UPDATE 2-UK's Southern Cross beat forecasts, shares rise

(Adds CEO comments, analyst comment, shares)

By Chris Wills

LONDON, May 12 (Reuters) - Britain's largest care-home operator Southern Cross posted forecast-beating earnings on the back of a sharp rise in fees and welcomed government moves to overhaul care for the elderly.

Southern Cross Health Care Group Plc (SCHE.L: Quote, Profile, Research), which has around 37,000 beds in some 730 care homes, said it had hiked fees by more than 5 percent, significantly above forecasts, while first-half profits beat estimates, sending its shares up over 8 percent.

The company, which gets about 70 percent of its revenue by providing care services to UK local authorities, said on Monday adjusted earnings before interest, tax, depreciation and amortisation rose 41 percent to 30.8 million pounds ($60.1 million) in the six months to March 30.

Revenue rose 28 percent to 431 million at the company which is benefiting from an aging population and the closure of hundreds of publicly-funded care homes, as local authorities try to save money by outsourcing work to privately-run care homes.

Prime Minister Gordon Brown is expected to say on Monday that an extra 2 million people will need care in their old age over the next 20 years, creating a 6 billion pounds ($11.7 billion) funding gap.

"We totally agree ... that this is not going to go away," Southern Cross Chief Executive Bill Colvin told Reuters. There are 200,000 fewer publicly-run beds than 12 years ago, he said.

Brown is expected to say the whole system of care homes needs an overhaul.  Continued...