are setting Group policy and strategy for risk management, identifying, assessing and managing risks facing the Group and communicating,
educating and training employees on the risks facing the Group.
The GRMC has representatives from finance, operations, legal, human resources, estates, health and safety and compliance. It meets on a
bi-monthly basis and reports into the Board, via the Audit Committee.
The Board has put in place a documented organisational structure with clearly defined and understood roles and responsibilities. There are
also established and documented policies and procedures at the home level, and the Group is in the process of implementing documented
policies and procedures for the head office finance function.
Management Information Systems
The Group has a comprehensive management information system for regular and timely reporting into the Board. The monthly financial
reporting system includes period and period to date results compared to budget, details of key performance indicators against budget,
working capital movements and detailed cash flow information. The monthly management reporting system includes information on
internal and external, regulatory and compliance audits, health and safety and other operational matters.
Effectiveness of Internal Controls
The Board confirms that it has reviewed the effectiveness of the system of internal controls, in accordance with the Turnbull Guidance, 
and is satisfied that the Group complies with that guidance.
Investor Relations
The Board supports the view that effective communications with its Shareholders, stakeholders and the wider market is a critical element
of corporate governance. The Chairman has overall responsibility for ensuring effective communication with the Group’s stakeholders and
to ensure the Board develops an understanding of the views of key stakeholders. 
The Group’s Annual and Interim Reports will be the primary method by which information is communicated to our stakeholders. In addition
there is also regular dialogue with individual institutional Shareholders and general meetings will be held after the announcement of
interim and preliminary results. It is the intention of the Senior Independent Director to be present at these meetings. 
28 Southern Cross Healthcare Group PLC   Annual Report and Accounts 2006 The Group’s Annual General Meeting shall be used as an opportunity to communicate with private investors and to give all ordinary
Shareholders the opportunity to ask questions of the Directors. 
In an effort to communicate more readily with an audience of stakeholders, the Group’s website has been developed so as to incorporate
an investor relations page. A Group profile, statutory financial statements, all announcements and regular corporate news are included.
Internal Audit
Throughout the period, the Regional Administrator and Operational Manager groups have performed financial and operational compliance
work at the home level. To help ensure compliance, the Group has a quality assurance department that assists in training both groups 
on internal compliance techniques and also ensures a uniform approach is adopted across the Group. 
The Board is satisfied that the work performed by the external Auditors in preparation for Admission together with the current internal
compliance structure of the Group was sufficient for the period under review. However, the Board will be reviewing the internal audit
requirements of the Group in the year ahead.
Going Concern
After making enquiries the Directors have a reasonable expectation that the Group and Company have adequate resources to continue
operations for the foreseeable future. For this reason the financial statements continue to be prepared on the going-concern basis.
Compliance Statement
The Board confirms that for the period since the Company’s shares were listed on the London Stock Exchange (being 12 July 2006 to 
1 October 2006), it has been in compliance with the provisions set out in Section 1 of the Combined Code, except that:
i) During this period, the Remuneration Committee membership was not made up entirely of independent Non-Executive Directors; and
ii) During this period, independent Non-Executive Directors, excluding the Chairman, did not make up half of the Board.
By order of the Board
William McLeish
Company Secretary
Southgate House
Archer Street
Darlington
County Durham
DL3 6AH
Southern Cross Healthcare Group PLC   Annual Report and Accounts 2006 29 Remuneration Report
Introduction
The Remuneration Committee presents its report and information on Directors’ remuneration. This report is un-audited except for those
parts which are stated as being audited.
The Remuneration Committee and its Role
The Remuneration Committee comprises of three Non-Executive Directors (namely Ray Miles, Christopher Fisher and Joseph Baratta). 
The Chairman of the committee is Ray Miles. The committee meets formally at least twice a year and otherwise as required.
The committee has clearly defined terms of reference; these are set out on the Group’s website. Its responsibilities include making
recommendations to the Board on the Group’s framework of remuneration for executive management, reviewing the ongoing
appropriateness and relevance of the remuneration policy and determining, on behalf of the Board, specific remuneration packages 
for each of the Executive Directors and the Chairman of the Board. 
During the period the committee has taken advice from New Bridge Street Consultants and Deloitte & Touche. Advice was taken on a wide
range of issues, including the current market positioning of the Group’s executive remuneration with regard to other listed groups.
Remuneration Policy
This report sets out the Company’s policy on Directors’ remuneration for the financial year 2006 and, so far as practical, for future years. 
Any changes in policy for future years will be described in future Remuneration Reports. The Company’s overall policy on remuneration 
is to attract, develop, motivate and retain individuals at all levels, pay competitive salaries and align remuneration arrangements with 
the Group’s strategy and objectives.
As part of the process of preparing for Admission onto the London Stock Exchange, and using the expertise of third party consultants, 
a comprehensive review of Executive remuneration was undertaken. Following this the Board’s policy on Executive remuneration is to:
l pay basic salaries that are competitive with other companies of similar size and standing;
l to have a significant part of remuneration linked to the achievement of performance targets;
l to have performance-related remuneration aligned to the interests of shareholders; and 
l encourage executives to hold shares in the Company.
In establishing these policies, the Board has given full consideration to the requirements of the Combined Code.
Executive Remuneration Packages
Executive remuneration packages for the current period comprised basic salary and benefits, annual performance-related bonus, long-term
share incentives and pension benefits. Further details of each element are given below:
Basic Salary and Benefits
The Committee reviews basic salary and benefits each year, taking into consideration Group financial performance, individual responsibilities,
skills and experience. Consideration is also given to the salaries and benefits paid to Executives by other companies of similar size and
standing. The last such review took place during the process of preparing for Admission onto the London Stock Exchange.
Basic salaries for the Executive Directors are a fixed annual sum payable monthly in cash. The value of benefits for Executive Directors is
included in the remuneration table on page 32 and consists of car allowance and life and health insurance.
Annual Performance-related Bonus
During the period from 3 October 2005 to 12 July 2006 (Admission date) each Executive Director participated in the Southern Cross
Healthcare Group Limited bonus scheme, all awards were entirely discretionary and decided upon by the Board at that time.
During the period from Admission to 1 October 2006, eligibility to receive a bonus was at the discretion of the Remuneration Committee. 
In respect of the financial year 2007 Directors are entitled to receive a bonus of up to 50% of basic salary, subject to attainment of certain
performance targets based on the Group’s earnings before interest tax, depreciation and amortisation. The Directors are also eligible to
receive a further bonus equal to 20% of basic salary, subject to the discretion of the Remuneration Committee and approval by the Board.
30 Southern Cross Healthcare Group PLC   Annual Report and Accounts 2006 Performance Share Plan
The Southern Cross Healthcare Group 2006 Performance Share Plan (“the PSP”) was adopted by the Company in June 2006. Awards under
the PSP are on an annual allocation of notional ordinary shares equivalent in value to a maximum of 100% of annual basic salary as at the
award date, unless the Remuneration Committee decides that exceptional circumstances exist in relation to the recruitment or retention of
an employee, in which case the limit will be 200% of annual basic salary. 
On 4 September 2006, 2,365,332 awards were granted with an exercise price of £Nil. A summary of the vesting conditions are included below.
Vesting of awards made under the PSP takes place at the expiry of the three-year performance period of the plan and are subject to
attainment of agreed performance targets. 70% of the award will vest on attainment of a performance target based on Earnings Per Share
(“EPS”). For the purposes of calculating the EPS condition, net income is defined as profit after taxation before deduction of future minimum
rental increases, goodwill impairment, annual bonuses paid to participants in the PSP and the cost of share options charged to the income
statement under the PSP . The remaining 30% will vest on attainment of a performance target based on Total Shareholder Return (“TSR”).
In respect of the EPS performance target, 100% of the award will vest if the PSP EPS for the 2008 financial period exceeds 23.13p per
share and no awards will vest if PSP EPS is below 18.61p per share, with straight-line vesting between these two points. The remaining
30% will vest subject to TSR performance measured against the constituents of the FTSE 250 Index, excluding investment trusts. 100% 
of the award will vest if the Company’s TSR growth is in the upper quartile and 40% will vest if growth is at the median, with straight-line
vesting between the two points. If the Company’s growth is below the median then no awards shall vest.
The calculation below shows how the Group has performed against the PSP EPS earnings per share measure, during the year.
52 weeks ended
2 October 2006
Per share
Earnings amount
£’m p
Loss attributable to ordinary shareholders (12.1) (9.35)
Charge for future minimum rental increases 30.7 23.82
Goodwill impairment ––
Annual bonuses paid to individuals within the PSP 2.3 1.81
Charge in respect of share options/taxation 0.1 0.11
Taxation impact of the above (10.0) (7.76)
Profit for the purposes of calculating earnings per share under the PSP 11.0 8.63
The Remuneration Committee considers the targets to be appropriate and will review targets for future awards on an annual basis.
Pension Benefits
All Executive Directors are entitled to money purchase benefits equal to 15% of annual salary. Bonuses and awards made under the PSP
are not pensionable.
Service Contracts
Upon Admission the Executive Directors entered into new service agreements with the Company. The Executive Director service
agreements provide that the notice required to terminate their employment is 12 months given either by the Director or the Company. 
The Company also has the right to terminate the employment of an Executive Director without notice or with less than 12 months notice
by making a payment in lieu of notice equal to the base salary and contractual benefits the Executive Director would be entitled to receive
during any un-expired part of the notice period.
Under the terms of the Executive Directors’ new service agreements, Philip Scott is entitled to receive a basic salary of £335,000 per
annum, whilst John Murphy and Graham Sizer are both entitled to receive basic salaries of £300,000 per annum. Each Executive Director 
is also entitled to a car allowance and life and healthcare insurance.
Southern Cross Healthcare Group PLC   Annual Report and Accounts 2006 31 Remuneration Report
A summary of the specific terms of the Executive Directors’ service contracts is included in the table below:
Director Date of contract Effective date Un-expired term Notice period
P Scott 12 July 2006 1 July 2006 Indefinite 12 months
J Murphy 12 July 2006 1 July 2006 Indefinite 12 months
G Sizer 12 July 2006 1 July 2006 Indefinite 12 months
Non-Executives
Upon Admission the Non-Executive Directors entered into letters of appointment with the Company. The terms of the letters of appointment
for the Non-Executive Directors are subject to the provisions of the Articles. All such appointments are for an initial term of three years.
Fees payable to the Non-Executive Directors are set by the Board, as a whole, with recommendations made by the Remuneration
Committee. Under the current letters of appointment, the Chairman receives an annual fee of £125,000. All other Non-Executive Directors,
receive an annual fee of £45,000. With the exception of the chairman of the Nomination Committee, the Non-Executive Directors receive
an annual fee of £7,500 for each committee of the Board which they chair. All Non-Executive Directors receive reimbursement of business
expenses incurred in the proper performance of their duties. The fees payable in respect of the services provided by Joseph Baratta are
paid to Blackstone Management Partners IV LLC.
The appointment of each of the Non-Executive Directors is terminable on one month’s notice, is subject to the retirement by rotation
provisions in the Articles and does not give rise to any entitlement to compensation in respect of their termination. 
Under the terms of an agreement with Blackstone Management Partners IV LLC, they are entitled to nominate one Non-Executive Director 
to the Board whilst the Blackstone shareholding remains above 10%. The current nominee is Joseph Baratta (see above).
Directors’ Remuneration (audited)
Total Pension
Pre-IPO Post-IPO Compensation
emoluments contributions
Salary salary salary Annual Pre-IPO Post-IPO for loss Benefits
or fees or fees or fees bonus bonus bonus of office in kind 2006 2005 2006 2005
£’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000
Executive
P Scott 332 247 85 253 85 168 – 16 601 230 – –
J Murphy 285 210 75 235 85 150 – 16 536 175 43 19
G Sizer 240 165 75 235 85 150 – 16 491 175 36 19
C Rutter** 147 147 – 15 15 – 177 15 354 110 – –
Non-Executive
W Colvin 125 94 31 50 50 – – 5 180 – – –
J Baratta
†
– –– ––– – – – –
R Miles* 13 – 13 – – – – – 13 – – –
C Fisher* 13 – 13 – – –– – 13 – – –
Baroness Morgan 
of Huyton* 11 – 11 – – – – – 11 – – –
C Pike**
†
– –– ––– –– – – – –
A Wilson** 18 18 – – – – 30 – 48 44 – –
D Blitzer**
†
– – –– ––– – – – – –
M Tooth**
†
–– ––– ––– – – – –
1,184 881 303 788 320 468 207 68 2,247 734 79 38
Note: Remuneration for 2005 is in respect of the 28-week period ended 2 October 2005.
* Appointed to the Board on 27 June 2006.
** Resigned from the Board on 5 June 2006.
†
Blackstone Shareholders’ representative.
In addition to the above, fees of £750,000 (2005 – £500,000) per annum and expenses were payable to Blackstone Management Partners
IV LLC under the terms of a monitoring agreement. The total charged to the profit and loss account in the period was £565,861 (2005 –
£250,000). The agreement was terminated on 12 July 2006 and there are no further amounts due as at the balance sheet date.
32 Southern Cross Healthcare Group PLC   Annual Report and Accounts 2006 Directors’ Interests (audited)
The Directors of the Company had the following shareholdings in the Company at each of the balance sheet dates:
2006 2005
Number of Number of
ordinary ordinary
shares shares
of 1p each of 1p each
P Scott 2,019,120 11,218
J Murphy 1,851,840 11,022
G Sizer 1,434,000 7,967
W Colvin 1,202,400 6,680
J Baratta – –
R Miles 44,444 n/a
C Fisher 22,222 n/a
Baroness Morgan of Huyton 2,222 n/a
A bonus issue representing 240 ordinary shares to every ordinary share held, was made on 5 July 2006 (note 25). Upon listing on the
London Stock Exchange the Directors were entitled to sell up to 25% of their holdings in the ordinary share capital of the Company.
Performance Share Plan (audited)
Interests of Directors in the plan are:
At Awarded on Market price At End of
3 October 12 September at date of 1 October performance
2005 2006 award Vested Lapsed 2006 period
Number Number Pence Number Number Number Date
P Scott – 148,889 294.0 – – 148,889 12 September 2009
J Murphy – 150,000 294.0 – – 150,000 12 September 2009
G Sizer – 133,333 294.0 – – 133,333 12 September 2009
The Company’s closing share price on 1 October 2006 was 314.0p, whilst the highest and lowest, during the period, was 315.0p and
225.0p, respectively.
TSR Graph
R Miles
Chairman of the Remuneration Committee
11 December 2006
Southern Cross Healthcare Group PLC   Annual Report and Accounts 2006 33
90
95
100
105
110
115
120
7/7/06
14/7/06
21/7/06
28/7/06
4/8/06
11/8/06
18/8/06
25/8/06
1/9/06
8/9/06
15/9/06
22/9/06
29/9/06
6/10/06
13/10/06
20/10/06
27/10/06
3/11/06
10/11/06
17/11/06
24/11/06
Southern Cross Healthcare PLC
FTSE Mid 250 Independent Auditors’ Report to the Members
of Southern Cross Healthcare Group PLC
We have audited the Group financial statements (the “financial statements”) of Southern Cross Healthcare Group PLC for the 52 week
period ended 1 October 2006 which comprise the consolidated income statement, the consolidated balance sheet, the consolidated cash
flow statement, the consolidated statement of change in shareholders’ equity/(deficit) and the related notes. These financial statements
have been prepared under the accounting policies set out therein.
We have reported separately on the parent company financial statements of Southern Cross Healthcare Group PLC for the 52 week period
ended 1 October 2006 and on the information in the remuneration report that is described as having been audited.
Respective Responsibilities of Directors and Auditors
The Directors’ responsibilities for preparing the Annual Report and the financial statements in accordance with applicable law and
International Financial Reporting Standards (IFRS) as adopted by the European Union are set out in the statement of Directors’
responsibilities.
Our responsibility is to audit the financial statements in accordance with relevant legal and regulatory requirements and International
Standards on Auditing (UK and Ireland). This report, including the opinion, has been prepared for and only for the Company’s members as
a body in accordance with Section 235 of the Companies Act 1985 and for no other purpose. We do not, in giving this opinion, accept or
assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save
where expressly agreed by our prior consent in writing.
