Auditel Consultant:
Simon Beechinor

A duck can leave a bad taste in your mouth …

03 Mar 2010 | Filed under: Cost management, Shipping & Transport

The sorry saga of Bedfordshire haulier Trans Haul (UK) which saw its business and assets sold for £50,000 to a company run by the same director when it underwent 2009′s pre-pack administration, leaves something of a bad taste in my mouth. While I accept the staff may have kept (some of) their jobs, I feel really sorry for the creditors left holding £1.2 mio of unsecured debt. It’s noteworthy that some banks won’t allow pre-packs to related parties such as existing directors … presumably as the funding requirement wasn’t great in this case they didn’t need bank finance. Perhaps they stumped up personal guarantees and secured funds from other sources … petty cash?

A pre-pack is the process of selling the assets of a company immediately after it has entered administration. This process has advantages in that it enables the administrator to realise a greater amount for the assets due to business continuity, and the goodwill of the company is preserved. The employees of the company may also be transferred to the new company thus preserving jobs. Pre-packs have attracted criticism because of the appearances it gives to unconnected parties that the company has just continued without its creditors … that’s certainly how it looks … when it looks like a duck and talks like a duck, it usually is … a duck.

According to Roadtransport.com administrators from MCR Corporate Restructuring were appointed to the firm on 3 November last year, with the business and assets sold on the same day to Trans Haul (Europe), run by Nigel Machado. However, administrator Stephen Clancy disclosed that due to the firm’s “extreme funding difficulties”, MCR was only able to market the business for a period of four days, between 22 and 26 October. Of the firms contacted, only Trans Haul (Europe) made an offer, paying £20,000 upfront and a further four instalments of £7,500, which ended on 15 February.

MCR says that since this was the only offer for the business, its sale realised more than would have been achieved if the assets were sold piecemeal. Despite this, Trans Haul (UK)’s statement of affairs indicates its total deficiency is £1.3m, with unsecured creditors representing £1.2m of that.

The blame for the collapse was placed on a “failed expansion programme and trading losses due to the downturn in the economic climate”…. apparently administration was the only option for the firm, because its cost base was too high to support either continued trading. As turnover declined, the business vacated leasehold premises and was left with a fleet of poorly used vehicles.

Management accounts show that in the 11 months to 30 September 2009, it made a loss of £425,000 on a £4.2m turnover. Perhaps some solid cost management at the outset might have helped?

Main source: Roadtransport.com