Our client was a haulage and logistics company that was established for 20 years, specialising in Just In Time deliveries (JIT) and Home Deliveries (HD) in the retail, events and automative sectors. The company employed 80 people and had a turnover of £11m until December 2018 but for 2020 this was forecast to be £5m.
Our client was suffering a downturn in business from Jan 2020 as problems in the High Street meant that a number of its retail clients went into administration or liquidation. The final blow came when the Covid-19 Pandemic, and associated lockdown hit, meaning that clients did not need so much storage or goods moved around. This left the company with overcapacity at 2 sites and a number of legacy costs in terms of vehicle leases, and other contracts and too many staff. 50% of the staff meanwhile were furloughed. The company was in a difficult position and it owed the following;
- Secured Creditors such as the bank £266,973
- Unsecured creditors such as trade, HMRC and potential redundancy payments amounted to in excess of £2m.
It was identified that the home delivery portion of the business was losing money and this had to be addressed. As such, the company proposed a CVA as a way to rescue the company, get a return for creditors and bring the company back to profitability. The creditors accepted the CVA proposal in July. This meant that the company could close down the operations in home deliveries making 53 people redundant (paid for by the government under the redundancy payments office). It exited its lease at no cost and cancelled some contracts. Not including its staffing costs it cut its costs by £175k.
Overall the company is paying back more than £600k over the next 5 years and it continues to trade in line with expectations
Categories: What is a CVA or Company voluntary arrangement?