The number of UK breweries becoming insolvent has tripled in the past year, jumping to 45 in the year to March 31 2023, up from 15 in the previous year* says Mazars, the international audit, tax and advisory firm.

Paul Maloney, Associate Director at Mazars says the insolvencies are largely of smaller craft breweries who have suffered from an oversaturated market and from rising overheads.

Paul Maloney explains that even without the cost-of-living crisis there would have been a major shakeout in the market, as the boom in craft brewery start-ups meant that there were too many breweries competing for limited shelf space in supermarkets and bar space within pubs.

Paul Maloney says: “Craft breweries have been struggling for some time but rising prices have brought their financial challenges to a head.”

Smaller brewers have struggled with a change in consumer spending when it comes to beer as the cost-of-living crisis has deepened. As inflation has risen and remained high, consumers have looked to cheaper options.

Says Paul Maloney: “Craft brewers often offer ‘premium’ beers, but consumers are turning to cheaper options. As such, discounted brands produced by large international brewers and supermarket own brands are increasingly the choice for consumers.”

“The craft beer market became heavily overpopulated over the last decade. The cost-of-living crisis now means many of these brewers are fighting for a place in a shrinking market. Some of them will not make it.”

Small breweries often suffer from limited routes to market, lacking proper distribution channels to consumers. These smaller companies often do most of their business within local communities, relying on taprooms and supplying to local “bottle shops”. That has limited the turnover of many craft breweries, meaning that many were not able to reach breakeven.

The craft beer market has also been oversaturated for the last few years following a boom in demand for craft beers encouraged entrepreneurs to launch their own breweries.

Examples of breweries that entered administration in the past year include Tyne Bank Brewery, which was funded through a crowdfunding campaign in 2015/16 and had contracts with Morrisons and the Co-op. London-based Boxcar Brewery also called in administrators due to an “unworkable situation” with landlords and debt issues.

* Source: Insolvency Service, Year-end March 31st

The EY FS Corporate Finance team has recently advised Lantern on the successful completion of a £97.5m amendment refinance and extension of its existing facility made up of an initial commitment of £77.5m and an accordion of £20m with a syndicate comprising specialist lenders Hampshire Trust Bank (“HTB”) Paragon Bank (“Paragon”) Shawbrook Bank (“Shawbrook”) and alternative investment manager BCI Capital (“BCI”).

Lantern established in 2008 is a leading specialist debt purchasing and customer management services provider with a particular focus on vulnerable customers. Lantern has established itself as a trusted partner with a significant number of the leading specialist lenders generating both spot and forward-flow debt purchase opportunities. Lantern also provides additional services such as vulnerability identification and outsourced managed services across both financial services and utility clients through its subsidiary Sonex. In October 2017 Copper Street Capital (“CSC”) a financial services specialist investor acquired a majority stake in Lantern. Since then Lantern has grown to £30m in net revenues £13m EBITDA and £130m ERC.

The facility will help Lantern to achieve its significant growth ambition through the purchase of an increasing supply of new non-performing debt portfolios over the coming years.

CEO at Lantern Denise Crossley welcomed the announcement of the deal saying: “We are delighted to be working with HTB and continuing our existing relationship with Paragon Shawbrook and BCI. The extended facility will allow us to continue to grow our portfolio acquisitions consolidate our unique market position and deliver our future strategy. We expect to reinforce existing client relationships and build successful new partnerships with consumer lenders looking to work with Lantern as a trusted specialist.”

Managing Director Massimo Araldi at CSC: “We have worked with EY on the original Lantern facility three years ago to leverage on their unique knowledge and experience in the debt purchase market and asset-based financing. In this transaction they were instrumental in achieving a very successful outcome for Lantern both in terms of size and terms of the facility. This will provide significant firepower to the business to take advantage of significant market opportunities in the next few years. We look forward to continuing working with the EY team.”

