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’
equitydeficit – 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 fiveyear 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 andor learning disabilities operating 580
homes with 28917 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
28299
17000
7718 7665
5966
oct 06 oct 05 mar 04 mar 03 mar 02
year end
6109
3495
1578
1468
1036
oct 06 oct 05 mar 04 mar 03 mar 02
year end
3856
underlying
1896
1118
555
475
334
oct 06 oct 05 mar 04 mar 03 mar 02
year end
1243
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 10000 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 28917
beds at year end 2005 – 17000 beds
average occupancy of 910 
2005 – 916 underlying occupancy
of 916 2005 – 916
average weekly fee up 80 
to £478 2005 – £443
efficient cost control management
postacquisition and integration of new
beds has maintained operating
margins
ipo successfully completed in july
2006 raising £1750m proceeds of
issue were used to refinance the
business
revenue of £6109m 
2005 28 weeks – £1882m
operating income of £16m 2005 
28 weeks – £75m after a charge 
of £307m 2005 28 weeks – £40m 
for future minimum lease charges
under ias 17
basic loss per share for the year 
of 94p 2005 – 01p
other financial highlights
underlying revenues up 100 to
£3856m 2005 annualised – £3495m
home ebitdar before central 
costs of £1896m 2005 28 weeks –
£602m 
underlying home ebitdar before
central costs up 110 to £1243m
2005 annualised – £1118m
adjusted ebitda of £488m 
2005 28 weeks – £157m
adjusted earnings per share 
of 100p
home ebitdar before central costs
margin of 310 2005 28 weeks –
320 the comparative period
represents the most profitable part 
of the calendar year
net cash inflow from operations 
of £506m 2005 28 weeks – £150m
representing cash conversion of
adjusted ebitda of 1037 2005 –
956
first dividend of 11p 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
24027
number of beds
1
466
number of homes
1
£4816m
fee income 
£1428m
home ebitdar before central costs
£455
revenue
bed per week
3974
number of beds
1
72
number of homes
1
£940m
fee income 
£382m
home ebitdar before central costs
£524
revenue
bed per week
916
number of beds
1
42
number of homes
1
£353m
fee income 
£86m
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 andor learningdisabilities
as the market leader and primary consolidator in the uk care 
home services sector southern cross has benefited from the
growing demand for highquality valueformoney longterm care
services across the uk the success of our strategy of acquiring 
and developing modern purposebuilt 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 £6109m 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 80 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 £488m representing an increase of 671 compared
to the prior year on an annualised basis the loss before taxation
was £174m reflecting the impact of the ifrs adjustment for
charges for future minimum rental increases of £307m exceptional
charges relating to the ipo which amounted to £31m and the
financing costs of the capital structure preipo
basic loss per ordinary share was 94p after a uk corporation 
tax credit of £53m adjusted earnings per share before charges 
for future minimum rental increases and exceptional charges and
the taxation impact thereof were 100p
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 48p 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 11p 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 longterm 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 1000 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 longterm care
market targeting further growth in both core and specialist divisions
the demand for longterm 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 14000 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 24hour 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 24hour care services at current average
weekly fee rates of £465 for elderly care this equates to a price 
of just over £275 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 selffunding residents
6 southern cross healthcare group plc   annual report and accounts 2006
during another excellent year we have continued
to consolidate the longterm 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 10000 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 postflotation 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 onsale
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 2000 beds in various stages of planning
and construction a further 1000 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 64bedded facility in enniskillen
ni 90 beds in wishaw and 85 beds in renfrew both sc we
have also added an 80bedded 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 longterm 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 twoyear
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 6574 7584 85
na
27
04
20
00
15
03
04
85 7584 6574
cagr
all
19862006
20062026
uk elderly population 19012071 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 wellinvested purposebuilt 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 1200 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 28917 beds
scotland 78 homes 4604 beds
northern ireland 21 homes 977 beds
north and yorkshire 192 homes 9627 beds
midlands 101 homes 4698 beds
wales and sw england 68 homes 2861 beds
east anglia 58 homes 2761 beds
south east england 62 homes 3389 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 24027
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 postapril 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 3974 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 £21000 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 longterm 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 2000 staff from eastern europe and southeast asia
those personnel are deployed across the uk during an initial 
twoyear contract period and generally a high number of those
staff resign for a second period 
our staff teams have worked diligently over the last year to 
ensure that our reputation as a provider of highquality 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
purposebuilt fullyequipped 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 daytoday service delivery we continue to robustly monitor 
our service on a weeklymonthly 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
daytoday 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
alzheimers 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 £16770 from various local events
around the country this was increased with a £50000 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 internationallyrecruited
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 100 of our workforce were 
nonuk nationals and 825 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 boardlevel 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 topquality 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
10000 beds outside of that major acquisition the group has
continued to grow through its development programme 428 new
beds opened and through bolton acquisitions 950 new beds via
eight transactions it is the group’s intention to continue with this
twopronged strategy and the completion of dedicated landlord
funds totalling £3000m 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 £1750m which was used to refinance debt redeeming
shareholder deep discounted bonds and loan notes and reducing
bank indebtedness approximately £200m 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 backoffice support systems of highfield acquired
in late march 2005 and ashbourne referred to above these
two acquisitions added some 380 care homes and 18000 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 £307m and £40m 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 £6109m
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 6109 1882 75 10
operating income 16 75 89 –
adjusted ebitda
1
488 157 67 11
loss before taxation 174 24 287 –
average number of 
available beds 27008 16575 63 3
cash generated from 
operating activities 506 150 – –
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 £2253m and
£653m respectively
