Loss Making Northeast Sign Manufacturer

The Challenge

An old, established business in the Newcastle area, with £9m in sales and 170 staff, was facing severe financial distress. A management buyout had occurred years earlier, but the company had a history of loss-making. The losses were causing a critical cash flow crisis. The new Managing Director, appointed by a venture capital company, was unable to drive change quickly enough due to internal divisions. Over 300 creditors were putting enormous pressure on the company, and the Inland Revenue (HMRC) had sent a bailiff and was threatening a winding-up action to recover its arrears.

The Solution

RMT KSA was brought in to lead a comprehensive restructuring. They used a Company Voluntary Arrangement (CVA) to restructure the balance sheet and achieve debt forgiveness from finance providers. RMT KSA acted decisively to relieve the intense creditor pressure and address the threat from HMRC. This freed up the management team to focus on the business. The operational changes involved included the removal of two non-performing directors, the introduction of KSA Client Services managers to fill those roles, and an improvement in communication between departments. A loss-making division was subcontracted out, and a full operational review led to over 40 redundancies to right-size the company.

The Results

The CVA was successfully approved, and the company achieved a major turnaround. After a period of continued senior management issues, RMT KSA introduced a new finance director, which solved the financial reporting and internal staff problems. After 26 months of continuous losses, the company became profitable. RMT KSA continued to act as a non-executive director, aiding long-term growth and strategic development. The company’s balance sheet is now stronger than it was at any point since the management buyout. The case demonstrates that while the CVA was crucial for debt relief, the real success came from the operational and senior management restructuring efforts.