Senior Manager Jack Dutton at EY: “We are delighted to have been able to support Lantern throughout this fundraising process which further strengthens our relationship both with the business and CSC. The upsized facility provides Lantern with the headroom and flexibility to continue to be dynamic and nimble in its acquisition of portfolio opportunities with both existing and new partners. We would also like to thank Addleshaw Goddard the teams at each of the lenders and their respective legal counsels who were all a pleasure to work with.”

EY was appointed as sole financial advisor to Lantern on the transaction.

The EY engagement team comprised of Stuart Mogg Jack Dutton Arihant Jain and Emily Holmes.

Addleshaw Goddard acted as legal counsel for Lantern with Travers Smith acting for HTB Shawbrook and Paragon and Simmons & Simmons acting for BCI.

From 2 October, the FCA will ban some debt advice firms from receiving referral fees for things like IVAs. Providers entering the market from today will be banned from receiving them.

It found evidence of some firms pushing products that left customers out-of-pocket. One customer, who was homeless, was recommended an IVA costing £6,000, when they could have been debt free in a year using a debt relief order for £90.

Another was recommended an IVA, which cost £4,710 more than a DRO and took them five years longer to become debt free.

Sarah Coles, head of personal finance, Hargreaves Lansdown said: “The FCA has taken the axe to fees that encouraged debt advice firms to exploit those who could least afford it. It could mean the end for firms adopting this model – unless they can find an alternative way to make money. But whatever tack they take, they’ll still be more expensive than free, independent advice available from debt charities.

“The FCA has banned incentives that encouraged debt advice firms to push expensive products onto vulnerable customers – after it found horrible examples of people in dire straits being pushed to spend over the odds.

“These fees have been paid to ‘debt packagers’, which are commercial firms that offer debt advice and sell products from other providers. The ‘packagers’ picked up hefty fees for selling particular products. On average they’d get £940 for selling an IVA (in 2019/20) and £1,340 for selling a Scottish PTD. Meanwhile other products, like a debt relief order, didn’t pay any referral fees at all.

“This gave them an incentive to recommend IVAs, rather than to consider what was best for the client. The FCA picked up worrying practices, including some who appeared to manipulate customer details, so they would meet the criteria for IVAs, and others who were leaning on people to opt for them. This meant a customer could be persuaded to opt for an IVA, which can cost them £3,650 or more – rather than a debt relief order costing less than £100.

“This ban may effectively shut down this part of the market – unless they can find an alternative funding model. Firms which previously held two thirds of the market in terms of customer numbers have either left the market or stopped trading since the FCA first started looking into it in July 2021.

“However, it’s worth knowing that you don’t need these companies, and you don’t have to pay for debt advice. You can get free help from MoneyHelper and charities like Stepchange, who can access all the same options if you need them – but won’t have anything to gain from being anything other than completely fair and independent.”

Target Group, the operational transformation, business processing and software provider, has today appointed Peter O’Connor as CEO.

O’Connor, joined the firm last year as Chief Operating Officer, following several years with Capita. In his new role, Peter will continue the company’s focus on providing innovative and market-leading solutions to our clients, whilst continuing to improve the journey for our 1,000+ colleagues.

Previously, O’Connor was the Managing Director of Capita’s mortgage software business, and worked across a wide range of Change, IT, Operational and Risk roles, primarily in the Financial Services industry, with a clear focus on colleagues, customers and clients.

Before Capita, Peter spent over 10 Years at Lloyds Banking Group, where he held a number of senior roles in Innovation, Operations, Supplier and Relationship Management.

Peter O’Connor, Target Group’s Chief Executive Officer comments: “It is a great privilege to become the CEO.  We at Target Group are a leading provider of business process outsourcing and operational transformation for major financial institutions across the globe. We have a fintech platform that manages assets in excess of £25bn, and our systems currently process over 19 million accounts and collect £3bn of direct debits each year for both private and public sector clients. I’m excited to lead an organisation of such size, scale, and quality. I can’t wait to get started.”

O’Connor continues: “To date, our mission has been to transform customer experiences for our colleagues, customers and clients. In my new role, I have a clear aim to grow the business. We’ll do that by developing exceptional colleague engagement, industry-leading customer service and delighting our clients, working as true partners with their business.  As part of global multinational next-generation tech experts Tech Mahindra, we’ve extensive capabilities in digital transformation. I look forward to progressing our joint proposition to create exceptional value for our clients.

