Shares in Southern Cross Healthcare, the UK’s biggest care home operator, dived 75 per cent after warning that a higher-than-expected death rate, lower demand and slower funding from Government has reduced occupancy levels.

The company, which operates 700 homes, also said today that its finance director had quit after admitting it has failed to repay banks £46 million by today's deadline.

Richard Midmer, previously finance director at NHP, is taking over from Jason Lock who is leaving the company with immediate effect. Mr Midmer is Southern Cross's third finance director in less than 12 months after Graham Sizer quit late last year.

Shares in the company fell by 213p to 100.5p, wiping over £400 million off its market value which is now just £189 million.

Southern Cross said it has been in talks to sell properties to raise the cash to pay back the loan but had so far failed to do so.

The banks have agreed to extend their loan by four weeks to July 28. However, if Southern Cross can not agree a sale, it will have to renegotiate the payments on its loans which could prove expensive.

The company said today: "This period will allow the group to pursue the potential sale of some or all of these assets and/or suitable amendments to its overall longer term funding arrangements."

The company has a total of £82 million borrowings outstanding.

Its Active Care division, which has specialist homes for people with physical and learning disabilities and for children with behavioural problems, was also struggling with lower than expected occupancy and high fixed costs, it warned, meaning profits were "significantly lower than expected."

It said: "Central government funding to Local Authorities for social care has come through later than in previous years and the seasonal admissions increase has taken longer to occur.

"These factors, when combined with higher than normal attrition rates of nursing residents, have resulted in lower than anticipated occupancy levels."

It said it expected underlying earnings for the year to the end of September were unlikely to exceed £80 million, compared with last year's £66.8 million.

Worries about the care home operator first surfaced late last year when Philip Scott, chief executive, quit to be followed shortly by Mr Sizer.

In November, The Sunday Times conducted an undercover investigation, with a reporter posing as a carer, and documented a series of alleged abuses and said the home was under-resourced and understaffed.

The company said it was convinced the home was providing a proper standard of care. However, the negative publicity may have impacted the number of admissions it received since.

Bill Colvin, chairman and a former director of rival care home operator NHP, stepped into the chief executive role to replace Mr Scott.

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