Turnaround finance case study – May 2019

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Our client is a large employer, with over 3000 employees. It operates a group of companies across the UK and Ireland in the services sector. Growth has been explosive from £21m  to over £35m in the last 12 months, a bulging order book showed growth to £60m was likely by the end of 2020. But a systemic fraud in one of the companies had brought the business to a sudden and unexpected cashflow crisis.

The existing invoice finance funder was, justifiably, not keen to further extend facilities and required evidence that the fraud was controlled and that no further shocks were likely. They had seen the operations director leave in 2018 and were concerned about the boards ability to turn the situation around never mind drive fast growth. By reducing initial drawdown from 75% to 65% the funder inadvertently placed MORE pressure on cash flow.

So, the board approached Cheswick Capital to ask us to secure new funding offers and to address the turnaround management issues. Our sister company KSA Group was engaged by the board to prepare an independent business review (IBR) to assess the possible problem causes, management actions, the likelihood of insolvency being required and the possible outcomes in administration for the lender and creditors such as HMRC. Very detailed financial forecasts were produced to support what-if scenario planning.

Fundamentally this is still a strong business but short of management, having seen the departure of two senior executives in late 2018. KSA assessed incumbent (next tier) management and agreed that they had the skill and tenacity to drive the turnaround, but they require the support of a new part time finance director.

Cheswick has arranged for two new finance providers to quote to refinance the company and the company has now repaid the previous lender and has a steadily available drawn down of 75% again. And KSA Group negotiated a 12 month time to pay arrangement for HMRC liabilities of £700,000. This joint approach solved two pressing problems and saved over 3000 jobs.

Do you have a funding problem? Do you need turnaround capital? Does your board or your client need advice on how to turnaround the business? Contact Cheswick Capital today on 020 7416 6677 to get experienced experts to help your viable company or group.

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