Business Recovery Specialists

Creditor Pressure Leads to Administration – Some Jobs are Saved

In April 2016, through Poppleton and Appleby, we were appointed as administrators of long established Worcestershire engineering company, F H Realisations Limited. The company had formerly traded as Froude Hofmann Limited. The administration was the result of a period of sustained losses and creditor pressure for payment. This article looks at the eventual outcome and how we were able to save some of the jobs. It also suggests how our business recovery specialists can help companies facing creditor pressure and associated issues to find a way forward.

The Background to This Administration

The underlying business of this Company, which had been trading in Worcester since 1903, was specialising in designing, and manufacturing engine testing systems. By the time of its administration its turnover was £9m and it had been suffering losses for quite some time. The reasons for this were many, not least the £2 million it owed to unsecured creditors. This made it difficult to secure stock to complete orders and generate further cash in sales.  This resulted in a negative trend where creditors would not supply without payment and customers would not pay as their contracts were not complete. The company was constantly trying to balance cash flow requirements, at a time of declining orders.

The position of the company meant that we had to make 80 workers redundant immediately. We then focused all of our efforts in finding a buyer for the company or parts of it, with the aim of preserving as many jobs as possible.

The Outcome – A successful sale and some jobs saved

We conducted an urgent search for a buyer, during which 27 parties (nationally and internationally) expressed varying degrees of interest. The positive outcome was that a sale of the business’s assets was completed in late June 2016 to the highest bidder, with the buyer being Froude Engineering Limited, a company that is associated to the former management of F H Realisations Limited.

The good news is that this outcome has saved 14 jobs from the original raft of redundancies. Saving jobs is always a key priority during an administration. As part of the process, we also liaised with the Department of Work and Pensions and met the local MP, Robin Walker, to do all we could to help those, whose jobs could not be saved, find work.

How we Can Help Companies Deal With Creditor Pressure

In this case the business’s problems were so severe that administration was the only option available. Creditor pressure to pay debts that a business can’t pay due to cash flow problems builds up over time. If these problems are not addressed as early as possible, a critical point will be reached. The longer the pressure goes on for, the more likely it is that administration will be the outcome. Our business recovery specialists can help. Our aim is to address these creditor pressures and help turn things around before the critical point is reached.

Creditor pressure can come from many sources. These include: HMRC, landlords, bank funders, finance providers as well as trade creditors and suppliers, and customers. The earlier you talk to us the more we can do to help your business. If your business is experiencing pressure from these creditors please contact us. Alternatively, call us on 0333 222 8065 for a free initial chat.