the group results set out in the consolidated income statement 
on page 36 show a decrease of £59m of operating income 
but an increase in earnings before interest tax depreciation and
amortisation of goodwill “ebitda” from £106m to £129m
excluding the charge for future minimum rental increases under
ias 17 and exceptional central costs adjusted ebitda increased by
670 on an annualised basis from £157m to £488m the loss
for the year before taxation amounted to £174m 2005 28
weeks – £24m
earnings per share
basic loss per share for the year was 94p 2005 – 01p
earnings per share for the year before future minimum rental
increase charges and exceptional costs and the taxation impact
thereof was 100p 2005 – 00p this adjusted measure excludes
nonrecurring and noncashbased charges however it does not
reflect a fullyear 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 15874 beds to 26109 beds and revenue on an annualised
basis from £3211m to £5756m the growth in this segment was
predominantly as a result of acquisition activity with associated
average available beds and revenue of 10606 beds and £2188m
respectively the average weekly fee for elderly care increased by
£413 per week 97 to £4651 per week the operating margin
of elderly care decreased slightly from 318 to 314 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 £1023m 
to £1810m 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 £284m on an annualised basis to £353m
for the 52 weeks ended 1 october 2006 the average weekly fee 
for this segment was in line with expectations at £8726 acquisition
activity within this sector accounted for increased average available
beds and revenue of 206 beds and £65m respectively total home
ebitdar before central costs on an annualised basis decreased from
£95m to £86m further details of acquisitions during the year are
shown in note 29
rent
the rent charge for the year amounted to £1468m 2005 28 weeks
– £405m excluding the noncash charge under ias17 for leases
with fixed or minimum annual increases the rental charge for the
year was £1161m giving a rent cover of home ebitdar before
central costs cash rent of 163 times 2005 – 165 times
central costs
total central costs for the year amounted to £308m an increase
of £128m on an annualised basis compared to central costs 
of £97m for the 28week 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 £52m excluding these nonrecurring charges central costs
amounted to £256m
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
purposebuilt 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 nonrecurring exceptional costs
during the year primarily as a result of restructuring following 
the acquisition of ashbourne £18m and costs incurred in relation
to the listing of the company’s shares on the london stock
exchange £31m 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 £190m and
predominantly related to charges based on the financing structure
prior to flotation of the total charge £70m related to interest
payable upon deep discount bonds and £51m 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 £32m
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 £53m 2005 – £10m
charge represents a headline rate of 305 2005 – 416
however this headline rate is significantly affected by the tax
effect amounting to £81m credit of translation adjustments to
ifrs such effects predominantly relate to the future tax benefit of
the additionalrental charge under ias17 this amounts to £92m
the preexceptional pregoodwill amortisation tax charge under
uk gaap of £42m 2005 28 weeks – £31m represents an
effective tax rate of 256 2005 28 weeks – 557 of earnings
before goodwill amortisation and exceptional costs excluding the
tax impact of prior year credits predominantly a credit of £08m
arising from enhanced capital allowance claims the effective rate
is 305 the cause of the variance of the effective rate to the
standard rate of 300 is the disallowance of nonqualifying
depreciation
going forward the group expects the preexceptional 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 £21m being 11p 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
noncurrent assets
noncurrent assets increased by £1268m over the year to 
£3101m predominantly as a result of goodwill increasing to 
£1960m through acquisitions property plant and equipment
increased by £574m primarily as a consequence of acquisitions over
the year however the balance at 1 october 2006 included £279m
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 £600m term loan facility
£500m development facility and £300m revolving credit facility
plus a £83m mortgage facility the group used the revolving
credit facility to issue £151m of guarantees to landlords and loan
note holders at 1 october 2006 the total unutilised portion of
these facilities amounted to £485m
group net debt decreased during the year by £910m to £676m
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 £1071m existing bank loans amounting 
to £1213m and £17m 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 £600m of bank term
loans £181m of bank development loans and £65m 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 £67m of loan notes
and £04m of finance lease borrowings in issue at the year end
in july 2006 the group entered into a threeyear interest rate
swap for £300m at a fixed rate of 507 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 778m
shares the process raised £1750m issued share capital increased
to £19m with a share premium account of £1731m in addition
£116m 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 506 150
interest and taxation 287 70
investing activities 720 304
financing activities 678 342
net increase in cash 177 42
net cash inflow from operations was £506m 2005 – £150m
representing a cash conversion ratio compared to adjusted 
ebitda of 1037 2005 – 956
net cash flow from investing activities amounted to £720m
outflow 2005 28 weeks – £304m inflow gross investing
activities amounted to £1239m being £948m investment on
acquisition of subsidiaries £142m representing development
capital predominantly freeholds and £149m representing
maintenance capital excluding the acquisition of ashbourne the
group invested £554m on new subsidiaries disposal proceeds
relating to the disposal of subsidiary undertakings and freehold
properties amounted to £519m 2005 28 weeks – £973m 
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 £271m
2005 28 weeks – £57m the increase was primarily due to
settlement of £110m of accrued interest upon the redemption of
shareholder deep discount bonds and £65m 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
£678m inflow 2005 28 weeks – £342m outflow in november
2005 the group initially increased bank borrowings by £407m
and issued deep discount bonds amounting to £323m as part of
the ashbourne acquisition existing loan notes within ashbourne
amounting to £180m were repaid as part of the acquisition 
as part of the listing upon the london stock exchange £1750m
was raised through a primary issue of shares and £672m through
new bank loan finance which was used to redeem £961m of
deep discount bonds in issue plus associated accrued interest 
of £110m existing bank loan finance amounting to £1213m 
and management loan notes of £17m were also repaid
the increase in cash and cash equivalents during the year was
£177m 2005 28 weeks – £42m resulting in a year end 
balance of £219m 2005 – £42m
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 nonexecutive director and chairman
william colvin was appointed nonexecutive 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 nonexecutive 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 nonexecutive director
ray miles became a nonexecutive 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 nonexecutive 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 nonexecutive director
joseph baratta became a nonexecutive 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 nonexecutive director
baroness morgan of huyton became a nonexecutive 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 nonexecutive director 
of carphone warehouse plc
christopher fisher nonexecutive director
