The group acquired Greenaways, Pillans & Wilson and Waddie through bank debt, but this left the group with net debt of 24.6m including a bank overdraft of almost 16m.

Through the refinancing a substantial part of the group's current on-call debt has been converted to preference shares that mature in 2012, leaving it with a "sensible amount of debt to service" and an overdraft of just over 5m.

"This has involved a long-term commitment from the Bank of Scotland, and means that we can show a sensible balance sheet when we go for big contracts," said chief executive Bob Hodgson. "The business is back in profit the bank wouldn't have entertained this otherwise."

Even though the Waddie & Co final salary pension scheme was closed a decade ago, it still had an FRS17 deficit of 10.7m. To tackle the deficit Ormolu has negotiated with an independent trustee to come up with an innovative solution.

"The pension scheme will be given 32.9% of the ordinary shares in the Ormolu Group and 3m of preference shares. In return we get clearance from the responsibility of the FRS17 debt so we have no contingent liability on that," Hodgson explained. "The new arrangement is a positive and moral commitment to the pension fund from the shareholders of Ormolu."

In order to facilitate the move Waddie & Co and two non-trading companies have been put into receivership, which allows pension fund members to benefit from the new Pension Protection Fund legislation.

The business assets of Waddie & Co have been sold to Pillans & Wilson Holdings and all employees have transferred. The combined business will trade as Pillans & Waddies.

"This was a technical arrangement and the trade creditors of Waddies have been negotiated with and are very comfortable with it," Hodgson added.

Hodgson said the group was on track to show a pre-interest profit on sales of 48m-50m this year.

Story by Jo Francis