The company had come to the end of its selling season with about £3m of stock at cost (against an annual turnover of about £4m), and an overdraft of about £3m secured essentially on the stock.
The bank had a big 4 IBR done which told them that:
- the company had lost its two major accounts in the last two years
- the stock might sell for 10p/£ in an insolvency,
- the accounting system was a mess (with a £25m+ write off needing to be put through on the stock system!),
- no one in the business was able to manage the cash flow,
- there was a shareholder dispute, and
- the company was looking for another £600k to fund getting through the winter and ordering more stock with which to balance the lines.
The big 4 firm wasn’t in a position to give the company the hands on help it needed so one of our partners was brought in to provide the managing director with day to day support and to see whether the business could be managed through to the next selling season.
By instituting a tight control of the cash, and by negotiating new terms of business on credit with the company’s overseas suppliers, the company was managed through the off season without requiring any additional facilities. This then allowed the business to trade through a further selling season to work down its stock and bank exposure before the rump business was then placed into Administration under the big 4 firm.
Subsequently, we have gone on to work with the ex-MD to set up a new business on a more sustainable business model which is trading successfully.
