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20. February 2017

UK - PLUNGING TURNOVER AND LOSSES TOPPLED STEEL FOUNDRY

UK - PLUNGING TURNOVER AND LOSSES TOPPLED STEEL FOUNDRY

A dramatic slump in turnover sparked by difficulty in the oil and gas sector resulted in the closure of a steel foundry in the run-up to Christmas, new documents have revealed, with Finance Yorkshire among the creditors that look set to lose out.

Based in Doncaster and established in 1980, Noel Village (Steel Founder) made steel castings primarily for use in the oil and gas industry.

According to a report by administrators at KPMG, falling oil prices in 2014 and 2015 led to reduced orders from Noel Village's largest customers and a drop in turnover from £10.9m in 2014 to £4.3m in 2016.

Associated losses of £1.2m, £365,000 and £837,000 were racked up across the same period, resulting in significant cash flow pressures.

The business refinanced with Close Brothers at the start of 2016 and secured additional funding from Finance Yorkshire, which first invested in 2014, but after a sale process overseen by KPMG was unsuccessful, administrators from the professional services firm were appointed in December.

With ongoing trade not feasible, KPMG is now raising money for creditors through the collection of book debts, the sale of work in progress and the auction of plant and machinery.

Despite these efforts, it is currently uncertain as to whether there will be sufficient funds to enable a distribution to Finance Yorkshire, which is owed £875,000, as this will be dependent on the amounts raised.

Speaking at the time of the administration, Alex McWhirter, chief executive of Finance Yorkshire, said his organisation had invested in Noel Village at a time "when it was an established business showing further growth potential".

"All of our investments carry an element of risk and it is inevitable that a small number of businesses will run into difficulties," McWhirter added.

"In terms of our investments overall, Finance Yorkshire continues to make healthy returns."

Finance Yorkshire Small Loans and Donbac (now known as Finance for Enterprise), owed £19,000 and 78,000 respectively, are set to lose out as are unsecured claims estimated at £973,750.

As first-ranking creditor, Close is expected to recover its £594,864 of lending in full.

Source: insidermedia.com

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