Even when a company's accounts and records are very poor and there is a tight timescale; KSA Group can rescue a group of businesses!
We were approached by a South East based IT and IT logistics group. The directors had heard about our work with two previous clients from their auditors and thought we could help restructure their group.
The group came about as a result of a number of business purchases and a merging of a joint venture owned by two companies. Group sales were planned to be £25m, however, as below, targets were missed due to loss of a large contract. Sales were circa £12m when we arrived.
A number of separate companies were created to purchase the assets, handle the employees and there were a couple of associated companies that provided services to the other trading businesses. Prior to the acquisitions a finance director was brought in to oversee the growth and merging of the companies.
Unfortunately, due to pressure of growth, he had not managed the accounts properly and there was poor compliance, especially with HMRC. The group owed some £2m in taxes. HMRC was warning of legal actions and refusing any new time to pay deals.
The main funder was RBS which was providing loans and invoice finance of £2.2m. It was very supportive of the plans to restructure having known about the lost contract from the outset.
HMRC finally issued a winding up petition against one company in the group, this could have caused the whole group to implode and, of course, for KSA created significant time constraints.
So what did KSA Group do?
A strategy to restructure the whole group was needed. As part of this, KSA Group devised and produced 4 conjoint CVAs for the subsidiary companies. The strategy was to protect the two solvent group companies, restructure the 4 insolvent subsidiary companies, cut over 35 jobs and close down an unwanted office in Surrey.
The companies accounting was a mess and the group replaced the previous FD with a heavyweight chartered accountant with industry experience. He was only available for a few months, before eh returned to the USA and we advised the MD to begin recruiting his replacement before he arrived. He managed to reverse a lot of the “merged accounts” and broke them down into 6 different companies. So what? Well unbelievably, there was one trial balance for all companies when he arrived.
From KSA’s point of view this meant that we had to hold off aggressive creditors whilst these issues were resolved. We could not easily build 4 statements of affairs and devise four linked financial forecasts until that accounting work was done.
Keith Steven of KSA Group set out the restructure strategy and met with and led the dialogue with Royal Bank of Scotland and Royal Bank Invoice Finance. Both were very supportive throughout this difficult time. We would like to thank RBS for this as it certainly helped us get the CVAs completed quickly, once we had the information we needed.
KSA's turnaround team also helped as follows:
- Successfully negotiated adjournments with the winding up petitioner, to prevent complete shutdown of the group.
- Provided assistance with redundancies and claims by those who left.
- Provided assistance with closure of the unwanted property and negotiated a deal with the landlord.
- KSA Group provided support, assistance and guidance to the directors daily.
- All proposals were supported by the body of creditors at each of the creditors meetings (including that of HMRC on each proposal).
The average CVA dividend across the group was 38p and 15 months later the managing director reported to KSA that the businesses are now performing ahead of budget and sales are growing back to target.