Southern Cross Healthcare (United Kingdom)

Southern Cross Healthcare

Type	Public (: )
Founded	1996
Headquarters	Darlington, UK
Services	health and social care
Number of employees	41,000 (2011)
Website	www.schealthcare.co.uk

Southern Cross Healthcare (Group plc) was a private provider of health and social care services, predominantly through the provision of care centres for elderly and some younger people. The group was the largest provider of care homes and long term care beds in the United Kingdom, operating over 750 care homes, 37,000+ beds and employing around 41,000 staff. Following rapid expansion financed by the sale of leases of its homes, its shares fell 98% from early 2008 to early 2011, reducing its market value from £1.1bn to around £12m. It was listed on the and a constituent of the FTSE Fledgling Index.

The company was founded in 1996 by John Moreton, who was its chairman and chief executive until 2002. By 2002 "...it had 140 homes, was the third-largest of its kind in Europe and was heading for the stock market". In August 2002, the management backed by West Private Equity and Healthcare Investments Limited, acquired Southern Cross through an £80m management buy-out.

In September 2004, a secondary buy-out of the business by the management together with Blackstone Capital Partners followed, for £162m. Blackstone then acquired care home owner NHP (Nursing Home Properties) for £564m, which saw a competition investigation by the Office of Fair Trading. In November 2005, it also took over the Ashbourne Group of care homes, comprising 10,000 beds in 193 homes, for £85m.

Blackstone continued to grow the business under its pre-existing sale-and-leaseback strategy. Southern Cross Healthcare continued as a pure operating company, renting care homes from a number of landlord companies, including NHP which became its largest landlord. NHP was subsequently sold to investors.

In July 2006, the company was floated on the , entering the FTSE 250 Index in September.

In 2007 and 2008 the Blackstone management team left and were succeeded by a new team led by William Colvin. However cracks soon began to appear and in early 2011 the company was in crisis as a direct result of a 8% reduction in occupancy. This equated to a decline in income of circa £52m. Given its upwards only rent bill (over £240m on its 750 properties) margins declined significantly creating pressure to pay landlords. With public spending cuts leading to fewer referrals (and a drop in occupancy rates from 92% to 84%), it was forced into negotiations with its landlords for rent reductions and appealed to the government for support. In early June 2011 it was announced that the company had made its own decision to withhold 30% of rent owed to avoid mass care home closure. Experts warned of a possible collapse into administration. Its shares had already fallen 98% from early 2008 to early 2011, reducing its market value from £1.1bn to around £12m.