R3’s quarterly ‘Business Distress Index’ reveals almost 50% of UK businesses are experiencing falling profits

R3, the association for insolvency, business recovery and turnaround professionals has released their quarterly ‘Business Distress Index’ revealing 850,000 businesses are currently experiencing falling profits.

Decreased profits’ was identified as the most common cause of distress, experienced this quarter by nearly 50% of UK businesses. 44% of businesses (or 750,000) have seen a reduction in their sales volumes, whilst 32% have seen a recent fall in market share.

R3 President Steven Law commented:
“These signs of distress on their own do not suggest insolvency is inevitable but they should be observed over the longer term. It is worrying that the most common signs recorded in September this year are decreased profits and a reduction in sales volume, given we are now out of recession. Although corporate insolvency numbers have decreased over 2010, experience of past recessions tell us to expect them to continue rising as the recession finishes in an ‘insolvency lag’.

He said: “The UK’s insolvency practitioners are expecting corporate insolvency numbers to increase for 2011 to 27,500 (In 2009 the figure was 26,400).”

Owls given 28 days to fend off administration

Sheffield Wednesday have been given a 28-day stay of execution by a High Court Judge in order to find new owners and pay off their outstanding tax bill.

The club, best known as ‘The Owls’ had been facing a winding up petition from HM Revenue & Customs for £600,000, but the judge revealed in court that the figure had more than doubled to £1.4m due to interest, VAT and fines.

The judge confirmed that the Yorkshire football club, were currently insolvent, but had been granted the extension under exceptional circumstances.

Deputy prime minister and Sheffield MP Nick Clegg, who lobbied the tax authorities and the club’s bank to help win a reprieve, warned that Wednesday’s escape was “only a stay of execution and much more needs to be done.”

Wednesday had hoped to broker a deal before the court date with one of four suitors including Leicester chairman Milan Mandaric, but time ran out. The Co-Op Bank, the largest creditor with around £23m outstanding, was said to support the Mandaric offer, but current club chairman Howard Wilkinson has been critical of the offer.

Insolvency News reports on HM Revenue and Customs 'Time to Pay'

“HM Revenue and Customs has finally revealed just how many Time to Pay arrangements have been granted to struggling businesses since the start of the recession. The official figures show that a whopping 371,200 agreements, worth £6.8bn, have been agreed. Critics of the scheme have said that whilst it has prevented an Armageddon, it is simply delaying the inevitable wave of collapses that will occur once the measure is withdrawn – the very definition of the “extend and pretend” catchphrase.” 
For further reading - click here...

Insolvency & Rescue Awards 2010

For the team at Beer & Young, the Insolvency & Rescue Awards on 21^st October proved to be an evening of delight and jubilation with Beer & Young taking away the award for Business Rescue Funder of the Year (Broker/Equity).

The event, held at the Lancaster London saw almost 600 professionals from across the insolvency and rescue sectors enjoy a night of entertainment and festivities as industry winners took home awards. 

Managing Director Nick Young commented:

“We are very grateful to come out on top of our peer group in this key category. We are delighted to have been recognised as the major deliverer of equity funding to SMEs seeking working capital for their businesses.”

Beer & Young September Update

It has been a busy September at the Beer & Young offices. As usual we've seen an upswing in investment activity following the summer holiday season - investors are active and a number of projects are reaching a positive conclusion.

Tomorrow sees Nick Young spending his day locked in a committee room as one of the judges for the Insolvency & Rescue Awards 2010. Beer & Young has been nominated for two awards - sadly Nick has been barred from voting in these two categories, impartiality rules! The judging panel is made up of recognised industry figures who can bring their skills, experience, and knowledge of the turnaround market to bear on proceedings. Sworn to secrecy, the results will be anounced at the gala dinner on 21st October.

Manchester & North Cheshire Voice of Business

Manchester & North Cheshire Voice of Business had an article about the turnaround industry, which is shown here (Click for a better view):

It has Ian Ross of Beer & Young giving valuable advice to SME's (Small to Medium Enterprises)

Two Nominations for Beer and Young

We are delighted to announce Beer & Young has been short-listed for two awards at this year’s Insolvency and Rescue Awards.

Launched in 2008, The Insolvency and Rescue Awards is the biggest event in the insolvency and turnaround industry, where professional excellence and outstanding achievements are recognised.

