City Gardens August 2017
City Gardens, one of Pochin's problem jobs

Pochin’s Construction subcontractors set to lose £9m

Charlie Schouten

Unsecured trade creditors of the Cheshire-based company’s construction arm are likely to receive only 4p in the pound following the firm’s collapse, with some owed six-figure sums.

In the latest details to emerge, administrators have listed numerous construction, property, and other businesses that were owed money by Pochin’s construction arm when it folded this summer.

Pochin’s and its subsidiaries entered administration in early August with the company blaming “legacy issues” from several problem jobs, and all its staff have now been made redundant.

Administrators at Grant Thornton blamed four separate unnamed contracts for the collapse, which between them racked up losses of at least £17m across Pochin’s Construction and the company’s residential arm.

These losses were “exacerbated by supply chain failure and shortfalls in the recovery of contractual entitlements”, the report said.

It is understood that the company was in a dispute with architect Ollier Smurthwaite and developer DeTrafford over the City Gardens residential scheme in Manchester, which was running significantly behind schedule.

While administrators said attempts had been made to mitigate losses through claims and settlements, these negotiations “proved protracted and costly”.

Following the construction arm’s failure, administrators have said unsecured creditors will only receive 4p for each pound they are owed. Unsecured trade creditors, including subcontractors, consultants, and other businesses, are owed £8.9m, according to the administrators’ report at Companies House. These remain estimates as the directors of Pochin’s are yet to return at statement of affairs.

According to the report, creditors set to lose out on six-figure sums include:

  • Stoke-based Carter Electrical Services, owed £740,000
  • CS Civils & Groundwork, based in Leigh, owed £373,000
  • Salford-based Quartzelec, owed £328,500
  • Liverpool M&E contractor Laycock Mechanical Services, owed £236,000
  • Blackpool based JMC Mechanical & Eletrical, owed £182,200
  • Walker Modular, owed £143,000
  • M&E contractor HE Simm, based in Liverpool and owed £114,000

Pochin’s Construction also owed rugby club Sale Sharks nearly £40,000 when it collapsed, while property businesses and consultants due to lose out on fees and payments also include AEW Architects and law firm Weightmans.

The construction arm had posted a £6.2m loss after tax on a turnover of £50.5m, according to its most recent accounts for the year ending 28 February 2018.

Shortly before the collapse, Pochin’s directors Jim Nicholson and Bob Nicholson injected £1.5m into Pochin’s parent company in July, in an attempt to provide working capital to keep the construction and residential arms afloat.

Other attempts had been made to rationalise the construction arm and securing bridging finance, but the latter was unsuccessful, according to the administrators. The company also failed to secure a number of tenders it had bid for, leading the directors to call in administrators on 31 July 2019.

At the time of its collapse, the parent company of Pochin’s Construction, owed unsecured creditors £69.8m, with these likely to receive 1p for every pound owed.

Adding the trade creditors from its construction arm, Pochin’s owes unsecured creditors a total of £89m.

Many of these are primarily inter-company creditors, which are owed £13.8m, while Pochin’s Limited also provided cross-guarantees for live construction contracts, totalling £21m. There also bond liabilities of £8.8m, while the company also has a pension deficit of £25m.

While the directors have not yet provided a full statement of affairs for the business, other major creditors set to lose money include Tokio Marine, owed £5m, and Aviva Insurance, which is owed £3.8m.

Before entering administration, Pochin’s put its 250,000 sq ft Cheshire investment property portfolio on the market with a price tag of £14m but attempts to find a buyer were unsuccessful.

Grant Thornton has instructed Christopher Dee, Northwood, and Avison Young to sell a series of sites and assets, with a number of these now under offer. Two sales have also completed at Brooks Lane in Middlewich for a total of £250,000, with realisations from the sale distributed to NatWest, one of the company’s preferential creditors.

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The impact on the SME supply chain of these collapses is painful.

By Mark Gilbertson

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