Birmingham care firm Claimar yesterday said a shortage of staff had been responsible for wiping out profits over six months.
The company posted a first-half pre-tax loss of £80,000, compared to a profit of £690,000 the year before, saying it had been unable to cope with increased staff costs.
Turnover was £24.1 million from £9.1 million the previous year, after two high-profile but high-cost acquisitions.
Claimar chairman John Crabtree said he expected profit and turnover to grow for the rest of 2008, but the board expected to fall short of trading expectations. “The first half of this year has been challenging and disappointing,” he said. “We are disappointed recent trading has been adversely affected by a shortage of suitable staff across the group, but more noticeably in the Complete Care Group, our complex care business, and our inability to pass on the full charge of increased staff costs principally arising from the implementation of the working time directive and rising fuel claims.
“Management has set in train a rapid recovery plan. The main drive this year has been to focus on alternative revenue streams that can be obtained by cross selling to our growing service user base. We strongly believe this approach places us in a strong position to respond to changes in the way services are delivered.”
The company, which provides domiciliary care to local authorities in the Midlands and the north west, said it faces further challenges.
But it added it believes prospects are good in the medium and long term, on the back of demographics, industry trends of consolidation, growing barriers to entry, and its strongly motivated and ambitious management team.
It said the ageing population and increasing number of people choosing to be cared for at home would pay off in the long run for Claimar.
Last week Claimar issued a trading statement saying it was unlikely to meet financial targets, because of unexpected costs.
The firm said it was finding it difficult to recoup the increased costs from local government groups, meaning Claimar had to take a hit. It also had to take on a large rise in interest payments on loans, which rose more than 500 per cent to £642,000 after the group borrowed to fund two acquisitions in recent months.
Claimar bought Telford-based Complete Care Group in October 2007 for £33.1 million.
The company, which employs about 700 carers, was Claimar’s biggest acquisition to date, but has struggled to recruit enough full-time staff to cope with its success, meaning it had to take on expensive agency staff to fulfil contracts.
The acquisition had some early success, leading Claimar to higher full-year profits at the end of 2007, but saw its fortunes turn in 2008.
Claimar put in place a recovery strategy, and has already cancelled a small number of contracts to make savings of about £30,000 a month. Earlier this year, Claimar also bought the Ravenscroft group of companies, based in Preston, for just under £3 million.
And Mr Crabtree repeated the company’s commitment to further acquisitions in the near future.
Despite the financial difficulties, Claimar said it continued to sign new contracts, including a doubling in the size of its contract with the local authority in Manchester to 3,500 hours of care a week.
It also signed a contract for another 1,500 hours of care a week in Rotherham, and opened new facilities in Lancashire.
Claimar said it would not be issuing a dividend this year.