Member Info for knightin

I'm feel very sorry for anyone that has lost money. However I did try and warn people. If you care to check any of my comments made over several months prior I never waivered from the belief that this would end badly for all accept those that ripped the cash out of this company under the noses of the investors several years ago. Personally I think an invetigation needs to take place but with the "Political sensitiivites" at play it may take some time, if it ever happens, to find out the truth..

Not only that but by making multiple posts you quickly remove other relevant comments from the front page! Strange how the sky news that you so kindly posted is confirming everything that I have been saying for weeks. No doubt you will say that people should do their own research and not believe everything posted on a share trading web site.

What do you expect the Chairman to say at this time? By not saying anything it would be admitting that the company is about to collapse. He uses his words very carefully. I do agree with him that no resident will be put at risk of being put out on to the street as there are already contingency plans in place by both public and private organisations to step in should the need arise. The issue here is the financial stability of the company and its daily worsening position. Frankly it is perilous to say the least. Stating that a “Massive Rally” is imminent upon talks with SC and landlords is frankly misleading and smacks of a shareholder wanting to boost his or her position. Southern Cross has no say now as they have reneged on the original tenancy agreements that they signed. No new owner is going to take on the debt. Any new tenant will have a massive cost to outlay in order to halt the failing ratio 1:4 of this group. Some sites will require a full refurbishment programme circa £3k per bed that not only will be a significant outlay but also will certainly reduce revenues through the process.

I have posted genuine and honest appraisals of this business over the past few months in an attempt to prevent smaller investors from wasting their money. It’s clear that some larger investors, and some former Directors, bailed when they were aware of the company’s weaknesses. Whilst there have been moments when the SP has risen, the overall trend since I started this process has been continually downward. Even this morning’s sharp rise from close to oblivion feels like a final “Throw of the dice”. All that said it is only my opinion and, as you can see from other postings, some still believe this business will survive albeit under a different name and structure. Clearly I do not share the view that this can be done without taking the company to the brink and affectively wiping any nominal value that is still left. Don’t believe that the government is just interested in the welfare of the residents when I suspect there will be significant tax and NI payments that remain unpaid. The current board no longer have control of the company’s destiny and are in effect powerless. If I were a landlord who had been “Forced” to accept a 30% rent reduction I would be looking for an alternative tenant. I suspect a “Deal” is around the corner that will consign the company to its fate of being recognised as a fundamentally flawed business model.

Hi stueyh I am not in the business of "Scaremongering". Everything I have posted is based on my 20 years industry and business knowledge and the facts to hand. I think your are being naive if you believe this business cannot go into administration, although I accept that it is still possible that a phoenix may emerge from the flames. No resident would ever be put out on the street and that prospect really is "Scaremongering". Assuming that the landlords won’t take the leases back and find other tenants, any administrator would either sell the business on or make arrangements with the local authority to find a suitable alternative home for any resident. Occupancy levels are generally low at the moment and there will be enough homes within the general area with spare capacity. Hold your shares by all means but there's a real chance they may one day be worthless. This business was flawed from the start and to compound matters has been run very badly by a series of incompetent and arrogant boards. Only a few year ago 3 Directors sold their minority shares at a value that is now greater than the whole company is now worth and subsequently left. Now that really is “Scary”

http://www.guardian.co.uk/society/2011/may/25/southern-cross-care-homes-in-balance

Finally an article that shows the full extent of their strife and even some honest comment from their board. Also notice what their staff think of the company. http://www.independent.co.uk/news/business/news/southern-cross-on-the-brink-as-losses-soar-2286592.html

I appreciate that closing 200 sites might be a solution but remember there will be all sorts of guarantees attached to the leases. Every lease will almost certainly be fully repairable so the cost of handing back could be massive and that’s without some landlords seeking damages. They employ 41k staff so that would be 11k redundancies packages as well no doubt reneging on countless supplier/service agreements, assuming they can pay their bills in the meantime as cash flow will get a hammering. Do the maths. The company is in a mess, needing £100m just to stay afloat. Why would anyone buy this group when it would inherit all the baggage? The only solution is for the administrators, if and when appointed, is to sell back the assets to the landlords or other potential tenants, most likely other care home operators. This will be at a knock down price, if some have any value at all. The new tenants will have the liquidity and investment to sort the homes out. The good sites will be cherry picked and the worst performing closed with the taxpayer picking up the redundancy bill. Not withstanding the potential upheaval to it residents, which will be extremely unsettling, in every area they operate there will be homes willing and able to take on the capacity. I have no money invested here and would pull out if I had.

Hi caolon1997. You do make a valid point and there is always a chance that some landlords will agree to a reduction. However, the problem is in the impact of a reduction at 20% let alone 30%. Their operating profit/loss last year was (£44.1m) so a 20% reduction would see them potentially move back into profit. If we assume optimistically that their trading position has not worsened, when all indicators are to the contrary, then there is still the matter of the spend required on the sites to bring them up to scratch. I would estimated this at £40m, as some homes have not seen a paint brush in years, and then the ongoing costs to maintain this standard (Min 15% annual portfolio refurbishment estimated at £20m pa). Not a lot of fat left. You also need to consider who else might be interested in taking on the leases. There are a number of much better run operators, some are actually landlords to SCHE with far better CQC relations who would welcome the opportunity to expand their portfolios at a discounted price. If I was a landlord who would I want looking after my asset?

I have written on here a few times in the past to give an objective view based on facts and not blind optimism and it appears that finally the message is getting across. I notice that "Kline" has not pointed out the number of sells versus buys this morning following another negative article on this beleaguered group, 700k v 1k if you are interested. I think a large percentage of landlords will not accept the 30% reduction and there will be a natural break up. Can this happen and they continue to trade normally is the question? My view is unlikely.

