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Mr Miles has been replaced by Christopher Fisher, a former managing director of the investment bank Lazard and a board member of Southern Cross, with immediate effect.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.

Start your day with The Independent, sign up for daily news emails
ebooksNow available in paperback
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

Sheridan Maine: Regulatory Reporting Accountant

Up to £65,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...

Ashdown Group: Marketing Services Manager - (communications, testing, DM)

£32000 - £35000 per annum + benefits: Ashdown Group: Marketing Services Manage...

Guru Careers: Finance Account Manager

£Neg. (DOE) + Excellent Benefits: Guru Careers: A Finance Account Manager with...

Ashdown Group: Java Developer - Hertfordshire - £47,000 + bonus + benefits

£40000 - £470000 per annum + bonus: Ashdown Group: Java Developer / J2EE Devel...

Day In a Page

Homeless Veterans appeal: 'You look for someone who's an inspiration and try to be like them'

Homeless Veterans appeal

In 2010, Sgt Gary Jamieson stepped on an IED in Afghanistan and lost his legs and an arm. He reveals what, and who, helped him to make a remarkable recovery
Could cannabis oil reverse the effects of cancer?

Could cannabis oil reverse effects of cancer?

As a film following six patients receiving the controversial treatment is released, Kate Hilpern uncovers a very slippery issue
The Interview movie review: You can't see Seth Rogen and James Franco's Kim Jong Un assassination film, but you can read about it here

The Interview movie review

You can't see Seth Rogen and James Franco's Kim Jong Un assassination film, but you can read about it here
Serial mania has propelled podcasts into the cultural mainstream

How podcasts became mainstream

People have consumed gripping armchair investigation Serial with a relish typically reserved for box-set binges
Jesus Christ has become an unlikely pin-up for hipster marketing companies

Jesus Christ has become an unlikely pin-up

Kevin Lee Light, aka "Jesus", is the newest client of creative agency Mother while rival agency Anomaly has launched Sexy Jesus, depicting the Messiah in a series of Athena-style poses
Rosetta space mission voted most important scientific breakthrough of 2014

A memorable year for science – if not for mice

The most important scientific breakthroughs of 2014
Christmas cocktails to make you merry: From eggnog to Brown Betty and Rum Bumpo

Christmas cocktails to make you merry

Mulled wine is an essential seasonal treat. But now drinkers are rediscovering other traditional festive tipples. Angela Clutton raises a glass to Christmas cocktails
5 best activity trackers

Fitness technology: 5 best activity trackers

Up the ante in your regimen and change the habits of a lifetime with this wearable tech
Paul Scholes column: It's a little-known fact, but I have played one of the seven dwarves

Paul Scholes column

It's a little-known fact, but I have played one of the seven dwarves
Fifa's travelling circus once again steals limelight from real stars

Fifa's travelling circus once again steals limelight from real stars

Club World Cup kicked into the long grass by the continued farce surrounding Blatter, Garcia, Russia and Qatar
Frank Warren column: 2014 – boxing is back and winning new fans

Frank Warren: Boxing is back and winning new fans

2014 proves it's now one of sport's biggest hitters again
Jeb Bush vs Hillary Clinton: The power dynamics of the two first families

Jeb Bush vs Hillary Clinton

Karen Tumulty explores the power dynamics of the two first families
Stockholm is rivalling Silicon Valley with a hotbed of technology start-ups

Stockholm is rivalling Silicon Valley

The Swedish capital is home to two of the most popular video games in the world, as well as thousands of technology start-ups worth hundreds of millions of pounds – and it's all happened since 2009
Did Japanese workers really get their symbols mixed up and display Santa on a crucifix?

Crucified Santa: Urban myth refuses to die

The story goes that Japanese store workers created a life-size effigy of a smiling "Father Kurisumasu" attached to a facsimile of Our Lord's final instrument of torture
Jennifer Saunders and Kate Moss join David Walliams on set for TV adaptation of The Boy in the Dress

The Boy in the Dress: On set with the stars

Walliams' story about a boy who goes to school in a dress will be shown this Christmas