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Lagan Construction collapsed owing firms £21m

Collapsed contractor Lagan Construction Group owed firms more than £21m when it entered administration in March, CN can reveal.

KPMG’s administrator’s proposals for the Northern Irish company revealed it owed trade creditors £9,107,959, while a further £12,493,396 was owed to the company’s joint ventures.

It was also revealed that the business owed HMRC £719,196.

KPMG said it had failed to find adequate funds within the business to pursue a trading strategy and it would look to sell the group’s assets.

The proposals revealed 112 of Lagan Construction Group’s 133 staff members have been made redundant since the administration, 18 have resigned, while three have been kept on to oversee the company’s winding-up.

In February, Lagan Construction bosses confirmed they would be putting four of its construction subsidiaries into administration, with the group’s chair Michael Lagan blaming contractual disputes and delays to projects for the move.

Of the companies owed money from Lagan Construction Group, King & Moffatt UK is the biggest creditor, owed just over £851,000, of which almost £267,000 is in the form of retentions.

Other major creditors include Arup Ireland, which is owed £245,000, and roof light and access specialist Lareine Engineering, which is owed £322,000.

The administrator expects that there will be insufficient funds in the company to distribute to creditors and JVs, and as a result no creditors meeting would take place.

The administrators have said there may be some money available for trade creditors through a prescribed part distribution, an administration process which can see a small percentage of any floating charges against the company by banks made available to unsecured creditors.

According the administrator’s proposals, Lagan Construction Group burnt through more than £50m in cash in two years.

The company’s last financial accounts, covering the 12 months to 31 March 2016, showed it had £52.1m in cash and equivalents, contributing to total current assets of £82.2m.

By the time KPMG was appointed as administrator just under two years later on 5 March 2018, the business had no cash in the bank.

The administrator said in the months leading up to the administration delays to projects and unprofitable contracts had seen Lagan Construction Group’s cashflow impacted significantly.

It added: “In addition, recent insolvencies in the construction industry had had an adverse impact on the company, resulting in tightened credit terms and requests for upfront payment which further impacted cashflows.”

Lagan Construction Group work in progress totalled £8,492,351, with the firm owed retentions totalling £2,232,941 and £1,855,239 from joint venture partners.

The administrator said it had been in discussions with a number of Lagan Construction Group’s JV partners to achieve clean exits from the company’s JV obligations.

Within days of the company’s administration a number of partners triggered contingency plans.

These included Lagan’s Highways England partner Sisk, which confirmed it would be going it alone on highways projects with the collapsed firm.

Other schemes have been halted after the administration, with the £250m Ulster University project Lagan Construction was carrying out with Portuguese firm Somague yet to restart.

In total, 172 staff working across the four companies put into administration have been made redundant so far, with 44 coming from the Lagan Building Contractors and six from its water business.

In addition, 23 staff members resigned immediately after the administration.

The administrator said it had received a number of claims from the employment tribunal in respect of Lagan Construction Group’s failure to consult with employees over the redundancies.

The other companies to be put into administration were Lagan Construction Group Holdings Limited, Lagan Building Contractors Limited and Lagan Water Ltd.

According to the administrator’s reports for these companies, Lagan Building owed £2,690,693 to creditors, while Lagan Water owed £302,894.

Administrator’s proposals for Lagan Construction Group Holdings have yet to be filed. 

The holding company’s remaining 26 subsidiaries will continue to operate. These include Lagan Operations and Maintenance Limited, FK Lowry Piling Limited, Dew Piling, H&J Martin, Lagan Construction Aviation, Lagan Construction Limited, Lagan US inc, Coastal Industrial, and Lagan Construction Services.

Lagan Construction Group declined to comment.

Lagan Construction collapsed owing firms £21m

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