I am a bit surprised at the share price jump on "Talks with landlords" when on Monday yet another profits warning. The press releases are completely devoid of detail and have all the hallmarks of SCHE PR spin. Nothing has changed for me; massive problems, declining income, crumbling infrastructure, no investment and mismanagement from those that are left and those that have preceded them. Break it up and give other more able and more financially robust operators a chance to turn them around. The national was less of a gamble.

Would recommend you read some of my previous posts to get an educated view. There will of course be those that disagree with me. Government bail out request has the look of a "Last Stand". What happened to the banks being fully supportive? This business was built on a bed of sand and in my mind break up is looking inevitable, in administration or otherwise. Maybe some of the current board want it to fail? Cheap MBO from the ashes??

It all really depends on what is available in the way of choice near to the sites in question. There are less local authority homes available now and I would agree that their standards might be no better. This is about what private homes with higher CQC ratings are available with spare beds. Certainly with cut backs some will be experiencing falls in occupancy and be more than happy to accept new clients. With more choice being given to the consumer it is evitable that some will choose to move loved ones if a better option is on offer. The problem for SCHE is that they have let the bar slip too far on too many sites. Even given the high cost of refurbishments at some locations the part or even full closure will be required whilst works are being carried out affecting a drop in income still further. I am also very concerned at their “Asset Values”. I am struggling, even given for some goodwill, how they can justify the best part of £500k per site when they do not own the properties. Some adjustment is certainly required here undermining an already fragile equity position. They need to be broken up and spread the homes in need of facelifts across other providers who have both the funds to invest and the management infrastructure to crisis manage poor performing homes.

Blaming the landlords is passing the buck. Remember SCHE signed the leases with full knowledge of their implications and I would expect the majority of leases to be fully repairable.The turnover of this company is frankly irrelevant as its’ size is part of the problem. The reason their debt is so low is that they have no freehold left having sold what little remained over the past 18 months or so. Another major reason for a reduction in their debt is a total lack of investment in the property infrastructure. This is a policy driven by the current board and in some cases going back many years from taking control of the leaseholds. Frankly some of their homes are not fit for purpose. A group of this size should be spending £40m + a year just to stand still. Industry standards would expect between 10-15% of a portfolio to have a complete overall each year with some refurbishments running into hundreds of thousands. My best guess is you could be looking a well over 30% needing at least a major makeover. There may well be some landlords that will agree to a reduction but I suspect some will prefer for their assets to be handled by a more competent tenant. I am not an insider but someone who has had dealings with the industry for over two decades so please take my comments as they are intended. My objective is to give you and not the institutions accurate information to make a valid judgement. In the end you never know they come out of this intact but it will be a major phoenix from the flames.

The writer in this article is not willing to gamble his money so it just confirms the precarious state SCHE are in. Don't forget there are care home operators out there who are performing well in a difficult market who might be a better bet in the long term for these “Cornered Land lords” than this ailing leviathan that keeps trying to move the goal posts to cover up their operational and strategic failings. Potentially a break up is on the cards but at what cost is anyone’s guess.

If you read the bbc article published today the "will reach an agreement" is according to the CEO. With respect what else is he going to say. This is still a gamble although if the landlords do play ball then the price will almost certainly rise. That said any agreement does not sort out the fundamental problems with the operating company in the short to medium term. The cap ex required alone in the coming years will be a heavy burden on an already fragile performance. I suspect most of the lease agreeements will include a full repairable clause so any investment will only improve the landlords equity pot even though the prop market is flat at best. Speaking of "Equity" and assets, there is still a large asset value in the groups accounts which I am struggling to identify which may mean some accounting "Adjustments" in the future.

This really is a 50:50 bet. Even if they went into administration no one is going to be kicked out of their home in the short term. Not sure the government wants to set a new precedent in saving a failing private business after the bank debacle when there's a march in London at the weekend of 200k+ protesting against public sector cut backs. Irrespective of the sensitivity here where would they draw the line? I think some landlords who have an interest in this market will use their position to take back control of the leases for much less than they sold them for, others will probably agree to renegotiate but not at any price, as they will be leveraged too. There are fundamental issues at the heart of this business that are wrong and have been wrong from the start but their meteoric, if not obsessive desire for growth, means they were abandoned long ago. It is much less about who is on the board, makes a premiership manager look like a job for life, than those charged with actually delivering the care. The churn rate for home managers is very high and that tells you that they have not been supported. This business had at its heart an objective to make money, no harm in that in principle, however they forgot or chose to forget all about the customer. Break up is probable and a re branding exercise with the name consigned to the scrap heap.

Agree that LA's cutbacks are unjustified but they are only just starting to bite. The group has been badly run for sometime. It's way to big and every board, and there have been several, in the past few years has shown that it is. Break the group up and it will have a chance. I wouldn't give you a penny for some of the sites. They need management changes and probably a facelift that could swallow profit. Turnover is vanity......

The landlords hold the key here. If they refuse to budge on what will be legally binding contracts then SCHE are on a slippery slop downwards. What you must remember is that they have competition in every location that they have a site and that the CQC rating holds the key to the placement of residents. The higher rated homes will always get preference. SCHE reputation is some areas in appalling. Where would you place your mother?

I am very cautious about this stock despite the price. Not long ago they were over £6! Let's look at some facts. They have no assets, have falling occupancy rates blaming everyone but themselves, are losing money when others are not, have an increasingly poor record with the industry governing body CQC, will probably need significant investment to get the homes up to standard, have a board that has had more changes than an Elton John concert and they are yet to do a deal with their landlords. Perhaps I being too pessimistic but my best guess is they will be broken up and someone is going to pay a heavy price. Good luck but it feels too hot for me.