christopher fisher was appointed a nonexecutive 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 52week 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 andor 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 11p 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 4312
landsdowne partners limited 473
legal and general group plc 419
charitable and political donations
during the period the group made donations to charities totalling £50000 2005 – £57000 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 heshe ought to have taken as a director to make himselfherself 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 privatelyheld 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 “postadmission period”
the board
the board currently comprises four nonexecutive and three executive directors in addition to the nonexecutive 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 nonexecutive 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 daytoday activities
the board meets formally bimonthly and additional meetings are arranged as necessary to consider urgent business the chairman also
holds meetings with the nonexecutive directors
the table below summarises the total number of board audit committee nomination committee and remuneration committee meetings
during the postadmission 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 nonexecutive directors led by the senior independent nonexecutive 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 nonexecutive 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 nonexecutive 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 nonaudit 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 nonaudit 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 nonexecutive 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 
nonexecutive directors as joseph baratta is not considered to be independent the group does not comply with provision b21 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 nonexecutive 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
bimonthly 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 goingconcern 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 nonexecutive directors and
ii during this period independent nonexecutive 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 unaudited except for those
parts which are stated as being audited
the remuneration committee and its role
the remuneration committee comprises of three nonexecutive 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 performancerelated 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 performancerelated bonus longterm
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 performancerelated 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 2365332 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 threeyear 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 2313p per
share and no awards will vest if psp eps is below 1861p per share with straightline 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 straightline
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 121 935
charge for future minimum rental increases 307 2382
goodwill impairment ––
annual bonuses paid to individuals within the psp 23 181
charge in respect of share optionstaxation 01 011
taxation impact of the above 100 776
profit for the purposes of calculating earnings per share under the psp 110 863
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 unexpired 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 £335000 per
annum whilst john murphy and graham sizer are both entitled to receive basic salaries of £300000 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 unexpired 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
nonexecutives
upon admission the nonexecutive directors entered into letters of appointment with the company the terms of the letters of appointment
for the nonexecutive directors are subject to the provisions of the articles all such appointments are for an initial term of three years
fees payable to the nonexecutive 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 £125000 all other nonexecutive directors
receive an annual fee of £45000 with the exception of the chairman of the nomination committee the nonexecutive directors receive
an annual fee of £7500 for each committee of the board which they chair all nonexecutive 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 nonexecutive 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 nonexecutive director 
to the board whilst the blackstone shareholding remains above 10 the current nominee is joseph baratta see above
directors’ remuneration audited
total pension
preipo postipo compensation
emoluments contributions
salary salary salary annual preipo postipo 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 – –
nonexecutive
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
†
–– ––– ––– – – – –
1184 881 303 788 320 468 207 68 2247 734 79 38
note remuneration for 2005 is in respect of the 28week 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 £750000 2005 – £500000 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 £565861 2005 –
£250000 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 2019120 11218
j murphy 1851840 11022
g sizer 1434000 7967
w colvin 1202400 6680
j baratta – –
r miles 44444 na
c fisher 22222 na
baroness morgan of huyton 2222 na
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 – 148889 2940 – – 148889 12 september 2009
j murphy – 150000 2940 – – 150000 12 september 2009
g sizer – 133333 2940 – – 133333 12 september 2009
the company’s closing share price on 1 october 2006 was 3140p whilst the highest and lowest during the period was 3150p and
2250p 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
7706
14706
21706
28706
4806
11806
18806
25806
1906
8906
15906
22906
29906
61006
131006
201006
271006
31106
101106
171106
241106
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’ equitydeficit 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 6109 1882
home payroll costs 3 3430 1048
home running costs 3 783 232
home ebitdar before central costs 3 1896 602
rent
charge for rental amounts currently payable 1161 365
charge for future minimum rental increases 307 40
total rent 3 1468 405
home ebitda before central costs 428 197
central costs 308 97
other operating income 09 06
adjusted ebitda before exceptional central costs 
and charge for future minimum rental increases 3 488 157
exceptional central costs 4 52 11
charge for future minimum rental increases 307 40
ebitda 129 106
profit on disposal of property plant and equipment 
and subsidiary undertakings 5 04 04
depreciation 11 101 26
amortisation 13 16 09
operating income 6 16 75
finance costs 7 193 99
finance income 7 03 –
loss before taxation 174 24
taxation 8 53 10
loss attributable to ordinary shareholders 26 121 34
pence pence
note per share per share
loss per share attributable to equity shareholders
basic 10 935 005
diluted 10 935 005
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
noncurrent assets
property plant and equipment 11 963 389
goodwill 12 1960 1363
other intangible assets 13 24 40
deferred tax assets 24 129 40
other noncurrent assets 14 25 01
total noncurrent assets 3101 1833
current assets
cash and cash equivalents 15 219 42
accounts receivable 16 288 223
inventories 17 11 04
other current assets 16 128 81
total current assets 646 350
total assets 3747 2183
liabilities
current liabilities
shortterm financial liabilities 20 259 338
trade and other payables 18 654 372
total current liabilities 913 710
noncurrent liabilities
longterm financial liabilities 20 636 1290
provisions and similar obligations 21 81 11
future minimum rental payable 21 637 206
total noncurrent liabilities 1354 1507
total liabilities 2267 2217
net assetsliabilities 1480 34
ordinary shares 25 19 –
share premium 26 1615 –
retained deficit 26 154 34
shareholders’ equitydeficit 27 1480 34
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 28 506 150
interest received 03 –
interest and bank loan arrangement fees paid 274 57
tax paid 16 13
net cash from operating activities 219 80
cash flows from investing activities
purchase of subsidiary undertakings net of cash acquired 29 948 512
sales of subsidiary undertakings 5 479 04
proceeds from sale of freehold properties 11 – 939
