A nursing home operator might seem to sit at the more defensive end of the investment spectrum in a country where the proportion of the population over 85 is forecast to double over the next 20 years.

But today’s share price movement in Southern Cross - down 66 per cent - tells a different story. Not only has the sector’s biggest player given warning on profits - which it blames on lower than expected occupancy levels - but it has had to agree a four-week waiver from its banks after being unable to pay a £46 million loan and has parted company with its finance director.

Those tidings aside, the stockmarket has additional reason to punish the shares. First, only last month Southern Cross issued an upbeat trading statement, citing the increased fee levels it had successfully achieved. Second, investors have remained wary of the shares after last year’s unexpected departure of its chief executive and finance director and heavy boardroom shares sales: four directors sold £37 million of shares at 550p - against this morning’s 48p low.

Southern Cross’s problem remains its high operational gearing - high fixed costs mean a drop in sales produces a disproportionate drop in profits - and the fact that its profits are heavily weighted towards the second half of the year. For those reasons alone, keep away.

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