davenewellhome Posted March 10, 2009 Share Posted March 10, 2009 Tonight Sloppy Star front page story is that of a local construction company which has been forced to shut by the bank. This company has a 2.8million overdraught but SECURE orders for 40 Million pounds (yes FORTY MILLION) over the next year and four million pounds worth for next year. The bank in question is RBS and they have first of all frozen the companies account and then asked for immediate payment of the outstanding overdraught, all 2.8 million pounds of it. Trouble is the company cannot pay the overdraught 'cos the ruddy bank have frozen its account. This company employs(ed) 650 local people and did most of the local road resurfacing for many county councils but that don't count for squat 'cos OUR bank want their money, in cash, NOW!!! So what's going on in this country where the Government can plough hundreds of billions of our money into a bank that is in trouble because of its own management greed but will stand idly by and let that same bank force a valuable and profitable business to close for a relatively small amount?? I personally know several people who work(ed) for this company, one chap (who lives about 300 yards from us) was layed off just before Christmas and had just been given a restart with them for yesterday. Imagine his feelings when turning up for his first day back and being told "sorry but we're shutting down so there's no job for you after all" and to add to his woes his wife has just lost her job too!! D. Link to comment Share on other sites More sharing options...
Guest peter Posted March 10, 2009 Share Posted March 10, 2009 Well Dave, the management can't be up to much if they have allowed their bank to freeze the account when presumably there is more than enough to pay their liablities. Perhaps there is more to this story than you have been told. Link to comment Share on other sites More sharing options...
woody. Posted March 10, 2009 Share Posted March 10, 2009 It seems these accounts have been frozen and the companies involved havent been able to do anything about it .Thats also happened to a couple of companies down here dave , trouble is were only tax payers we havent a say in what happens to our hard earned. Link to comment Share on other sites More sharing options...
davenewellhome Posted March 10, 2009 Author Share Posted March 10, 2009 peter - 2009-03-10 9:57 PM Well Dave, the management can't be up to much if they have allowed their bank to freeze the account when presumably there is more than enough to pay their liablities. Perhaps there is more to this story than you have been told. I don't quite follow how you think the company's management could stop the bankers freezing their account? D. Link to comment Share on other sites More sharing options...
Guest peter Posted March 10, 2009 Share Posted March 10, 2009 davenewell@home - 2009-03-10 10:02 PM peter - 2009-03-10 9:57 PM Well Dave, the management can't be up to much if they have allowed their bank to freeze the account when presumably there is more than enough to pay their liablities. Perhaps there is more to this story than you have been told. I don't quite follow how you think the company's management could stop the bankers freezing their account? D.If the company is solvent , then how can a bank deny them access to their funds?. Link to comment Share on other sites More sharing options...
Brian Kirby Posted March 10, 2009 Share Posted March 10, 2009 Builder's live on margins. £40 million of orders would translate to about 3-5% on turnover, still useful, but not £M40. Building is risky - maybe the bank thinks one of the builder's clients is not so sound, or maybe the builder's track record on profitability is not that good, so now he looks a higher risk than before. There is no mention of how much the builder currently owes his suppliers - usually substantial! The builder has first to finance the construction: he only gets paid when he has completed work. On larger projects he is paid in stages, monthly in arrears, and usually also for goods delivered to site. Nevertheless, his order book may give no more than evidence of his ability to win work on price. It is the lowest tender than wins the work, so, unless someone is very clever, it is also the lowest calculated margin that wins the work. Finally, most construction jobs are won on mistake, or on error of judgement! Sorry, but the bank just may have a point. Link to comment Share on other sites More sharing options...
davenewellhome Posted March 11, 2009 Author Share Posted March 11, 2009 rian, this particular company is more to do with civil engineering than actual building, they do(did) a lot of road resurfacing for County Councils all over the country among other things. They've been trading for over 40 years profitably and nothing has changed in that picture. The bank has simply withdrawn their overdraft facility because they want cash to reinstate their own finances. The bonuses paid out by this bank were worth more than this company generates! D. Link to comment Share on other sites More sharing options...
