Background
Stephen Dixon of HM Advisory was appointed as the Restructuring Practitioner for a specialist mining services company providing non-destructive testing (NDT) and auditing services to the oil and gas industry. The company also offered training courses in NDT; however, these courses had historically operated at a loss and diverted resources from the company’s core, profitable service offerings.
The business began experiencing significant financial pressure due to a combination of high rent, excessive wages, and other operating overheads. The situation was further exacerbated by internal fraud committed by a former employee, which impacted heavily on the company’s leadership. At the time of restructuring, the company had accumulated unpaid ATO liabilities totalling $368,000.
Our Solution
Working collaboratively with the Director and the company’s accountant, the HM Advisory team initiated a number of strategic operational improvements. These included:
- Scaling back unprofitable NDT training courses to focus on core NDT testing and auditing services;
- Exiting a high-cost lease and relocating to more affordable premises;
- Reducing staff numbers to align overheads with revenue; and
- Developing a 12-month cash flow forecast to demonstrate the company’s future viability and sustainability.
A restructuring plan was proposed to creditors, offering a return of ten (10) cents in the dollar (c/$), to be paid by monthly instalments over a twelve (12) month period.
The Results
The restructuring plan was accepted by creditors, allowing the business to continue to trade while meeting commitments to the plan in the ordinary course. In a fantastic result, the company was able to complete its obligations pursuant to the restructuring plan and returned to a viable business within just eight (8) months. Creditors received a full and final dividend shortly after the plan was paid out.
If you have any questions on insolvency or have a client that is currently facing financial difficulty please contact the Hamilton Murphy team by telephoning (03) 8866 7600 or via email to [email protected]