Hat-trick of deals for corporate finance team

Our corporate finance team has made a strong start to 2021, completing three more corporate deals within the last few weeks.

The team has advised Preston-based electrical safety and testing company Lantei on its sale to British Engineering Services Group, The Angel Inn at Bowness-on-Windermere on its sale to The Inn Collection Group, and Tristone Healthcare on its acquisition of Wales-based care business ProCare (Wales) Ltd.

The deals come just a few weeks after our team revealed it had advised on deals with a value of over £200m in 2020 and anticipates significant deal activity in Q1 of 2021.

MHA Moore and Smalley’s head of corporate finance, Andrew Feeke, said:

“We’re delighted for our clients that we’ve been able to complete these significant transactions. It has been a hugely successful last 12-months for the MHA corporate finance team as we consolidate our position as the advisor of choice for the owner managed market.”

Ian Waddingham, our corporate finance senior manager, who led on the Lantei and The Angel Inn transactions, added:

“Lantei is an excellent business that has seen significant growth over a number of years and now has some high-profile, blue-chip clients on its books. Becoming part of a large national player like British Engineering Services Group, will put it on an even stronger footing for further growth.

“Meanwhile, we’re pleased to have assisted another longstanding client behind the success story of The Angel Inn at Bowness on its sale to The Inn Collection Group. As a well-managed, well-funded business with a portfolio of high-performing hospitality venues, customers of The Angel Inn can look forward to the same high standards to which they’ve become accustomed.”

The acquisition of ProCare, which employs 140 staff across two care homes and a community living service, is the second deal in the last six months for Tristone Healthcare. The investor’s strategy is to acquire high-quality businesses with strong fundamentals, delivering outstanding care and support to vulnerable people who need it most.

In recent weeks MHA Moore and Smalley has also overseen the sale of Cumbria-based AUK Investments to national petrol forecourt operator Motor Fuel Group, and the management buyout of logistics, transport, and shipping business LTS Global Solutions among others.

Valuations, Covid-19 and EBITDAC adjustments

The impact of the pandemic has been felt in many ways, and one of these is in relation to valuation approaches for businesses. This blog will give an overview of how buyers and sellers of companies are trying to factor in Covid-19 factors accurately and fairly.

In general terms, EBITDA is applied to a valuation multiple to form the headline valuation of a business. Net cash/debt and working capital adjustments are then applied to provide the valuation of the business. Hence growing EBITDA normally leads to a higher valuation.  

Corporate finance advisers usually adjust EBITDA to derive the underlying position. This means adjusting for one-off costs and income (although the latter is usually rare!), both of which can become highly subjective.

It is therefore important to note that if you are considering selling your business, the profitability used to value your business could be significantly different to the profitability in your recent financial statements.

Typical one-off costs would include excessive repairs and renewals, short term loss making contracts, above market rate directors remuneration etc. One-off income would capture items such as grant income, or the profitability arising from short term, non-recurring turnover. But, as noted above, the adjustments are often highly subjective, and many other items can be included.

Whilst some sectors have benefitted, Covid-19 has adversely impacted many businesses, and the impact of further lockdown measures announced in January 2021 means that the effect will continue to be felt well into the year and for some, very possibly, long beyond this year.

Therefore, the impact of Covid-19 could be a significant add back adjustment for many companies when assessing their underlying ‘true’ EBITDA. Hence the adjustments made to reflect the impact of Covid-19 have had, and will continue to have, a significant impact on valuations and transaction values across many sectors. The impact of adjustments for Covid-19 has led to the acronym EBITDAC.

EBITDAC (Earnings before interest, tax, depreciation, amortisation and the effects of Covid-19) has become an often used term in corporate finance transactions since the Covid-19 pandemic started.

It is important that any adjustments to the EBITDA can be clearly justified. Hence business owners need to be aware that whilst Covid-19 add backs can be significant, the “C” adjustment must be clearly justified.

Without this, acquirors are unlikely to fully accept such adjustments, with an adverse impact on business valuations.

To have any significant adjustments accepted by an acquiror, there will be a requirement for the adjustments to be clearly analysed and quantified. To do so usually requires good quality management information systems, which provide sufficient granularity to enable one off costs to be identified and quantified as they arise.

