Southern Cross directors step aside on profits alert

Southern Cross Healthcare has made a last ditch attempt to salvage its struggling business with a management overhaul, as its worsening finances put 31,000 elderly residents at risk of losing their homes.

The UK's largest care home operator revealed that chairman Ray Miles had resigned yesterday as the company warned trading had deteriorated further and a breach of its covenants was a matter of "when not if".

Insiders said the future of the company depended on the outcome of negotiations with the landlords of its care homes and it hopes to wrap up discussions by the beginning of July.

Mr Miles has been replaced by Christopher Fisher, a former managing director of the investment bank Lazard and a board member of Southern Cross, with immediate effect. The departing chairman said his experience had "mainly been building businesses and improving their operational performance and that the company now faces a period of intense financial restructuring, it is time to hand over to others with more experience of this".

Jamie Buchan, the group's chief executive, has also shifted his focus to concentrate on the restructuring of Southern Cross and the negotiations. So far it has been unable to renegotiate its rental bill.

The group does not own the freehold to most of its 750 care homes, and the rent has risen nearly a fifth since 2006 to £248m. There can be no certainty that the negotiations will be successful, it said in a statement yesterday, before adding "the prevailing mood appears to be constructive".

The company said that beyond the restructuring it was adopting a radical approach to reshaping its portfolio. "It is not clear whether these actions will be sufficient to offset the lost revenues from lower occupancy and fees," Panmure Gordon's analyst Damian McNeela said.

Day-to-day operations have been handed to executive committee member Mark Cash, who was yesterday appointed to the newly created role of chief operating officer. Mr Cash, who joined Southern Cross as a regional director in 2009, will have the role on an interim basis reporting to Mr Buchan.

Mr Fisher said: "The board is focused on supporting Jamie Buchan and his executive team in promoting an orderly restructuring of the company's affairs, to stabilise its financial position and to provide the business with a sustainable platform for the future while at the same time ensuring the continued delivery of high quality care for residents."

Even though the group is set to breach its covenants – which the company revealed in a statement last month – its lenders "continue to be supportive. The company will shortly be making proposals to its major landlords as to how its rent burden and capital structure might be reorganised."

As it remains under pressure Southern Cross revealed its profits have suffered, blaming the disruption caused by March's announcement. Analysts put the deterioration in trading down to lower occupancy and weekly fees because of continuing cost-saving measures by local authorities, as well as rising rental costs.

Mr McNeela said: "The combination of a high level of fixed costs and declining revenues is likely to result in the company breaching its banking covenants."

There will be a further update on the full impact of the restructuring when the group puts out its interim results in just under a month's time.

There are fears that if Southern Cross goes bankrupt, the care-home owners could repossess the sites potentially forcing residents to be moved.

Life and Style
A teenager boy wakes up.
Life and Style
It is believed that historically rising rates of alcohol consumption have contributed to the increase
food + drink
Life and Style
fashionEveryone, apparently
The erotic novel Fifty Shades of Grey has already been blamed for a rise in the number of callouts to the fire brigade for people trapped in handcuffs
voicesJustine Elyot: Since Fifty Shades there's no need to be secretive about it — everyone's at it
Arts and Entertainment
A new Banksy entitled 'Art Buff' has appeared in Folkestone, Kent
Life and Style
Playing to win: for Tanith Carey, pictured with Lily, right, and Clio, even simple games had to have an educational purpose
lifeTanith Carey explains what made her take her foot off the gas
Arts and Entertainment
The White Sails Hospital and Spa is to be built in the new Tunisia Economic City.
architectureRussian billionaire designs boat-shaped hospital for new Dubai-style Tunisia Economic City
Arts and Entertainment
You could be in the Glastonbury crowd next summer if you follow our tips for bagging tickets this week
Husain Abdullah returns an interception off Tom Brady for a touchdown
nflLeague has rules against 'sliding to ground on knees'
Arts and Entertainment
Critics say Kipling showed loathing for India's primitive villagers in The Jungle Book
filmChristopher Walken, Bill Murray, Scarlett Johanssen Idris Elba, Andy Serkis, Benedict Cumberbatch, Cate Blanchett and Christian Bale
Life and Style
ebooksAn unforgettable anthology of contemporary reportage
Life and Style
food + drink
Arts and Entertainment
Kylie performs during her Kiss Me Once tour
musicReview: 26 years on from her first single, the pop princess tries just a bit too hard at London's O2
Arts and Entertainment
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Trust Accountant - Kent

