Traditionally, construction is the first industry to enter recession and the last to exit and this was certainly true in 2008. As a result, the industry experienced one of the largest decreases in job numbers of any UK sector and output fell faster than the whole UK economy.
With contractors unable to pay sub contractors and suppliers, cashflow was in rigor mortis, while at the same time, traditional bank finance was becoming increasingly difficult to attain. By 2009, the number of companies declaring bankruptcy had risen to its highest level since 1995.
As house building took a hit, Michelmersh Brick Holdings PLC, the UK's largest independent brick maker, was feeling the pressure.
Established in 1997, the company had grown through acquisition and organic growth into a profitable and asset rich business. But with cashflow halting due to the recession, Michelmersh needed support.
Laying the foundation of recovery
Michelmersh turned to ABN AMRO Commercial Finance to release cashflow from debtors and other assets.
Stephen Morgan, Finance Director said of the decision to work with ABN AMRO Commercial Finance: “The team always demonstrated a willingness to find a solution to our funding requirements. They were innovative in identifying different arrangements for the various assets we had available, and were encouraging and flexible in putting structures in place. Whilst the arrangements were always properly secured, the Commercial Finance team were fair and measured in their suggestions”.
The arrangements implemented in 2008 were flexible and were adjusted to reflect changes in the business, such as the gradual reduction in borrowing that accompanied improvement in its trading performance.
Paving the path to prosperity
Michelmersh is enjoying the benefit of the upturn in the UK construction sector, having established a successful operational structure over five years of hard work. Profitability has increased dramatically, and the cashflow generated has put the group in a net cash position that is set to improve with further sales of surplus assets.
Recently Michelmersh's products have been used in high-profile projects such as the Brentford Lock West, the award winning ORTUS Learning Centre and the ITV Studios, Media City at Salford Quays.
Due to ongoing support from ABN AMRO Commercial Finance, Michelmersh has recently been able to end its account as it no longer has borrowing requirements.
Morgan concludes, “ABN AMRO has always been supportive, even when our business recovered to the extent that we no longer needed their services. I will have no hesitation in re-igniting our relationship if we need finance in the future”.