Management should consider also formally capturing Covid-19 impacts in monthly management accounts and board packs (along with other add backs and adjustments).

The typical Covid-19 adjustments we are seeing include the following:

  • extra facilities management costs such as cleaning
  • lost or deferred income due to work being postponed due to lockdown measures
  • redundancy costs
  • additional advisory fees, for example in relation to furlough arrangements

Of course, each business is different and in many ways unique; but if you are thinking of selling your business, or any of the issues highlighted are relevant to your business, please don’t hesitate to get in touch to discuss further with our Corporate Finance Senior Manager, Ian Waddingham on 01772 821021 or ian.waddingham@mooreandsmalley.co.uk

Tristone Capital acquires North Wales care business

Buy and build Investment group Tristone Capital – through its care division Tristone Healthcare – has acquired North Wales-based care business, ProCare (Wales) Limited.  

ProCare employs 140 staff across two care homes and a community living service. This is the second deal in the last six months for Tristone Healthcare. The investor’s strategy is to acquire high-quality businesses with strong fundamentals, delivering outstanding care and support to vulnerable people who need it most. 

ProCare was founded in 2001 by Helen Shepherd and is one of the UK’s leading high acuity care businesses, providing care for individuals, between the ages of 16 and 64, who have complex support needs. This includes people with physical and/or learning disabilities, autism, mental health disorders or acquired brain injuries and challenging behaviour.  As part of the transaction Helen Shepherd, will retain a minority shareholding and continue in her role as managing director. 

Helen Shepherd, managing director of Procare, said: “I am extremely proud of Procare’s track record in striving for excellence, and in consistently delivering high quality support to the people we care for. I am delighted that in Tristone we have found a new partner, with the right values that are closely aligned with our own. This partnership will enable our work to continue in a way which maintains the strong reputation we have established in the communities we serve”. 

Tristone founder and CEO, Yannis Loucopoulos, added: “We have been speaking to Helen for some time and over that period it was evident that under her leadership, the team has built a highly successful and respected company that delivers best-in-class care and support. ProCare fits well with our acquisition criteria, as a company which delivers outstanding services and is well-run, profitable and cash generative. We are excited to work with such an experienced management team and are looking forward to supporting ProCare’s next chapter of growth, delivering additional services and in the process creating more jobs for the local community”. 

Led by Jason Whitworth and Chris Cumber, BDO LLP provided M&A corporate finance advice and tax advisory services to ProCare. Hill Dickinson LLP, led by Craig Scott and Elan Iorwerth, provided legal advice to the vendor. 

Jason Whitworth commented: “We are delighted to have worked with Helen and her team to deliver this transaction. Helen has built a business with an exceptional reputation in caring for some of the most vulnerable people in the community. Working with the team at Procare, Tristone will be able to support the business to develop and expand the care it can deliver. It is a fantastic outcome for all parties.” 

Tristone was advised by business advisory and accountancy firm MHA Moore and Smalley, led by corporate finance director, Simon Carruthers and tax partner David Bennett, who provided financial and taxation due diligence support. 

Simon Carruthers said: “Yannis and his team have developed a clear strategy to combine their deep understanding of children’s, young person’s and adult social care, with established independent operators delivering high-quality care outcomes. We’re delighted to have been able to assist on the transaction and achieve a positive outcome for our client through a focused approach.” 

The IMF and the Future of Work

It seems almost trite to write this but since March 2020 we have been living in truly extraordinary times. 

What started out as an expected short term pause to the ‘normal way of things’ with a several weeks lockdown in the pleasant spring and early summer of 2020 has developed into something really quite different. 

The ramifications of which, for many if not all of us, have been wide and pervasive. And it now feels like the world as we knew it in February 2020 is not going to be the world which we will get to know from 2021 and beyond.

From a business and wider economic sense, one of the biggest changes has been the way in which we work and the widespread adoption of technology to facilitate remote and agile working.  Probably many more of us than we thought have, relatively seamlessly, moved to this new way of working; and many are feeling its benefits in terms of greater autonomy and flexibility and have little desire to go back to the pre Covid world of work –  if that were even an option.