We report to you our opinion as to whether the financial statements give a true and fair view and whether the financial statements have
been properly prepared in accordance with the Companies Act 1985 and Article 4 of the IAS Regulation. We report to you whether in our
opinion the information given in the Directors’ report is consistent with the financial statements. The information given in the Directors’
report includes that specific information presented in the business review and financial review that is cross referred from the business
review section of the Directors’ report. We also report to you if, in our opinion, we have not received all the information and explanations
we require for our audit, or if information specified by law regarding Directors’ remuneration and other transactions is not disclosed.
We review whether the corporate governance statement reflects the Company’s compliance with the nine provisions of the 2003 FRC
Combined Code specified for our review by the Listing Rules of the Financial Services Authority, and we report if it does not. We are not
required to consider whether the Board’s statements on internal control cover all risks and controls, or form an opinion on the
effectiveness of the Group’s corporate governance procedures or its risk and control procedures.
We read other information contained in the Annual Report and consider whether it is consistent with the audited financial statements. 
The other information comprises only the Directors’ report, the unaudited part of the remuneration report, the Chairman’s statement, 
the business review and the financial review and the corporate governance statement. We consider the implications for our report if we
become aware of any apparent misstatements or material inconsistencies with the financial statements. Our responsibilities do not extend
to any other information.
Basis of Audit Opinion
We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board. 
An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also
includes an assessment of the significant estimates and judgements made by the Directors in the preparation of the financial statements,
and of whether the accounting policies are appropriate to the Group’s circumstances, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to
provide us with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatement,
whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation
of information in the financial statements.
34 Southern Cross Healthcare Group PLC   Annual Report and Accounts 2006 Opinion
In our opinion:
l the Group financial statements give a true and fair view, in accordance with IFRS as adopted by the European Union, of the state 
of the Group’s affairs as at 1 October 2006 and of its loss and cash flows for the 52 week period then ended;
l the financial statements have been properly prepared in accordance with the Companies Act 1985 and Article 4 of the IAS Regulation;
and
l the information given in the Directors’ report is consistent with the financial statements.
PricewaterhouseCoopers LLP
Chartered Accountants and Registered Auditors
Newcastle upon Tyne
11 December 2006
Southern Cross Healthcare Group PLC   Annual Report and Accounts 2006 35 Consolidated Income Statement – IFRS
52 weeks 28 weeks
ended ended
1 October 2 October
2006 2005
Note £’m £’m
Revenue 3 610.9 188.2
Home payroll costs 3 (343.0) (104.8)
Home running costs 3 (78.3) (23.2)
Home EBITDAR before central costs 3 189.6 60.2
Rent
Charge for rental amounts currently payable (116.1) (36.5)
Charge for future minimum rental increases (30.7) (4.0)
Total rent 3 (146.8) (40.5)
Home EBITDA before central costs 42.8 19.7
Central costs (30.8) (9.7)
Other operating income 0.9 0.6
Adjusted EBITDA before exceptional central costs 
and charge for future minimum rental increases 3 48.8 15.7
Exceptional central costs 4 (5.2) (1.1)
Charge for future minimum rental increases (30.7) (4.0)
EBITDA 12.9 10.6
Profit on disposal of property, plant and equipment 
and subsidiary undertakings 5 0.4 0.4
Depreciation 11 (10.1) (2.6)
Amortisation 13 (1.6) (0.9)
Operating income 6 1.6 7.5
Finance costs 7 (19.3) (9.9)
Finance income 7 0.3 –
Loss before taxation (17.4) (2.4)
Taxation 8 5.3 (1.0)
Loss attributable to ordinary shareholders 26 (12.1) (3.4)
Pence Pence
Note per share per share
Loss per share attributable to equity shareholders
Basic 10 (9.35) (0.05)
Diluted 10 (9.35) (0.05)
All of the above activities relate to continuing operations.
36 Southern Cross Healthcare Group PLC   Annual Report and Accounts 2006 As at As at
1 October 2 October
2006 2005
Note £’m £’m
ASSETS
Non-current assets
Property, plant and equipment 11 96.3 38.9
Goodwill 12 196.0 136.3
Other intangible assets 13 2.4 4.0
Deferred tax assets 24 12.9 4.0
Other non-current assets 14 2.5 0.1
Total non-current assets 310.1 183.3
Current assets
Cash and cash equivalents 15 21.9 4.2
Accounts receivable 16 28.8 22.3
Inventories 17 1.1 0.4
Other current assets 16 12.8 8.1
Total current assets 64.6 35.0
Total assets 374.7 218.3
LIABILITIES
Current liabilities
Short-term financial liabilities 20 (25.9) (33.8)
Trade and other payables 18 (65.4) (37.2)
Total current liabilities (91.3) (71.0)
Non-current liabilities
Long-term financial liabilities 20 (63.6) (129.0)
Provisions and similar obligations 21 (8.1) (1.1)
Future minimum rental payable 21 (63.7) (20.6)
Total non-current liabilities (135.4) (150.7)
Total liabilities (226.7) (221.7)
Net assets/(liabilities) 148.0 (3.4)
Ordinary shares 25 1.9 –
Share premium 26 161.5 –
Retained deficit 26 (15.4) (3.4)
Shareholders’ equity/(deficit) 27 148.0 (3.4)
The financial statements on pages 36 to 80 were approved by the Board of Directors on 11 December 2006:
P Scott Chief Executive G Sizer Finance Director
Consolidated Balance Sheet – IFRS
Southern Cross Healthcare Group PLC   Annual Report and Accounts 2006 37 Consolidated Cash Flow Statement – IFRS
52 weeks 28 weeks
ended ended
1 October 2 October
2006 2005
Note £’m £’m
Cash flows from operating activities
Cash flows from operations 28 50.6 15.0
Interest received 0.3 –
Interest and bank loan arrangement fees paid (27.4) (5.7)
Tax paid (1.6) (1.3)
Net cash from operating activities 21.9 8.0
Cash flows from investing activities
Purchase of subsidiary undertakings net of cash acquired 29 (94.8) (51.2)
Sales of subsidiary undertakings 5 47.9 0.4
Proceeds from sale of freehold properties 11 – 93.9
Purchase of property, plant and equipment 11 (29.1) (15.7)
Receipts from the sale of property, plant and equipment 4.0 3.0
Net cash (used)/generated (in) from investing activities (72.0) 30.4
Cash flows from financing activities
Repayment of borrowings (332.2) (197.5)
New borrowings 236.4 163.4
Capital element of finance leases (0.2) (0.1)
Proceeds from share issues 25 163.8 –
Net cash generated/(used) from/(in) financing activities 67.8 (34.2)
Net increase in cash and cash equivalents 17.7 4.2
Opening cash and cash equivalents 4.2 –
Closing cash and cash equivalents 15 21.9 4.2
Note: Included within the purchase of property, plant and equipment are purchase of freehold properties totalling £6.1m (2005 – £10.0m) and development expenditure on new
properties totalling £7.1m (2005 – £1.8m).
Consolidated Statement of Changes in
Shareholders’ Equity/(Deficit) – IFRS
Share premium Profit and Total
Share capital account loss account equity
£’m £’m £’m £’m
Group
Issue of ordinary share capital – – – –
Loss attributable to ordinary shareholders – – (3.4) (3.4)
At 2 October 2005 – – (3.4) (3.4)
Issue of ordinary share capital 1.9 173.1 – 175.0
Share-based payments – – 0.1 0.1
Costs incurred in respect of issuance of ordinary share capital – (11.6) – (11.6)
Loss attributable to ordinary shareholders – – (12.1) (12.1)
At 1 October 2006 1.9 161.5 (15.4) 148.0
38 Southern Cross Healthcare Group PLC   Annual Report and Accounts 2006 1 Basis of Preparation
Following admission to the Official List, the Group is required to prepare statutory consolidated financial statements which comply with
IFRS as adopted for use in the EU for the period ended 1 October 2006 (the “2006 financial statements”) and subsequently.
The Group’s principal activities are the development and operation of care homes for the elderly and the provision of specialist services 
for people with physical and/or learning disabilities.
This financial information has been prepared in accordance with International Financial Reporting Standards (IFRS) (and IFRIC interpretations)
endorsed by the EU and with those parts of the Companies Act, 1985, applicable to companies reporting under IFRS. The financial
information has been prepared under the historical cost convention, with the exception of certain financial instruments, which are recognised
at fair value.
This is the Group’s first consolidated financial information prepared in accordance with IFRS. Accordingly, IFRS 1, “First Time Adoption of IFRS”
(revised 2004) has been applied. IFRS 1 permits companies adopting IFRS for the first time to take exemptions from applying the full
requirements of IFRS to certain items. In preparing this financial information, the Group has applied the following:
l As permitted, the implementation of IAS 32, “Financial Instruments: Disclosure and Presentation”, and IAS 39, “Financial Instruments:
Recognition and Measurement”, has been applied from 10 January 2005.
At the period end, the following standards and interpretations relevant to the Group, but which have not yet been adopted, were in issue
but not yet effective:
IFRS 7 “Financial Instruments Disclosure”
IAS 1 “Presentation of Financial Statements” (amended)
IAS 19 “Employee benefits”
IAS 39 “Financial Instruments: Recognition and Measurement” (amended)
IFRIC 4 “Determining Whether an Arrangement contains a Lease”
IFRIC 9 “Reassessment of Embedded Derivatives” (yet to be adopted by the EU)
The Group does not anticipate that the adoption of these standards and interpretations will have a material impact on the Group’s 
financial statements on adoption.
The preparation of financial information in conformity with IFRS requires the use of estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the
reporting period. Although these estimates are based on management’s best knowledge of the amount, events or actions, actual results
ultimately may differ from those estimates.
The financial information presented is for the 28 weeks ended 2 October 2005 (the “financial period ended 2 October 2005”) and the 
52 weeks ended 1 October 2006 (the “financial year ended 1 October 2006”). The Group prepares its financial information for the financial
year ending on the nearest Sunday to 30 September of a given calendar year.
Development of the Group
The Company was incorporated on 10 January 2005. On 23 March 2005, through a Group reconstruction, Southern Cross Healthcare 
Group Limited acquired the entire share capital of Southern Cross Bidco Limited through its subsidiary undertaking Southern Cross
Healthcare Investments No. 2 Limited.
On 8 April 2005, Southern Cross Bidco Limited acquired the Highfield Care (“Highfield”) trading business from funds controlled by the
Blackstone Group.
On 30 October 2005, Southern Cross Bidco Limited acquired the entire share capital of Cannon Capital Ventures Limited (“Ashbourne”).
On 13 June 2006, the Company re-registered as a PLC.
On 12 July 2006, the Company’s ordinary shares were admitted to the London Stock Exchange through an Initial Public Offering.
Notes to the IFRS Financial Information
For the 52 weeks ended 1 October 2006
Southern Cross Healthcare Group PLC   Annual Report and Accounts 2006 39 Notes to the IFRS Financial Information
For the 52 weeks ended 1 October 2006
1 Basis of Preparation continued
Development of the Group continued
Further details of the above acquisitions and other acquisitions are given in note 29. The consolidated financial information of the Group
represents the following:
28 weeks ended 2 October 2005
The consolidated financial information of Southern Cross Healthcare Group Limited, incorporating the effects of the Group reconstruction 
on 23 March 2005, and including:
l the consolidated financial information of Southern Cross Healthcare Group Limited and its subsidiaries for the period from 
10 January 2005 to 2 October 2005; and
l the consolidated financial information of Highfield from 9 April 2005 to 2 October 2005.
52 weeks ended 1 October 2006
The consolidated financial information of Southern Cross Healthcare Group PLC, including:
l the consolidated financial information of Southern Cross Healthcare Group PLC and its subsidiaries for the period from 3 October 2005 
to 1 October 2006; and
l the consolidated financial information of Ashbourne from 31 October 2005 to 1 October 2006.
The principal companies within the Group are disclosed in note 36.
2 Accounting Policies
The principal accounting policies adopted in the preparation of the financial statements are set out below. These policies have been
consistently applied to all the financial periods presented unless otherwise stated.
Basis of Consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company 
(its subsidiaries) made up to 2 October 2005 and 1 October 2006. Control is achieved where the Company has the power to govern the
financial and operating policies of an entity so as to obtain benefits from its activities. The existence and effect of potential voting rights
that are currently exercisable or convertible are considered when assessing whether the Group controls another entity.
On acquisition, the assets and liabilities and contingent liabilities of a subsidiary are measured at their fair values at the date of acquisition.
Intangible assets in acquired companies which concern resident contracts are recognised and amortised over periods of up to three years.
Any excess of the cost of acquisition over the fair values of the identifiable net assets acquired is capitalised as goodwill. Goodwill is not
amortised; instead impairment tests are made annually, and any impairment is charged to the income statement. Any deficiency of the
cost of acquisition below the fair values of the identifiable net assets acquired (ie discount on acquisition) is credited to the income
statement in the period of acquisition.
The results of subsidiaries acquired or disposed of during the period are included in the consolidated income statement from the effective
date of acquisition or up to the effective date of disposal, as appropriate. Where necessary, adjustments are made to the financial
statements of subsidiaries to bring the accounting policies used into line with those used by the Group. All intra-group transactions,
balances, income and expenses are eliminated on consolidation.
Revenue Recognition
Revenue comprises the fair value of fee income relating to the provision of care services, net of price reductions directly related to sales.
Fee income comprises care home fees which are recognised when delivery of service is completed. Fees invoiced in advance are included
as deferred income until service is completed.
40 Southern Cross Healthcare Group PLC   Annual Report and Accounts 2006 2 Accounting Policies continued
Home Payroll Costs
Home payroll costs represent payroll costs directly incurred at home level, including costs incurred in respect of the use of agency labour.
Home Running Costs
Home running costs represent costs of items directly incurred at home level, including food and kitchen supplies, medical supplies, utilities,
maintenance and other running costs of the home.
Home EBITDAR before Central Costs
Home EBITDAR before central costs represents profitability at a home level after taking account of home payroll and home running costs,
but before rental charges on operating leases, central costs and depreciation on home assets.
Home EBITDA before Central Costs
Home EBITDA before central costs represents profitability at a home level after taking account of home payroll and home running costs 
and rental charges in operating leases, but before central costs and depreciation on home assets.
Central Costs
Central costs represent costs of head office support functions, including central payroll costs, other costs not directly attributable to 
a home level and certain other payroll costs.
EBITDA and Adjusted EBITDA
EBITDA represents earnings before depreciation, amortisation and profit on disposal of property, plant and equipment. Adjusted EBITDA
represents EBITDA after adding back exceptional central costs and the charge for future minimum rental increases. 
The Group believes that EBITDA and Adjusted EBITDA (and measures derived therefrom including Home EBITDAR before central costs 
and Home EBITDA before central costs) facilitate operating performance comparisons from period to period and company to company 
by eliminating potential differences caused by variations in capital structures (affecting finance income and costs), tax positions, 
the age and book depreciation of property, plant and equipment (affecting relative depreciation expense) and intangible assets 
identified (affecting amortisation expense).
Exceptional Items
Exceptional items are events or transactions that fall within the activities of the Group and which, by virtue of their size or incidence, have
been disclosed in order to improve a reader’s understanding of the financial information.
Use of Boxes in Income Statement
Boxes have been used in the income statement to provide sub-analyses of items in order to improve a reader’s understanding of the
financial information.
Segmental Reporting
A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns 
that are different from those of other business segments. A geographical segment is engaged in providing products or services within 
a particular economic environment that are subject to risks and returns that are different from those of segments operating in other
economic environments.
Based on an analysis of risks and returns, the directors consider that the Group has two identifiable business segments: Elderly Care and
Specialist.
All operations of the Group are carried out in the United Kingdom and therefore no geographical segmentation is disclosed. Consequently,
the Group has considered business segmentation as the primary segmentation, with two reportable segments, Elderly Care and Specialist.
Other Income
Other income relates to management income received in respect of a portfolio of homes operated by the Group on behalf of a third party,
as well as other operating income. Income is recognised on completion of the management service on an accruals basis.
Southern Cross Healthcare Group PLC   Annual Report and Accounts 2006 41 Notes to the IFRS Financial Information
For the 52 weeks ended 1 October 2006
2 Accounting Policies continued
Share-based Payments
Equity-settled Transactions
The cost of equity-settled transactions with employees is measured by reference to the fair value at the date at which they are granted
and is recognised as an expense over the vesting period, which ends on the date on which the relevant employees become fully entitled
to the award. Fair value is determined by an external valuer using an appropriate pricing model. In valuing equity-settled transactions, 
no account is taken of any vesting conditions, other than conditions linked to the price of the shares of the Company (market conditions).
