Hewlett owed creditors £16m, reveals report

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CIVIL engineering group Hewlett went into administration owing creditors an estimated £16m, a new report reveals.

The business was bought out of administration by its management, saving around 300 jobs. But suppliers to Hewlett, based in Leeds, claimed to have been “left out of pocket” following the deal.

According to a report by administrator BDO just filed with Companies House, the amounts due to non-preferential creditors (generally contractors and suppliers), were £10.2m by Hewlett Civil Engineering, £1.16m by Hewlett Plant Hire and £250,500 by Hewlett Rail, amounting to £11.6m in total. This excludes inter-company claims.

Debt owed to the bank by the group amounted to £4.4m, the report said. BDO said it was contacted by “a significant number” of creditors wanting to pursue reservation of title claims with regard to goods supplied that had not been paid for.

Reservation of title claims can be pursued by a supplier in an effort to secure payment if the buyer becomes insolvent or defaults. BDO said that claims of this kind from more than 40 separate creditors have been received to date.

A spokeswoman from BDO explained that the £11.6m figure was a maximum figure that could reduce as the purchasers settle the claims. It is the purchasers’ responsibility to deal with these kinds of claims, BDO said.

Nothing was owed to employees as they were all transferred to the newly formed company when the management buyout was completed.

BDO said that Hewlett “encountered financial difficulties as a result of the challenging economic climate over the past few years”, with its annual turnover falling from about £62m in 2009 to about £42m in 2012.

According to the report, the group experienced its peak annual turnover of around £70m in 2007. BDO said: “The financial performance of the companies and the group was initially impacted during 2007, and onwards, due to its direct involvement in housing development activities.

“This was exacerbated by the continual decline in contracting services due to the adverse effects of the economic downturn on the construction sector.”

The report said that the business and assets of Hewlett Civil Engineering and Hewlett Rail were sold for a total consideration of around £1.5m, while those of Hewlett Plant Hire were sold for £66,000.

Lloyds TSB, Hewlett’s bank at the time of administration, said previously it had worked with the firm’s management “to try and find a consensual solution which would put the business on a sounder financial footing”. But it said it “did not prove possible to restructure without a formal insolvency process”.

However, managing director of Hewlett, Alan Cooper, claimed at the time that the decision by Lloyds TSB to place Hewlett in administration was “hostile”, “premature” and “not backed by the directors”.

Mr Cooper and John Duffy own Hewlett in its new form. Mr Duffy was previously its chairman and owned Hewlett before it went into administration.

Hewlett declined to comment on the creditors’ report when contacted by the Yorkshire Post this week, but previously said: “The result of the decision to take the action that the bank chose meant that the business faced serious problems and a protracted process ending in liquidation could have been the alternative with the loss of many more jobs. As a team we have sought the best solution possible for the business and the employees.

“The new business relies on relationships with suppliers and we understand that as a result of the administration process there will be a loss of confidence, however we are working closely with suppliers and clients to ensure the business has the best possible platform to move forward and preserve jobs.”

BDO said that due to the nature of the companies’ trade, the value of the business and assets “would quickly reduce following the appointment of administrators, so it was important to act promptly”.