You may have missed this in the pre Christmas rush (which still made its presence felt, Covid restrictions or not) but the World Economic Forum (“WEF”)released its third detailed assessment of the world of work (The Future of Jobs Report) entitled The Jobs of Tomorrow.  WEF is an arm of the International Monetary Fund (“IMF”) and so its data reach is broad and very deep.  We may not agree with all of their views on economic trends, but we should take careful note of them and consider to what extent these shine a light on the challenges we face either as employees or employers.

The report concludes that the Covid impact has been in relation to five key related themes.  In many ways, the period since March 2020 has ‘simply’ accelerated existing waves of change which were moving through societies and the businesses which operate in them.

The five areas are:

  1. The workforce is automating faster than expected.  This will displace some jobs, but also…. 
  2. the robot revolution will create more new jobs. 
  3. In 2025, analytical thinking, creativity, and flexibility will be among the most sought-after skills. 
  4. The most competitive businesses will focus on upgrading their workers’ skills.
  5. Remote work is here to stay. 

As with any change it is always much easier to identify what will be lost (in terms of jobs in this context) than what will be created (i.e. new jobs) so I think we should be a little wary of placing too much emphasis on headlines telling us that ‘Robots are taking over and it is the end of work!’ –  or something along those lines.

These trends, if correct, raise a number of questions for businesses large and small. 

From the discussions we are having with our clients these seem principally to be along the following lines:

  • What can you do to generate the greatest productivity and efficiency improvements for any given level of investment?
  • What are you going to do in relation to investing in and upskilling your workforce? 
  • How can you not only manage but benefit from the remote working revolution (which is certainly what it feels like for many)?
  • What is likely to be the medium and longer-term impact on your business model and market from increased automation?  Where are the challenges to be managed and the opportunities to be developed?

The full text of the report can be accessed here.

You might think that these changes aren’t going to impact you and your business.  You may be right; but can any business really afford not to give them detailed thought and reflection? 

Change can be unnerving, but history tells us that it is often the nursemaid of opportunity and there will doubtless be opportunities emerging from these developments over the next 5 years. 

They could be of benefit to you.

To discuss the content discussed in this blog, please don’t hesitate to get in touch with our Corporate Finance Director, Stephen Gregson on 01772 821 021 or stephen.gregson@mooreandsmalley.co.uk

MHA Moore and Smalley advises as Cumbria petrol station operator sold to national firm

A family-owned business operating six petrol stations across Cumbria has been purchased by a large national operator in a deal supported by MHA Moore and Smalley.

Auk Investments has been sold to Motor Fuel Group (MFG) for an undisclosed sum. MFG operates more than 900 sites across the UK and the deal will allow the company to gain a foothold in the Lake District.

Auk Investments reported a turnover of £27 million for the year to March 2020 and is managed by siblings Angus, Marcus and Simon Hockings.

The company was advised on the sale by Paul Williams, partner at our Preston office as well as our corporate finance director Stephen Gregson and tax partner Tony Medcalf.

Paul said: “Auk Investments is a long-standing client of the firm and we are extremely pleased to have led on this deal, which meets the family’s objectives and passes the firm over to a good custodian in MFG.”

The deal was originally agreed early this year. After being put on hold due to the economic implications of coronavirus, it was then revived in October on the same headline terms.

“The fact the sale was only put on hold due to coronavirus disruptions suggests to us that, for the right businesses, there is an appetite nationally for deals. Growth is firmly on the agenda for many businesses despite the ongoing economic challenges coronavirus has brought,” added Paul.

Simon Hockings, managing director, Auk Investments, said: “My brothers and I have operated our filling station business in the Lake District for many years after Dad bought his first site in 1970s.

“I think we have done him proud but times are changing quickly in the industry and we felt it was the right time to move on. We are pleased to be handing the sites over to Motor Fuel Group, their stewardship will bring further investment including addressing the growth of electric vehicles. We wish them all the very best.”

Simon is also director of bicycle retail and hire company Biketreks which operates two sites in Cumbria. The company’s Ings site is based at one of Auk Investments’s petrol station sites and the company will continue to operate at the site.