No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition,
which are treated as vesting irrespective of whether or not the market condition is satisfied, provided that all other performance conditions
are satisfied.
At each balance sheet date before vesting, the cumulative expense is calculated, representing the extent to which the vesting period has
expired and management’s best estimate of the achievement or otherwise of non-market conditions number of equity instruments that
will ultimately vest or in the case of an instrument subject to a market condition, be treated as vesting as described above. The movement
in cumulative expense since the previous balance sheet date is recognised in the income statement, with a corresponding entry in equity.
Financial Instruments
Derivative Financial Instruments and Hedging
The Group uses derivative financial instruments such as interest rate swaps to hedge its risks associated with interest rate fluctuations. 
Such derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and 
are subsequently measured at fair value. 
Derivatives are carried as assets when the fair value is positive and as liabilities when the fair value is negative.
For cash flow hedges, the effective portion of the gain or loss on the hedging instrument is recognised directly in equity, while the
ineffective position is recognised in the income statement. Amounts taken to equity are transferred to the income statement when 
the hedged transaction affects profit or loss, such as when a forecast sale or purchase occurs. 
Where the hedged item is the cost of a non-financial asset or liability, the amounts taken to equity are transferred to the initial carrying
amount of the non-financial asset or liability.
If a forecast transaction is no longer expected to occur, amounts previously recognised in equity are transferred to the income statement. 
If the hedging instrument expires or is sold, terminated or exercised without replacement or rollover, or if its designation as a hedge is
revoked, amounts previously recognised in equity remain in equity until the forecast transaction occurs and are transferred to the income
statement or to the initial carrying amount of a non financial asset or liability as above. If the related transaction is not expected to occur,
the amount is taken to the income statement.
Leases
Assets held under finance leases, which transfer to the Group substantially all the risks and benefits incidental to ownership of the leased
item, are capitalised at inception of the lease, with a corresponding liability being recognised for the value of the leased asset or, if lower,
the present value of the minimum lease payments. Assets held under finance leases are depreciated over the shorter of the estimated
useful economic life or the lease term.
Leases where the lessor retains substantially all the risks and benefits of ownership of the asset are classified as operating leases and
rentals payable are charged in the income statement on a straight-line basis over the lease term where property lease contracts contain
guaranteed minimum incremental rental payments, the total committed cost is determined and is calculated and amortised on a straight-
line basis over the lease term. The charge for rentals currently payable is the actual amount payable, in the period, by the Group for its
operating leases. The charge for future minimum rental increases reflects the impact of recognising future-fixed committed rental increases
on a straight-line basis over the lease term.
42 Southern Cross Healthcare Group PLC   Annual Report and Accounts 2006 2 Accounting Policies continued
Onerous Leases
Provision is made for future operating lease payments of vacant care homes for the full remaining lease term or up to the expected point
at which the lease is expected to be sublet.
Property, Plant and Equipment
Property, plant and equipment is stated at cost less accumulated depreciation and accumulated impairment losses. Such losses include
costs directly attributable to making the asset capable of operating as intended. Borrowing costs attributable to assets under construction
are recognised as an expense as incurred.
Depreciation is provided on all property, plant and equipment at rates calculated to write off the cost, less estimated residual value based
on prices prevailing at the balance sheet date, of each asset evenly over its estimated useful life as follows:
l Freehold buildings – 2% per annum
l Short leasehold property – over life of lease
l Motor vehicles – 25% per annum
l Fixtures and fittings – 14% per annum
l Computer equipment – 33
1
⁄ 3% per annum
The carrying value of property, plant and equipment is reviewed for impairment when events or changes in circumstances indicate the
carrying value may not be recoverable. Gains and losses on the sale of property, plant and equipment are recognised under central costs,
unless they are so material as to be disclosed separately.
Intangibles
Goodwill
Business combinations completed on or after 10 January 2005 are accounted for under IFRS 3 using the purchase method. Any excess 
of cost of the business combination over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent
liabilities is recognised in the balance sheet as goodwill and is not amortised. To the extent that the net fair value of the acquired 
entity’s identifiable assets, liabilities and contingent liabilities is greater than the costs of investment, a gain is recognised immediately 
in the income statement.
After initial recognition, goodwill is stated at cost less any accumulated impairment losses, with the carrying value being reviewed for
impairment, at least annually and whenever events or changes in circumstances indicate that the carrying value may be impaired.
For the purpose of impairment testing, goodwill is allocated to the related cash generating units monitored by management, at the
segment level. Where the recoverable amount of the cash generating unit is less than its carrying amount, including goodwill, an
impairment loss is recognised in the income statement.
Other Intangibles
Intangible assets are carried at cost less accumulated amortisation and impairment losses.
An intangible asset acquired as part of a business combination is recognised outside of goodwill if the asset is separable or arises from
contractual or other legal rights and its fair value can be measured reliably. Intangible assets with a finite life are amortised on a straight-
line basis over their estimated useful lives, as follows:
l Resident contracts – three years
The carrying value of intangibles is reviewed for impairment whenever events or changes in circumstances indicate the carrying value may
not be recoverable.
Southern Cross Healthcare Group PLC   Annual Report and Accounts 2006 43 Notes to the IFRS Financial Information
For the 52 weeks ended 1 October 2006
2 Accounting Policies continued
Employee Benefit Costs
Staff costs comprise salaries, wages and pensions for the Group’s staff as well as other staff costs. The Group operates defined contribution
pension plans, which are plans under which the Group pays fixed contributions into a separate entity. The Group has no legal or
constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating 
to employee service in the current and prior periods. Contributions are recognised as employee benefit expenses as they fall due.
Inventories
Inventories are stated at the lower of cost and net realisable value. Where necessary, impairment is made for obsolete, slow moving 
and defective stocks.
Taxation including Deferred Tax
The tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the income statement
because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never
taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted 
by the balance sheet date.
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities 
in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using 
the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred 
tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary
differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the 
initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the tax profit 
nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries, except where the Group 
is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the
foreseeable future.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable
that sufficient taxable profits will be available against which the temporary differences can be utilised. Deferred tax is calculated at the tax
rates that are expected to apply in the period when the liability is settled or the asset is realised. 
Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited directly to reserves, 
in which case the deferred tax is also dealt with in reserves.
Cash and Cash Equivalents
Cash and cash equivalents includes cash and balances in accounts at no or short notice. Bank overdrafts are shown within borrowings in
current liabilities; however they are included as a component of cash and cash equivalents for the purposes of the cash flow statement.
Finance Costs
Financial costs include interest and amortisation of loan arrangement fees. Loan arrangement fees are amortised evenly over the term 
of the associated loan instrument.
Finance Income
Finance income is accrued on a time basis by reference to the principal outstanding and at the effective interest rate applicable.
44 Southern Cross Healthcare Group PLC   Annual Report and Accounts 2006 2 Accounting Policies continued
Receivables
Trade receivables defined in accordance with IAS 39 are recorded initially at fair value and subsequently measured at amortised cost using
the effective interest method for any doubtful amounts. A provision for impairment of trade receivables is established when there is
evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables. The amount of the
provision is the difference between the assets’ carrying amount and the present value of future cash flows discounted at the effective
interest rate. The movement in the provision is recognised in the income statement.
Any other trade receivables are recognised at their original amount less an allowance for any doubtful amounts. An allowance is made
when collection of the full amount is no longer considered probable.
Other Liabilities
Other liabilities primarily comprise holiday pay liabilities, income taxes, other taxes and interest payable, which are measured 
at the best estimate of the expenditure required to settle the obligation. Other liabilities also comprise the fair value of derivative 
financial instruments.
Financial Risk Management
The Group’s activities expose it primarily to the financial risks of changes in interest rates and liquidity risk. The Board reviews and agrees
policies for managing each of these risks, and others and they are summarised below.
Interest Rate Risk
The Group’s interest rate risk arises from long-term borrowings which are issued at variable rates that expose the Group to cash flow
interest rate risk.
The interest exposure of the Group is managed within the constraints of the Group’s business plan and the financial covenants under its
facilities. The Group aims to reduce exposure to the effect of interest rate movements by hedging an appropriate amount of interest rate
exposure. The impact of movements in interest rates is managed, where considered appropriate, through the use of fixed and floating rate
debt and interest rate swaps. 
Fair Value Estimates
The fair value of interest rate swaps is calculated as the present value of the estimated future cash flows.
The fair values of short-term deposits, loans and overdrafts with a maturity of less than one year are assumed to approximate to their 
book values. The fair value of long-term borrowings approximate to the carrying value reported in the balance sheet, as the majority 
are fixed rate borrowings and interest rate fluctuations have been minimal during the period.
Liquidity Risk
As regards liquidity, the policy of the Group has throughout the year been to maintain a mix of short and long-term borrowings with short
term flexibility achieved through overdraft facilities.
Credit Risk
The Group has no significant concentrations of credit risk. The Group has implemented policies that require appropriate credit checks on
potential residents before services commence.
3 Segmental Analysis
Revenue, earnings before taxation and total equity of the Group are wholly attributable to the operation of care homes and arise solely
within the United Kingdom. The Group is unable to analyse income statement items below Home EBITDA before central costs. The Group’s
financial reporting systems allow for the Balance Sheet to be prepared by legal entity only. Individual legal entities often have both
segments included, the financial reporting systems do not allow further analysis. As such, the Group is unable to analyse assets or
liabilities between the two operating segments.
Southern Cross Healthcare Group PLC   Annual Report and Accounts 2006 45 Notes to the IFRS Financial Information
For the 52 weeks ended 1 October 2006
3 Segmental Analysis continued
Included below is segmental analysis of average occupancy and income statement items:
52-week period ended 1 October 2006
Elderly Care Specialist Total
Number Number Number
Available beds
Acquisitions 10,606 206 10,812
Continuing operations 15,503 693 16,196
Segment available beds 26,109 899 27,008
Occupied beds
Acquisitions 9,590 146 9,736
Continuing operations 14,209 631 14,840
Segment occupied beds 23,799 777 24,576
Elderly Care Specialist Total
%%%
Occupancy
Acquisitions 90.4 70.7 90.1
Continuing operations 91.7 91.0 91.6
Segment occupancy 91.2 86.4 91.0
£ £ £
Average weekly fee 465.1 872.6 478.0
28-week period ended 2 October 2005
Elderly Care Specialist Total
Number Number Number
Available beds
Acquisitions 15,874 701 16,575
Continuing operations –– –
Segment available beds 15,874 701 16,575
Occupied beds
Acquisitions 14,568 619 15,187
Continuing operations –– –
Segment occupied beds 14,568 619 15,187
Elderly Care Specialist Total
% % %
Occupancy
Acquisitions 91.8 88.3 91.6
Continuing operations n/a n/a n/a
Segment occupancy 91.8 88.3 91.6
£££
Average weekly fee 423.8 911.6 442.6
46 Southern Cross Healthcare Group PLC   Annual Report and Accounts 2006 3 Segmental Analysis continued
Primary Reporting Format – Business Segments
The following tables present income statement and balance sheet information regarding the Group’s business segments for the 28-week
period ended 2 October 2005 and the 52-week period ended 1 October 2006.
52-week period ended 1 October 2006
Elderly Care Specialist Total
£’m £’m £’m
Revenue
Acquisitions 218.8 6.5 225.3
Continuing operations 356.8 28.8 385.6
Segment Revenue 575.6 35.3 610.9
Home payroll costs
Acquisitions (124.6) (4.6) (129.2)
Continuing operations (197.3) (16.5) (213.8)
Segment Home payroll costs (321.9) (21.1) (343.0)
Home running costs
Acquisitions (29.2) (1.6) (30.8)
Continuing operations (43.5) (4.0) (47.5)
Segment Home running costs (72.7) (5.6) (78.3)
Home EBITDAR before central costs
Acquisitions 65.0 0.3 65.3
Continuing operations 116.0 8.3 124.3
Segment Home EBITDAR before central costs 181.0 8.6 189.6
Home EBITDAR before central costs (%)
Acquisitions 29.7 4.6 29.0
Continuing operations 32.5 28.8 32.2
Segment Home EBITDAR before central costs (%) 31.4 24.4 31.0
Total rent
Acquisitions (54.8) (1.0) (55.8)
Continuing operations (84.0) (7.0) (91.0)
Segment Rent (138.8) (8.0) (146.8)
Home EBITDA before central costs
Acquisitions 10.2 (0.7) 9.5
Continuing operations 32.0 1.3 33.3
Segment Home EBITDA before central costs 42.2 0.6 42.8
Unallocated expenses (42.5)
Unallocated income 1.3
Operating income 1.6
Assets and liabilities
Unallocated assets 374.7
Total assets 374.7
Unallocated liabilities (226.7)
Total liabilities (226.7)
Other segment information
Amortisation – all Elderly Care (note 13) (1.6)
Release of provision for vacant properties (recognised as Rent) – all Elderly Care (note 22) 1.4
Southern Cross Healthcare Group PLC   Annual Report and Accounts 2006 47 Notes to the IFRS Financial Information
For the 52 weeks ended 1 October 2006
3 Segmental Analysis continued
28-week period ended 2 October 2005
Elderly Care Specialist Total
£’m £’m £’m
Revenue
Acquisitions 172.9 15.3 188.2
Continuing operations –– –
Segment Revenue 172.9 15.3 188.2
Home payroll costs
Acquisitions (96.5) (8.3) (104.8)
Continuing operations –– –
Segment Home payroll costs (96.5) (8.3) (104.8)
Home running costs
Acquisitions (21.3) (1.9) (23.2)
Continuing operations –– –
Segment Home running costs (21.3) (1.9) (23.2)
Home EBITDAR before central costs
Acquisitions 55.1 5.1 60.2
Continuing operations – ––
Segment Home EBITDAR before central costs 55.1 5.1 60.2
Segment Home EBITDAR before central costs (%) 31.8 33.3 31.9
Total rent
Acquisitions (36.9) (3.6) (40.5)
Continuing operations –– –
Segment Rent (36.9) (3.6) (40.5)
Home EBITDA before central costs
Acquisitions 18.2 1.5 19.7
Continuing operations –– –
Segment Home EBITDA before central costs 18.2 1.5 19.7
Unallocated expenses (13.2)
Unallocated income 1.0
Operating income 7.5
Assets and liabilities
Unallocated assets 218.3
Total assets 218.3
Unallocated liabilities (221.7)
Total liabilities (221.7)
Other segment information
Amortisation – all Elderly Care (note 13) (0.9)
Release of provision for vacant properties – all Elderly Care (note 22) 0.5
48 Southern Cross Healthcare Group PLC   Annual Report and Accounts 2006 4 Exceptional Central Costs
52 weeks 28 weeks
ended ended
1 October 2 October
2006 2005
£’m £’m
Flotation costs 3.1 –
Restructuring and integration costs 1.8 0.9
Other 0.3 0.2
Total 5.2 1.1
Flotation costs are legal and professional costs incurred in association with the Company’s Initial Public Offering, on 12 July 2006, to the
extent they have not been charged to the Share Premium account.
Following the acquisition of Cannon Capital Ventures Limited (“Ashbourne”) (see note 29), the Group incurred redundancy costs of £0.6m
as part of integrating the senior operational management teams of Southern Cross and Ashbourne. On 10 January 2006, the Group
announced its decision to relocate the finance department of Ashbourne to its head office. The project has been completed. The total 
cost of this integration project, including redundancy costs, charged to the profit and loss account is £1.2m.
5 Sale of Subsidiary Undertakings
On 2 November 2005, the Group sold its investment in Southern Cross (Crown Holdings) Limited for cash consideration of £8.3m and
realised a loss on disposal of £0.1m.
On 18 January 2006, the Group sold its investment in Southern Cross Propco 1 Limited for cash consideration of £4.2m and realised 
a loss on disposal of £0.1m.
On 8 February 2006, the Group sold its investment in Moorpark Propco Limited for cash consideration of £5.1m and realised a profit on
disposal of £Nil.
On 8 February 2006, the Group sold its investment in Southern Cross Propco 2 Limited for cash consideration of £24m and realised 
a loss on disposal of £0.2m.
On 30 June 2006, the Group sold its investment in CC Care Propco Limited for cash consideration of £0.1m and realised a profit on disposal
of £Nil.
On 26 September 2006, the Group sold its investment in Bon Accord Limited for cash consideration of £2.0m and realised a profit on
disposal of £Nil.
