Case Study: Penman Engineering Limited
At the end of August, Mark Ranson, Daryl Warwick and Michael Kienlen were appointed Joint Administrators over Penman Engineering Limited and two other group companies. The Company specialised in the production and design of armoured vehicles including military vehicles and cash in transit vehicles.
The Company’s cash flow issues came to light during R&D tax work undertaken by our tax colleagues. They alerted us to the issues and we made contact with the Company to see if we could assist in a restructuring. Whilst a restructuring was the initial remit of RRI’s involvement it soon became apparent that the Company’s cash flow position had deteriorated to a point where a number of winding up threats were being instigated and therefore an insolvency procedure was inevitable.
In order to preserve the maximum value in the business, the decision was made to trade the business in the short term. To enable this we contacted the Company’s key customers, including the Ministry of Defence, with regards to their orders and to determine whether they would be willing to trade with the Company in Administration, a hard sell when we weren’t able to offer any warranties.
The Company was one of the largest employers in Dumfries, employing 139 staff, and as a result there was significant public interest in our appointment. We not only liaised with the press enquiries but also with the local MPs. The Prime Minister was also alerted to the Administration of the Company when one of the Scottish MPs we had been dealing with raised a question in Prime Minister’s Question Time.
The Company’s cash flow problems had been ongoing for some time, resulting in suppliers being owed considerable sums and many attended site to undertake Retention of Title stock takes. We also liaised with suppliers in respect to ongoing trading and provided a number of undertakings.
Whilst a sale of the business was pursued, as well as generating income through continued trading with customers, we sought to collect the Company’s book debts to assist in the short term cash flow enabling the payment of wages and initial costs incurred.
Unfortunately, the fact the Joint Administrators were unable to provide warranties meant that a number of customers decided not to continue to trade with the Company and as a result a number of redundancies had to be made, reducing the workforce to just 14 people.
A sale of the business and assets completed on 16 November 2016 and the purchaser has already sought to reemploy a number of the Company’s former workforce.
This has been the firm’s largest trading administration to date and involved working closely with our Corporate Finance colleagues who dealt with the sale of the business and our Payroll colleagues who provided Payroll services post appointment.
