Helen Jude is Partner and Head of Recovery & Valuation at Landwood, experts in insolvencies, recoveries, and restructures. Here she shares her advice for care homes navigating insolvency challenges.
Since the autumn budget, the care sector has faced unprecedented financial strain, forcing providers to contend with rising costs and tough decisions.
This was exacerbated by the Chancellor’s recent Spring Statement with National Insurance hikes causing some providers’ annual costs to rise by £380,000.
For care homes operating on razor-thin margins, this financial burden is a tipping point that could lead to insolvency without strategic intervention.
For those facing financial strain, there are ways to improve efficiency, stabilise finances, or plan a thoughtful exit while protecting the people they support.
A holistic approach is key.
Assessing your value and operational costs
If you believe you are at risk of insolvency, the right expert advice is crucial to navigating this period effectively.
Potential inefficiencies can be addressed to improve operations and value, especially before a sale. This can include supply chain issues like overstocking or understocking and underutilised land, property and assets.
For example, while preparing a large care home group in Oldham for sale, Landwood conducted a comprehensive review of their assets and trading performance. We identified issues like inconsistent staffing, recruitment costs and inflated supplier costs that, if addressed, could boost value and buyer appeal.
This process required a detailed analysis of past trading accounts, recent management accounts and key operational factors – including CQC assessments, resident numbers, weekly rates and staffing costs, which resulted in a successful sale.
Even if a sale isn’t on the horizon, this kind of insight allows operators to make informed decisions, improve efficiency and better manage their cash flow.
Consolidations, downsizes and asset sales
Not every situation points towards a sale. Many care homes are sitting on untapped value in property and underutilised spaces. This is something valuers can help care home owners identify.
For care operators looking to downsize, the key is making informed decisions about which sites to retain, sell or repurpose to maintain long-term financial stability. Underperforming or non-strategic properties may be better suited under new ownership, freeing up resources for stronger-performing sites.
Some properties have potential for conversion into supported living or specialist care services, which can provide new revenue streams.
During this time, operators must carefully manage financial commitments, including debts and lease obligations, to ensure a smooth transition and avoid unnecessary liabilities.
Business sales
If insolvency risks are leading you to consider a sale, understanding the property is as essential as the financials.
Beyond the numbers, key factors like the age of the building, maintenance history, compliance with standards and potential upgrade costs, all influence long-term viability and value. This alongside a detailed analysis of the business operations and costs is of high importance for prospect buyers.
This was particularly evident in an insolvency situation involving the sale of two connected care homes – a 28-bedroom care home in Blackpool and a 58-bedroom care home in Preston.
We conducted detailed inspections of both properties and met with the management team to assess the current trading ability and value of both the property and assets. Careful management and marketing led to a successful sale with a new operator, ensuring uninterrupted business operations and delivering the maximum return to creditors.
When seeking advice it’s vital to look for specialists with extensive experience helping businesses, including those in the care sector, to navigate complex insolvency and asset recovery scenarios. They should have a team of experts with a proven track record of maximising value for clients, even in the most challenging circumstances.
With a proactive approach and informed decision-making, stability is within reach.
Image depicts Helen Jude, Partner and Head of Recovery & Valuation at Landwood