On 11 September 2006, the Group sold its investment in Property Acqco Limited for cash consideration of £4.2m and realised a profit 
on disposal of £0.5m.
During the year the Group disposed of property, plant and equipment for a cash consideration totalling £4.0m. The related assets had a net
book value of £3.7m, resulting in a profit on disposal of £0.3m.
Southern Cross Healthcare Group PLC   Annual Report and Accounts 2006 49 Notes to the IFRS Financial Information
For the 52 weeks ended 1 October 2006
6 Operating Income
52 weeks 28 weeks
ended ended
1 October 2 October
2006 2005
£’m £’m
The following items have been included in arriving at operating income:
Staff costs (note 30) 341.6 110.5
Operating lease rentals 146.8 40.5
Depreciation of property, plant and equipment – owned assets (note 11) 10.1 2.6
Depreciation of property, plant and equipment – leased assets – –
Amortisation of intangibles (note 13) 1.6 0.9
Other operating income (0.9) (0.6)
Services Provided by the Group’s Auditor
During the year, the Group obtained the following services from the Group’s Auditor at costs as detailed below:
52 weeks 28 weeks
ended ended
1 October 2 October
2006 2005
£’m £’m
Audit service 
– statutory audit 0.2 0.1
Services relating to corporate finance and acquisitions 1.8 0.2
Non-audit services of £1.8m, include £1.6m in relation to the Company’s Initial Public Offering and have been included within the Share
Premium Account and £0.2m in respect of due diligence services, which were capitalised as part of acquisition costs.
Other operating income relates to management fees receivable in relation to a portfolio of homes owned by a third party and other
operating income.
7 Finance Costs and Finance Income
52 weeks 28 weeks
ended ended
1 October 2 October
2006 2005
£’m £’m
Interest payable on bank borrowings 6.2 3.8
Deep discount bond amortisation 7.0 2.9
Interest payable on loan notes 2.4 –
Amortisation of loan arrangement fees 3.1 0.2
Other finance costs 0.6 1.3
Fair value of financial instruments – 1.7
19.3 9.9
Bank interest receivable (0.3) –
Finance costs – net 19.0 9.9
50 Southern Cross Healthcare Group PLC   Annual Report and Accounts 2006 8 Taxation
52 weeks 28 weeks
ended ended
1 October 2 October
2006 2005
£’m £’m
Current tax
– current period (0.3) 1.0
– prior period 0.1 –
Deferred tax (note 24)
– current period (4.2) –
– prior period (0.9) –
Taxation (5.3) 1.0
The tax for the period is in line with the standard rate of corporation tax in the United Kingdom (30%).
52 weeks 28 weeks
ended ended
1 October 2 October
2006 2005
£’m £’m
Loss before taxation (17.4) (2.4)
Loss before taxation multiplied by the standard rate of 
corporation tax in the United Kingdom of 30% (5.2) (0.7)
Effects of:
Amortisation of intangibles 0.4 0.3
Expenses not deductible for tax purposes 0.4 1.4
Other (0.9) –
Tax (credit)/charge for the period (5.3) 1.0
The tax charge is expected to be lower than the standard rate in future periods, as the impact of non-deductible intangibles and
depreciation is expected to be outweighed by benefits from the use of tax assets, including brought-forward losses and capital allowance
pools.
9 Dividends Paid and Proposed
No dividends were declared or paid during the periods.
The Directors have proposed a final dividend of 1.1p per share, totalling £2.1m, in respect of the 52 week period ended 1 October 2006.
These financial statements do not reflect this proposed dividend.
Southern Cross Healthcare Group PLC   Annual Report and Accounts 2006 51 Notes to the IFRS Financial Information
For the 52 weeks ended 1 October 2006
10  Earnings per Ordinary Share
Basic earnings per share is calculated by dividing the loss for the period attributable to ordinary equity holders of the parent, by the
weighted average number of ordinary shares outstanding during the period.
Diluted earnings per share is calculated by dividing the loss for the period attributable to ordinary equity holders of the parent, by the
weighted average number of ordinary shares outstanding during the period plus the weighted average number of ordinary shares that
would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares.
The following reflects the share data used in the basic and diluted earnings per share calculations and incorporates the impact of the
bonus issue made to all shareholders on 5 July 2006. Further details of which are given in note 25.
52 weeks 28 weeks
ended ended
1 October 2 October
2006 2005
Number Number
Basic weighted average number of shares (excluding treasury shares) 128,879,343 74,043,101
Dilutive potential ordinary shares:
Employee share options – –
Diluted weighted average number of shares 128,879,343 74,043,101
The Group presents exceptional items and future minimum rental increases on the face of the income statement. Items that are considered
exceptional, by virtue of their size or incidence, are disclosed in order to improve a reader’s understanding of the financial information. 
To this end, additional basic and diluted earnings per share information is also presented on this basis. Reconciliations of earnings and 
the weighted average number of ordinary shares used are set out below:
52 weeks ended 28 weeks ended
1 October 2006 2 October 2005
Basic Diluted Basic Diluted
per share per share per share per share
Earnings amount amount Earnings amount amount
£’m p p £’m p p
Loss attributable to ordinary shareholders (12.1) (9.35) (9.35) (3.4) (0.05) (0.05)
Charge for future minimum rental increases 30.7 23.82 23.82 4.0 0.05 0.05
Exceptional central costs:
– Flotation costs 3.1 2.37 2.37 –– –
– Restructuring and integration costs 1.8 1.37 1.37 0.9 0.02 0.02
– Other 0.3 0.27 0.27 0.2 – –
Taxation impact of above (10.8) (8.39) (8.39) (1.5) (0.02) (0.02)
Profit attributable to ordinary shareholders 
before charges for future minimum rental increases 
and exceptional central costs and taxation impact thereof 13.0 10.04 10.04 0.2 – –
52 Southern Cross Healthcare Group PLC   Annual Report and Accounts 2006 11  Tangibles Fixed Assets
Property, Plant and Equipment
Fixtures, Short Assets
Freehold fittings and leasehold Motor under
properties equipment property vehicles construction Total
£’m £’m £’m £’m £’m £’m
Cost
On acquisition 9.5 12.0 4.8 1.5 0.6 28.4
Additions 10.0 4.0 0.2 0.1 1.8 16.1
Disposals (3.0) – – – – (3.0)
At 2 October 2005 16.5 16.0 5.0 1.6 2.4 41.5
Additions 6.1 13.9 0.8 0.6 8.4 29.8
Acquisitions (note 29) 79.4 17.1 6.9 0.1 – 103.5
Transfers 2.9 0.3 2.4 – (5.6) –
Disposals (65.1) (0.3) (0.5) (0.1) – (66.0)
At 1 October 2006 39.8 47.0 14.6 2.2 5.2 108.8
Accumulated depreciation
Charge for the period 0.1 2.1 0.1 0.3 – 2.6
At 2 October 2005 0.1 2.1 0.1 0.3 – 2.6
Charge for the period 0.2 8.7 0.6 0.6 – 10.1
Disposals – (0.2) – – – (0.2)
At 1 October 2006 0.3 10.6 0.7 0.9 – 12.5
Net book amount
At 1 October 2006 39.5 36.4 13.9 1.3 5.2 96.3
At 2 October 2005 16.4 13.9 4.9 1.3 2.4 38.9
Assets held under finance leases totalled £0.3m at 2 October 2005 and £0.5m at 1 October 2006.
During the period ended 1 October 2006, freehold properties with a net book value of £3.7m were disposed of for a consideration totalling
£4.0m, realising a profit on disposal of £0.3m.
Included within freehold properties as at 1 October 2006 are ten properties, with a cost of £27.9m. The Group expects to dispose of these
properties during the 2007 financial year.
Southern Cross Healthcare Group PLC   Annual Report and Accounts 2006 53 Notes to the IFRS Financial Information
For the 52 weeks ended 1 October 2006
12 Goodwill
Group £’m
Cost
On incorporation –
Acquisition of Southern Cross Bidco Limited and subsidiary undertakings 78.6
Acquisition of Highfield 54.6
Other acquisitions 3.1
At 2 October 2005 136.3
Acquisition of Cannon Capital Ventures Limited (note 29) 59.2
Other acquisitions (note 29) 0.5
At 1 October 2006 196.0
Impairment Test for Goodwill
Goodwill arising on acquisitions, as noted above, is not being amortised but tested annually for impairment.
For the purposes of this impairment review, goodwill is allocated to the Group’s two business segments. The recoverable amounts of these
cash generating units (CGUs) are determined based on value in use calculations. These cash flow projections are based on financial budgets
approved by management covering a ten-year period. Cash flows beyond the five-year period are extrapolated using the growth rates
stated below. The growth rates do not exceed the long-term average growth rate for sector in which the Group operates.
Key assumptions used for value in use calculations of both segments:
Growth rate 3%
Discount rate 9%
As at 2 October 2005 and 1 October 2006, no impairment charge to goodwill has been required.
13  Other Intangible Fixed Assets
Group
Other intangible assets
Resident Contracts
£’m
Cost
On incorporation –
Acquisition of Southern Cross Bidco Limited and subsidiary undertakings 4.9
At 2 October 2005 and 1 October 2006 4.9
Accumulated amortisation
On incorporation –
Charge for the period (0.9)
At 2 October 2005 (0.9)
Charge for the period (1.6)
At 1 October 2006 (2.5)
Net book amount
At 1 October 2006 2.4
At 2 October 2005 4.0
Resident contracts relate to intangible assets acquired through business combinations and represent the value of resident contracts, in place,
at the time of acquisition. The intangibles are measured using the income model, incorporating the expected cash flows to be generated
from residents as at the date of acquisition. 
54 Southern Cross Healthcare Group PLC   Annual Report and Accounts 2006 14  Other Non-Current Assets
Other non-current assets relate to landlord rental security deposits which will not be contractually released within 20 years.
15  Cash and Cash Equivalents
1 October 2 October
2006 2005
£’m £’m
Cash and cash equivalents
Cash at bank and in hand 21.9 4.2
21.9 4.2
16  Trade and other Current Assets
1 October 2 October
2006 2005
£’m £’m
Trade receivables 34.0 26.2
Less: provision for impairment of receivables (5.2) (3.9)
Trade receivables – net 28.8 22.3
Other receivables 1.1 2.7
Income taxes (note 19) 1.4 –
Prepayments and accrued income 10.3 5.4
Other current assets 12.8 8.1
17 Inventories
1 October 2 October
2006 2005
£’m £’m
Consumables 1.1 0.4
The replacement cost of inventory does not differ materially from the costs stated above. There were no write-downs of inventory in the
52 weeks ended 1 October 2006 or the 28 weeks ended 2 October 2005.
18  Trade and Other Payables – Current
1 October 2 October
2006 2005
£’m £’m
Trade payables 14.6 7.9
Other tax and social security payable 6.2 5.0
Other payables 9.4 8.7
Income taxes – 0.1
Accruals 35.2 15.5
65.4 37.2
Southern Cross Healthcare Group PLC   Annual Report and Accounts 2006 55 Notes to the IFRS Financial Information
For the 52 weeks ended 1 October 2006
19  Income Tax (Receivable)/Payable
1 October 2 October
2006 2005
£’m £’m
Current tax (1.4) 0.1
20 Financial Liabilities – Borrowings
a) Short-term Borrowings
1 October 2 October
2006 2005
£’m £’m
Bank loans (secured) – net of arrangement fees totalling £0.2m (2005 – £Nil) 23.9 14.0
Obligations under finance leases 0.1 0.1
Loan notes (guaranteed) 1.9 1.9
Other (note 35) – 13.9
Financial instruments – 3.9
25.9 33.8
The guarantee is provided by Barclays Bank PLC as part of the facilities agreement.
b) Long-term Borrowings
1 October 2 October
2006 2005
£’m £’m
Bank loans (secured) – net of arrangement fees totalling £1.8m (2005 – £1.9m) 58.5 69.1
Obligations under finance leases 0.3 0.1
Loan notes 2015 4.8 2.2
Deep discounted bonds – 57.6
63.6 129.0
Bank loans
The bank loans are secured by a fixed and floating charge over all of the assets of the Company and certain of its subsidiaries. Interest on
the bank loans is currently charged at a margin of 1.75% above LIBOR.
On 4 November 2005, the Group renegotiated its existing banking facility and increased its term loans by £38.7m as part of the funding 
for the acquisition of Ashbourne (see Note 29). Arrangement fees amounting to £1.2m were paid in relation to the bank loan finance and
were subsequently capitalised as part of the financial instruments. Throughout the year, the Group utilised its short-term development
facility to fund other acquisitions. On 12 July 2006, as part of the Company’s Initial Public Offering, the Company negotiated new banking
facilities and repaid all of its outstanding bank indebtedness from the proceeds of the public offering plus £67.2m of new bank loans
drawn. Unamortised arrangement fees of £3.1m, including fees paid as part of the financing for Ashbourne, were consequently charged 
to the profit and loss account as part of the redemption of bank loans on 12 July 2006.
Arrangement fees and professional costs amounting to £2.2m were paid in relation to the bank loan finance raised on 12 July 2006 and
have consequently been capitalised as part of the financial instruments at amortised cost. As at the year end, £0.2m of these fees had
been amortised and charged to the profit and loss account.
Of the total bank loans falling due within one year, £5.8m relates to term loans and £18.1m relates to short-term facilities drawn to fund
acquisitions.
56 Southern Cross Healthcare Group PLC   Annual Report and Accounts 2006 20 Financial Liabilities – Borrowings continued
Bank loans continued
On 4 May 2005, the Group entered into a three-year interest swap agreement at a fixed interest rate of 5.14% on £56.2m of debt. On 
3 March 2006, the Group entered into an eight-year interest swap agreement at a fixed interest rate of 5.94% on £57.1m of debt. Under
the terms of the agreements the notional amount reduces at each repayment date to hedge 100% of total-term bank debt. On 26 July
2006, the Group redeemed the existing interest rate swap at a cost of £5.26m. On the same day, the Group entered into a three-year
interest rate swap agreement at a fixed rate of 5.09% on £30m of debt.
Loan Notes
Loan notes due within one year are redeemable in 2007, are unsecured and bear interest at a rate of 0.75% below LIBOR.
Loan Notes 2015
The Loan Notes 2015 are unsecured bonds and are redeemable by 2015 and bear interest at a rate of 0.75% below LIBOR.
Deep Discount Bonds
Under the terms of an instrument dated 4 November 2005, the wholly-owned subsidiary, Southern Cross Investments No. 1 Limited, issued
£84.8m of Unsecured Deep Discount Bonds 2015 at an initial discount price of £32.3m. The redemption date was 2015.
Under the terms of an instrument dated 3 March 2006, the wholly-owned subsidiary, Southern Cross Investments No. 1 Limited, issued 
a further £27.7m of Unsecured Deep Discount Bonds 2015 at an initial discount price of £13.7m. The redemption date was 2015.
On 3 March 2006, the wholly-owned subsidiary, Southern Cross Investments No. 1 Limited, redeemed £4.9m of deep discount bonds
including accrued interest of £0.2m.
On 12 July 2006, the wholly-owned subsidiary, Southern Cross Investments No. 1 Limited, redeemed £107.1m of deep discount bonds
including accrued interest of £11.0m.
Arrangement fees of £0.3m relating to the deep discount bonds were initially capitalised at cost. During the period these costs have been
released to the income statement, following redemption of the instrument on 12 July 2006.
21  Other Non-Current Liabilities
1 October 2 October
2006 2005
£’m £’m
Provisions (note 22) 8.1 1.1
Future minimum rental increases 63.7 20.6
71.8 21.7
Future minimum rental increases represent the cumulative difference, between operating lease charges under IFRS and the amounts
actually paid during the period (note 37).
An analysis of the movement during the period is given below:
1 October 2 October
2006 2005
£’m £’m
Opening balance 20.6 –
On acquisition (note 29) 12.4 16.6
Charged to income statement 30.7 4.0
Closing balance 63.7 20.6
Southern Cross Healthcare Group PLC   Annual Report and Accounts 2006 57 Notes to the IFRS Financial Information
For the 52 weeks ended 1 October 2006
22  Provisions for Liabilities and Charges
Vacant
properties
£’m
On acquisition 1.6
Utilised in the period (0.5)
At 2 October 2005 1.1
On acquisition (note 29) 8.4
Utilised in the period (1.4)
At 1 October 2006 8.1
Provision for vacant properties relates to rents payable on leased properties acquired as part of the acquisitions of Southern Cross Bidco Limited
and Cannon Capital Ventures Limited (see note 29) and their respective subsidiary undertakings. The longest lease expiry is April 2018 
and in the opinion of the directors the re-letting of these properties is extremely unlikely.