“The company has been evolving under John Barker’s strong stewardship, and I’m committed to moving it even further forward.

“It was a pleasure to work alongside John during his time as CEO, and I look forward to working closely with him to ensure a smooth transition.”

Vivek Argawal, President – APJI (Enterprise), BFSI & Corporate Development at Tech Mahindra, comments: “I’m delighted to welcome Pete into the new CEO position, the natural next step in his impressive career. I’m happy to see the great impact he’s already having and look forward to seeing the future growth of Target under his expert leadership.”

Lowell, a European leader in credit management services, today announces its results for the 3 months ended 31 March 2023.

Commenting on today’s announcement Colin Storrar, Group Chief Executive Officer, said: “These results demonstrate our resilience and continue to demonstrate our long track record of collecting in line with our ERC forecasts. As a business we continue to focus on balance sheet strength and operational efficiency driving 300bps margin expansion and a reduction in leverage below 3.0x across the next 15 months.”

Key Highlights

• Collections performing at 100% vs Dec-22 static pool
• LTM Cash EBITDA increasing to £661m (£533m)
• +100bps LTM Margin accretion to 61% (60%)
• £187m LTM free cash generated
• £377m LTM Market Portfolio Acquisitions (£557m)
• Off-balance sheet securitisation of Danish reperforming assets completed in May-23, contributing £55m to cashflow and reduction in debt, demonstrating repeatability of funding source
• Strong liquidity at the end of the quarter of £286m
• Pro forma leverage 3.1x
• Reaffirmation of financial guidance: leverage <3.0x within next 18 months, +300bps Cash EBITDA margin expansion across next 15 months

(Note: comparable numbers for LTM Q1-22 in brackets)

Key Financial Highlights

As at 31 March 2023	LTM Q1-23	LTM Q1-22	Change
Cash Income	£1,090m	£886m	+25%
Cash EBITDA	£661m	£533m	+24%
Cash EBITDA Margin	61%	60%	+100bps
Portfolio Acquisitions	£377m	£557m	(31)%

Outlook

Following significant capital deployment during 2022, including the completion of the Hoist UK acquisition, the Group is focused on balance sheet strength, increasing returns through disciplined capital deployment and operational effectiveness to drive margin expansion. Consistent with this outlook, the Group expects FY23 purchases to be more closely aligned to its Replacement Rate and its Cash EBITDA margin to improve by 300bps over the next 15 months. Alongside repeatable balance sheet velocity actions, this focus will drive leverage below 3.0x over the next 15 months.

Group Financial Performance

Strong performance

Collection performance in line with forecast at 100% of Dec-22 static pool. Record £661m LTM Cash EBTIDA delivering 24% LTM growth. Cash EBTIDA growth of £128m YoY with collections in the quarter delivered in line with our ERC forecast.

Additionally, the quarter benefited from the acceleration of collections associated with the Swedish portfolio sale. Strengthened margin performance, at 61% on an LTM basis, reflects the encouraging cost control and actions taken across prior periods.

Strengthened liquidity

The Group continues to generate significant free cashflow after Replacement Rate, providing sustainable self-funding for growth. Together with balance sheet velocity actions, the Group has strengthened its liquidity position to £286m.

During Q1-23 the Group completed the sale of a pool of Swedish portfolios, raising proceeds of c£95m.

In May-23, the Group completed its second off-balance sheet securitisation of reperforming receivables demonstrating the repeatability of this funding source and the continuation of our balance sheet velocity actions. The second reperforming securitisation was completed on Danish receivables and raised c£55m proceeds.

Focus on delivering leverage guidance

Leverage is 3.1x (pro forma for the May-23 off-balance sheet securitisation).

The Group is focussed on delivering its leverage guidance of <3.0x over the next 15 months through a combination of balance sheet velocity initiatives alongside organic deleveraging driven by improvements to the underlying business.