Lloyds Bank has pulled the plug on MyHome International, the nationwide franchise operator providing residential services such as cleaning and gardening to thousands of families.
The bank demanded immediate repayment yesterday of an £8m loan. The company said it was unable to pay and suspended dealings in its shares on the AIM market.
MyHome has more than 900 franchisees. Their immediate future is uncertain. The company owes its present plight to over-ambitious expansion. But it has also been hit by what it calls "cash-rich, time-poor" householders who are having to rein in their spending because of the credit crunch.
Alarm bells began ringing in June when the company, now with a new executive team, flagged up a deteriorating financial position and warned that pressure on household budgets would affect results for the rest of the year.
The following month it said that it was in breach of its banking covenants and was in discussions with Lloyds Bank which said it remained "committed" to a restructuring of its £8m facility.
But that proved to be a pipe dream and the bank has decided it is no longer willing to support the company which has also been in talks with unnamed financiers.
Franchisees who have paid thousands of pounds to join the MyHome network could lose heavily.
Management has almost certainly been distracted by the tasks of absorbing last November's £16m acquisition of the "man-in-a-van" car repair business ChipsAway. The board was then forced into a much-needed restructuring with the loss of jobs and offices resulting in one-off costs of £3.3m.
The company was also starting to find it harder to attract franchisees who were struggling themselves to raise the necessary finance. During the first half of the year, MyHome attracted just 77 new recruits, well below targets.
The group slimmed down to focus on residential and oven, carpet, fabric, and window cleaning, lawn cutting, and plumbing and electrical work.
MyHome was originally set up by Unilever which identified residential cleaning as a market for its cleaning and detergent products, but it was sold in 2001 and turned into a franchise operation.
The company was floated on AIM in December 2007 at 40p, focusing on what it termed "professional and managerial households likely to pay for a high-quality service provided by efficient and trustworthy providers".
The company targeted what it called "managerially minded entrepreneurs" as franchisees, starting with one vehicle and a couple of staff handling around 25 customers. This would later be developed into a more ambitious undertaking with the franchisee servicing up to 250 customers.
At its suspension price of 5p, MyHome is valued at just £3.18m. The shares have been as high as 98p.Reuse content