23 Financial Instruments
Numerical financial instruments disclosures are set out below. Additional disclosures are set out in the accounting policies relating to risk
management.
In accordance with IAS 39, “Financial Instruments: Recognition and Measurement”, management has reviewed contracts for embedded
derivatives that are required to be separately accounted for if they do not meet certain requirements set out in the standard. No such
embedded derivatives were found.
Financial Instruments
The Group’s financial instruments, other than derivatives, comprise borrowings, cash and liquid resources and various items such as trade
receivables and trade payables, that arise directly from its operations. The main purpose of these financial instruments is to manage the
finance for the Group’s operations. The Group also enters into derivative transactions (principally interest rate swaps). The purpose of such
transactions is to manage the interest rate risks arising from the Group’s operations and its sources of finance.
It is, and has been throughout the period under review, the Group’s policy that no trading in financial instruments shall be undertaken. 
The main risks arising from the Group’s financial instruments are interest rate risk and liquidity risk. The Board reviews and agrees policies
for managing each of these risks and they are summarised below. These policies remained unchanged throughout the periods presented.
Interest Rate Risk
The Group finances its operations through a mixture of retained profits and bank borrowings. The Group borrows in sterling at both fixed
and floating rates of interest and then uses interest rate swaps to manage the Group’s exposure to interest rate fluctuations.
Liquidity Rate Risk
As regards liquidity, the Group’s policy throughout the periods presented has been to maintain a mix of short, medium and long-term
borrowings with a number of banks and institutions. Short-term flexibility is achieved by overdraft facilities. It is, in addition, the Group’s
policy to maintain borrowing facilities with a syndicate of banks.
Currency Risks
The Group is based in the United Kingdom, with its operations entirely within the United Kingdom. It does not hold any investment in
overseas operations and consequently the balance sheet is not exposed to movements in currency exchange rates. The Group does not
have sales or purchase transactions in currencies other than the unit’s functional currency and consequently does not have transactional
currency exposures.
58 Southern Cross Healthcare Group PLC   Annual Report and Accounts 2006 23 Financial Instruments continued
Numerical Disclosures
Interest Rate Risk Profile of Financial Liabilities
After taking into account interest rate swaps entered into by the Group, the interest rate and currency profile of the Group’s financial
liabilities is:
At 1 October 2006
Fixed Floating
rate rate
financial financial
liabilities liabilities Total
Sterling £’m £’m £’m
Bank borrowings 30.0 54.4 84.4
Finance leases – 0.4 0.4
Trade and other payables (no interest paid) 65.4 – 65.4
Loan notes – 6.7 6.7
Onerous lease provisions (no interest paid) 8.1 – 8.1
103.5 61.5 165.0
Fixed rate weighted average interest rate, excluding no interest-paid items (%) 5.09%
Fixed rate weighted average interest period, excluding no interest-paid items (years) 2.80
At 2 October 2005
Fixed Floating
rate rate
financial financial
liabilities liabilities Total
Sterling £’m £’m £’m
Bank overdraft and borrowings 59.5 25.5 85.0
Trade and other payables (no interest paid) 37.2 – 37.2
Finance leases 0.2 – 0.2
Deep discount bonds 57.6 – 57.6
Loan notes 4.1 – 4.1
Other loans – 13.8 13.8
Onerous lease provisions (no interest paid) 1.1 – 1.1
159.7 39.3 199.0
Fixed rate weighted average interest rate, excluding no interest-paid items (%) 7.60
Fixed rate weighted average interest period, excluding no interest-paid items (years) 6.40
The floating rate financial liabilities have comprised:
l Sterling denominated bank borrowings and overdrafts that bear interest at rates between 1.75% and 3.25% above UK bank base rates.
l Sterling denominated loan notes that bear interest at between 0.75% below LIBOR and 10%.
l Sterling denominated other loans that bear interest at a rate of 2% above UK bank base rate.
l Sterling denominated deep discount bonds that bear interest at 10%. 
Southern Cross Healthcare Group PLC   Annual Report and Accounts 2006 59 Notes to the IFRS Financial Information
For the 52 weeks ended 1 October 2006
60 Southern Cross Healthcare Group PLC   Annual Report and Accounts 2006
23 Financial Instruments continued
Interest Rate Risk of Financial Assets:
The currency profile of the Group’s interest rate risk of financial assets is:
1 October 2 October
2006 2005
£’m £’m
Cash 21.9 4.2
Accounts receivable due within one year 29.9 25.0
Accounts receivable due in more than one year 2.5 0.1
54.3 29.3
Interest accrues on cash balances held at floating rates and accounts receivable balances do not attract interest.
Maturity of Financial Liabilities and Undrawn Commitments:
The maturity profile of the Group’s financial liabilities were as follows:
1 October 2 October
2006 2005
£’m £’m
Within one year 92.3 67.8
In more than one year, but less than two years 6.9 2.2
In more than two years, but less than five years 50.3 8.9
More than five years 15.5 120.1
165.0 199.0
The Group’s undrawn commitments’ expiry date were as follows:
1 October 2 October
2006 2005
£’m £’m
Within one year –
More than five years 46.8 20.9
46.8 20.9
Currency Exposures on Monetary Assets
The Group does not have any currency exposures that give rise to net currency gains and losses to be recognised in the profit and loss
account.
Fair Values of Financial Assets and Liabilities
1 October 2006 2 October 2005
Book Fair Book Fair
Primary financial instruments held or value value value value
issued to finance the Group’s operations £’m £’m £’m £’m
Borrowings 91.5 91.5 160.7 160.6
Other financial liabilities 73.5 73.5 38.3 38.3
Financial assets 54.3 52.2 29.3 29.2
Derivative financial instruments held
to manage the interest rate profile
Interest rate swap – liability –– 3.9 3.9 Southern Cross Healthcare Group PLC   Annual Report and Accounts 2006 61
23 Financial Instruments continued
Interest rate swap contracts have been marked to market to produce fair value figures. All other fair values shown above have been
calculated by discounting cash flows at prevailing interest rates. For floating rate bank loans, fair values closely approximate to book values.
The fair value of short-term loans and overdrafts approximate to the fair carrying value because of the short maturity of these instruments.
The fair value of long-term borrowings approximate to the carrying value reported in the balance sheet as the majority are floating rate.
Gains and Losses on Hedges
The Group enters into interest rate swaps to manage its interest rate exposure. Currently the Group does not apply hedge accounting.
24  Deferred Tax
Deferred tax is calculated in full on temporary differences under the liability method using a tax rate of 30% (2005 – 30%)
The movement on the deferred tax account is as shown below:
1 October 2 October
2006 2005
£’m £’m
Opening balance (4.0) –
Income and expense credit (5.1) –
On acquisition (3.8) (4.0)
Closing balance (12.9) (4.0)
Deferred tax assets have been recognised in respect of all tax losses and other temporary differences giving rise to deferred tax assets
where it is probable that these assets will be recovered. Deferred tax assets of £8.4m (2005 – £0.0m) were not recognised in respect 
of losses that can be carried forward against future taxable income.
The movements in deferred tax assets and liabilities (prior to the offsetting of balances within the same jurisdiction as permitted by IAS12)
during the period are shown below.
Deferred tax assets and liabilities are only offset where there is a legally enforceable right of offset and there is an intention to settle the
balances net.
Deferred Tax Assets
Accelerated
Operating tax
leases depreciation Other Total
£’m £’m £’m £’m
On incorporation –– ––
Income and expense charge/(credit) (1.2) 1.2 ––
Acquisition of subsidiary (5.0) 1.6 (0.6) (4.0)
At 2 October 2005 (6.2) 2.8 (0.6) (4.0)
Income and expense (credit)/charge (9.2) 2.7 1.4 (5.1)
Acquisition of subsidiary (3.7) (0.1) – (3.8)
At 1 October 2006 (19.1) 5.4 0.8 (12.9) Notes to the IFRS Financial Information
For the 52 weeks ended 1 October 2006
62 Southern Cross Healthcare Group PLC   Annual Report and Accounts 2006
25 Called Up Equity Share Capital
1 October 2 October
2006 2005
Number Number
Authorised: 
Ordinary shares of 1p each 300,000,000 1,000,000
£’m £’m
Ordinary shares of 1p each 3 –
Number Number
Allotted, called up and fully paid:
Ordinary shares of 1p each 188,067,377 459,540
£’m £’m
Ordinary shares of 1p each 1.9 –
On 13 June 2006, the authorised share capital of the Company was increased from £10,000 to £55,405 by the creation of 45,405
redeemable shares of £1 each. On 6 July 2006, the Company held an Extraordinary General Meeting, and passed resolutions to increase
the authorised share capital of the Company from £55,405 to £3,045,405 by the creation of 299,000,000 ordinary shares of 1p each and 
to authorise the Directors to issue ordinary shares with an aggregate nominal amount of £1,307,037.
On 13 June 2006, the Company issued 45,405 redeemable shares of £1 each for cash. On Admission to the London Stock Exchange on 
7 July 2006, the Company allotted and issued 77,777,777 ordinary shares of 1p at 225p per share for cash and made a bonus issue of
109,830,060 ordinary shares of 1p. A bonus issue was made to all shareholders included on the register of members at 5pm on 5 July
2006 and represents a holding of 240 ordinary shares to every ordinary share held as at 5pm on 5 July 2006. The Company also redeemed
and cancelled 45,405 redeemable shares of £1 each.
26  Reserves
Share Profit
premium and loss
account account
Group £’m £’m
On incorporation ––
Loss attributable to ordinary shareholders – (3.4)
At 2 October 2005 – (3.4)
Loss attributable to ordinary shareholders – (12.1)
Share-based payments – 0.1
Issue of ordinary share capital 173.1 –
Costs incurred in relation to issuance of ordinary share capital (11.6) –
At 1 October 2006 161.5 (15.4) Southern Cross Healthcare Group PLC   Annual Report and Accounts 2006 63
27 Shareholders’ Funds and Statement of Changes in Shareholders’ 
(Deficit)/Equity
Share Profit
Share premium and loss
capital account equity Total
Group £’m £’m £’m £’m
On incorporation –– ––
Loss attributable to ordinary shareholders – – (3.4) (3.4)
At 2 October 2005 – – (3.4) (3.4)
Loss attributable to ordinary shareholders – – (12.1) (12.1)
Share-based payments – – 0.1 0.1
Issue of ordinary share capital 1.9 173.1 – 175.0
Costs incurred in relation to issuance of ordinary share capital – (11.6) – (11.6)
At 1 October 2006 1.9 161.5 (15.4) 148.0
28 Cash Flows from Operating Activities
Reconciliation of loss before taxation to net cash flow from operating activities:
1 October 2 October
2006 2005
£’m £’m
Loss before taxation (17.4) (2.4)
Adjustments for: 
Profit on disposal of property, plant and equipment and subsidiary undertakings (0.4) (0.4)
Depreciation 10.1 2.6
Amortisation 1.6 0.9
Finance costs 19.3 9.9
Finance income (0.3) –
Changes in working capital (excluding effects of acquisitions of subsidiaries) 
Increase in inventories 0.4 –
Decrease/(increase) in trade and other receivables 1.3 (6.0)
Increase in payables 6.5 6.9
Increase in provision for future minimum rental payable 30.7 4.0
Decrease in provisions (1.2) (0.5)
Cash generated from operations 50.6 15.0 Notes to the IFRS Financial Information
For the 52 weeks ended 1 October 2006
64 Southern Cross Healthcare Group PLC   Annual Report and Accounts 2006
29  Acquisitions
Acquisition of Cannon Capital (“Ashbourne”)
On 4 November 2005 (effective date 30 October 2005), the Group acquired the entire share capital of Cannon Capital Ventures Limited
(“Ashbourne”) at an enterprise value of £54.3m, being consideration of £54.3m. In calculating the goodwill arising on acquisition, the fair
value of Ashbourne has been assessed and adjustments from book value have been made where necessary. The acquired business contributed
revenues of £208.4m and profit after taxation of £5.2m to the Group for the period from 30 October 2005 to 1 October 2006. If the
acquisition had occurred on 3 October 2005, Group revenue would have been £628.1m.
The residual excess over the net assets acquired is recognised as goodwill in the financial statements. The fair value adjustments are
summarised in the following table:
Carrying value
pre acquisition Fair value
Ashbourne £’m £’m
Property, plant and equipment 40.1 40.1
Inventories 1.1 1.0
Receivables 13.6 12.5
Payables (24.3) (25.2)
Provisions (3.5) (8.2)
Future minimum rental increases (12.4) (12.4)
Taxation
– Deferred 3.8 3.8
Cash and cash equivalents 10.7 10.7
Minority interests 0.2 0.2
Loans (27.4) (27.4)
Net liabilities acquired 1.9 (4.9)
Goodwill 59.2
Consideration 54.3
Consideration satisfied by:
Cash 54.3
54.3
£’m
Cash consideration (54.3)
Cash acquired 10.7
(43.6)
The fair value adjustments are as follows:
£’m
Provision for onerous leases 4.7
Provision for inventories 0.1
Provision for doubtful debts 1.1
Liabilities not recorded 0.9
6.8
No intangible assets were acquired as part of the acquisition of Ashbourne. Southern Cross Healthcare Group PLC   Annual Report and Accounts 2006 65
29  Acquisitions continued
Other Acquisitions
On 11 October 2005, the Group acquired the entire share capital of St Oswald’s Limited at a share consideration of £1.5m, being cash
consideration.
On 1 November 2005, the Group acquired the entire share capital of Rozelle Healthcare Limited at an enterprise value £18.3m, being cash
consideration.
On 19 January 2006, the Group acquired the entire share capital of Downing (Bon Accord) Limited at an enterprise value of £1.9m, being
cash consideration.
On 8 March 2006, the Group acquired the entire share capital of CC Care Limited at an enterprise value of £8.4m, being cash consideration.
On 9 August 2006, the Group acquired the entire share capital of YCH No.1 Limited at an enterprise value of £18.2m, being cash
consideration.
The acquired businesses contributed revenues of £11.4m and earnings after taxation of £0.4m to the Group for the period from acquisition
to 1 October 2006.
It is not possible to determine the pre-acquisition profit or loss of the above acquisitions. As such, performance on a stand alone basis, 
for the 52 weeks ended 1 October 2006, has not been reported by the Group.
In calculating the goodwill arising on these acquisitions, the provisional fair values of the assets acquired have been assessed and
adjustments from book value have been made where necessary. These adjustments are summarised in the following table:
Provisional
fair value to
Book value Adjustments the Group
£’m £’m £’m
Tangible fixed assets 40.3 23.1 63.4
Stock –– –
Debtors 0.5 (0.1) 0.4
Cash
Total assets
Creditors (0.8) – (0.8)
Overdrafts (0.3) – (0.3)
Long term loans (12.6) – (12.6)
Provisions for liabilities and charges (0.4) – (0.4)
Total liabilities
Net assets 26.7 23.0 49.7
Cost of acquisition 50.2
Goodwill arising on acquisition 0.5
The provisional fair value adjustments relate to the valuation of freehold property to market value and provision for bad and doubtful debts.
In the opinion of the Directors, these acquisitions are not material to the Group and consequently no further profit and loss disclosures
have been provided. Notes to the IFRS Financial Information
For the 52 weeks ended 1 October 2006
66 Southern Cross Healthcare Group PLC   Annual Report and Accounts 2006
30  Employees and Directors
52 weeks 28 weeks
ended ended
1 October 2 October
2006 2005
£’m £’m
Staff costs for the Group during the period
Wages and salaries 321.8 102.9
Social security costs 25.5 7.4
Other pension costs 0.5 0.2
347.8 110.5
Staff costs for the Group by function
Home payroll costs – excluding agency and other staff-related costs 331.8 99.8
Central payroll costs 16.0 10.7
347.8 110.5
Home payroll costs, as disclosed on the face of the income statement include agency and other staff-related costs. Agency and other staff-
related costs totalled £11.2m and £5.0m for the periods ended 1 October 2006 and 2 October 2005 respectively. 
Average monthly number of people (including executive directors) employed:
52 weeks 28 weeks
ended ended
1 October 2 October
2006 2005
Number Number
By activity
Care and ancillary 21,119 13,645
Management and administration 1,242 828
22,361 14,473
Directors’ Remuneration
A detailed analysis of Directors’ remuneration, including salaries, performance-related bonuses and share option schemes is provided in the
remuneration report on pages 30 to 33 under the heading Directors’ remuneration, which form part of these financial statements.
