Care First hit by clash at the top

Care First, the UK's largest nursing home operator, is in a mess. Keith Bradshaw, executive chairman, has managed to lose a valuable asset in Chai Patel, who joined as chief executive less than a year ago and was seen as the one person with the vision to improve the group's dire performance.

Mr Patel joined last September when his company Court Cavendish merged with Takare, Mr Bradshaw's group. Many predicted then that the two would clash. Mr Patel wanted a free hand, but Mr Bradshaw could not let go of the reins.

It seems that Mr Patel, fed up with having his decisions double-checked, demanded that Mr Bradshaw commit to a date when he would step down to a non-executive role. Mr Bradshaw refused to give it and Mr Patel walked out. This is the third and the most high-profile departure that Mr Bradshaw has presided over in 12 months.

Though he now says he will become non-executive chairman when a new chief executive joins, it all looks rather late. Institutions are already worried that the company will not find it easy to attract a candidate with Mr Bradshaw still in the executive role. Tony Heywood, director of business development, looks a good choice, but as an ex-Cavendish man his appointment may not find favour with Mr Bradshaw.

Care First is not an attractive prospect. Though Court Cavendish added private pay patients and more beds in the wealthier south, most Takare homes are low quality. Some 8,000 beds of the combined group's 12,500 do not even have en suite bathrooms. That means local authorities are not referring patients who need nursing care to Care First, sending instead residential patients who pay around half the fees of nursing patients. As a result Care First's fees are flat.

And with no proper pension and benefits structure and low wages in some homes, staff turnover is a hefty 40 per cent. The company is having to use employment agencies, which added pounds 2.5m to costs in the first half. That, plus the costs of modernising the IT system and occupancy pressures, led to a worrying fall in margins in the half year to June. Though those pressures will ease and a halt on building new homes will help raise average occupancy, the company will remain under pressure.

Laing & Buisson, the nursing home analyst, forecasts pounds 21m full year profits. A bid is a possibility, but the fundamentals make the shares, down 3p at 103p, unattractive.