Achieving a positive result from a CVA
Our client was an air transport, warehouse and distribution company turning over £6 million. It was barely profitable and was up against its borrowing levels. The company was a well-established family business with a good track record of providing a flexible service to its customer base.
Unless current losses were converted into profit, the company was at risk of bank foreclosure. The directors were also seeking a positive exit strategy.
What we did
We analysed the trading pattern and established that there were too many low-margin customers. A secondary distribution business was running a fleet of costly high-maintenance vehicles, and this was closed on our recommendation.
The client was relying on spot hire work at higher rates, but the market had turned and they did not have enough longer-term, medium-margin work. We undertook, over a four-month period, to target and assist in negotiating a significant long-term contract.
The company had an in-house fleet maintenance unit. This was closed and maintenance was subcontracted, saving 15% on annual maintenance costs.
The overhead base was still too high and the company was unlikely to trade out of this situation. We organised a business closure via a Company Voluntary Arrangement (CVA). This coincided with the sale of two properties. All current contracts were sold to another operator. All creditors were paid 100p in the £ and the cash balance produced a retirement fund for the owners.