Home Experience A Chilled Food Company
A Chilled Food Company

Sector: Chilled Food
Owner Type: Management Buyout from Family
Turnover: £8m

Background

  • £8 million turnover food business which exhibited strong historic growth in both December turnover and earnings through to 2006 when acquired by the management team.
  • Business forecast to be profitable in 07/08, however in reality losses were escalating.
  • Increased gearing and losses created in a cash crisis which would result in insolvency if it could not be overcome.
  • In the event of insolvency the factors had a first change and the family had a change so there would be no recovery for unsecured creditors.
  • Accounts needed to be filed at Companies House.

Causes

  • Payment to the family for the business had imposed costs that were too high for the ongoing business.
  • Significant investment in a warehouse had greatly increased the overhead cost base and financial gearing.
  • Stock piling of the base commodity had overstretched the cash requirements of the business.
  • Commodity dealing in a time of rising prices had added risks to the business.
  • Creditor days were stretched to over 60 days causing some supplies to go on stoplists so some orders could not be fulfilled.
  • Financial controls were weak and margin analysis was not accurate.

Turnaround

  • In mid 2007, a multi disciplined team was introduced with myself acting as Finance Director.  An insolvency practitioner advised all parties on their personal situation.
  • All financial figures including forecasts were consolidated into one report which was the baseline for the future.

The following strategy was developed:

  • To establish the true stock position and reflect in the financial results.
  • To make sales in areas where margins were maximized at a time when the base commodity was in short supply.
  • To explore potential exit routes.
  • To explore alternative finders.

Outcome

  • The business secured on alternative funder.
  • The business filed its accounts.
  • Creditors were secured.
  • Administration was averted.