Following a conversation with the company's financial advisor, our Regional Manager for Scotland and Northern Ireland, Derek Robinson, met with the company directors at their plant in Northern Ireland to discuss, in detail, the problems the company was encountering.
KSA were appointed to assist with the preparation of a company voluntary arrangement (CVA) proposal. The company had a turnover of £506k, a drop from £597k and £645k in the two previous years of trading. The company was suffering financial difficulties because having previously invested heavily in custom built premises and state of the art manufacturing plant and equipment, to cater for the previously buoyant construction sector; experienced a sharp decline in sales that were now less than 50% of previous peak levels. During this period the company had downsized, reduced staff numbers and reduced costs in order to maintain profitability.
The company had also attempted, albeit unsuccessfully, to negotiate with the company bankers, to revise the terms for the repayment of the mortgage secured previously to fund the building of the manufacturing facility. As a result, cash flow pressures had been mounting. In addition, the company received a notice of requirement to provide security payment to HMRC in addition to already due VAT payments.
The company had disputed the notice and their case referred to a tribunal to hear their appeal against the claim. The company could not pay the security demanded, nor indeed the arrears of VAT, PAYE and NIC.
The bank was secured, providing c. £120k on overdraft and c. £100k in advances against sales invoices. The bank was also owed c. £500k the balance remaining on a mortgage provided to fund the building of the purpose built manufacturing facility. The bank, following various discussions and negotiations facilitated by KSA, continued in their support and provision of facilities. This included the restructuring of the mortgage debt to provide the breathing space the company needed to recover.
Total debt £296k including HMRC at £274k (c.92%).
HMRC approved the CVA. The creditors meeting was held in Belfast and the CVA was approved by the body of creditors with a dividend of 31p in £1.