A global leader in electronic point of sale (EPOS) and online ordering for the takeaway and delivery sector, with customers around the world from independents to global chains.
The company was awarded a contract with a major customer, to roll out its software in several countries as well as the North American market (which for that customer alone would have been a multi-million pound sale).
In early 2012, the company took the decision to set up a North American office in order to capitalise on that opportunity and others in the US market. The North American office was set up as a subsidiary company and initial costs were funded by the UK company, initially through loans to the subsidiary.
In 2013, the decision was taken to attend the International Pizza Exhibition in April. Costs were incurred for a stand, and other marketing materials, and a small sales and support team were hired.
The new sales team secured a significant number of sales leads and they continued to follow up sales opportunities in North America. However, around the same time, it became apparent that the international rollout for the major customer was on hold. The expected revenues of £200,000 from this would not come through in 2013. The directors took the decision to revitalise UK sales efforts in order to increase alternative sales.
The company invested time and resources to upgrade the software for the international markets. The R&D investment for the international markets incurred costs of around £250,000, and because this resulted in delays to planned products and upgrades for the UK market, there was a loss of sales in the UK.
The directors also realised that cashflow was extremely tight and the company was in arrears with creditor payments. The company approached a number of venture capital and other potential investors and a good level of interest was found. The company selected one corporate finance group to work with in order to obtain investment, aiming to secure c£500,000.
By summer 2013, the directors believed the situation was at a turning point. Discussions with investors were progressing and sales were beginning to come through in North America. The software version changes were now 90% complete and a good number of customers had been installed. Discussions with customers with potential values over £1m, were in progress. The company’s UK sales initiatives were also starting to bear fruit. The UK business was showing a healthy profit up until June 2013.
In late 2013, it became apparent that the investors were taking a ‘wait and see’ attitude and did not want to invest until the company had regained profitability and the company’s balance sheet looked stronger.
The directors also realised that the outsourced accountant, who had prepared the company’s management accounts, had made a number of errors. Resulting in a profitable year being a loss making one! In early October 2013, the company reviewed the results for September. Sales had increased for the month compared with prior year and year to date. The company had made a small profit for the month and the North American office had broken even for the month. The directors expected sales and profits to be good for the remainder of the year and a very high level of sales enquiries had come in.
The directors put together proposals to repay outstanding unsecured creditors through informal time to pay arrangements. The directors continued to believe that this would be the best way of maximising creditors’ returns. Unfortunately, due to the fact that not all of the company’s creditors were prepared to accept the informal time to pay proposals, the directors took the decision to appoint KSA to assist with the preparation of a CVA.
CVA was approved in December 2013 offering 38p in £1 over 5 years.