Unshellfish Interest (Published June 2004)
The life of a trade financier is full of variety. We do whatever our
clients do, wherever they are. For example, we have purchased CDs, cars, coaches,
cranes, Chinese foods, Christmas gift wrap paper, ceramics, carpets, cladding
for buildings, chairs, chicken, computers, computer components, cloth, clothing,
cement mixing plants, kitchens, compressors, cod, cockles, crabs, and condoms.
There seems to be a concentration on the letter "c", but otherwise the variety
is obvious.
We often want to assist a company to achieve its objectives because of an immediate
liking and respect for the principals and the way they manage themselves and
their business. It is not easy for business managers who try to do new things.
Things do not usually go to plan or on time. This was undoubtedly true at Valley
Park Canning (VPC).
VPC was established in 1998 in Lancashire by Melvyn Flitman and a colleague.
It was a bold venture. They started the first substantial fish-canning factory
in England.
"The greatest contrast was between the pungent smell of fresh whelks
and . . . the meticulous presentation of Melvyn, impressively turned out in
perfect suit, impeccable shirt, and polka dot bow tie."
Their tasks sound simple if you say them quickly. You equip a factory to food
factory standards and get it approved. You find and train staff to ensure perfect
quality and have systems so that every batch is recorded and the records kept
for 8 years. You buy fresh sea products. You prepare it and put it into cans
with any added sauces, seal the cans and cook the product. Or you prepare and
freeze. You then deliver to customers all over the world.
The factory produces many canned and frozen seafood products, but largest among
them is whelk, purchased from British fishermen and sold mostly in USA and Korea.
They also sold the crab, cockles and cod listed above.
VPC started with us about 3 years ago and the problems for a trade financier
were many. The balance sheet was wrecked and they had some aggressive creditors.
There were many existing debentures. It would be complex to keep title to goods
through the manufacturing process. Our funds recovery would be from export open-account
sales or Letters of Credit (LCs) from the customers. VPC were learning about
this, but we could make sure it was achieved successfully.
When they started with us they forecast a rapid increase in turnover from £0.8m
pa to over £3m. Orders were available. Product sources were available. Capacity
was available. Profitability was surely not far away. To implement their plan
they needed a trade financier who had the skills to provide safe finance.
My visit to the factory was an experience of extremes. The greatest contrast
was between the pungent smell of fresh whelks and cockles in a fish factory
and the meticulous presentation of Melvyn, impressively turned out in perfect
suit, impeccable shirt, and polka dot bow tie. We have since found his compliance
with agreements and attention to detail equally meticulous.
Their finance problems were ones we know how to solve:
- The fresh cockles and whelks come from UK fishing sources that would not
give credit to VPC, but VPC did not always have the money to pay cash.
- The can supplier also refused them credit
- The customers for their products were in places like Korea, France, Jamaica
and USA. Some sales are on open account; others are paid for by incoming LCs.
We gave Supplier Undertakings (SUs) to the whelk and can suppliers and bought
from them on credit. By the time we pay them, VPC have approved their invoices
and the finished product is frozen or in the can, heading for the customer with
the incoming debts assigned to us. We then pay the wages!
There was delay in building up the projected sales and VPC failed in 2002.
We provided the working capital for the difficult restart to the Ocean Food
Group Plc.
The volumes are now substantial and the future seems secure, particularly
now they have raised a substantial sum on an AIM listing. The new equity will
be used for their general expansion, but they still plan to use us for their
working capital funding.
I called Melvyn recently to see how they are doing. "Very well"he
said "but we could not have done it without you". A typical unshellfish
comment. They are coming through 3 traumatic years. They delivered, with our
flexible and evolutionary support.
Together we canned this one.
Written by David Ross Director
Download
the Article 'Unshellfish Interest' at www.fairfaxgerrard.co.uk/docs/BusMon 0604
Unshellfish Interest.pdf
<< Back to News Headlines