Review of Three Family Owned Homes on Behalf of a Bank

A leading lender to the sector contacted HCMS with concern over the viability of a family operated, three home care group. The bank in question believed that the homes were being operated to a reasonably high standard but was concerned that a high cost base, together with the imminent end to a capital repayment moratorium would lead to financial difficulties for the group.

The bank wanted a review of the business, but they were mindful of concerns raised by the owners that a high profile review would lead to worry among the staff and damage the reputation of the business locally.

HCMS discussed the concerns with both the bank and client and it was decided that a ‘light touch’ review of operations should be undertaken together with a more thorough review of the financial performance, most of which could be carried out off-site and in advance of the fieldwork.

It was agreed that a thorough examination of the operations would only be required if the initial visits indicated that there might be problems.

The owners worked closely to provide detailed information which was carefully analysed before the visit. A single HCMS representative was involved throughout the process, in this case a Director, and the physical time on site at the various homes was limited to a single day.

The conclusion drawn was that the operations at the home, although not perfect, were good and that there was evidence that the owners were driving further improvement. Despite much closer attention to costs, it was evident that the business was unlikely to be able to meet the capital repayments, however in the light of the report, the bank concluded that a further interest-only period was appropriate as it avoided the crystallization of debt and gave the business the breathing space to make further improvements.