Beer & Young is a finalist in the Business Rescue Funder of the Year – Broker / Equity category and Senior Associate, Michael Morley-Smith has been nominated for the ‘Turnaround Practitioner of the Year’ award.

Nick Young, Managing Director of Beer & Young will join the judging panel for these awards to be held on 21 October, though sadly he will not be judging the above categories!

For more information about the Insolvency and Rescue Awards visit Credit Today or the Insolvency and Rescue Awards website.

A WINNING COMBINATION SME BANKING RELATIONSHIP MANAGERS + BEER & YOUNG THE CATALYST FOR BUSINESS RECOVERY

We all need a little extra help sometimes, but where do SME’s turn when the going
gets tough and additional capital is needed to re-build their depleted balance sheet?
This is where Beer & Young can be the answer.

Since 1998 Beer & Young has been acting for undercapitalised SME’s who have
often reached a critical point in their banking relationship. Beer & Young is focused
on investor backed recovery solutions – the typical Beer & Young investor will be
an experienced ‘Business Angel’ willing to invest in a turnaround situation or simply
where urgent funding is required.

Beer & Young is delighted to have forged close working relationships with many
relationship managers across the banking community. Some, but not all, operate
within the business support/special situations departments of the bank. The common
characteristics of the accounts that are being managed tend to be:

Profitability has deteriorated and/or losses are accumulating
Liquidity is poor and the bank facilities are increasingly ‘hardcore’
Gearing has reached a tipping point where the bank is no longer comfortable

• Profitability has deteriorated and/or losses are accumulating
• Liquidity is poor and the bank facilities are increasingly ‘hardcore’
• Gearing has reached a tipping point where the bank is no longer comfortable

The above could be described as the ‘hard issues’, but financial ‘fire fighting’ takes
an inordinate toll on business owners in terms of emotional energy and commitment.
The old adage of ‘trying to see the wood for the trees’ is often very pertinent. This is
an area where the hands on help and experience of a Business Angel investor can
be invaluable.

We all know about the problems that the global credit crunch has caused, but this
has not affected the investor appetite for SME opportunities. Business Angels will
make their own decisions as to how and when they invest – they see investing in
businesses that have been successful in the past as far less risky than early stage/
start-up situations.

This is a counter cyclical market, where there is increased liquidity for turnaround/
distressed opportunities. The upside for bank relationship managers is that there
is access to ‘Business Angel’ funding for SME’s via specialist firms such as Beer &
Young.

We are always pleased to talk to bankers to explain our services more fully and listen
to the views of front line lending managers. Please contact our London offices on
0207 329 6886 or 07808 788803 to arrange a convenient appointment – please ask
for Declan Williams (williams@beerandyoung.com).

Business Recovery Service Success in the West Midlands

Connect Fast Track for Innovation and Investment is an initiative to help stressed businesses that has seen good success. Beer and Young's part in this is detailed in this newsletter (click the title)

OFT Slams Insolvency Service

The insolvency profession and particular the role of insolvency practitioners (IPs) has come in for some serious criticism from the Office of Fair Trading (OFT), after a 7 month study of the market. Clive Maxwell, the OFT Senior Director of Services, said: “Self-regulation has not worked. We have called for some fundamental changes so that bad behaviour can be better constrained by fear of regulatory punishment and fines. Our recommendations would benefit the wider economy and good insolvency practitioners, without imposing on the taxpayer.”

One of the major issues highlighted in the OFT report was the level of IPs fees in comparison to the level of realisations and therefore dividends to unsecured creditors. This has always been an area where unsecured creditors see themselves being left behind while the IPs fees take preference.

In reality probably a few bad apples in the insolvency community have meant the whole profession being tainted with the expensive undertaker badge and the vast majority of IPs would welcome a more robust regulatory framework.

Specialist firms like Beer & Young have worked closely with IPs for many years and their experience has generally been very positive, particularly where an insolvency process was required as part of an investor backed turnaround solution. Inevitably the baggage of the past is sometimes prohibitive for an investor to simply ‘pick up the tab’ and a re-structuring process needs to be utilised.

The real key is working with all the stakeholders, including unsecured creditors, to make sure the business has the maximum chance of success in the future. It is crucial for SMEs to engage with firms like Beer & Young no matter how distressed things might seem and they will focus on the positives. An insolvency process may be necessary but this can merely be a stepping stone to a positive future, particularly with new investment being provided as part of the recovery solution.