purchase of property plant and equipment 11 291 157
receipts from the sale of property plant and equipment 40 30
net cash usedgenerated in from investing activities 720 304
cash flows from financing activities
repayment of borrowings 3322 1975
new borrowings 2364 1634
capital element of finance leases 02 01
proceeds from share issues 25 1638 –
net cash generatedused fromin financing activities 678 342
net increase in cash and cash equivalents 177 42
opening cash and cash equivalents 42 –
closing cash and cash equivalents 15 219 42
note included within the purchase of property plant and equipment are purchase of freehold properties totalling £61m 2005 – £100m and development expenditure on new
properties totalling £71m 2005 – £18m
consolidated statement of changes in
shareholders’ equitydeficit – 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 – – 34 34
at 2 october 2005 – – 34 34
issue of ordinary share capital 19 1731 – 1750
sharebased payments – – 01 01
costs incurred in respect of issuance of ordinary share capital – 116 – 116
loss attributable to ordinary shareholders – – 121 121
at 1 october 2006 19 1615 154 1480
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 andor 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 reregistered 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 intragroup 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 subanalyses 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
sharebased payments
equitysettled transactions
the cost of equitysettled 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 equitysettled 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 nonmarket 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 nonfinancial asset or liability the amounts taken to equity are transferred to the initial carrying
amount of the nonfinancial 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 straightline 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 futurefixed committed rental increases
on a straightline 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 longterm 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 shortterm deposits loans and overdrafts with a maturity of less than one year are assumed to approximate to their 
book values the fair value of longterm 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 longterm 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
52week period ended 1 october 2006
elderly care specialist total
number number number
available beds
acquisitions 10606 206 10812
continuing operations 15503 693 16196
segment available beds 26109 899 27008
occupied beds
acquisitions 9590 146 9736
continuing operations 14209 631 14840
segment occupied beds 23799 777 24576
elderly care specialist total

occupancy
acquisitions 904 707 901
continuing operations 917 910 916
segment occupancy 912 864 910
£ £ £
average weekly fee 4651 8726 4780
28week period ended 2 october 2005
elderly care specialist total
number number number
available beds
acquisitions 15874 701 16575
continuing operations –– –
segment available beds 15874 701 16575
occupied beds
acquisitions 14568 619 15187
continuing operations –– –
segment occupied beds 14568 619 15187
elderly care specialist total
  
occupancy
acquisitions 918 883 916
continuing operations na na na
segment occupancy 918 883 916
£££
average weekly fee 4238 9116 4426
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 28week
period ended 2 october 2005 and the 52week period ended 1 october 2006
52week period ended 1 october 2006
elderly care specialist total
£’m £’m £’m
revenue
acquisitions 2188 65 2253
continuing operations 3568 288 3856
segment revenue 5756 353 6109
home payroll costs
acquisitions 1246 46 1292
continuing operations 1973 165 2138
segment home payroll costs 3219 211 3430
home running costs
acquisitions 292 16 308
continuing operations 435 40 475
segment home running costs 727 56 783
home ebitdar before central costs
acquisitions 650 03 653
continuing operations 1160 83 1243
segment home ebitdar before central costs 1810 86 1896
home ebitdar before central costs 
acquisitions 297 46 290
continuing operations 325 288 322
segment home ebitdar before central costs  314 244 310
total rent
acquisitions 548 10 558
continuing operations 840 70 910
segment rent 1388 80 1468
home ebitda before central costs
acquisitions 102 07 95
continuing operations 320 13 333
segment home ebitda before central costs 422 06 428
unallocated expenses 425
unallocated income 13
operating income 16
assets and liabilities
unallocated assets 3747
total assets 3747
unallocated liabilities 2267
total liabilities 2267
other segment information
amortisation – all elderly care note 13 16
release of provision for vacant properties recognised as rent – all elderly care note 22 14
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
28week period ended 2 october 2005
elderly care specialist total
£’m £’m £’m
revenue
acquisitions 1729 153 1882
continuing operations –– –
segment revenue 1729 153 1882
home payroll costs
acquisitions 965 83 1048
continuing operations –– –
segment home payroll costs 965 83 1048
home running costs
acquisitions 213 19 232
continuing operations –– –
segment home running costs 213 19 232
home ebitdar before central costs
acquisitions 551 51 602
continuing operations – ––
segment home ebitdar before central costs 551 51 602
segment home ebitdar before central costs  318 333 319
total rent
acquisitions 369 36 405
continuing operations –– –
segment rent 369 36 405
home ebitda before central costs
acquisitions 182 15 197
continuing operations –– –
segment home ebitda before central costs 182 15 197
unallocated expenses 132
unallocated income 10
operating income 75
assets and liabilities
unallocated assets 2183
total assets 2183
unallocated liabilities 2217
total liabilities 2217
other segment information
amortisation – all elderly care note 13 09
release of provision for vacant properties – all elderly care note 22 05
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 31 –
restructuring and integration costs 18 09
other 03 02
total 52 11
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 £06m
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 £12m
5 sale of subsidiary undertakings
on 2 november 2005 the group sold its investment in southern cross crown holdings limited for cash consideration of £83m and
realised a loss on disposal of £01m
on 18 january 2006 the group sold its investment in southern cross propco 1 limited for cash consideration of £42m and realised 
a loss on disposal of £01m
on 8 february 2006 the group sold its investment in moorpark propco limited for cash consideration of £51m 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 £02m
on 30 june 2006 the group sold its investment in cc care propco limited for cash consideration of £01m 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 £20m 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 £42m and realised a profit 
on disposal of £05m
during the year the group disposed of property plant and equipment for a cash consideration totalling £40m the related assets had a net
book value of £37m resulting in a profit on disposal of £03m
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 3416 1105
operating lease rentals 1468 405
depreciation of property plant and equipment – owned assets note 11 101 26
depreciation of property plant and equipment – leased assets – –
amortisation of intangibles note 13 16 09
other operating income 09 06
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 02 01
services relating to corporate finance and acquisitions 18 02
nonaudit services of £18m include £16m in relation to the company’s initial public offering and have been included within the share
premium account and £02m 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 62 38
deep discount bond amortisation 70 29
interest payable on loan notes 24 –
amortisation of loan arrangement fees 31 02
other finance costs 06 13
fair value of financial instruments – 17
193 99
bank interest receivable 03 –
finance costs – net 190 99
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 03 10
– prior period 01 –
deferred tax note 24
– current period 42 –
– prior period 09 –
taxation 53 10
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 174 24
