Bottom Line: Bright prospects

THERE were no unpleasant surprises in half-year figures from Takare, the nursing home operator, which appears to have coped well with the traumatic changes to care for the highly dependent, introduced by the Government on 1 April. Is this enough to justify the premium rating given to the company's shares?

Forecasts of a sharp drop in occupancy rates and average revenues per bed as local authorities eked out their fixed budgets by limiting admissions and driving down fees have proved to be exaggerated.

This is all the more encouraging because Takare is in the midst of an extremely rapid growth phase involving physical expansion of between 20 and 30 per cent a year.

Any sign that occupancy rates were slipping or revenues suffering would do severe damage to a rating that commands a prospective p/e of 16, assuming pounds 14m pre-tax this year, and a yield of only 1 per cent at 237p.

Soaring net interest costs on the back of rapid expansion have slowed a 73 per cent rise in operating profits to an underlying pre-tax gain of 17 per cent and a pounds 17m cash outflow is likely to take gearing to 60 per cent by the end of the year.

A return to shareholders for new money, after a pounds 60m fund raising in 1991, looks ever more likely by early 1995, which should be borne in mind.

Meanwhile, fears that local authorities' budgets will run out of money before Takare does suggest some caution. Long term, the shares are good value.