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Something’s afoot at Charcol

John Charcol, one of the most well known mortgage broking brands in the UK, has had a tough time of it lately and this looks set to continue.

The firm announced way back in January that it was launching a strategic review and putting itself up for sale, with a rumoured price tag of £50m.

The outcome of the review resulted in the firm’s private equity shareholder Advantage Capital selling its 15 per cent stake to Charcol’s founders after a sale of the broker was ruled out.

This sees directors John Garfield and Charles Wishart acquire the interests of Advantage Capital.

Garfield and Wishart, along with shareholder Jon Moulton, will also make significant further investments to the working capital of the business.

This comes after Money Marketing revealed in March that these three directors had paid £1.5m to plug a hole in the company’s accounts after auditor KPMG warned of the “material uncertainty” of the broker continuing as a going concern.

Charcol said the funding was an “interim measure” prior to its ownership review but it now looks like the directors will be shelling out lots more money to keep the firm going.

In a bid to make sure the broker will be here this time next year, the firm is currently undergoing a restructure.

This has already seen technical manager Katie Tucker leave the firm with immediate effect while MM revealed that chief executive officer Ian Kennedy, who joined the firm in October 2006, is in negotiations with Garfield over his future role.

A spokesman for the firm confirmed it has also closed its Birmingham branch and it is understood more are to follow.

It is clear the firm needs to cut its cost base. It currently has over 250 staff which is a huge amount when compared to rival broking firms with just 40 staff.

While such a large amount of staff might have been just okay for Charcol when the mortgage market was going well, the firm knows itself that it cannot continue in the same way in the current tough conditions.

Its 2006 accounts revealed that it had incurred a net loss of £41,000 in 2006 and its parent company¹s liabilities exceeded its assets by £150,000.

Although the firm’s accounts may have improved since 2006, the current conditions will continue to provide a challenge for the firm.

Charcol has yet to confirm how many redundancies will result from its consultation but it definitely won’t be just one or two.

A Charcol spokesman says: “In terms of our numbers we are set up for this time last year. Obviously the market is now a lot tougher and we have to make sure we are in the right position. We have to make some tough decisions.”

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