Your browser is no longer supported

For the best possible experience using our website we recommend you upgrade to the newest version of your browser.

Your browser appears to have cookies disabled. For the best experience of Construction News, please enable cookies in your browser.

Welcome to the Construction News site. As we have relaunched, you will have to sign in once now and agree for us to use cookies, so you won't need to log in each time you visit our site.
Learn more

Carillion victim Vaughan's supply chain loses £9m

Unsecured creditors are expected to lose £11.1m following the collapse of Vaughan Engineering Ltd, administrator KPMG has said.

The M&E specialist called in the administrators on 26 March, citing the collapse of Carillion – a major customer – as a key cause of the firm’s failure.

According to the administrators’ proposals, Vaughan Engineering owed unsecured creditors £11.1m, with subcontractors and suppliers making up £9.2m of this.

KPMG has said these creditors are unlikely to receive any money from the administration.

Some of the largest unsecured creditors are Matrix Control Solutions (now owned by E.ON), which is owed £468,112; electrical supplies wholesaler Rexel, which is £309,795 out of pocket; and testing company NRL, which is owed £277,151.

Retention monies totalling almost £1.4m are also owed to a range of subcontractors.

The failure of Vaughan Engineering Ltd, which operated primarily in Scotland and the North-east, was said to have been driven by Carillion’s collapse and disputes on two contracts.

The company had been working on the Vaux Brewery site in Sunderland for Carillion, which was worth £1m to the firm, and was also owed more than £300,000 by the contractor for work on the Heath School in Runcorn, which was completed in December last year.

As a result of these setbacks the company needed an extra £1.5m in cash to cover its obligations by the end of March, KPMG said.

Vaughan Engineering approached local development agencies and sought prompt payments from customers to cover this, but on 12 March the agencies told the company they would not back it.

The company’s situation led to pressure from subcontractors and suppliers wanting outstanding accounts settled and payment in advance for supplying material and services.

On 22 March the management sent all employees home and announced its intention to enter administration the following day.

Subsequently, 147 staff were made redundant.

Former workers are owed £268,000 in back pay and holiday, and as preferential creditors are expected to receive some money from the administration.

Vaughan Engineering Ltd’s one secured creditor, Danske Bank, is owed £2.9m and is expected to receive a “partial” payout, according to KPMG.

Following the firm entering administration in March, finance director Gavin Vaughan said: “We have tried everything we can to save our business. It is especially painful for all of us involved in this to know that none of it is our fault.

“We did the work we were commissioned to do, to our usual extremely high standard and as usual we completed it on time and to budget, yet this is the result.”

In its assessment of the company, KPMG highlighted Vaughan Engineering Ltd’s rapid growth from £20m turnover prior to 2010 to £50m by March 2016.

However, despite this peak in turnover the company reported a £800,000 operating loss for that year.

The following financial year ending 31 March 2017 saw losses increase to £2.6m, while turnover fell by a quarter to £38.2m.

Its directors had forecast turnover to remain stable and the company to break even by the end of March this year, but the firm was then hit by Carillion’s collapse and contract disputes.

Parent company Vaughan Group, based in Northern Ireland, has said its Vaughan Engineering Services and Brankin businesses are unaffected and continue to trade strongly.

Vaughan Group has been contacted for comment.

Have your say

You must sign in to make a comment

Please remember that the submission of any material is governed by our Terms and Conditions and by submitting material you confirm your agreement to these Terms and Conditions. Links may be included in your comments but HTML is not permitted.