Auk Investments also received legal advice on the deal from Jack Stephenson, Harrison Drury.

Simon added: “We would like to thank our professional advisors who have helped get this deal over the line. We will continue to work with both MHA Moore and Smalley and Harrison Drury to grow our remaining property and cycling related interests.”

This acquisition brings the total number of stations operated by MFG to 911.

William Bannister, chief executive, MFG said: “AUK is a well-respected family business in the Lake District. The six stations that we have purchased from them give us the opportunity to extend our network coverage into Cumbria in what is normally, a thriving tourist area.”

“We have acquired three BP branded and three Shell branded stations and we will, in-line with our standard business model, improve the shop offer for customers and introduce a ‘food to go’ option where appropriate to help ensure the sites become a destination for both the local community and visiting tourists.”

MHA Moore and Smalley advises on buyout at LTS Global Solutions

MHA Moore and Smalley’s corporate finance team has advised on the management buyout of a major logistics, transport, and shipping business.

The MBO at Birmingham-based LTS Global Solutions will support the business’ plans to grow by more than 40% in the next five years.

Established in 1999 as a transport operator, the company has grown to become a total service provider for global supply chain solutions – specifically in ocean, air and rail services, third party logistics (3PL) and fulfilment solutions.

The company employs 60 people at its Midlands hub and plans to create at least six new jobs next year, when it hopes to take on additional premises to service new contracts. By 2022 the business hopes to have found larger, state-of-the-art premises to cope with anticipated demand.

The MBO will enable LTS Global Solutions to focus on areas of growth such as import/export and e-fulfilment, which is becoming even more important because of the current Covid-19 outbreak.

The MBO team has been led by current managing director Dave Hands and Mirza Baig, director of international services. Dave Hands said: “Our business has always been known for its impeccable customer service, reliability and knowledge of global logistics. This deal will enable us to bring in new thinking and further investment to realise our ambitious growth plans.

“Our key markets are construction, retail and manufacturing, where we provide a wide range of added-value logistics services. This is where we differentiate ourselves from our competitors – providing customers with more than just transport services, rather complete, business critical logistics solutions.”

MHA Moore and Smalley’s tax team, led by tax director Victoria Dadswell, advised the MBO team on due diligence and tax issues. National law firm Backhouse Jones advised on legal matters.

Victoria Dadswell, tax director at MHA Moore and Smalley, said: “LTS Global Solutions is a business with a strong management team and a clear and credible plan for growth. That’s why it’s well placed to continue growing and providing a first-rate service to its customers at a time when global supply chain security has become even more critical. We’re thrilled to have advised the management team on acquiring the business and look forward to seeing them realise their growth aspirations.”

LTS sees significant growth in global logistics over the next few years. The company already operates a seamless worldwide 3PL operation for customers through its well-established network of trusted international partners. In the UK, LTS is a member of The Pallet Network, a partnership that guarantees cost-efficient nationwide distribution coverage and the ability to provide a total logistics service for businesses using e-commerce.

Record NW deal activity predicted after mooted changes to capital gains tax

The appetite for business owners to do deals will remain strong in 2021, particularly in the first quarter, according to MHA Moore and Smalley’s head of corporate finance.

Andrew Feeke believes widely anticipated changes to the capital gains tax regime next year, together with strong liquidity among funders, could lead to a record volume of deals between January 1 and April 5.

Andrew made the comments as the firm revealed it advised on corporate transactions and fundraising deals with a value of more than £200m in the 10 months to October 2020. These deals included:

Andrew said:

“We mustn’t forget that this has been a very challenging time for many people and communities, as well as for businesses and their owners. At the same time, it’s also been encouraging to see many businesses are still growing, creating jobs, and attracting investment.

“Our deal activity has remained strong throughout the pandemic period with our team kept busy on deals spanning different sectors, including cross border deals. Many of the legal advisors and private equity contacts I speak to are witnessing a recent increase in activity levels.

“Our short-term pipeline of deals remains incredibly strong and a key driver of this is the possible increase in capital gains tax rates, likely to be introduced from April next year. We’re looking at a lot of MBO activity and Employer Ownership Trust transactions as owners, particularly those with cash on the balance sheet, look to accelerate transactions to realise value from the business before any potential changes come in.

