Armstrong Watson were approached by a construction company who had encountered difficulties with their cash flow after having encountered a reduction in turnover coupled with encountering losses on a number of larger contracts. The underlying business was potentially sound however the cash flow difficulties had meant that historic liabilities were starting to become a challenge for the business.
With the assistance of Armstrong Watson, a major review of the company's operations was undertaken, which highlighted several matters:
In order to improve the Company's cash flow problems re-financing options were considered. Our Corporate Finance specialists were consulted in order to help renegotiate the company's banking facilities. In addition discussions with a number of other funders were held regarding asset finance, business loans and invoice discounting facilities, the sale and leaseback of the company's freehold property was considered, as was the sale of under-utilised plant and machinery; and a time to pay agreement was negotiated with the largest unsecured creditor, HMRC.
The directors took on board the suggestions and were successful in securing a number of main contractor contracts. An improved job costing system was introduced which allowed a more joined up approach to be undertaken involving all key staff ranging from quantity surveyors, buyers, operational managers, finance, and the directors themselves. Weekly finance meetings were held to challenge all costs to ensure no unnecessary expenditure was incurred.
Once the processes had been updated and the cost saving measures implemented, the directors were then able to propose a Company Voluntary Arrangement (“CVA”) which enabled them to manage the historic liabilities (including Crown arrears) and deal with the costs of the restructure, including the redundancy costs which had arisen, in a structured way.
The CVA was subsequently approved by creditors, enabling the final phase of the turnaround plan of the business to be implemented, with the directors remaining in control of the process throughout.
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