NEGOTIABLE: Austen Lloyd: TRUST ACCOUNTANT - KENTIf you are a Chartered Accou...

Graduate Recruitment Consultant - 2013/14 Grads - No Exp Needed

£18000 - £20000 per annum + OTE £30000: SThree: SThree are a global FTSE 250 b...

Law Costs

Highly Competitive Salary: Austen Lloyd: CITY - Law Costs Draftsperson - NICHE...

SQL Developer (Stored Procedures) - Hertfordshire/Middlesex

£300 - £330 per day: Ashdown Group: SQL Developer (Stored Procedures) Watford...

Day In a Page

Isis is an hour from Baghdad, the Iraq army has little chance against it, and air strikes won't help

Isis an hour away from Baghdad -

and with no sign of Iraq army being able to make a successful counter-attack
Turner Prize 2014 is frustratingly timid

Turner Prize 2014 is frustratingly timid

The exhibition nods to rich and potentially brilliant ideas, but steps back
Last chance to see: Half the world’s animals have disappeared over the last 40 years

Last chance to see...

The Earth’s animal wildlife population has halved in 40 years
So here's why teenagers are always grumpy - and it's not what you think

Truth behind teens' grumpiness

Early school hours mess with their biological clocks
Why can no one stop hackers putting celebrities' private photos online?

Hacked photos: the third wave

Why can no one stop hackers putting celebrities' private photos online?
Royal Ballet star dubbed 'Charlize Theron in pointe shoes' takes on Manon

Homegrown ballerina is on the rise

Royal Ballet star Melissa Hamilton is about to tackle the role of Manon
Education, eduction, education? Our growing fascination with what really goes on in school

Education, education, education

TV documentaries filmed in classrooms are now a genre in their own right
It’s reasonable to negotiate with the likes of Isis, so why don’t we do it and save lives?

It’s perfectly reasonable to negotiate with villains like Isis

So why don’t we do it and save some lives?
This man just ran a marathon in under 2 hours 3 minutes. Is a 2-hour race in sight?

Is a sub-2-hour race now within sight?

Dennis Kimetto breaks marathon record
We shall not be moved, say Stratford's single parents fighting eviction

Inside the E15 'occupation'

We shall not be moved, say Stratford single parents
Air strikes alone will fail to stop Isis

Air strikes alone will fail to stop Isis

Talks between all touched by the crisis in Syria and Iraq can achieve as much as the Tornadoes, says Patrick Cockburn
Nadhim Zahawi: From a refugee on welfare to the heart of No 10

Nadhim Zahawi: From a refugee on welfare to the heart of No 10

The Tory MP speaks for the first time about the devastating effect of his father's bankruptcy
Witches: A history of misogyny

Witches: A history of misogyny

The sexist abuse that haunts modern life is nothing new: women have been 'trolled' in art for 500 years
Shona Rhimes interview: Meet the most powerful woman in US television

Meet the most powerful woman in US television

Writer and producer of shows like Grey's Anatomy, Shonda Rhimes now has her own evening of primetime TV – but she’s taking it in her stride
'Before They Pass Away': Endangered communities photographed 'like Kate Moss'

Endangered communities photographed 'like Kate Moss'

Jimmy Nelson travelled the world to photograph 35 threatened tribes in an unashamedly glamorous style