loss before taxation multiplied by the standard rate of 
corporation tax in the united kingdom of 30 52 07
effects of
amortisation of intangibles 04 03
expenses not deductible for tax purposes 04 14
other 09 –
tax creditcharge for the period 53 10
the tax charge is expected to be lower than the standard rate in future periods as the impact of nondeductible intangibles and
depreciation is expected to be outweighed by benefits from the use of tax assets including broughtforward 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 11p per share totalling £21m 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 128879343 74043101
dilutive potential ordinary shares
employee share options – –
diluted weighted average number of shares 128879343 74043101
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 121 935 935 34 005 005
charge for future minimum rental increases 307 2382 2382 40 005 005
exceptional central costs
– flotation costs 31 237 237 –– –
– restructuring and integration costs 18 137 137 09 002 002
– other 03 027 027 02 – –
taxation impact of above 108 839 839 15 002 002
profit attributable to ordinary shareholders 
before charges for future minimum rental increases 
and exceptional central costs and taxation impact thereof 130 1004 1004 02 – –
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 95 120 48 15 06 284
additions 100 40 02 01 18 161
disposals 30 – – – – 30
at 2 october 2005 165 160 50 16 24 415
additions 61 139 08 06 84 298
acquisitions note 29 794 171 69 01 – 1035
transfers 29 03 24 – 56 –
disposals 651 03 05 01 – 660
at 1 october 2006 398 470 146 22 52 1088
accumulated depreciation
charge for the period 01 21 01 03 – 26
at 2 october 2005 01 21 01 03 – 26
charge for the period 02 87 06 06 – 101
disposals – 02 – – – 02
at 1 october 2006 03 106 07 09 – 125
net book amount
at 1 october 2006 395 364 139 13 52 963
at 2 october 2005 164 139 49 13 24 389
assets held under finance leases totalled £03m at 2 october 2005 and £05m at 1 october 2006
during the period ended 1 october 2006 freehold properties with a net book value of £37m were disposed of for a consideration totalling
£40m realising a profit on disposal of £03m
included within freehold properties as at 1 october 2006 are ten properties with a cost of £279m 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 786
acquisition of highfield 546
other acquisitions 31
at 2 october 2005 1363
acquisition of cannon capital ventures limited note 29 592
other acquisitions note 29 05
at 1 october 2006 1960
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 tenyear period cash flows beyond the fiveyear period are extrapolated using the growth rates
stated below the growth rates do not exceed the longterm 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 49
at 2 october 2005 and 1 october 2006 49
accumulated amortisation
on incorporation –
charge for the period 09
at 2 october 2005 09
charge for the period 16
at 1 october 2006 25
net book amount
at 1 october 2006 24
at 2 october 2005 40
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 noncurrent assets
other noncurrent 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 219 42
219 42
16  trade and other current assets
1 october 2 october
2006 2005
£’m £’m
trade receivables 340 262
less provision for impairment of receivables 52 39
trade receivables – net 288 223
other receivables 11 27
income taxes note 19 14 –
prepayments and accrued income 103 54
other current assets 128 81
17 inventories
1 october 2 october
2006 2005
£’m £’m
consumables 11 04
the replacement cost of inventory does not differ materially from the costs stated above there were no writedowns 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 146 79
other tax and social security payable 62 50
other payables 94 87
income taxes – 01
accruals 352 155
654 372
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 receivablepayable
1 october 2 october
2006 2005
£’m £’m
current tax 14 01
20 financial liabilities – borrowings
a shortterm borrowings
1 october 2 october
2006 2005
£’m £’m
bank loans secured – net of arrangement fees totalling £02m 2005 – £nil 239 140
obligations under finance leases 01 01
loan notes guaranteed 19 19
other note 35 – 139
financial instruments – 39
259 338
the guarantee is provided by barclays bank plc as part of the facilities agreement
b longterm borrowings
1 october 2 october
2006 2005
£’m £’m
bank loans secured – net of arrangement fees totalling £18m 2005 – £19m 585 691
obligations under finance leases 03 01
loan notes 2015 48 22
deep discounted bonds – 576
636 1290
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 175 above libor
on 4 november 2005 the group renegotiated its existing banking facility and increased its term loans by £387m as part of the funding 
for the acquisition of ashbourne see note 29 arrangement fees amounting to £12m 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 shortterm 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 £672m of new bank loans
drawn unamortised arrangement fees of £31m 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 £22m 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 £02m of these fees had
been amortised and charged to the profit and loss account
of the total bank loans falling due within one year £58m relates to term loans and £181m relates to shortterm 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 threeyear interest swap agreement at a fixed interest rate of 514 on £562m of debt on 
3 march 2006 the group entered into an eightyear interest swap agreement at a fixed interest rate of 594 on £571m of debt under
the terms of the agreements the notional amount reduces at each repayment date to hedge 100 of totalterm bank debt on 26 july
2006 the group redeemed the existing interest rate swap at a cost of £526m on the same day the group entered into a threeyear
interest rate swap agreement at a fixed rate of 509 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 075 below libor
loan notes 2015
the loan notes 2015 are unsecured bonds and are redeemable by 2015 and bear interest at a rate of 075 below libor
deep discount bonds
under the terms of an instrument dated 4 november 2005 the whollyowned subsidiary southern cross investments no 1 limited issued
£848m of unsecured deep discount bonds 2015 at an initial discount price of £323m the redemption date was 2015
under the terms of an instrument dated 3 march 2006 the whollyowned subsidiary southern cross investments no 1 limited issued 
a further £277m of unsecured deep discount bonds 2015 at an initial discount price of £137m the redemption date was 2015
on 3 march 2006 the whollyowned subsidiary southern cross investments no 1 limited redeemed £49m of deep discount bonds
including accrued interest of £02m
on 12 july 2006 the whollyowned subsidiary southern cross investments no 1 limited redeemed £1071m of deep discount bonds
including accrued interest of £110m
arrangement fees of £03m 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 noncurrent liabilities
1 october 2 october
2006 2005
£’m £’m
provisions note 22 81 11
future minimum rental increases 637 206
718 217
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 206 –
on acquisition note 29 124 166
charged to income statement 307 40
closing balance 637 206
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 16
utilised in the period 05
at 2 october 2005 11
on acquisition note 29 84
utilised in the period 14
at 1 october 2006 81
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 reletting 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 longterm
borrowings with a number of banks and institutions shortterm 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 300 544 844
finance leases – 04 04
trade and other payables no interest paid 654 – 654
loan notes – 67 67
onerous lease provisions no interest paid 81 – 81
1035 615 1650
fixed rate weighted average interest rate excluding no interestpaid items  509
fixed rate weighted average interest period excluding no interestpaid items years 280
at 2 october 2005
fixed floating
rate rate
financial financial
liabilities liabilities total
sterling £’m £’m £’m
bank overdraft and borrowings 595 255 850
trade and other payables no interest paid 372 – 372
finance leases 02 – 02