The total remuneration of the Directors comprises:
2006 2005
£’m £’m
Aggregate emoluments 2.0 0.7
Compensation for loss of office 0.2 –
Company contributions to money purchase pension schemes 0.1 –
2.3 0.7
Details of the highest-paid Director are given in the remuneration report under the heading Directors’ remuneration.
The key management of the Group are deemed to be the Board of Directors who have authority and responsibility for planning and
controlling all significant activities of the Group.  Southern Cross Healthcare Group PLC   Annual Report and Accounts 2006 67
31  Pension Charge
Pension costs for defined contribution schemes are as follows:
52 weeks 28 weeks
ended ended
1 October 2 October
2006 2005
£’m £’m
Defined contribution schemes 0.5 0.2
32  Contingent Liabilities
The Group has provided guarantees to certain of the Group’s landlords and holders of loan notes. As at 1 October 2006 these guarantees
totalled £15.1m.
33  Financial Commitments
At 2 October 2005 and 1 October 2006 the Group and Company had commitments under non-cancellable operating leases expiring 
as follows:
1 October 2 October
2006 2005
£’m £’m
Within one year 161.3 146.8
Within one to three years 322.6 293.6
Within three to five years 322.6 293.6
Over five years 3,011.2 1,753.1
3,817.7 2,487.1
The majority of operating leases provide for fixed annual increases at 2.5% or 2.75%, or annual rent increases based on the retail price
index, subject to negotiated caps and collars.
Financial commitments, due within one year, under non-cancellable operating leases and analysed by nature of lease terms is included
below.
1 October 2 October
2006 2005
£’m £’m
Annual rental increases based on RPI subject to cap and collar arrangement 41.6 37.9
Fixed annual rental increases 101.9 92.7
Five-yearly, fixed, rental increases 8.9 8.1
Annual rental increases based on RPI 8.9 8.1
161.3 146.8 Notes to the IFRS Financial Information
For the 52 weeks ended 1 October 2006
68 Southern Cross Healthcare Group PLC   Annual Report and Accounts 2006
34  Share-based Payments
The total charge for share-based payments was £147,797 (2005 – £Nil) all of which relates to equity settled transactions. After deferred
tax, the total charge was £103,458 (2005 – £Nil).
Performance Share Plan
The Southern Cross Healthcare Group 2006 Performance Share Plan (the “PSP”) is available to Executive Directors and approximately 
100 members of senior management. Annual grants are made under the PSP with a value of up to 100% of an individual’s salary. 
Vesting of options is subject to performance conditions based on earnings per share and total shareholder return. Further details 
of the vesting conditions are given in the remuneration report on page •.
A reconciliation of option movements during the period is given below:
52 weeks ended 28 weeks ended
1 October 2006 2 October 2005
Weighted Weighted
average average
exercise exercise
Number price Number price
’000 p ’000 p
Outstanding:
Beginning of period – n/a – n/a
Granted 2,365 £Nil – n/a
End of period 2,365 £Nil – n/a
The fair value of Company’s options granted in the period ended 1 October 2006 and the assumptions used in the calculation are as
follows:
52 weeks
ended
1 October
2006
Grant date 4 September 2006
Share price at grant date £2.94
Exercise price £Nil
Number granted 2,365,332
Option pricing model Monte Carlo
Vesting period (years) 3
Expected volatility 26.00%
Contracted life (years) 3
Risk free rate 5.02%
Dividend yield 0.00%
Fair value per option £2.94
Expected volatility is based on historical volatility of shares is the same sector over the last ten years. The risk-free rate of return is the
yield on zero-coupon UK government bonds of a term consistent with assumed option life.
The weighted average remaining contractual life of options outstanding at the end of the period was 2.9 years. Southern Cross Healthcare Group PLC   Annual Report and Accounts 2006 69
35  Ultimate Parent Undertaking and Related Party Transactions
The Group presents details of transactions with related parties. Note (a) details transactions with Directors, and note (b) details transactions
with entities controlled by the Blackstones Group.
a) Transactions with Directors and Management
Unsecured loan notes issued by Southern Cross Healthcare Investments No. 2 Limited:
P Scott C Rutter G Sizer J Murphy W Colvin
£’m £’m £’m £’m £’m
On incorporation – – – – –
Purchase of unsecured 10% interest-bearing bonds 2015 (nominal amount) 0.8 0.4 0.6 0.1 0.2
Discount accrued during period – – – – –
Balance at 2 October 2005 0.8 0.4 0.6 0.1 0.2
Discount accrued during period – – – – –
Redeemed (0.8) (0.4) (0.6) (0.1) (0.2)
Balance at 1 October 2006 – – – – –
Unsecured Loan Notes issued by TBG Careco Investments No. 1 Limited:
P Scott C Rutter G Sizer J Murphy W Colvin
£’m £’m £’m £’m £’m
On incorporation – – – – –
Purchase of unsecured 10% interest-bearing unsecured bonds 
2015 (nominal amount) 0.4 0.2 – 0.2 0.4
Discount accrued during period – – –– –
Balance at 2 October 2005 0.4 0.2 – 0.2 0.4
Discount accrued during period – – – – –
Redeemed (0.4) (0.2) – (0.2) (0.4)
Balance at 1 October 2006 – – – – –
b) Transactions with Shareholders
In addition, unsecured deep discount bonds were issued by Southern Cross Healthcare Investments No. 1 Limited, to the following
shareholders:
Total Nominal Interest
Entity £’m £’m £’m
BCP (Cayman) IV LP
Balance at incorporation –– –
Issue of DDBs 38.6 38.6 –
Accrued discount 1.6 – 1.6
Redeemed (7.8) (7.6) (0.2)
Balance at 2 October 2005 32.4 31.0 1.4
Issue of DDBs 26.8 25.9 0.9
Accrued discount 3.9 – 3.9
Redeemed (63.1) (56.9) (6.2)
Balance at 1 October 2006 –– – Notes to the IFRS Financial Information
For the 52 weeks ended 1 October 2006
70 Southern Cross Healthcare Group PLC   Annual Report and Accounts 2006
35 Ultimate Parent Undertaking and Related Party Transactions continued
b) Transactions with Shareholders continued
Total Nominal Interest
Entity £’m £’m £’m
BCP (Cayman) IV A LP 
Balance at incorporation –– –
Issue of DDBs 0.7 0.7 –
Redeemed (0.1) (0.1) –
Balance at 2 October 2005 0.6 0.6 –
Issue of DDBs 0.5 0.5 –
Accrued discount 0.1 – 0.1
Redeemed (1.2) (1.1) (0.1)
Balance at 1 October 2006 –– –
BFI (Cayman) IV A 
Balance at incorporation –– –
Issue of DDBs 1.8 1.8 –
Accrued discount 0.1 – 0.1
Redeemed (0.4) (0.4) –
Balance at 2 October 2005 1.5 1.4 0.1
Issue of DDBs 1.2 1.2 –
Accrued discount 0.2 – 0.2
Redeemed (2.9) (2.6) (0.3)
Balance at 1 October 2006 –– –
BPP (Cayman) IV LP 
Balance at incorporation –– –
Issue of DDBs 0.1 0.1 –
Balance at 2 October 2005 0.1 0.1 –
Issue of DDBs 0.1 0.1 –
Accrued discount –– –
Redeemed (0.2) (0.2) –
Balance at 1 October 2006 –– –
BREP (Alberta) IV LP 
Balance at incorporation –– –
Issue of DDBs 3.5 3.5 –
Accrued discount 0.2 – 0.2
Redeemed (0.7) (0.7) –
Balance at 2 October 2005 3.0 2.8 0.2
Issue of DDBs 2.5 2.4 0.1
Accrued discount 0.4 – 0.4
Redeemed (5.9) (5.2) (0.7)
Balance at 1 October 2006 – –– Southern Cross Healthcare Group PLC   Annual Report and Accounts 2006 71
35 Ultimate Parent Undertaking and Related Party Transactions continued
b) Transactions with Shareholders continued
Total Nominal Interest
Entity £’m £’m £’m
BREP (Alberta) IV TE 1 LP 
Balance at incorporation –– –
Issue of DDBs 1.2 1.2 –
Accrued discount 0.1 – 0.1
Redeemed (0.2) (0.2) –
Balance at 2 October 2005 1.1 1.0 0.1
Issue of DDBs 0.8 0.8 –
Accrued discount 0.1 – 0.1
Redeemed (2.0) (1.8) (0.2)
Balance at 1 October 2006 –– –
BREP (Alberta) IV TE 2 LP 
Balance at incorporation –– –
Issue of DDBs 2.3 2.3 –
Accrued discount 0.1 – 0.1
Redeemed (0.5) (0.5) –
Balance at 2 October 2005 1.9 1.8 0.1
Issue of DDBs 1.6 1.6 –
Accrued discount 0.2 – 0.2
Redeemed (3.7) (3.4) (0.3)
Balance at 1 October 2006 –– –
BREP (Alberta) IV TE 3 A LP 
Balance at incorporation –– –
Issue of DDBs 2.0 2.0 –
Accrued discount 0.1 – 0.1
Redeemed (0.4) (0.4) –
Balance at 2 October 2005 1.7 1.6 0.1
Issue of DDBs 1.4 1.4 –
Accrued discount 0.2 – 0.2
Redeemed (3.3) (3.0) (0.3)
Balance at 1 October 2006 –– –
BREP (Alberta) IV F LP 
Balance at incorporation –– –
Issue of DDBs 1.2 1.2 –
Accrued discount 0.1 – 0.1
Redeemed (0.3) (0.3) –
Balance at 2 October 2005 1.0 0.9 0.1
Issue of DDBs 0.9 0.9 –
Accrued discount 0.1 – 0.1
Redeemed (2.0) (1.8) (0.2)
Balance at 1 October 2006 –– – Notes to the IFRS Financial Information
For the 52 weeks ended 1 October 2006
35 Ultimate Parent Undertaking and Related Party Transactions continued
b) Transactions with Shareholders continued:
Total Nominal Interest
Entity £’m £’m £’m
BREP (Alberta) IV LP 
Balance at incorporation –– –
Issue of DDBs 0.6 0.6 –
Redeemed (0.1) (0.1) –
Balance at 2 October 2005 0.5 0.5 –
Issue of DDBs 0.4 0.4 –
Accrued discount 0.1 – 0.1
Redeemed (1.0) (0.9) (0.1)
Balance at 1 October 2006 –– –
BREP International IE LP 
Balance at incorporation –– –
Issue of DDBs 7.7 7.7 –
Accrued discount 0.3 – 0.3
Redeemed (1.5) (1.5) –
Balance at 2 October 2005 6.5 6.2 0.3
Issue of DDBs 5.3 5.1 0.2
Accrued discount 0.8 – 0.8
Redeemed (12.6) (11.3) (1.3)
Balance at 1 October 2006 –– –
BREP International ID LP 
Balance at incorporation –– –
Issue of DDBs 3.6 3.6 –
Accrued discount 0.1 – 0.1
Redeemed (0.7) (0.7) –
Balance at 2 October 2005 3.0 2.9 0.1
Issue of DDBs 2.5 2.4 0.1
Accrued discount 0.4 – 0.4
Redeemed (5.9) (5.3) (0.6)
Balance at 1 October 2006 –– –
BREP International ID 2 LP 
Balance at incorporation –– –
Issue of DDBs 4.2 4.2 –
Accrued discount 0.2 – 0.2
Redeemed (0.9) (0.9) –
Balance at 2 October 2005 3.5 3.3 0.2
Issue of DDBs 2.9 2.8 0.1
Accrued discount 0.4 – 0.4
Redeemed (6.8) (6.1) (0.7)
Balance at 1 October 2006 –– –
72 Southern Cross Healthcare Group PLC   Annual Report and Accounts 2006 35 Ultimate Parent Undertaking and Related Party Transactions continued
b) Transactions with Shareholders continued:
Total Nominal Interest
Entity £’m £’m £’m
BREP International A LP 
Balance at incorporation –– –
Issue of DDBs 0.7 0.7 –
Redeemed (0.1) (0.1) –
Balance at 2 October 2005 0.6 0.6 –
Issue of DDBs 0.5 0.5 –
Accrued discount 0.1 – 0.1
Redeemed (1.2) (1.1) (0.1)
Balance at 1 October 2006 –– –
BREP International B LP 
Balance at incorporation –– –
Issue of DDBs 0.2 0.2 –
Balance at 2 October 2005 0.2 0.2 –
Issue of DDBs 0.1 0.1 –
Redeemed (0.3) (0.3) –
Balance at 1 October 2006 –– –
Total
Balance at incorporation –– –
Issue of DDBs 68.5 68.5 –
Accrued discount 2.9 – 2.9
Redeemed (13.9) (13.6) (0.3)
Balance at 2 October 2005 57.5 54.9 2.6
Issue of DDBs 47.5 46.0 1.5
Accrued discount 6.9 – 6.9
Redeemed (111.9) (100.9) (11.0)
Balance at 1 October 2006 –– –
During the period 8 April 2005 to 3 March 2006, TBG Careco Holdings Limited and its subsidiary undertakings were deemed related parties
of the Group by virtue of common control.
As part of the reconstruction of the business in April 2005, NHP Limited (formerly NHP plc, one of the Group’s principal landlords), a
subsidiary of TBG Careco Holdings Limited, provided funding to the Group of £13,767,000. Interest was charged on the balance at 2% 
over Bank of England base rate and the loan was repaid on 3 March 2006. The balance outstanding at 2 October 2005 was £13,837,417.
Total interest charged in the period ended 2 October 2005 was £0.1m and in the period ended 1 October 2006 was £0.4m.
Southern Cross Healthcare Group PLC   Annual Report and Accounts 2006 73 Notes to the IFRS Financial Information
For the 52 weeks ended 1 October 2006
35 Ultimate Parent Undertaking and Related Party Transactions continued
b) Transactions with Shareholders continued
In addition, rent and insurance premiums were paid to NHP Limited during the period. These transactions are summarised in the table below:
Rent
Insurance Total prepaid at 
Rent premiums amounts balance 
payable payable payable sheet date
£’m £’m £’m £’m
Period ended 2 October 2005 30.9 0.3 31.2 1.7
Period ended 1 October 2006 67.0 0.6 67.6 2.4
All transactions between the Group and NHP Limited have been undertaken on an arm’s length basis and on normal commercial terms.
Transactions with Blackstone Management Partners IV LLC are disclosed within the remuneration report.
