Former mid-cap darling Southern Cross plunges 85% after occupancy warning

Care-home services provider Southern Cross fell 85% early on after the group revealed occupancy rates and earnings were below expectations and loans had been extended.

The stock, previously held by star managers including Old Mutual Asset Managers AAA-rated Ashton Bradbury, initially gave up 265.25p or 84.7%, as a shocked market reacted to the news that the company would not meet its own forecasts for bed occupancy rates.

As a result of lower occupancy levels, Southern Cross Healthcare Grou (SCHE) said earnings were unlikely to exceed £80 million this year.

It said: 'Although the overall occupancy has risen since the half year from 32,900 residents to 33,450, this increase has not happened at the speed, nor to the absolute of residents, originally anticipated by the Company.'

Southern Cross said central government funding to local authorities for social care had also come through later than in previous years, compounding the occupancy problem.

It added: 'Slightly lower occupancy spread across a large portfolio offers limited scope to reduce costs and overall financial performance in the second half has therefore fallen behind expectations.'

The group has also been forced to renegotiate loan terms on one of its credit facilities used for funding acquisitions which was due for repayment today after failing to offload property assets. Southern Cross said it had been granted an extension to the repayment date and a waiver of an anticipated non-compliance with a financial covenant until 28 July.

It said the extension would allow it to attempt to sell the property assets or else put in place another arrangement regrading its funding.

The company's finance director, Jason Lock, has also left the company, and has been replaced by Richard Midmer, previously finance director at NHP (Nationwide Health Properties).

By 11:18am shares were 68% or 212.25p lower, at 100.75p.