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Educational Support Services

AABRS had advised an educational support services Company based in West Yorkshire.

The Company was incorporated in March 2012 initially with two directors and one shareholder. Its principal activity was the recruitment of apprentices aged 16-18 for employers and the identification of training opportunities for employed staff of all ages.

The Company traded from premises in Birstall, which was held under a licence agreement attracting an annual rental of £12,000.  As the Company had no facilities with its bankers, it entered into a factoring agreement as a means of managing cash-flow.

The Company had an approximate turnover of £90,000 and loss of nearly £18,000 during the last year of trading.

The director had previously worked in the government-funded training sector for over 20 years, taking on the roles of a college manger, trainer, assessor and Business Development Manager.  Identifying a gap in the market for a source of training opportunities, the director took the decision to form the Company to provide this service.  A variety of different courses were offered, the most popular of which were in IT training, leadership and management training and business improvement techniques.

Benefitting from the directors vast experience and contacts in the industry, the business grew steadily, attracting the interest of a number of local and national training providers and colleges, who were required to spend their allocated funding within each given academic year.  The Company were approached by a training provider based in the North East of England with an open ended contract to act as their sole apprenticeship recruiter.  The Company accepted and by mid-2014, this provider had become the Company’s biggest customer, accounting for approximately 75% of its business.

Unfortunately, the provider had its Skills Funding Agency contract frozen, creating uncertainty as to the number of new apprentices that could be recruited.  As it was understood that this would only be a temporary issue, the Company continued to work on filling the apprenticeship vacancies for that provider.  However, difficulties were experienced in obtaining payment for work completed, which placed pressure on the Company’s cash-flow.  This was further compounded when, the director was informed that the provider was to cease trading, at which time it owed a significant amount to the Company’s factors.

Although the Company attracted a large amount of interest from new customers, it was unable to release sufficient funds from the factoring company in order to alleviate the pressure on its cash-flow and funds from the factors were eventually placed on stop.  With attempts to secure borrowing from other sources unsuccessful and the Company unable to discharge its outstanding liabilities which were in the region of £80,000, the director took the decision that the Company could no longer continue to trade.

With no foreseeable future, AABRS concluded that the company take the steps to be placed into Creditors Voluntary Liquidation.

Should you have any queries in relation to this case study please contact Simon Renshaw on 020 8444 2000 or emailsr@aabrs.com.