deep discount bonds 576 – 576
loan notes 41 – 41
other loans – 138 138
onerous lease provisions no interest paid 11 – 11
1597 393 1990
fixed rate weighted average interest rate excluding no interestpaid items  760
fixed rate weighted average interest period excluding no interestpaid items years 640
the floating rate financial liabilities have comprised
l sterling denominated bank borrowings and overdrafts that bear interest at rates between 175 and 325 above uk bank base rates
l sterling denominated loan notes that bear interest at between 075 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 219 42
accounts receivable due within one year 299 250
accounts receivable due in more than one year 25 01
543 293
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 923 678
in more than one year but less than two years 69 22
in more than two years but less than five years 503 89
more than five years 155 1201
1650 1990
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 468 209
468 209
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 915 915 1607 1606
other financial liabilities 735 735 383 383
financial assets 543 522 293 292
derivative financial instruments held
to manage the interest rate profile
interest rate swap – liability –– 39 39 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 shortterm loans and overdrafts approximate to the fair carrying value because of the short maturity of these instruments
the fair value of longterm 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 40 –
income and expense credit 51 –
on acquisition 38 40
closing balance 129 40
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 £84m 2005 – £00m 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 chargecredit 12 12 ––
acquisition of subsidiary 50 16 06 40
at 2 october 2005 62 28 06 40
income and expense creditcharge 92 27 14 51
acquisition of subsidiary 37 01 – 38
at 1 october 2006 191 54 08 129 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 300000000 1000000
£’m £’m
ordinary shares of 1p each 3 –
number number
allotted called up and fully paid
ordinary shares of 1p each 188067377 459540
£’m £’m
ordinary shares of 1p each 19 –
on 13 june 2006 the authorised share capital of the company was increased from £10000 to £55405 by the creation of 45405
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 £55405 to £3045405 by the creation of 299000000 ordinary shares of 1p each and 
to authorise the directors to issue ordinary shares with an aggregate nominal amount of £1307037
on 13 june 2006 the company issued 45405 redeemable shares of £1 each for cash on admission to the london stock exchange on 
7 july 2006 the company allotted and issued 77777777 ordinary shares of 1p at 225p per share for cash and made a bonus issue of
109830060 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 45405 redeemable shares of £1 each
26  reserves
share profit
premium and loss
account account
group £’m £’m
on incorporation ––
loss attributable to ordinary shareholders – 34
at 2 october 2005 – 34
loss attributable to ordinary shareholders – 121
sharebased payments – 01
issue of ordinary share capital 1731 –
costs incurred in relation to issuance of ordinary share capital 116 –
at 1 october 2006 1615 154 southern cross healthcare group plc   annual report and accounts 2006 63
27 shareholders’ funds and statement of changes in shareholders’ 
deficitequity
share profit
share premium and loss
capital account equity total
group £’m £’m £’m £’m
on incorporation –– ––
loss attributable to ordinary shareholders – – 34 34
at 2 october 2005 – – 34 34
loss attributable to ordinary shareholders – – 121 121
sharebased payments – – 01 01
issue of ordinary share capital 19 1731 – 1750
costs incurred in relation to issuance of ordinary share capital – 116 – 116
at 1 october 2006 19 1615 154 1480
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 174 24
adjustments for 
profit on disposal of property plant and equipment and subsidiary undertakings 04 04
depreciation 101 26
amortisation 16 09
finance costs 193 99
finance income 03 –
changes in working capital excluding effects of acquisitions of subsidiaries 
increase in inventories 04 –
decreaseincrease in trade and other receivables 13 60
increase in payables 65 69
increase in provision for future minimum rental payable 307 40
decrease in provisions 12 05
cash generated from operations 506 150 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 £543m being consideration of £543m 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 £2084m and profit after taxation of £52m 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 £6281m
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 401 401
inventories 11 10
receivables 136 125
payables 243 252
provisions 35 82
future minimum rental increases 124 124
taxation
– deferred 38 38
cash and cash equivalents 107 107
minority interests 02 02
loans 274 274
net liabilities acquired 19 49
goodwill 592
consideration 543
consideration satisfied by
cash 543
543
£’m
cash consideration 543
cash acquired 107
436
the fair value adjustments are as follows
£’m
provision for onerous leases 47
provision for inventories 01
provision for doubtful debts 11
liabilities not recorded 09
68
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 £15m being cash
consideration
on 1 november 2005 the group acquired the entire share capital of rozelle healthcare limited at an enterprise value £183m being cash
consideration
on 19 january 2006 the group acquired the entire share capital of downing bon accord limited at an enterprise value of £19m being
cash consideration
on 8 march 2006 the group acquired the entire share capital of cc care limited at an enterprise value of £84m being cash consideration
on 9 august 2006 the group acquired the entire share capital of ych no1 limited at an enterprise value of £182m being cash
consideration
the acquired businesses contributed revenues of £114m and earnings after taxation of £04m to the group for the period from acquisition
to 1 october 2006
it is not possible to determine the preacquisition 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 403 231 634
stock –– –
debtors 05 01 04
cash
total assets
creditors 08 – 08
overdrafts 03 – 03
long term loans 126 – 126
provisions for liabilities and charges 04 – 04
total liabilities
net assets 267 230 497
cost of acquisition 502
goodwill arising on acquisition 05
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 3218 1029
social security costs 255 74
other pension costs 05 02
3478 1105
staff costs for the group by function
home payroll costs – excluding agency and other staffrelated costs 3318 998
central payroll costs 160 107
3478 1105
home payroll costs as disclosed on the face of the income statement include agency and other staffrelated costs agency and other staff
related costs totalled £112m and £50m 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 21119 13645
management and administration 1242 828
22361 14473
directors’ remuneration
a detailed analysis of directors’ remuneration including salaries performancerelated 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 20 07
compensation for loss of office 02 –
company contributions to money purchase pension schemes 01 –
23 07
details of the highestpaid 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 05 02
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 £151m
33  financial commitments
at 2 october 2005 and 1 october 2006 the group and company had commitments under noncancellable operating leases expiring 
as follows
1 october 2 october
2006 2005
£’m £’m
within one year 1613 1468
within one to three years 3226 2936
within three to five years 3226 2936
over five years 30112 17531
38177 24871
the majority of operating leases provide for fixed annual increases at 25 or 275 or annual rent increases based on the retail price
index subject to negotiated caps and collars
financial commitments due within one year under noncancellable 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 416 379
fixed annual rental increases 1019 927
fiveyearly fixed rental increases 89 81
annual rental increases based on rpi 89 81
1613 1468 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  sharebased payments