Insolvency & Rescue Awards 21 October 2010

Nick Young, Managing Director of Beer & Young, has been chosen as one of the panel of expert judges for these prestigious industry awards.

These awards recognise major contributions and professionalism in the turnaround market place with categories including Banking Restructuring Team of the Year, Corporate Recovery Firm of the Year , Business Rescue Funder of the Year (Broker/Equity). The focus of the event is very much to celebrate excellence in the sector and the positive contribution that business recovery professionals make in these challenging times.

Nick is delighted to have been nominated as a judge and comments:

“I am very pleased to join a panel of industry experts and hope to make a very positive contribution in the judging process.

These awards are a great way to recognise the hard work and skills of the people in our market.”

This years event is being held at the Lancaster London hotel and promises to be the biggest yet with an estimated 600 guests.

PLAN AHEAD

All businesses, particularly SMEs, keep an eye on cash.
Most will know to the nearest £ what their bank balance is at close of business last night.
A few might even have the link to on-line banking on their computer or mobile device on continuously.

Fewer, however, look ahead to see if there will be enough cash to pay future salaries and other bills.

How often have you thought that “There’s too much month left at the end of the money”?

This is where a forecast can come in handy, says Ian Ross, a Chartered Management Accountant and Associate in the North West for Beer & Young Ltd.

The ideal forecast will have visibility for at least 13 weeks, and will be split into weeks.

Why 13 weeks?

This period has been chosen so that it covers at least one VAT payment date. The payment of VAT, whilst predictable exactly in terms of the date and approximately in terms of the value, is usually the payment that catches a business unawares.

Forecasting the timing of receipts from customers is more tricky. If you have good records and a close business relationship with your key customers, you can usually predict to within a day or two when they will pay, and how reliable a promise to pay really is. By predicting the amount to be paid for the main customers individually, this will leave a smaller value of “others” to predict.

Forecasting the payments made through standing orders and direct debits is usually reasonably easy. Predicting wages and salaries and the related PAYE and NI is generally not too problematic. Any remaining cash available will go to the suppliers , where the critical suppliers will be paid first.

With luck, there will be some money left over for the owner.

Even in the best-organised businesses, this forecasting and control of cash can sometimes lead to a situation where outgoings exceed income.

If this can be predicted in terms of time and amount, the bank or main lender is usually the first port of call. Armed with your cash flow forecast, this will provide a good basis for a sensible discussion.

If the bank is unwilling to lend more, then what other options are available?

Asset-based lending or ABL, using property or debtors as security is a popular way to fund a growing business. Make sure you understand all the rules associated with credit checking customers, concentration of debt (that is, having a high proportion of debt in the hands of a small number of customers) and recourse (that is, what happens if the invoice is more than 90 days overdue).

Sometimes ABL is not an option and more radical options are needed.
One such is to consider selling a minority stake in your business and bringing in an extra business partner who contributes not only cash but expertise. This route can provide a lifeline for good businesses that may be struggling temporarily and needs additional senior resource. It can be a lonely place running a business and ultimately it is better to have 70% of something with a substantial future than 100% of something with limited prospects.

An incoming investor will usually bring significant added value to a business and open doors that the existing management could only dream about. This creates a real ‘win-win’ where the aspirations of all the parties can be achieved.

Whatever you do, take the appropriate specialist advice from professionals you trust and remember the old saying...Plan ahead. It wasn’t raining when Noah started building the ark.

To contact Ian or find out more about equity investors, e-mail ian.ross@beerandyoung.com or his colleague shon.laird@beerandyoung.com

HMRC GETTING TOUGHER

This is something we highlighted in our last newsletter in February and the ‘sting in the tail’ seems to have arrived with HMRC starting to take a tougher stance on arrears.

However, we would stress, that HMRC are still very receptive to the proposals that we put to them. They certainly see our involvement as a very positive step and please bear us in mind for any situations where we can leverage our relationships.

STRATEGIC ALLIANCE WITH MARKET LEADING INDEPENDENT BROKERAGE HILTON BAIRD

We are very pleased to announce that we have established a new strategic alliance with Hilton Baird (www.hiltonbaird.co.uk), which will provide our clients with a wider range of financial solutions. Hilton-Baird is the largest independent broker in the UK and has a unique approach to arranging financial options for a range of businesses, from start-ups to corporate entities.

