Suppliers of MJN Colston are unlikely to see any of the money owed to them after the firm went into administration with £49 million of debts, it has been revealed.
According to a report by administrators at Deloitte, MJN Colston owed £41m to trade creditors, £2.4m to employees, and £2.9m to HM Revenue and Customs. Its financier, GE Financial, was owed £4.4m and gets priority over suppliers, which are classed as unsecured creditors.
MJN, which was placed into administration on 23 February with hundreds of jobs lost - was a wholly owned subsidiary of Staveley Engineering Services Ltd, which employed head office staff and held several leases, but did not trade.
The consolidated accounts for the two show a 98 per cent drop in pre-tax profit between May 2010 and May 2011.
The administrators’ report states: “In respect of both MJN and SES there will be insufficient funds for a distribution to the unsecured creditors from asset realisations or via the prescribed part, a fund set aside for the benefit of unsecured creditors by virtue of Section 176A(2)(a) of the Act.”
Creditors of either MJN or SES whose total debts amount to at least 10 per cent of the total debts of MGN or SES can request a meeting, it says.
Extracts of the consolidated accounts for SES and MJN - unverified by the administrators - say pre-tax profit dropped 98 per cent between 31 May 2010 and 31 May 2011, from £19.3m to £432,000. By 25 November 2011, the accounts showed a pre tax loss of £532,000. Revenue at the firm dropped from £134m in May 2010 to £96m in May 2011, then down to £57m by November.
The report by joint administrators - Daniel Butters and Matthew Cowlishaw - says MJN directors reported a challenging 2011 “due to uncertainties in economic circumstances”, which had led to pressure on working capital.
Attempts to renegotiate financing with GE in late 2011 were unsuccessful.
Credit insurance cover was unexpectedly withdrawn from a number of main MJN suppliers, understood to be after two defaulted payments of about £74,000 and £8,000. The two companies refused further supply to MJN and other suppliers, becoming aware that MJN was in difficulty, also then refused supply.
After administrators were appointed, three interested parties submitted offers, with Integral buying the prime contracting business for £750,000. The deal included 58 staff being transferred to Integral. Thirty-one employees were kept on to help in debt collection but all other staff were made redundant.
Imtech and Lorne Stewart revealed to CN last month that they had been interested in MJN Colston’s Ministry of Defence’s South-western and Eastern prime contracts.
The administrators’ time costs incurred to 23 March 2012 for MJN total £614,578, representing 1,203.5 hours at an average hourly rate of £510.66. For SES, time costs total £9,961 representing 39.8 hours at an average hourly rate of £250.27. That will be paid by GE.
Staveley Engineering Services Group is not in administration.