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Company Voluntary Arrangements (CVA): a retailer’s perspective

Author: Paul Bedworth, Finance Director & John Boyle, CFO of Ann Summers

Published: 20 Apr 2021

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In this article Paul Bedworth and John Boyle answer some of the extra questions that came in from the audience in the recent Company Voluntary Arrangements webinar.

If you missed the webinar from the Finance Director of Ann Summers, Paul Bedworth and CFO, John Boyle as they shared their experiences and key learnings of working through the process of a CVA then don’t despair! A recorded version is available here.

Were any particular types of landlord more difficult?

No not particularly, we were dealing with a full range from individuals to large landlords and councils. All were different in their negotiations and some were going through administrations, which caused some problems in ensuring you were talking to the right people! - John Boyle

How did the Treasury & HMRC interface with the CVA? Are they entitled to a vote in the CVA process with regards deferred VAT/business rates/furlough payments etc?

Generally, they do not really engage, especially now as they are preferred creditors. As we were on a rates’ holiday a few local authority's contacted to say that it did not affect them. Our advisers, FRP had a conversation with the treasury department that deals with CVA's. - John Boyle

Did the change in Crown preferential status have any practical impact on the viability of the CVA and its attractiveness to unsecured creditors?

Yes, it changed the viability and made the alternative worse, and therefore the CVA became more attractive. - John Boyle

Do you think that the bricks and mortar philosophy of management can continue to keep the brand price competitive?

Yes given the changes that are happening in the property market, if landlords want to rent to retailers they will have to accept more flexible rental incomes, and hopefully business rates reform and/or an online sales tax will level the playing field to keep the brand competitive. - John Boyle

Across the store estate what did the CVA do?

We only exited one store as a result of the CVA. The majority of our stores are now on turnover based rents. - John Boyle

What advice would you give to landlords who are approached by tenants with a potential CVA proposal? They clearly have their own businesses to run and potentially a high level of exposure to these arrangements

My advice is to look at the relationship as a partnership, not as an adversarial one. If the tenant is prepared to share the commercials of the store (which we did), then they can see what the issues might be and then work to come to a sensible arrangement that works for both parties. If they do not engage then they will almost certainly be subject to more severe compromises if the CVA takes place. - John Boyle

How is future growth more challenging given what you've done? i.e. trying to open new stores / new suppliers etc

The CVA weighs heavily on the business in the aftermath of its implementation and just makes everything more difficult. It will ease once positive trading is reported going forward. At this point it’s just a forecast that has yet to be delivered! - John Boyle

Was a pre-pack was considered as an alternative and why was a CVA was selected as the right tool?

When we appointed FRP they prepared an options paper which covered all the possible options that they believed were open to the business (including a pre-pack). The CVA was chosen as the most appropriate with the least risk attached to it. - John Boyle

Staffing – did you see staff attrition?

We saw some staff attrition, but we successfully retained all staff that were key to the future of the business. - Paul Bedworth

What happened to the implementation of Microsoft Nav? Did you stick with it or go down an alternative route in the end?

We stuck with it. The issue was more with the implementation than the actual system and all key issues were resolved in the months following go live. - Paul Bedworth

*The views expressed are the author’s and not ICAEW