There are very good synergies between us and this creates opportunities for significant reciprocity. For us this will be particularly relevant when a business simply cannot access new/alternative finance and equity investment is the most appropriate solution for the situation.

This is tangible evidence of two market leading businesses aligning their respective capabilities for the benefit of SME clients. Please contact us if you recognise benefits to your clients via similar strategic partnerships/alliances.

£750,000 EQUITY INVESTMENT COMPLETION

This is another great example of the current vibrancy of our market.

Our client was referred to us following an Independent Business Review (IBR) by Moorfields Corporate Recovery that was undertaken upon the instructions of the company’s bankers. The business had been struggling as their market place had been badly affected by a number of recessionary factors and critically the bank had no further appetite to increase their exposure.

However, there were a number of very positive factors that enabled us to generate significant investor interest, with 5 meetings being held within the first two weeks following engagement.
Within 3 weeks our client was in advanced discussion with one of our investors and we are delighted to report that completion took place a short time thereafter.
This was an excellent result all round with all the stakeholders benefitting significantly and formal re-structuring procedures were avoided.

Nicholas Young, Managing Director

GREAT START TO 2010 - Second Newsletter of 2010.

In the first quarter of this year we were delighted to have successfully helped over 30 clients in the West Midlands region as part of the ‘Business Recovery Service’ initiative. Some of you may recall this was a very positive scheme to provide “at risk” businesses with consultancy/advisory services. This support package was offered at NO COST to the recipient SME as it was fully paid for from funds provided by the European Regional Development Fund and Advantage West Midlands.

This has also helped us to leverage the skills of our team and we are looking to develop our consultancy offering further in this area, particularly if similar schemes are rolled out across the country – although RDA budgets have already taken a pounding this week!

Luke Johnson and Beer & Partners

A number of financial news stories have noted the acquisition of a 27% share in Beer & Partners by Luke Johnson, the serial entrepreneur who was famed for bringing Pizza Express to the market. They are for example:

• http://www.growthbusiness.co.uk/news/fundraising-deals/1250548/luke-johnson-backs-beer-and-partners.thtml
• http://www.fundingforgrowth.co.uk/press-release-luke-johnson-supports-small-business-britain-through-beer-partners
• http://www.bmmagazine.co.uk/Luke-Johnson-supports-Small-Business-Britain-through-Beer-and-Partners.770
• http://realbusiness.co.uk/startups/luke_johnson_angels_are_the_only_realistic_option

Agreement to be support advisors to Beer & Young Ltd

In March 2010 Going For Grants signed a Business Development Agreement with Beer & Young Ltd, London.

Beer & Young has been established since 1998 and offers a range of services to Small and Medium sized Enterprises (SMEs) that are typically facing pressing financial issues. They act for clients that often require help on an urgent basis and always aim to deliver solutions rapidly to meet their needs. Their services include the following:

Turnaround/Urgent Investment
Company Re-Structuring (e.g. Company Voluntary Arrangements)
Accelerated Business Sales
HMRC Negotiation
Turnaround Consultancy

The above services are delivered by their very experienced team of business professionals who fully understand the pressures facing business owners/managers.

Their principal office is in the centre of London, however, they have representation in all the major regions of the UK and a very extensive network of contacts within the SME community – including government agencies (e.g. HMRC and Business Links), all major banks, asset based lenders, legal practices, accountancy firms, and many other professional services providers, which now includes Going for Grants.

Contact Details for Beer & Young:
Website: http://www.beerandyoung.com
Address: Painters Hall, 9 Little Trinity Lane, London EC4V 2AD
Contact: Nicholas Young, Managing Director; nick.young@beerandyoung.com
Phone: 020 7329 6886

How Struggling Companies Get an Injection of Business Finance

In the recession of 2009/2010 many companies are going through cash flow problems brought on by poor sales, few new sales leads and financial obligations such as employee payroll constantly looming. Business finance is needed, but seems impossible to obtain. In a downward spiral, the company may easily start to lose their own sense of confidence, lose morale, and lose the confidence of their suppliers. This can be a lethal mix. If suppliers even start to believe in a companies inability to pay the bill, they’ll understandably require it up-front which makes the cash flow much more difficult. Then what about the banks and the company overdraft facility?