the total charge for sharebased payments was £147797 2005 – £nil all of which relates to equity settled transactions after deferred
tax the total charge was £103458 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 – na – na
granted 2365 £nil – na
end of period 2365 £nil – na
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 £294
exercise price £nil
number granted 2365332
option pricing model monte carlo
vesting period years 3
expected volatility 2600
contracted life years 3
risk free rate 502
dividend yield 000
fair value per option £294
expected volatility is based on historical volatility of shares is the same sector over the last ten years the riskfree rate of return is the
yield on zerocoupon 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 29 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 interestbearing bonds 2015 nominal amount 08 04 06 01 02
discount accrued during period – – – – –
balance at 2 october 2005 08 04 06 01 02
discount accrued during period – – – – –
redeemed 08 04 06 01 02
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 interestbearing unsecured bonds 
2015 nominal amount 04 02 – 02 04
discount accrued during period – – –– –
balance at 2 october 2005 04 02 – 02 04
discount accrued during period – – – – –
redeemed 04 02 – 02 04
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 386 386 –
accrued discount 16 – 16
redeemed 78 76 02
balance at 2 october 2005 324 310 14
issue of ddbs 268 259 09
accrued discount 39 – 39
redeemed 631 569 62
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 07 07 –
redeemed 01 01 –
balance at 2 october 2005 06 06 –
issue of ddbs 05 05 –
accrued discount 01 – 01
redeemed 12 11 01
balance at 1 october 2006 –– –
bfi cayman iv a 
balance at incorporation –– –
issue of ddbs 18 18 –
accrued discount 01 – 01
redeemed 04 04 –
balance at 2 october 2005 15 14 01
issue of ddbs 12 12 –
accrued discount 02 – 02
redeemed 29 26 03
balance at 1 october 2006 –– –
bpp cayman iv lp 
balance at incorporation –– –
issue of ddbs 01 01 –
balance at 2 october 2005 01 01 –
issue of ddbs 01 01 –
accrued discount –– –
redeemed 02 02 –
balance at 1 october 2006 –– –
brep alberta iv lp 
balance at incorporation –– –
issue of ddbs 35 35 –
accrued discount 02 – 02
redeemed 07 07 –
balance at 2 october 2005 30 28 02
issue of ddbs 25 24 01
accrued discount 04 – 04
redeemed 59 52 07
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 12 12 –
accrued discount 01 – 01
redeemed 02 02 –
balance at 2 october 2005 11 10 01
issue of ddbs 08 08 –
accrued discount 01 – 01
redeemed 20 18 02
balance at 1 october 2006 –– –
brep alberta iv te 2 lp 
balance at incorporation –– –
issue of ddbs 23 23 –
accrued discount 01 – 01
redeemed 05 05 –
balance at 2 october 2005 19 18 01
issue of ddbs 16 16 –
accrued discount 02 – 02
redeemed 37 34 03
balance at 1 october 2006 –– –
brep alberta iv te 3 a lp 
balance at incorporation –– –
issue of ddbs 20 20 –
accrued discount 01 – 01
redeemed 04 04 –
balance at 2 october 2005 17 16 01
issue of ddbs 14 14 –
accrued discount 02 – 02
redeemed 33 30 03
balance at 1 october 2006 –– –
brep alberta iv f lp 
balance at incorporation –– –
issue of ddbs 12 12 –
accrued discount 01 – 01
redeemed 03 03 –
balance at 2 october 2005 10 09 01
issue of ddbs 09 09 –
accrued discount 01 – 01
redeemed 20 18 02
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 06 06 –
redeemed 01 01 –
balance at 2 october 2005 05 05 –
issue of ddbs 04 04 –
accrued discount 01 – 01
redeemed 10 09 01
balance at 1 october 2006 –– –
brep international ie lp 
balance at incorporation –– –
issue of ddbs 77 77 –
accrued discount 03 – 03
redeemed 15 15 –
balance at 2 october 2005 65 62 03
issue of ddbs 53 51 02
accrued discount 08 – 08
redeemed 126 113 13
balance at 1 october 2006 –– –
brep international id lp 
balance at incorporation –– –
issue of ddbs 36 36 –
accrued discount 01 – 01
redeemed 07 07 –
balance at 2 october 2005 30 29 01
issue of ddbs 25 24 01
accrued discount 04 – 04
redeemed 59 53 06
balance at 1 october 2006 –– –
brep international id 2 lp 
balance at incorporation –– –
issue of ddbs 42 42 –
accrued discount 02 – 02
redeemed 09 09 –
balance at 2 october 2005 35 33 02
issue of ddbs 29 28 01
accrued discount 04 – 04
redeemed 68 61 07
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 07 07 –
redeemed 01 01 –
balance at 2 october 2005 06 06 –
issue of ddbs 05 05 –
accrued discount 01 – 01
redeemed 12 11 01
balance at 1 october 2006 –– –
brep international b lp 
balance at incorporation –– –
issue of ddbs 02 02 –
balance at 2 october 2005 02 02 –
issue of ddbs 01 01 –
redeemed 03 03 –
balance at 1 october 2006 –– –
total
balance at incorporation –– –
issue of ddbs 685 685 –
accrued discount 29 – 29
redeemed 139 136 03
balance at 2 october 2005 575 549 26
issue of ddbs 475 460 15
accrued discount 69 – 69
redeemed 1119 1009 110
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 £13767000 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 £13837417
total interest charged in the period ended 2 october 2005 was £01m and in the period ended 1 october 2006 was £04m
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 309 03 312 17
period ended 1 october 2006 670 06 676 24
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 no2 limited
southern cross care homes no3 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 no2 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 no1 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 no1 limited
southern cross healthcare investments no2 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 21 12
operating lease rentals 307 40
amortisation of goodwill under uk gaap 89 31
amortisation of intangibles under ifrs 16 09
fair value of financial instruments 39 18
loss before taxation reported under ifrs 174 24
reconciliation of balance sheet at 1 october 2006
effect of 
previous transition to
uk gaap ifrs ifrs
£’m £’m £’m
plant property  equipment 963 – 963
goodwill 1671 289 1960
other intangible assets net – 24 24
deferred tax assets – 129 129
other non current assets 25 – 25
total noncurrent assets 2659 442 3101
cash and cash equivalents 219 – 219
accounts receivable 288 – 288
inventories 11 – 11
other current assets 128 – 128
total current assets 646 – 646
total assets 3305 442 3747
shortterm borrowings 259 – 259
trade and other payables 654 – 654
total current liabilities 913 – 913
longterm borrowings 636 – 636
provisions and similar obligations 81 – 81
deferred tax liabilities 36 36 –
future minimum rental payable – 637 637
total noncurrent liabilities 753 601 1354
total liabilities 1666 601 2267
net assets 1639 159 1480
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
noncurrent assets
property plant and equipment 389 – 389
goodwill 1249 114 1363
other intangible assets – 40 40
deferred tax assets – 40 40
other noncurrent assets 01 – 01
total noncurrent assets 1639 194 1833
current assets
cash and cash equivalents 42 – 42
accounts receivable 223 – 223
inventories 04 – 04
other current assets 81 – 81
total current assets 350 – 350
total assets 1989 194 2183
liabilities
current liabilities
shortterm financial liabilities 299 39 338
trade and other payables 353 19 372
total current liabilities 652 58 710
noncurrent liabilities
longterm borrowings 1290 – 1290
provisions and similar obligations 11 – 11
deferred tax liabilities 34 34 –
future minimum rental payable – 206 206
total noncurrent liabilities 1335 172 1507
total liabilities 1987 230 2217
shareholders’ deficit 02 36 34 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 6109 – 6109
home payroll costs 3430 – 3430
home running costs 783 – 783
home ebitdar before central costs 1896 – 1896
rent 
charge for rental amounts currently payable 1161 – 1161
charge for future minimum rental increases – 307 307
total rent 1161 307 1468
home ebitda before central costs 735 – 428
central costs 308 – 308
other operating income 09 – 09
adjusted ebitda before exceptional central costs 
and charge for future minimum rental increases 488 – 488
exceptional central costs 52 – 52
charge for future minimum rental increases – 307 307
ebitda 436 307 129
profit on disposal of property plant and equipment 
and subsidiary undertakings 04 – 04
depreciation 101 – 101
amortisation 89 73 16
operating income 250 234 16
finance costs 232 39 193