36  Principal Subsidiary Undertakings
The principal subsidiary undertakings as at 1 October 2006, all of which are registered in England and Wales (unless otherwise stated:
SC = registered in Scotland; NI = registered in Northern Ireland) and have been consolidated in the Group financial information, are as follows:
74 Southern Cross Healthcare Group PLC   Annual Report and Accounts 2006
Care home operating companies 
Abbeycourt Care Limited (SC)
Active Care Partnerships (Broadoaks) Limited
Active Care Partnerships (Churchfields) Limited
Active Care Partnerships (Drummond) Limited
Active Care Partnerships (Fryers) Limited
Active Care Partnerships (InterCare) Limited
Active Care Partnerships (Lombardy) Limited
Active Care Partnerships Limited
APTA Healthcare (UK) Limited
Ashbourne (Eton) Limited
Ashbourne Boss Limited
Ashbourne Care Homes (Bucks) Limited
Ashbourne Group Europe Limited
Ashbourne Group UK Limited (SC)
Ashbourne Homes Limited (SC)
Ashbourne Life Limited
Atlas Healthcare (South West) Limited
CC Care Limited 
Chiltern Care Homes Limited
Dunlarg Home Limited (NI)
Exceler Health Care Group Limited
Exceler Healthcare Services Leasing Limited
Exceler Healthcare Services Limited
Exceler Ireland Limited
Longfield Care Limited (NI)
Modelfuture Limited
Moorpark Kilbirnie Limited
Networked Living Limited
Networking Care Partnerships (South West) Limited
Nightingale Private Nursing Home Limited (NI)
Southern Cross (RZ) Limited
Southern Cross Care Centres Limited
Southern Cross Care Homes No.2 Limited
Southern Cross Care Homes No.3 Limited
Southern Cross Cymru Limited
Southern Cross Healthcare (Cheshire) Limited
Southern Cross Healthcare (Clyde) Limited
Southern Cross Healthcare (Kent) Limited
Southern Cross Healthcare (South East) Limited
Southern Cross Healthcare (West) Limited
Southern Cross Healthcare Centres Limited
Southern Cross Healthcare Facilities Limited
Southern Cross Healthcare Services Limited
Southern Cross Home Properties (Perth) Limited (SC)
Southern Cross Home Properties Limited
Southern Cross Management Limited
Southern Cross Operations (No.2) Limited
Southern Cross Operations Limited
Southern Cross (ATA) Limited
Southern Cross (Hamilton) Limited
Standford Homes Limited
Trinity Care (Brookfield) Limited
Trinity Care (Hove) Limited
Trinity Care (Whitchurch) Limited
Trinity Care Homes Limited
Trinity Care Limited
Trinity Care (Crown) Limited
YCH (No.1) Limited
West Regent Limited Southern Cross Healthcare Group PLC   Annual Report and Accounts 2006 75
36  Principal Subsidiary Undertakings continued
Dormant companies
Ashbourne Healthcare Limited
Ashbourne Homes (Developments) Limited (SC)
Ashbourne Leasing Limited
Cairncroft Limited
Care (Wookey Hole) Limited
Careerstaff Limited (SC)
CCSX Developments Limited
CCSX Investments Limited
CCSX Jersey General Partner Limited
Networking Care Partnerships (Devon)
CCSX Minster Limited
CCSX Properties Limited
CCSX West Limited
Community Care Management Services Limited
Dalnair Estate Development Limited (SC)
Doncaster Care Developments Limited
Elders Pharmacies Limited (SC)
Ely Care Home Limited
Firmprior Limited
Gradeindex Limited
Greatmagic Limited
Kingsclear Homes Limited
Larstrike Limited
Lartenant Limited
Noblerevel Limited
P .F. Young Limited
Pentland Healthcare Limited (SC)
Prizemagic Limited
Sedbury Park Limited
Southern Cross Care Management Limited
Southern Cross Healthcare Properties Limited
Southern Cross Leasing 1999 Limited (SC)
Southern Cross Projects Limited
Stoneyford Park Limited
Sunchoice Group Limited
Sunchoice Services Limited
Sunchoice Trading Limited
Sunchoice UK Limited
The CCSX Jersey Limited Partnership
Trinity Care (Southampton) Limited
Trinity Care Management Limited
West Regent Homes Limited
West Regent Healthcare Limited
Woodleigh Property (Dormant) Limited
Intermediate holding companies
Active Care Partnerships (Holdings) Limited
APTA Healthcare Limited
Ashbourne Holdings Limited
Ashbourne Limited
CCSX (DL) Limited
CCSX Holdings Limited
United Propco Limited
CCSX Limited
CCSX Ventures Limited
Networking Care Holdings Limited
Southern Cross (Highfield Holdco) Limited
Southern Cross (SX Holdco) Limited
Southern Cross Bidco Limited
Southern Cross Care Homes Holdings Limited
Southern Cross Care Homes Limited
Southern Cross Finance Limited
Southern Cross Healthcare Holdings Limited
Southern Cross Healthcare Investments No.1 Limited
Southern Cross Healthcare Investments No.2 Limited
Southern Cross Healthcare Limited
Care home development companies
Southern Cross Healthcare Developments Limited
Networking Care Properties Limited
Southern Cross (Armagh) Limited
Southern Cross (Crown Propco) Limited
Southern Cross (Kings Gate Propco) Limited
Southern Cross Ratho Street Limited
Southern Cross (Meiklewood) Limited
Southern Cross (Stepps) Limited
Southern Cross (Tornadee) Limited
Southern Cross Healthcare (Enniskillen) Limited
Southern Cross Propco 3 Limited
Southern Cross Propco 5 Limited
Southern Cross Propco 6 Limited
Southern Cross (Nerston) Limited
Southern Cross (Thames) Limited
Southern Cross RZ Properties Limited
Investment holding companies
CCSX Ventures Investments Limited
Southern Cross Debtco Limited
Southern Cross Loanco Limited
Southern Cross SLBCo Limited
Miscellaneous
CCSX Management Limited
Southern Cross Care Limited
Sunchoice Europe Limited 37  Reconciliation of Net Assets and Profit under UK GAAP to IFRS
Southern Cross Healthcare Group reported under UK GAAP in its financial information for the period ended 2 October 2005. The analysis
below shows a reconciliation of net assets and profit as reported under UK GAAP as at each balance sheet date to the revised net assets
and profit under IFRS as reported in these financial statements. 
The IFRS transition date for this Company was 10 January 2005. As there were no differences at that date in the companies financial
statements, between IFRS and UK GAAP , no reconciliation has been presented.
Reconciliation of profit before tax
1 October 2 October
2006 2005
£’m £’m
Profit before tax reported under UK GAAP 2.1 1.2
Operating lease rentals (30.7) (4.0)
Amortisation of goodwill under UK GAAP 8.9 3.1
Amortisation of intangibles under IFRS (1.6) (0.9)
Fair value of financial instruments 3.9 (1.8)
Loss before taxation reported under IFRS (17.4) (2.4)
Reconciliation of balance sheet at 1 October 2006
Effect of 
Previous transition to
UK GAAP IFRS IFRS
£’m £’m £’m
Plant, property & equipment 96.3 – 96.3
Goodwill 167.1 28.9 196.0
Other intangible assets, net – 2.4 2.4
Deferred tax assets – 12.9 12.9
Other non current assets 2.5 – 2.5
Total non-current assets 265.9 44.2 310.1
Cash and cash equivalents 21.9 – 21.9
Accounts receivable 28.8 – 28.8
Inventories 1.1 – 1.1
Other current assets 12.8 – 12.8
Total current assets 64.6 – 64.6
Total assets 330.5 44.2 374.7
Short-term borrowings (25.9) – (25.9)
Trade and other payables (65.4) – (65.4)
Total current liabilities (91.3) – (91.3)
Long-term borrowings (63.6) – (63.6)
Provisions and similar obligations (8.1) – (8.1)
Deferred tax liabilities (3.6) 3.6 –
Future minimum rental payable – (63.7) (63.7)
Total non-current liabilities (75.3) (60.1) (135.4)
Total liabilities (166.6) (60.1) (226.7)
Net assets 163.9 (15.9) 148.0
Notes to the IFRS Financial Information
For the 52 weeks ended 1 October 2006
76 Southern Cross Healthcare Group PLC   Annual Report and Accounts 2006 Southern Cross Healthcare Group PLC   Annual Report and Accounts 2006 77
37 Reconciliation of Net Assets and Profit under UK GAAP to IFRS
continued
Reconciliation of Balance Sheet at 2 October 2005
Effect of 
Previous transition to IFRS
UK GAAP IFRS 2005
£’m £’m £’m
ASSETS
Non-current assets
Property, plant and equipment 38.9 – 38.9
Goodwill 124.9 11.4 136.3
Other intangible assets – 4.0 4.0
Deferred tax assets – 4.0 4.0
Other non-current assets 0.1 – 0.1
Total non-current assets 163.9 19.4 183.3
Current assets
Cash and cash equivalents 4.2 – 4.2
Accounts receivable 22.3 – 22.3
Inventories 0.4 – 0.4
Other current assets 8.1 – 8.1
Total current assets 35.0 – 35.0
Total assets 198.9 19.4 218.3
LIABILITIES
Current liabilities
Short-term financial liabilities (29.9) (3.9) (33.8)
Trade and other payables (35.3) (1.9) (37.2)
Total current liabilities (65.2) (5.8) (71.0)
Non-current liabilities
Long-term borrowings (129.0) – (129.0)
Provisions and similar obligations (1.1) – (1.1)
Deferred tax liabilities (3.4) 3.4 –
Future minimum rental payable – (20.6) (20.6)
Total non-current liabilities (133.5) (17.2) (150.7)
Total liabilities (198.7) (23.0) (221.7)
Shareholders’ deficit 0.2 (3.6) (3.4) Notes to the IFRS Financial Information
For the 52 weeks ended 1 October 2006
37 Reconciliation of Net Assets and Profit under UK GAAP to IFRS
continued
Reconciliation of profit for the 52 weeks ended 2 October 2006
Effect of 
Previous transition to
GAAP IFRS IFRS
£’m £’m £’m
Revenue 610.9 – 610.9
Home payroll costs (343.0) – (343.0)
Home running costs (78.3) – (78.3)
Home EBITDAR before central costs 189.6 – 189.6
Rent 
Charge for rental amounts currently payable (116.1) – (116.1)
Charge for future minimum rental increases – (30.7) (30.7)
Total rent (116.1) (30.7) (146.8)
Home EBITDA before central costs 73.5 – 42.8
Central costs (30.8) – (30.8)
Other operating income 0.9 – 0.9
Adjusted EBITDA before exceptional central costs 
and charge for future minimum rental increases 48.8 – 48.8
Exceptional central costs (5.2) – (5.2)
Charge for future minimum rental increases – (30.7) (30.7)
EBITDA 43.6 (30.7) 12.9
Profit on disposal of property, plant and equipment 
and subsidiary undertakings 0.4 – 0.4
Depreciation (10.1) – (10.1)
Amortisation (8.9) 7.3 (1.6)
Operating income 25.0 (23.4) 1.6
Finance costs (23.2) 3.9 (19.3)
Finance income 0.3 – 0.3
Earnings before taxation 2.1 (19.5) (17.4)
Taxation (2.8) 8.1 5.3
Profit attributable to ordinary shareholders (0.7) (11.4) (12.1)
78 Southern Cross Healthcare Group PLC   Annual Report and Accounts 2006 Southern Cross Healthcare Group PLC   Annual Report and Accounts 2006 79
37 Reconciliation of Net Assets and Profit under UK GAAP to IFRS
continued
Reconciliation of Profit for the 28 weeks ended 2 October 2005
Effect of 
Previous transition to
GAAP IFRS IFRS
£’m £’m £’m
Revenue 188.2 – 188.2
Home payroll costs (104.8) – (104.8)
Home running costs (23.2) – (23.2)
Home EBITDAR before central costs 60.2 – 60.2
Rent
Charge for rental amounts currently payable (36.5) – (36.5)
Charge for future minimum rental increases – (4.0) (4.0)
Total rent (36.5) (4.0) (40.5)
Home EBITDA before central costs 23.7 (4.0) 19.7
Central costs (9.7) – (9.7)
Other operating income 0.6 – 0.6
Adjusted EBITDA before exceptional central costs and 
charge for future minimum rental increases 15.7 – 15.7
Exceptional central cost (1.1) – (1.1)
Charge for future minimum rental increases – (4.0) (4.0)
EBITDA 14.6 (4.0) 10.6
Profit/(loss) on disposal of property, plant and equipment 
and subsidiary undertakings 0.4 – 0.4
Depreciation (2.6) – (2.6)
Amortisation (3.1) 2.2 (0.9)
Operating income 9.3 (1.8) 7.5
Finance cost (8.1) (1.8) (9.9)
Finance income –– –
Earnings before taxation 1.2 (3.6) (2.4)
Taxation (2.8) 1.8 (1.0)
Earnings attributable to ordinary shareholders (1.6) (1.8) (3.4)
Operating lease rentals
General practice, under UK GAAP , has been for operating lease rentals to be charged, as an expense, in accordance with the contractual
payments made under the lease. IFRS requires the minimum guaranteed lease payments made under operating leases to be recognised,
as an expense, on a straight-line basis over the lease term, even if the payments are not made on such a basis. 
Consequently, rental charges included in the income statement have increased by £30.7m and £4.0m in the periods to 1 October 2006 
and 2 October 2005, respectively. Related deferred tax assets of £9.3m and £1.2m have been recognised in the Group balance sheets 
as at 1 October 2006 and 2 October 2005.
Goodwill amortisation
Under UK GAAP , the Group amortises goodwill over its estimated useful economic life of 20 years. IFRS 3 requires that goodwill is not
amortised but is subject to an annual impairment review instead. As required by IFRS 1 an impairment test was carried out on the date of
transition to IFRS and annually thereafter. No impairment was recognised and no other adjustments to the carrying value of goodwill were
made. Goodwill amortisation charged under UK GAAP , totalling £8.9m and £3.1m in the periods to 1 October 2006 and 2 October 2005,
respectively, have been reversed. Notes to the IFRS Financial Information
For the 52 weeks ended 1 October 2006
37 Reconciliation of Net Assets and Profit under UK GAAP to IFRS
continued
Business Combinations
IFRS requires that the cost of investment is allocated to the acquired entity’s assets and liabilities and contingent liabilities assumed based
on fair values to the acquirer at the date of acquisition. IFRS prescribes the allocation of the excess consideration to more categories of
intangible assets (such as resident contracts) with goodwill being a residual asset. Intangible assets associated with resident’s contracts
totalling £4.9m have been recognised upon the acquisition of Southern Cross Equityco Limited.
Amortisation on resident contracts totalling £1.6m and £0.9m has been recognised as an expense, for the periods to 1 October 2006 
and 2 October 2005, respectively.
Financial Instruments
Under UK GAAP , gains and losses from derivative financial instruments used for hedging purposes are not recognised in earnings or as
adjustments to carrying amounts until the underlying hedged transaction matures or occurs. IAS 39 requires all derivatives to be recognised
at fair value in the balance sheet. Consequently, interest rate swaps with a negative fair value of £Nil and £3.9m have been recognised 
in the Group balance sheets at 1 October 2006 and 2 October 2005 respectively. Related deferred tax assets of £Nil and £1.2m have been
recognised in the Group balance sheets.
80 Southern Cross Healthcare Group PLC   Annual Report and Accounts 2006 Southern Cross Healthcare Group PLC   Annual Report and Accounts 2006 81
Independent Auditors’ Report to the Members
of Southern Cross Healthcare Group PLC
We have audited the parent company financial statements of Southern Cross Healthcare Group PLC for the 52 week period ended 1 October
2006 which comprise the Company balance sheet and the related notes. These parent company financial statements have been prepared under
the accounting policies set out therein. We have also audited the information in the remuneration report that is described as having been audited.
We have reported separately on the Group financial statements of Southern Cross Healthcare Group PLC for the year ended 1 October 2006.
Respective Responsibilities of Directors and Auditors
The Directors’ responsibilities for preparing the Annual Report, the remuneration report and the parent company financial statements in
accordance with applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice) are
set out in the statement of directors’ responsibilities.
Our responsibility is to audit the parent company financial statements and the part of the Directors’ remuneration report to be audited in
accordance with relevant legal and regulatory requirements and International Standards on Auditing (UK and Ireland). This report, including
the opinion, has been prepared for and only for the Company’s members as a body in accordance with Section 235 of the Companies Act
1985 and for no other purpose. We do not, in giving this opinion, accept or assume responsibility for any other purpose or to any other
person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.
We report to you our opinion as to whether the parent company financial statements give a true and fair view and whether the parent
company financial statements and the part of the remuneration report to be audited have been properly prepared in accordance with the
Companies Act 1985. We report to you whether in our opinion the information given in the Directors’ report is consistent with the parent
company financial statements. The information given in the Directors’ Report includes that specific information presented in the business
review and the financial review that is cross referred from the business review section of the Directors’ report. We also report to you if, in
our opinion, the Company has not kept proper accounting records, if we have not received all the information and explanations we require
for our audit, or if information specified by law regarding Directors’ remuneration and other transactions is not disclosed.
We read other information contained in the Annual Report and consider whether it is consistent with the audited parent company financial
statements. The other information comprises only the Directors’ Report, the unaudited part of the remuneration report, the Chairman’s
statement and the business review and the financial review. We consider the implications for our report if we become aware of any
apparent misstatements or material inconsistencies with the parent company financial statements. Our responsibilities do not extend to
any other information.
Basis of Audit Opinion
We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board. 
An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the parent company financial
statements and the part of the remuneration report to be audited. It also includes an assessment of the significant estimates and
judgements made by the Directors in the preparation of the parent company financial statements, and of whether the accounting policies
are appropriate to the Company’s circumstances, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to
provide us with sufficient evidence to give reasonable assurance that the parent company financial statements and the part of the
remuneration report to be audited are free from material misstatement, whether caused by fraud or other irregularity or error. In forming
our opinion we also evaluated the overall adequacy of the presentation of information in the parent company financial statements and the
part of the remuneration report to be audited.
