€48m FMCG Manufacturer Distributor Rescued By KSA Group.
The group entered a critical condition after a sharp reduction in working capital facilities was surprisingly announced to our client by an international bank. This resulted in an immediate collapse in order-placing capability. The directors appointed KSA to oversee a restructure of this multinational group of 3 companies, which had operations across the EU. Although headquartered in the UK, it supplies wholesalers and retailers in 5 countries.
This was a complex group structure and had liabilities to unsecured creditors of €7.2m plus around €4m secured debt - which had recently been as high €13m. After the main buying season for its products the bank refused to provide trade and stock finance facilities for the future Christmas 18 and Spring 19 seasons.
Using a CVA we restructured the unsecured debt, our experts oversaw the necessary right sizing of the group and a reduction in costs. We also helped the business reduce employment costs and 16 people left the business including the CEO. This quickly left a smaller leaner and fitter business. As part of the CVA strategy KSA Group helped exit the company from its head office and this saved c£200k per annum.
This complex project was managed by Keith Steven MD of KSA and his turnaround team. Creative and fast solutions were provided to the executive chairman, who took over the day to day management after the CEO’s exit, with the senior management team.
Landlords of the two main warehouses were supportive; by ensuring rent payments were maintained this allowed the release of a stock backlog of c€4m over which liens had been or were about to be exercised. KSA helped negotiate this position, the stock was quickly sold at reduced margins which created essential liquidity and ensured that the companies had the ability to move forward profitably.
Post CVA and with sales at lower and more manageable levels, the huge annual ramp in debt facilities was no longer required. Additionally, the high volume FMCG products which were normally funded in this way each year, carried very low margins and had annual customer clawback and retailer marketing contribution liabilities. This meant managing the customer expectations as part of the plan and several meetings with large retail groups were required to explain the strategy.
With sales now at around €13m and costs reduced, the business will generate profits of €450k EBITDA in CVA year 1 rising to €800k in 2019-20 .