“With CBILS support ongoing, we should also see plenty of liquidity remaining in the market into the early part of next year. I think we may then see a pregnant pause in transactions after quarter one, which will coincide with funders reviewing the market and their own balance sheets, perhaps assessing where they may be overexposed and reviewing their target sectors.”

Andrew believes that even after some of the government loan schemes end, there will still be good levels of deal finance available as alternative funders look to continue their growth and enhance their client base. In the near term, there will remain strong appetite from private equity funders for well-managed businesses in the tech and healthcare sectors according to Andrew.

“Both prior to and throughout the pandemic we’ve seen an ever-increasing drive towards business models that offer software as a service, with long-term secured recurring revenues driving higher multiples. Those tech firms that are serving the healthcare sector are very sought after, with the health sector showing consistent growth and limited exposure to negative market factors,” added Andrew.

“With the rapid adoption of digital technologies across the public spectrum, I also predict an increasing amount of expansion and consolidation in the digital and creative sector as corporates pivot their marketing channels from ‘traditional’ to digital.

“On a more concerning note, I suspect there will also be an increase in business turnaround transactions when some of the pandemic support, such as Time to Pay arrangements come to an end and we may well see  a number of pre-pack deals going through. The timing of the return of ‘Crown Preference’ could not be better from a HMRC perspective, providing HMRC with more power in an insolvency process.

“There is obviously uncertainty over capital gains tax after April, which will probably weight the majority of next year’s deal activity in quarter one,” adds Andrew. “However, I’m confident that even if we see a dip in activity for a few months, it will stabilise in the second half of next year and we’ll still see a similar amount of deal activity overall.”

Chancellor Rishi Sunak asked the Office for Tax Simplification (OTS), an independent arm of the Treasury, to identify opportunities to simplify capital gains tax in relation to individuals and small businesses.  

Higher rate taxpayers currently pay a rate of 28% on gains on property and 20% on gains from other chargeable assets like shares. Basic rate taxpayers pay 18% on gains on property and 10% on other assets.

A reduced rate of capital gains tax of 10%, formerly known as Entrepreneurs Relief (now Business Asset Disposal Relief), also applies to individuals selling all or part of a business, providing certain criteria are met.

The OTS published a report in November 2020 in which it recommended bringing capital gains tax rates more in line with income tax rates and a reduction in the annual tax allowance. With this as a backdrop, it is thought the chancellor could implement some changes to the tax rates as part of his next budget.

Creating a competitive advantage in the SME sector

In a previous blog, my far more cerebral colleague, Stephen Gregson, managed to weave French philosopher Voltaire and man of letters Michel de Montaigne into a discussion about strategic business planning, and assisting clients see through the fog of current business challenges.

I’ll now attempt to link colour-blindness, garden peas and low-cost digital manufacturing initiatives to building a sustainable competitive advantage and shareholder value…stick with me…

My career in accountancy and corporate finance is a quirk of genetics – throughout my youth I wanted to follow in my father’s footsteps and be an engineer. However, a session with my school careers adviser when I was making my A-Level choices cruelly pulled the rug from beneath my engineering ambitions with the news that as most engineering design drawings, electrical diagrams, gas/chemical charts etc are colour-coded, not being able to tell the difference between red and green could be a tad problematic.

My optical deficiencies had been identified some years earlier when, knowing my mum always wanted to impress the local Vicar when he made his occasional home visits, I ran into the house proclaiming his imminent arrival as he had just parked his red Mini a few doors away. 30 minutes later with tea and cakes at the ready, he hadn’t arrived – it turned out it wasn’t the Vicar at all, but someone visiting a neighbour …in a green Mini.

Numerous eye-tests later I was formally diagnosed, laying the foundations of my subsequent career decisions. My younger brother’s similar diagnosis a few years later was a much more straightforward affair when he innocently asked at the dinner table one evening “Mum, why are peas called green peas when they’re red” ?…he’s also not now an engineer.