Opinion
In our opinion:
l the parent company financial statements give a true and fair view, in accordance with United Kingdom Generally Accepted Accounting
Practice, of the state of the Company’s affairs as at 1 October 2006;
l the parent company financial statements and the part of the remuneration report to be audited have been properly prepared in
accordance with the Companies Act 1985; and
l the information given in the Directors’ report is consistent with the parent company financial statements.
PricewaterhouseCoopers LLP
Chartered Accountants and Registered Auditors
Newcastle upon Tyne
11 December 2006 82 Southern Cross Healthcare Group PLC   Annual Report and Accounts 2006
Company Balance Sheet
2 October 1 October
2006 2005
Note £’000 £’000
Fixed assets
Investments 2 3 3
3 3
Current assets
Debtors – due after more than one year 3 266,577 2
Creditors – amounts due within one year 4 (26,074) –
Net current assets 240,503 2
Total assets less current liabilities 240,506 5
Creditors – amounts due within one year 5 (52,090) –
Net assets 188,416 5
Capital and reserves
Called up share capital 6 1,881 5
Share premium account 161,522 –
Profit and loss account 7 25,013 –
Equity shareholders’ funds 188,416 5
The financial statements on pages 82 to 87 were approved by the Board of Directors on 11 December 2006 and signed on their behalf by:
P Scott Chief Executive G Sizer Finance Director Southern Cross Healthcare Group PLC   Annual Report and Accounts 2006 83
Statement of Accounting Policies
Basis of Preparation
The financial statements have been prepared under the historical cost convention and in accordance with applicable UK accounting
standards and comply with the Companies Act 1985. No profit and loss account has been presented for the Company as permitted 
by Section 230 Companies Act 1985.
The Company is included in the financial statements of Southern Cross Healthcare Group , which are publicly available. Consequently 
the Company has taken advantage of the exemption from preparing a cash flow statement under the terms of FRS1 “Cash Flow
Statements (Revised 1996)”. The Company is also exempt under the terms of FRS8 “Related Party Transactions” from disclosing related
party transactions with entities that are part of the same group.
Turnover
Turnover represents fees charged (excluding VAT) by the Group for services provided relating to its principal activities. Turnover is recognised
when the services are provided in full.
Fixed Asset Investments
Fixed asset investments are included at cost, less amounts written off in respect of diminution in value.
Deferred Taxation
The Group accounts for taxation, which is deferred or accelerated by reason of timing differences which have originated but not reversed
by the balance sheet date. Deferred tax assets are only recognised to the extent that they are considered recoverable against future
taxable profits. Deferred tax is measured at the average tax rates that are expected to apply in the periods in which the timing differences
are expected to reverse. Deferred tax liabilities and assets are not discounted.
Finance Costs
Finance costs are charged to the profit and loss account over the term of the debt so that the amount charged is at a constant rate on the
carrying amount. Finance costs include issue costs, which are initially recognised as a reduction in the proceeds of the associated capital
instrument.
Financial Instruments and Derivatives
The Group’s accounting policy for derivatives is to defer and only recognise in the Group profit and loss account gains and losses on hedges
of revenues, operating payments and capital expenditure to match the underlying transactions.
Interest rate cap agreements taken out are recorded at cost in the balance sheet and amortised over the period of the agreements.
Amounts payable or receivable in respect of interest rate cap agreements are recognised in the net interest payable charge on an 
accruals basis.
Debt Instruments
Debt instruments are stated at the amount of net proceeds adjusted to amortise the issue cost of debt evenly over the term of the debt. 84 Southern Cross Healthcare Group PLC   Annual Report and Accounts 2006
Notes to the Financial Statements
For the period ended 1 October 2006
1 Profit and Loss Account
Southern Cross Healthcare Group PLC has not presented its own profit and loss account as permitted by Section 230 of the Companies Act
1985. The profit after taxation for the financial period dealt with in the accounts of the Company is £25,013,324.
The audit fee in respect of the Company was £Nil. The Company has no employees. Directors are remunerated by other Group companies.
2 Investments
Company
£’000
Cost
On incorporation –
Additions 3
At 2 October 2005 and 1 October 2006 3
The wholly-owned subsidiary undertakings at the balance sheet date, all of which are registered in England and Wales (unless otherwise
stated: SC = registered in Scotland; NI = registered in Northern Ireland ) and have been consolidated in the group financial statements, 
are as follows:
Care home operating companies 
Abbeycourt Care Limited (SC)
Active Care Partnerships (Broadoaks) Limited
Active Care Partnerships (Churchfields) Limited
Active Care Partnerships (Drummond) Limited
Active Care Partnerships (Fryers) Limited
Active Care Partnerships (InterCare) Limited
Active Care Partnerships (Lombardy) Limited
Active Care Partnerships Limited
APTA HealthCare (UK) Limited
Ashbourne (Eton) Limited
Ashbourne Boss Limited
Ashbourne Care Homes (Bucks) Limited
Ashbourne Group Europe Limited
Ashbourne Group UK Limited (SC)
Ashbourne Homes Limited (SC)
Ashbourne Life Limited
Atlas HealthCare (South West) Limited
CC Care Limited 
Chiltern Care Homes Limited
Dunlarg Home Limited (NI)
Exceler Health Care Group Limited
Exceler HealthCare Services Leasing Limited
Exceler HealthCare Services Limited
Exceler Ireland Limited
Longfield Care Limited (NI)
Modelfuture Limited
Moorpark Kilbirnie Limited
Networked Living Limited
Networking Care Partnerships (South West) Limited
Nightingale Private Nursing Home Limited (NI)
Southern Cross (RZ) Limited
Southern Cross Care Centres Limited
Southern Cross Care Homes No.2 Limited
Southern Cross Care Homes No.3 Limited
Southern Cross Cymru Limited
Southern Cross Healthcare (Cheshire) Limited
Southern Cross Healthcare (Clyde) Limited
Southern Cross Healthcare (Kent) Limited
Southern Cross Healthcare (South East) Limited
Southern Cross Healthcare (West) Limited
Southern Cross Healthcare Centres Limited
Southern Cross Healthcare Facilities Limited
Southern Cross Healthcare Services Limited
Southern Cross Home Properties (Perth) Limited (SC)
Southern Cross Home Properties Limited
Southern Cross Management Limited
Southern Cross Operations (No.2) Limited
Southern Cross Operations Limited
Southern Cross (ATA) Limited
Southern Cross (Hamilton) Limited
Standford Homes Limited
Trinity Care (Brookfield) Limited
Trinity Care (Hove) Limited
Trinity Care (Whitchurch) Limited
Trinity Care Homes Limited
Trinity Care Limited
Trinity Care (Crown) Limited
YCH (No.1) Limited
West Regent Limited Southern Cross Healthcare Group PLC   Annual Report and Accounts 2006 85
2 Investments continued
Dormant companies
Ashbourne Healthcare Limited
Ashbourne Homes (Developments) Limited (SC)
Ashbourne Leasing Limited
Cairncroft Limited
Care (Wookey Hole) Limited
Careerstaff Limited (SC)
CCSX Developments Limited
CCSX Investments Limited
CCSX Jersey General Partner Limited
Networking Care Partnerships (Devon)
CCSX Minster Limited
CCSX Properties Limited
CCSX West Limited
Community Care Management Services Limited
Dalnair Estate Development Limited (SC)
Doncaster Care Developments Limited
Elders Pharmacies Limited (SC)
Ely Care Home Limited
Firmprior Limited
Gradeindex Limited
Greatmagic Limited
Kingsclear Homes Limited
Larstrike Limited
Lartenant Limited
Noblerevel Limited
P .F. Young Limited
Pentland HealthCare Limited (SC)
Prizemagic Limited
Sedbury Park Limited
Southern Cross Care Management Limited
Southern Cross Healthcare Properties Limited
Southern Cross Leasing 1999 Limited (SC)
Southern Cross Projects Limited
Stoneyford Park Limited
Sunchoice Group Limited
Sunchoice Services Limited
Sunchoice Trading Limited
Sunchoice UK Limited
The CCSX Jersey Limited Partnership
Trinity Care (Southampton) Limited
Trinity Care Management Limited
West Regent Homes Limited
West Regent Healthcare Limited
Woodleigh Property (Dormant) Limited
Intermediate holding companies
Active Care Partnerships (Holdings) Limited
APTA HealthCare Limited
Ashbourne Holdings Limited
Ashbourne Limited
CCSX (DL) Limited
CCSX Holdings Limited
United Propco Limited
CCSX Limited
CCSX Ventures Limited
Networking Care Holdings Limited
Southern Cross (Highfield Holdco) Limited
Southern Cross (SX Holdco) Limited
Southern Cross Bidco Limited
Southern Cross Care Homes Holdings Limited
Southern Cross Care Homes Limited
Southern Cross Finance Limited
Southern Cross Healthcare Holdings Limited
Southern Cross Healthcare Investments No.1 Limited
Southern Cross Healthcare Investments No.2 Limited
Southern Cross Healthcare Limited
Care home development companies
Southern Cross Healthcare Developments Limited
Networking Care Properties Limited
Southern Cross (Armagh) Limited
Southern Cross (Crown Propco) Limited
Southern Cross (Kings Gate Propco) Limited
Southern Cross Ratho Street Limited
Southern Cross (Meiklewood) Limited
Southern Cross (Stepps) Limited
Southern Cross (Tornadee) Limited
Southern Cross Healthcare (Enniskillen) Limited
Southern Cross Propco 3 Limited
Southern Cross Propco 5 Limited
Southern Cross Propco 6 Limited
Southern Cross (Nerston) Limited
Southern Cross (Thames) Limited
Southern Cross R2 Properties Limited
Investment holding companies
CCSX Ventures Investments Limited
Southern Cross Debtco Limited
Southern Cross Loanco Limited
Southern Cross SLBCo Limited
Miscellaneous
CCSX Management Limited
Southern Cross Care Limited
Sunchoice Europe Limited
All investments are held indirectly via the intermediate holding company, Southern
Cross Bidco Limited, with the exception of Southern Cross Healthcare Investments No.1
Limited and Southern Cross Healthcare Investments No.2 Limited. 86 Southern Cross Healthcare Group PLC   Annual Report and Accounts 2006
Notes to the Financial Statements
For the period ended 1 October 2006
3 Debtors
Amounts receivable after more than one year:
1 October 2 October
2006 2005
£’000 £’000
Amounts due from subsidiary undertakings 266,577 2
266,577 2
4 Creditors – amounts due within one year
1 October 2 October
2006 2005
£’000 £’000
Bank loans (secured) 23,897 –
Corporation tax 1,759 –
Accruals 418 –
26,074 –
5 Creditors – amounts due after one year
1 October 2 October
2006 2005
£’000 £’000
Bank loans (secured) 52,090 –
The bank loans are secured by a fixed and floating charge over all of the assets of the Company and certain subsidiaries. Interest on the
bank loans is currently charged at a margin of 1.75% above LIBOR.
6 Share Capital
Allotted,
called up and
Authorised fully paid
1 October 1 October
2006 2006
Number Number
Ordinary shares of 1p each 300,000,000 1,000,000
£’000 £’000
Ordinary shares of 1p each 3,000 10 Southern Cross Healthcare Group PLC   Annual Report and Accounts 2006 87
6 Share Capital continued
Allotted,
called up and
Authorised fully paid
2 October 2 October
2005 2005
Number Number
Ordinary shares of 1p each 188,067,377 459,540
£’000 £’000
Ordinary shares of 1p each 1,881 5
On 13 June 2006, the authorised share capital of the Company was increased from £10,000 to £55,405 by the creation of 45,405
redeemable shares of £1 each. On 6 July 2006, the Company held an Extraordinary General Meeting, and passed resolutions to increase
the authorised share capital of the Company from £55,405 to £3,045,405 by the creation of 299,000,000 ordinary shares of 1p each and 
to authorise the Directors to issue ordinary shares with an aggregate nominal amount of £1,307,037.
On 13 June 2006, the Company issued 45,405 redeemable shares of £1 each for cash. On Admission to the London Stock Exchange on 
7 July 2006, the Company allotted and issued 77,777,777 ordinary shares of 1p and made a bonus issue of 109,830,060 ordinary shares 
of 1p. A bonus issue was made to all shareholders included on the register of members at 5pm on 5 July 2006 and represents a holding 
of 240 ordinary shares to every ordinary share held as at 5pm on 5 July 2006. The Company also redeemed and cancelled 45,405
redeemable shares of £1 each.
7 Reserves
Company
Share Profit
premium and loss
account account
£’000 £’000
At 3 October 2005 ––
Result for the financial period – 25,013
Issue of ordinary share capital 173,169 –
Costs incurred in relation to issuance of ordinary share capital (11,602) –
Redemption and cancellation of shares (45) –
At 1 October 2006 161,522 25,013
8 Dividends Paid and Proposed
No dividends were declared or paid during the periods.
The Directors have proposed a final dividend of 1.1p per share totalling £2.1m, in respect of the 52 week period ended 1 October 2006.
These financial statements do not reflect this proposed dividend. 88 Southern Cross Healthcare Group PLC   Annual Report and Accounts 2006
Five-year Record
The following table shows the latest available five year record under UK GAAP:
52 week 52 week 52 week 32 week 52 week
period ended period ended period ended period ended period ended
2 April 27 March 27 March 29 March 30 March
2006 2005 2004 2003* 2002
£’000 £’000 £’000 £’000 £’000
Turnover
Continuing operations 200,082 171,980 157,809 – 69,517
Acquired operations 274,760 11,464 – 90,350 34,096
Group turnover 474,842 183,444 157,809 90,350 103,613
Cost of sales (304,677) (118,183) (102,279) (61,096) (70,182)
Gross profit 170,165 65,261 55,530 29,254 33,431
Administrative expenses
Operating lease rentals (92,154) (32,450) (28,634) (16,787) (23,966)
Other administrative expenses (54,733) (18,302) (15,047) (5,650) (6,061)
Goodwill amortisation (7,261) (2,713) (2,463) (1,518) 108
Exceptional items (3,202) (2,927) (670) – (556)
Total administrative expenses (157,350) (56,392) (46,814) (23,955) (30,475)
Other operating income 867 26 410 – –
Operating profit
Continuing operations 7,770 8,003 9,126 – 2,780
Acquired operations 5,912 892 – 5,299 176
Group operating profit 13,682 8,895 9,126 5,299 2,956
Loss on disposal of subsidiary undertaking (86) – –– –
Profit on disposal of fixed assets 136 7,615 301 – –
Net interest payable (20,078) (13,155) (7,531) (4,678) (284)
Profit/(loss) on ordinary activities before taxation (6,346) 3,355 1,896 621 2,672
Taxation (2,489) (73) (1,521) 178 (923)
Profit/(loss) for the financial period (8,835) 3,282 375 799 1,749
* Consolidated, audited financial information is not available for the 20-week period from 31 March 2002 to 15 August 2002. 
Number of beds 28,229 17,000 7,718 7,665 5,966 Shareholder Information
Southern Cross Healthcare Group PLC   Annual Report and Accounts 2006 89
2006/2007 financial calendar
Annual General Meeting 30 January 2007
Interim results 14 May 2007
Financial year end 30 September 2007
Registered office Registrars
Southern Cross Healthcare Group Capita Registrars
Southgate House The Registry
Archer Street 34 Beckenham Road
Darlington Beckenham
County Durham Kent
DL3 6AH BR3 4TU
Registered number
05328138
Brokers
Morgan Stanley Securities Limited UBS Limited
25 Cabot Square 1 Finsbury Avenue
Canary Wharf London
London EC2M 2PP
EC2V 7QP
Independent Auditors
PricewaterhouseCoopers LLP
89 Sandyford Road
Newcastle Upon Tyne
NE1 8HW
Solicitors
Clifford Chance LLP DLA Piper UK LLP
10 Upper Bank Street Princes Exchange
London Princes Street
E14 5JJ Leeds
LS1 4BY
Bankers
Barclays Bank
1 Churchill Place
Canary Wharf
London
E14 5HP
Shareholder Enquiries
If you have any enquiries as a Shareholder, please contact Graham Sizer, Chief Financial Officer on 01325 351100 or via email:
gsizer@schealthcare.co.uk.
Website: www.schealthcare.co.uk
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printer registered to environmental management system ISO 14001. Southern Cross Healthcare Group PLC
Southgate House
Archer Street
Darlington
DL3 6AH
Tel:  01325 351100
Fax: 01325 351144
www.schealthcare.co.uk
Southern Cross Healthcare Group PLC Annual Report and Accounts 2006