Companies such as Financial Rescue in London are key players in the Turnaround Finance industry that generally finds success by injecting business finance into the company through an industry expert who has ready funds he or she would like to invest. They need to believe that the company has a fundamentally sound business model and that the problems can be rectified. If they can, the wealthy expert will provide the business funding and generally take a position on the company board as a director (not necessarily, or usually, a majority director) and advise as to changes that are required. The changes can be painful – but since it’s now a third party that is making the changes they are often more palatable because of the acceptance of the position the company was in and the new capital provided.

Admittedly, business can be tough, and changes in a struggling company can be tough. But now the company has another shareholder and one with experience in the industry segment with a mandate to make changes. The company that was struggling is now in better shape and is returned to financial health. What may have looked bleak now looks bright and the company can continue to trade in a competitive environment, even a recessionary one.

Business Angels Adding Value in Turnaround

Guest Article: Declan Williams, Beer & Young – Turnaround Investment Solutions

‘Business Angels Adding Value in Turnaround’

The turnaround market has always been fertile ground for business angel investors. They usually bring sector skills and much needed positivity to re-energise a distressed SME, as well as the ‘oxygen’ of investment. Often what is needed is the ability to act quickly and make decisions that protect the value of the business. This is where the incumbent owners/management can benefit enormously by working alongside another entrepreneurial figure who will act as a catalyst to simply get things done.

It is easy to be critical when a business starts to struggle and the management do not put a recovery plan in place. People don’t plan to get in trouble, so when they do, it is not surprising that they make mistakes and fail to address the critical issues confronting them. Emotion can take over and simply hoping things get better is a common theme. Business angels will be empathetic and many will have experienced similar challenges themselves. However, they have the benefit of being able to take a ‘helicopter view’ and the skills to execute a recovery plan.

Retaining and protecting goodwill are key issues in distressed situations. Business angels will engage with the stakeholders and work alongside them to put the business back on much firmer ground. This will mean talking to customers, suppliers, bankers, employees, landlords, etc. Relationships need to be re-built and stabilised to ensure the recovery plan can be delivered. The risk profile of the investor is also significantly reduced as threats to the business are dealt with.  

At Beer & Young we are seeing increasing numbers of new business angels registering (now over 1000) with the Beer Group and showing an appetite for turnaround opportunities. They typically look to invest between £50,000 and £1,000,000. This is great news for our clients as there is a significant correlation between the volume of registered investors and the chances of successfully raising funding. New investors are the most active and keen to leverage their skills at the earliest opportunity.

Although the green shoots of recovery seem to have arrived there is always a lag effect in post recessionary periods. Many thousands of SMEs are still undercapitalised and struggling. However, many of these businesses now have the opportunity to raise business angel capital and a route to market via Beer & Young.

Thankfully there is a stronger recovery culture now than has been evident previously and we firmly believe business angels will have an increasing role to play in helping UK plc back to health. We never like seeing SMEs going bust and rarely do we come across situations where something positive cannot be achieved. It is very rewarding when you help a struggling business receive investment and successful relationships develop between like minded entrepreneurial people.

Contact declan.williams@beerandyoung.com to find out more about how Beer & Young help struggling businesses or if you are interested in turnaround investment.

Commercial Interior Design and Consultancy - Case Study

Location: Re-located to the UK from Portugal
New Capital: Equity (Amount Not Disclosed)


Beer and Young's client company was based in Portugal and provided interior design and consultancy services to the local commercial market. However, a number of its customers had suffered in the economic downturn and they were consequently unable to pay their bills to our client. This resulted in their business being exposed to severe cash flow pressures and with little prospect of being able to continue to trade.

This was a challenging situation, however, one which we were delighted to take on. Our client wanted to return to the UK as they recognised the market here still presented opportunities for his business.

Within a few weeks of engagement the client was offered acceptable terms by one of our investors, who owns a complimentary industry sector business and a good strategic fit was the key driver to a successful completion. A new UK corporate entity was formed as the most appropriate investment vehicle and a full financial package has been provided to fund budgeted working capital requirements.