But, years later, I am still a frustrated engineer and still fascinated by how engineering has historically found ingenious solutions to a vast range of industrial, commercial and business problems. This led me to recently watch a webinar arranged by the ICAEW and Cambridge University’s Institute for Manufacturing, entitled “Making digital manufacturing on a shoestring work.”

I recommend any business owners seeking to gain an insight into how digital technologies can now be implemented at extremely low cost, and to help move your business into the age of Industry 4.0, to visit the IfM website – https://www.ifm.eng.cam.ac.uk/insights/digital-manufacturing/helping-smes-towards-digitalisation/ where a number of SME business owners and academics address how this thinking is helping them tackle an interesting range of operational issues.

Both myself and most of the business owners I have talked to about strategically moving into an era of digitisation and introduction of AI, have assumed that the cost would be prohibitive and therefore beyond their reach. But, this no longer has to be the case based on the IfM’s approach which uses cheap, off-the-shelf technology and devices, and readily available open-source software to deliver significant operational and cost improvements for hundreds of £’s rather than tens of thousands of £’s.

The IfM’s primary focus sits perfectly alongside the approach we also take to assist SME client reviews and assess and challenge their historic busines models, with a view to improving the business and driving shareholder value.

A key part of the non-transactional advisory elements of our Corporate Finance teams’ approach to working with our clients is structured around constructively challenging business owners and management teams to break-out of a cycle of repeating next month, exactly what they did the previous month, and the month before that and the month before that, to open their eyes to alternative thinking.

With all of the competing pressures and challenges of running a business, particularly with the added difficulties and uncertainties arising from COVID-19, it’s not surprising that many businesses, management teams and shareholder groups tend to adopt a primarily inwardly-focused approach to “business improvement”, often missing the opportunity and benefits of exploring how wider thinking, alternate strategies and new technologies could perhaps help deliver significant operational improvements, cost reductions and long term competitive advantage.

In a commercial world dominated, at present, by the combined uncertainties of COVID-19, Brexit and wider global geo-political uncertainties, making your business more robust and more able to successfully take advantage of what will inevitably be an altered landscape of opportunities and challenges over the coming months, is perhaps no longer a choice but now an imperative.

A key take-away from the IfM’s “digital manufacturing shoestring” agenda is perhaps therefore that the adoption of strategic business planning and business improvement processes is not exclusively the domain of much larger multi-national businesses with the budgets to deploy and significant financial resources to take their businesses forward and improve their competitive position – these strategies and thought processes are available to every business.

We adopt a structured but flexible approach to strategic planning and business improvement – if you would like to discuss further, please contact Simon Carruthers, Corporate Finance Director or a member of the Corporate Finance team on 0161 519 5050 or email info@mooreandsmalley.co.uk.

PS – there’s a happy ending to the above story. As colour blindness is passed through your mother’s chromosomes, my daughters are both free of this visual impairment and guess what…the youngest is now a graduate engineer!

Is your business too lean?

The clocks have just gone back so the mornings are lighter but the nights are very much drawing in.  The supermarket Christmas catalogues have arrived and they are full of tempting things to eat and drink. 

No sooner have our thoughts turned to the lovely taste of warm mince pies (or whatever your cake of choice is at this time of year) than the harsher reality of tighter clothes, letting out the belt a hole (or two) and the weighing scales begging for mercy  also spring to mind.  We feel the pressure to become or stay lean (-ish)…..

Lean is good , better, more efficient, more economical.  That is what we have been taught to believe in relation to our economies and our businesses.  But what if that isn’t quite true?  Or, rather, what if it can be overplayed and thus what is a strength, up to a point, then becomes a weakness?

Some fascinating research on this topic in relation to regional economies has recently been published by Stanford University and the Santa Fe Institute in America.

The research was published in the journal Evolutionary Human Sciences.

Now this isn’t the usual place where you would expect to find relevant business advice and insight, but a key conclusion is that it highlights the weakness of lean economic systems in the face of uncommon but severe threats, such as the coronavirus. The most telling conclusion is perhaps:  

“One of the things we’re seeing right now is a world that has been optimized for efficiency and is extremely vulnerable to risk……..If you scale back organizations to keep them running at a mean level that’s high, and you don’t have a lot of slack, when a crisis hits you’re in trouble.”