BGD Posted March 11, 2009 Share Posted March 11, 2009 peter - 2009-03-10 10:16 PM davenewell@home - 2009-03-10 10:02 PM peter - 2009-03-10 9:57 PM Well Dave, the management can't be up to much if they have allowed their bank to freeze the account when presumably there is more than enough to pay their liablities. Perhaps there is more to this story than you have been told. I don't quite follow how you think the company's management could stop the bankers freezing their account? D.If the company is solvent , then how can a bank deny them access to their funds?. Because they are not "their" funds. They are bank borrowings. Any commercial loan or overdraft facility to any Company is on an "immediate repayment on demand" basis. Also it may not even be a calling-in of any existing credit, it may simply be (and is perhaps far more likely to be) that on top of whatever existing credit they already have, the Company says it needs yet more borrowing to provide cashflow in the coming weeks/months in order to continue to operate/pay materials bills/pay wages/pay taxes/pay VAT until the sales revenue from future projects flows back in. But their bank may be saying "enough is enough, we're not going to lend you yet more on top of what you've already borrowed". Cashflow is actually the most important lifeblood of any business. Most Companies that go under do so not because they are unviable in the long term, but simply because they run out of ready cash to pay current debtors/service loan repayments/interest. Link to comment Share on other sites More sharing options...
LordThornber Posted March 11, 2009 Share Posted March 11, 2009 Not on the same scale admittedly but this has echoes of something local. A carpet supplier, employing 40 or so staff, and had been trading for approx 40 years was recently brought to it's knees by the bank. The owner, a quite well known person, went public on the front page of the local paper. He explained in some detail that the companies liabilities had reached just short of £0.5m and the bank wanted him to rein it in. He explained that he'd managed to get it down to £45,000 and then for no reason at all the bank pulled the plug. OK, more than meets the eye springs to mind, (it did with me), but if all was above board, what on earth is going on. Sadly I can't recall who the bankers were. Martyn Link to comment Share on other sites More sharing options...
BGD Posted March 11, 2009 Share Posted March 11, 2009 Seems to be a lot more to the Wrekin Construction saga than the headlines mention. Diiging a little deeper indicates that they've been teetering on the edge of the abyss for quite a long time:- In the year to 31st December 2006 the Company lost £9m on £100m turnover. In the 9 months to 31st December 2007 turnover was £60m and they only made a tiny pre-tax profit of £1.7m; and that was only after they'd been taken over by a new owner who pumped £11m of his own money into the Company to keep it afloat on October 2007. Even after that new-owner massive cash injection their margin in 2007 was only 1.6%......so they've basically been working on/trying to win contracts at nearly zero profit margin, just to keep the place going. Then they spent even more money (borrowed it?) to buy the remains of two other busted businesses out of receivership in 2008 as well: Watson Dallas (window manufacturers), and Toft Johnson. Contract News reports this week that many of the big subcontractors to Wrekin Construction had been complaining more and more strongly of not being paid for the past month. Seems it was those creditors who were putting pressure on RBS bank for payment, that in the end caused the bank to say they were not prepared to lend yet more money to Wrekin, on top of the £2.45m that the Company were by Monday already overdrawn. (Wrekin will probably also have other longer term loans outstanding with this and/or other lenders, as a commercial overdraft is a very expensive way of borrowing money, and tends to be done by a Company as a desperate last resort measure). If the business was only making 1.6% margin on contracts won even before the construction industry imploded even after an £11m owners personal cash injection, the chances of it surviving through the worst building industry recession in generations are zip. That seemingly inevitable outcome makes it no less sad for all the employees, suppliers and lenders of course. Link to comment Share on other sites More sharing options...
Brian Kirby Posted March 11, 2009 Share Posted March 11, 2009 Yep, that sounds like construction! Very fine margins. One bad mistake and you're in the doo-doo! Sad, but very typical. Link to comment Share on other sites More sharing options...
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