According to Care-home operator Southern Cross Health Care, local-authority fees would increase around half the level it had estimated and occupancy levels had not met its anticipations, which could hit its full-year revenue.

While the company had anticipated local authorities to agree to average fee growth of a minimum 2%, recent negotiations recommended that it would be around 1%.

On Monday, Southern Cross said that it would respond by reducing costs, but that would only somewhat tone down the lower fees.

The company said, "Whilst the group anticipates that the first half will be in line with its expectation, a degree of downside risk exists in the second half of the year which could adversely affect the full year outturn".

It said that while occupancy for the period 1 Oct 2009 to 25 March 2010 was 85.7%, down from 86.4% in the period Sept. 28 to Dec. 31, occupancy in its mature homes also dropped to 87.0% from 87.6% during the same periods.

Since the beginning of the year, shares in Southern Cross have plunged 6%. On Friday, it closed at 130 pence.