Creditors at airfreight haulier Circle Express unanimously voted to approve a company voluntary arrangement (CVA).
The Slough-based logistics firm appointed turnaround firm KSA Group to devise a CVA to enable the business to carry on trading while it repays its debts over five years at a rate of 38.3p/per pound owed for unsecured creditors.
In its CVA submission, seen by MT.co.uk, Circle explains how rising fuel prices in 2008 led to diesel costs outstripping the company’s fuel surcharge, set at 10.21%. As a result, it increased its surcharge to 19.57% to cover costs from the previous quarter. However, this sharp increase led to some customers leaving the business and Circle lowered the surcharge to pre-inflation figures, resulting in a £550,000 operating hit for the year.
A turnaround plan was implemented, with the firm’s Bristol and East Midlands airport depots closed, wages and recruitment frozen and the chief executive injecting £300,000 into the company.
However, severe weather in 2009-10 hit trading, as airports were closed and distribution ground to a halt. This was exacerbated by the Icelandic ash cloud in April 2010.
Despite this, Circle reported a pre-tax operating profit of £144,000 for the year ended 31 October 2010 on a £25.1m turnover; creditors falling due within 12 months totalled about £6.9m, up from £6.2m the previous year. In 2011, however, turnover fell after difficult economic trading conditions.
MT.co.uk understands the directors are reviewing the business to ensure contract profit and maximise efficiencies and are confident Circle will return to a healthy profit, and are forecasting sales of £25m in the first year of the CVA.
Circle Express chief executive Chris Coffey says: “The directors wish to thank the creditors for their support during this difficult period and will endeavour to continue to build strong working relationships with all those who have stood by us.
“We would also like to thank our loyal customers and staff who have stood by us and given tremendous support during the CVA process. We look forward to repaying this support by building a strong and sustainable business for the future.”