And something very similar to this has been seen in relation to many businesses and those which are managing to weather the Covid-19 related economic storms and those which are struggling.  Businesses which had built up cash reserves and hadn’t spent them or distributed them to the shareholders have been in a better position to cope with the extremely rapid impact on trading and  cash generation brought about by lockdowns with the near collapse and then the slow and fitful regrowth of much economic activity.

Those businesses which had monetary ‘wool on their backs’  whilst perhaps not as ‘lean’ as those which were using debt to fund their growth were fitter (and in some cases, much more so).  That might sound odd; isn’t being fit the same as being lean?  No, it isn’t. 

Fitness is the ability of the organisation to continue and survive.  Having some financial ‘fat’ in terms of underutilised and ‘inefficient’ cash reserves  is the way to create that organisational fitness.  Having an employee base that minimises any dependency upon key individuals is another aspect of organisational fitness. 

But this fitness rarely occurs organically;  it has to be planned for.

It is the consequence of owners understanding what their businesses are there to do; what they want and need to achieve; where the weaknesses and faultlines are in their business and organisational models – and doing something to deal with these.

These are exactly the kinds of conversations which we have been having with a number of our clients over the lockdown period.  Some, with the ‘fittest’ clients, have been simply a continuation of the pre Covid discussions; for others, they have had to pivot from a focus upon leanness to fitness very quickly by both changing their internal organisational and cultural model and accessing external sources of support and help (such as CBILS and similar funding lines).

Business as with life is about survival and, if we can, flourishing and achieving our potential.  The period since March 2020 has perhaps shown ever more strongly than it is better to be fit and flexible as an organisation and a human being than ‘lean and mean’. 

If this resonates with you and where your business finds itself then come and talk to us;  wherever you want to go, we can help you get there.

To discuss the content discussed in this blog, please don’t hesitate to get in touch with our Corporate Finance Director, Stephen Gregson on 01772 821 021 or stephen.gregson@mooreandsmalley.co.uk

North West construction sector: stamina and persistence required to maintain Covid recovery

The construction sector can overcome the economic challenges of coronavirus but it is likely to be a long road to full recovery.

That’s according to a survey of 100 construction companies across the UK, compiled in association with Lancashire-based accountants and business advisers MHA Moore and Smalley.

The MHA Construction Sector Report 2020 found that while 71 per cent of companies who have used the Government’s furlough scheme planned to bring back all furloughed staff, 32 per cent of companies surveyed had been forced to make redundancies.

And while 44 per cent of those surveyed said coronavirus was having minimal impact on their business, 49 per cent claimed the impact was substantial, with 30 per cent believing it would be more than a year before business returned to pre-pandemic levels.

Joe Sullivan, partner at MHA Moore and Smalley’s Preston office said:

“The fact that the majority of firms using the furlough scheme plan to bring back all furloughed staff is a positive sign. However, the sector’s future is currently very uncertain.

“Government projects are now the most likely source of revival. Housebuilding, although buoyed by strong demand, is likely to suffer from a rise in unemployment. Commercial building is unlikely to thrive, with many companies questioning whether they need as much office space as before.”

He said with the stark contrast between companies who had felt minimal impact from coronavirus and those claiming the impact had been substantial, any future government relief must be properly targeted.

Joe added:

“Not everyone needs help and there is no blanket solution for the companies that do need assistance. In particular, the government needs to be mindful that big infrastructure projects tend to benefit larger companies the most, and even disadvantage small ones by sucking in materials and labour.”

The biggest concern, shared by 61 per cent of respondents, was economic uncertainty. Supply chain disruption also ranked high on the list of worries, mentioned by 45 per cent of respondents.

The vast majority of respondents have used of some form of Government support. 81 per cent have used the furlough scheme and 68 per cent have used the VAT deferral scheme.

However, take up of other schemes was much lower, with only 13 per cent making use of the Coronavirus Business Interruption Loan Scheme (CBILS) and 12 per cent taking advantage of the Bounce Back loan scheme.

The MHA Construction Sector Report 2020 can be viewed here.