An Essex retailer has been brought back from the brink of closure thanks to intervention from BTG Restructuring, which demonstrated to the operator’s bank and fuel supplier that if the site priced more sensibly, sustainable profitability would return.
The forecourt in Colchester had suffered from supermarket competition and was trading at a loss, which meant that he was not turning over enough to meet direct debit payments for previous fuel loads. The retailer’s overdraft was at its limit and direct debits were returned by the bank unpaid, resulting in irregular deliveries and tanks sometimes left empty for days.
Richard Fry, partner at BTG Restructuring, said: “The oil company concluded that the owner was unlikely to be able to find sufficient funds to be able to function satisfactorily and requested that the owner find an alternative supplier or a purchaser for the business, which he did without success.
“The bank faced a substantial loss via a call on the bank guarantee by the oil company and the non-recovery of the loan/overdraft funding it had put into the business. Fortunately the bank has a close working relationship with BTG Restructuring and asked if I had any ideas.”
Using its bespoke financial diagnostic model for the petrol retailing sector, BTG evaluated all of the turnover aspects including volumes, margins, payment mix and payment card timings, and calculated the impact of a change in selling price and litreage, plus shop sales, from both a profit and cash flow perspective.
Fry ascertained that, historically, the premises had managed a profitable level of turnover, with a high number of previously regular customers buying because of the brand, not minding a one or two pence variance from the supermarket price.
“With this information and using the diagnostic model, I was able to demonstrate to both the bank and the oil company that the premises could price sensibly against the supermarket and turnover could be drastically improved, returning to sustainable historic levels. meaning the business would return to profitability and sufficient cash flows,” said Fry.
“To achieve this the business required an initial cash injection to clear outstanding debt and get back onto a normal business footing with the oil company. This was achieved by the bank and oil company agreeing to financially support the business on a basis that is very manageable for the owner.”