Haulage Company Suffered As Managing Director Was On Sick Leave

The Challenge

A specialist haulage company with a fleet of around 40 vehicles faced a severe financial crisis. The problem began when the managing director was out of the business due to illness, during which time the company was poorly managed and its financial reporting collapsed. Upon his return, the MD discovered a significant financial hole, and the company was forecasted to fail within four to eight weeks. It was burdened with too many vehicles, had a loss-making operation, and could not service its high debt load from leases and HP agreements. The company’s situation was compounded by poor financial data, a common issue in many insolvency cases, which made it difficult to accurately assess the company’s true position and secure a path to recovery.

The Solution

The company was introduced to RMT KSA by an insolvency practitioner who recognized that the business was viable and could be rescued. RMT KSA developed a comprehensive four-stage rescue plan. First, they introduced a Company Voluntary Arrangement (CVA) to relieve pressure from tax creditors, including VAT and PAYE. Second, they worked with the company’s bank, Barclays, to restructure its secured lending. Third, the plan addressed the 40 leases and HP agreements, aiming to get a breathing space for cash flow and remove some of the vehicles that were a financial burden. Fourth, KSA implemented aggressive cash management strategies, improved the company’s accounting practices, and introduced a non-executive director to oversee the recovery. This multi-pronged approach was designed to stabilize the business and provide a structured path back to profitability.

The Results

The rescue plan was a great success. After 3.5 years, the asset-based lenders were all repaid in full and have even started financing new trucks and trailers for the company. The bank, Barclays, was a crucial partner in the rescue, and its faith in the plan was rewarded when the company paid off the bulk of its overdraft lending. Tax and trade creditors are set to receive around 40 pence in the £1 over five years. KSA’s non-executive director stepped down after 15 months, confident in the company’s turnaround. The company is on target to have its best year in 12 years and has been able to invest in new equipment. It still uses a model provided by KSA to produce monthly management accounts within four days of month-end, a testament to the lasting improvements made. This case demonstrates that a well-structured CVA, combined with strategic financial and operational restructuring, can save a business and return it to a position of strength and profitability.