HEALTH & FITNESS BUSINESS GETS BACK IN SHAPE, 18 MONTHS LATER AND STILL GOING STRONG

Successful Company Voluntary Arrangements (CVA’s) – Yes they do exist – please read on!


In May 2008 we were approached by the owner/operator of 2 health and fitness clubs. He was faced with an extremely challenging situation as one of the clubs was loss making and this had completely eroded the capital base of the company – a balance sheet ‘black hole’ had opened up and it was growing rapidly. 

However, there were some significant positives:

• Directors had formulated a new ‘budget’ club model that looked viable.
• The underperforming club could be ‘wound down’ with the support of the landlord.
• Local development/re-generation was starting to show signs of tangible benefits to the better performing club.

The most precious commodities in these situations are often some time to review the options and a strategy to relieve cash flow pressure. We worked closely with the owner and other stakeholders to ensure that any immediate threats to the business were dealt with and this facilitated the time to formulate a workable CVA proposal.  

The following testimonial is from the owner.

“I was faced with an almost impossible financial situation when I was introduced to Beer & Young. However, with their help and guidance we put a business recovery plan (CVA) in place that has put my club back on a firm financial base.

This gave us the opportunity and time to re-position the business and I am delighted to say we are now profitable once again.”

DR – Independent Health Club Owner/Manager – Feb 2010 

Beer and Young: BUILDING our PRESENCE across the country

We, at Beer and Young, are delighted to have established a greater presence across the country with new associates in the following locations: 

Liverpool Area: Shon Laird (Mobile: 07836 272649 em: shon.laird@beerandyoung.com) 

Manchester Area: Ian Ross (Mobile: 07905 624456 em: ian.ross@beerandyoung.com) 

West Midlands: Chris Jones (Mobile: 07879 056456 em: chris.jones@beerandyoung.com) 

West Midlands: Brian O’Reilly (Mobile:07765 247249 em: brian.oreilly@beerandyoung.com)  

Bucks: Andrew Hall (Mobile: 07908 733203 em: andrew.hall@beerandyoung.com) 

Herts/Beds: Robin Pyke (Mobile: 07734 272113 em: robin.pyke@beerandyoung.com)

Please feel free to make contact with any of the above members of our team. Shon, Ian, Chris, Brian, Andrew, and Robin, are all keen to build local contacts on the ground in their respective areas.  

We now have a team of 15 associates across the country and combined business experience that totals well over 200 years. We continue to increase our expertise in almost every sector of the economy.

OUR FRIENDS AT HMRC

Although this might appear a little bit of a contradiction in terms for many of us, we are genuinely pleased to say that we have forged some very positive relationships with HMRC over the last 12 months.

The Debt Management Units have been very receptive to the ‘Time to Pay’ or CVA proposals we present to them on behalf of our clients.

The ‘sting in the tail’, however, looks as though it has arrived as HMRC are starting to take a     tougher stance on arrears.

I would stress, however, that we are still in a good position to leverage our relationships with HMRC and would always encourage any business with arrears issues to contact us. 

Nicholas Young, Managing Director

The Glass Really is Half Full

Welcome to our First Newsletter of 2010.

‘The glass really is half full’ rather than ‘half empty’ has been very much part of our philosophy during the recession and since Beer & Young started in 1998. No matter how dire things might seem there will always be some positives.  We really don’t like seeing failure and business owners throwing in the towel when they have not fully reviewed all the options. Our clients need help, support, and positivity, as well as the money! This brings me nicely onto…

SOME VERY GOOD NEWS – THE BUSINESS RECOVERY SERVICE (BRS)  

We are delighted to have been awarded a contract, via Business Link West Midlands, to provide “at risk” businesses with consultancy/advisory services. This support package has been offered at NO COST to the recipient SME as it is being fully paid for from funds provided by the European Regional Development Fund and Advantage West Midlands.   

We are very pleased to have been recognized as a leading firm in our market place and we are actively delivering this service to a number of BRS clients in the West Midlands. 

BPIF conference aims to map out routes to finance

Offering company equity to private investors for finance could be the best route for printer companies looking to grow in the period after the recession, according to Nick Young - one of the speakers for the February 2010 BPIF Finance Conference. Young, founder of business finance/turnaround finance company Beer and Young, will speak on the subject 'Accessing alternative funding and making it work for you' at this conference. He claims that conventional bank and asset-based routes to business finance were still tough to access...