Shares in Southern Cross Healthcare lost more than half their value on Monday after the nursing home group issued a profit warning and revealed it had been forced to secure a temporary waiver of banking covenants.

Blaming in part what it described as a "higher than normal attrition rate" of its residents, Southern Cross said its overall financial performance in its second-half had fallen below expectations.

The warning came a month after the group reported a 40 per cent rise in interim profits and said it was "confident" of making further progress this year.

Southern Cross shares dived 58.5 per cent to 130p. At one stage in early trading, they had fallen as much as 84 per cent to 47¾p.

The company also announced that Jason Lock, finance director, had left the company "with immediate effect". He has been replaced by Richard Midmer, former finance director of NHP, another nursing home group.

The healthcare provider has been hit by the fall in the property market.

Southern Cross runs 728 homes and is the largest nursing home operator in the UK. It has expanded rapidly in recent years by purchasing large residential care properties, then selling the facilities and leasing them back.

Southern Cross had been due on Monday to repay £46m of an £82m loan it had raised to buy 20 nursing homes.

As the market for care home property began to sour this year, the company had difficulty finding a buyer for the homes. Up until last week it was hopeful of concluding a deal, but it failed, forcing it to agree the temporary waiver with the banks.

The lenders have given the group an extension until July 28 and a waiver of financial covenants until then. That gives it time to sell the assets or amend its funding arrangements.

Southern Cross also had been hit by the tightening of public funding for care of older people.

The company said that central government funding to local authorities for social care had come through "later than in previous years", affecting occupancy rates at its homes.

Southern Cross also blamed "higher than normal attrition rates" (the number of patients who leave homes, mainly by dying) for hitting occupancy levels, which hover around 90 per cent. The average age of adult care patients in Southern Cross homes is 87, and they typically stay between 12 and 18 months.

"The people getting admitted to the homes are very frail," said Bill Colvin, Southern Cross chief executive.