finance income 03 – 03
earnings before taxation 21 195 174
taxation 28 81 53
profit attributable to ordinary shareholders 07 114 121
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 1882 – 1882
home payroll costs 1048 – 1048
home running costs 232 – 232
home ebitdar before central costs 602 – 602
rent
charge for rental amounts currently payable 365 – 365
charge for future minimum rental increases – 40 40
total rent 365 40 405
home ebitda before central costs 237 40 197
central costs 97 – 97
other operating income 06 – 06
adjusted ebitda before exceptional central costs and 
charge for future minimum rental increases 157 – 157
exceptional central cost 11 – 11
charge for future minimum rental increases – 40 40
ebitda 146 40 106
profitloss on disposal of property plant and equipment 
and subsidiary undertakings 04 – 04
depreciation 26 – 26
amortisation 31 22 09
operating income 93 18 75
finance cost 81 18 99
finance income –– –
earnings before taxation 12 36 24
taxation 28 18 10
earnings attributable to ordinary shareholders 16 18 34
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 straightline 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 £307m and £40m in the periods to 1 october 2006 
and 2 october 2005 respectively related deferred tax assets of £93m and £12m 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 £89m and £31m 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 £49m have been recognised upon the acquisition of southern cross equityco limited
amortisation on resident contracts totalling £16m and £09m 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 £39m have been recognised 
in the group balance sheets at 1 october 2006 and 2 october 2005 respectively related deferred tax assets of £nil and £12m 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 266577 2
creditors – amounts due within one year 4 26074 –
net current assets 240503 2
total assets less current liabilities 240506 5
creditors – amounts due within one year 5 52090 –
net assets 188416 5
capital and reserves
called up share capital 6 1881 5
share premium account 161522 –
profit and loss account 7 25013 –
equity shareholders’ funds 188416 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 £25013324
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 whollyowned 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 no2 limited
southern cross care homes no3 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 no2 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 no1 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 no1 limited
southern cross healthcare investments no2 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 no1
limited and southern cross healthcare investments no2 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 266577 2
266577 2
4 creditors – amounts due within one year
1 october 2 october
2006 2005
£’000 £’000
bank loans secured 23897 –
corporation tax 1759 –
accruals 418 –
26074 –
5 creditors – amounts due after one year
1 october 2 october
2006 2005
£’000 £’000
bank loans secured 52090 –
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 175 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 300000000 1000000
£’000 £’000
ordinary shares of 1p each 3000 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 188067377 459540
£’000 £’000
ordinary shares of 1p each 1881 5
on 13 june 2006 the authorised share capital of the company was increased from £10000 to £55405 by the creation of 45405
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 £55405 to £3045405 by the creation of 299000000 ordinary shares of 1p each and 
to authorise the directors to issue ordinary shares with an aggregate nominal amount of £1307037
on 13 june 2006 the company issued 45405 redeemable shares of £1 each for cash on admission to the london stock exchange on 
7 july 2006 the company allotted and issued 77777777 ordinary shares of 1p and made a bonus issue of 109830060 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 45405
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 – 25013
issue of ordinary share capital 173169 –
costs incurred in relation to issuance of ordinary share capital 11602 –
redemption and cancellation of shares 45 –
at 1 october 2006 161522 25013
8 dividends paid and proposed
no dividends were declared or paid during the periods
the directors have proposed a final dividend of 11p per share totalling £21m 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
fiveyear 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 200082 171980 157809 – 69517
acquired operations 274760 11464 – 90350 34096
group turnover 474842 183444 157809 90350 103613
cost of sales 304677 118183 102279 61096 70182
gross profit 170165 65261 55530 29254 33431
administrative expenses
operating lease rentals 92154 32450 28634 16787 23966
other administrative expenses 54733 18302 15047 5650 6061
goodwill amortisation 7261 2713 2463 1518 108
exceptional items 3202 2927 670 – 556
total administrative expenses 157350 56392 46814 23955 30475
other operating income 867 26 410 – –
operating profit
continuing operations 7770 8003 9126 – 2780
acquired operations 5912 892 – 5299 176
group operating profit 13682 8895 9126 5299 2956
loss on disposal of subsidiary undertaking 86 – –– –
profit on disposal of fixed assets 136 7615 301 – –
net interest payable 20078 13155 7531 4678 284
profitloss on ordinary activities before taxation 6346 3355 1896 621 2672
taxation 2489 73 1521 178 923
profitloss for the financial period 8835 3282 375 799 1749
 consolidated audited financial information is not available for the 20week period from 31 march 2002 to 15 august 2002 
number of beds 28229 17000 7718 7665 5966 shareholder information
southern cross healthcare group plc   annual report and accounts 2006 89
20062007 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
gsizerschealthcarecouk
website wwwschealthcarecouk
designed and produced by 
85
four
principal location photography by bob wheeler
the report was printed without the use of harmful voc emitting isopropyl alcohol using pureprint
®
environmental print technology by esp  
a carbonneutral
®
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
wwwschealthcarecouk
southern cross healthcare group plc annual report and accounts 2006


Summary:
 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 longterm care
market targeting further growth in both core and specialist divisions
the demand for longterm 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 14000 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 24hour 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 24hour care services at current average
weekly fee rates of £465 for elderly care this equates to a price 
of just over £275 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 selffunding residents
6 southern cross healthcare group plc   annual report and accounts 2006
during another excellent year we have continued
to consolidate the longterm 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 10000 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 postflotation 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 onsale
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 2000 beds in various stages of planning
and construction a further 1000 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 64bedded facility in enniskillen
ni 90 beds in wishaw and 85 beds in renfrew both sc we
have also added an 80bedded 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 longterm 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 twoyear
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 6574 7584 85
na
27
04
20
00
15
03
04
85 7584 6574
cagr
all
19862006
20062026
uk elderly population 19012071 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 wellinvested purposebuilt 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 1200 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 28917 beds
scotland 78 homes 4604 beds
northern ireland 21 homes 977 beds
north and yorkshire 192 homes 9627 beds
midlands 101 homes 4698 beds
wales and sw england 68 homes 2861 beds
east anglia 58 homes 2761 beds
south east england 62 homes 3389 beds
note available beds including managed portfolio as at 1 october 2006
geographic presence