Engineering firm is hit by cashflow crisis due to problem customer
This was the situation for PC Engineering Services Limited and it was why they approached Clarke Bell for help.
PC Engineering was incorporated in 1997 and began trading in the engineering industry from its premises in Eccles, Manchester, providing fabrication and repair of metal-based products.
After several years of successful trading, the company took on a large, complex contract with a Lebanese-based company, which was to be completed in Belgium. They invested considerable resources into the project but, after completion, the customer failed to pay. This left PC Engineering with a significant bad debt. When this was combined with a general downturn in the engineering industry, the overall result was that the company had severe financial difficulties.
The director, Paul Cooper, tried to turn the situation around by introducing additional funds by way of a director's loan and reducing the company's overheads and making several redundancies. However, this was not enough to turnaround the problems and so he contacted his accountants for their advice. They recommended that he should call Clarke Bell because of their expertise in helping companies in exactly this type of situation.
Clarke Bell assessed that the company was, by the definitions given in Section 123 of the Insolvency Act 1986, insolvent - i.e. its assets were not sufficient to repay its liabilities and it was unable to pay its debts as and when they fell due.
The company was placed into Administration and its assets purchased by another company within the same group. In addition to monetary consideration, the purchasing company also undertook to assist in the collection of book debts, including the completion of any remedial works to enable this. The result was that, for the creditors there was a better chance of recovery than if the company had been wound up and, for the new company, they were able to continue trading without the huge debt problems hanging over them.
Paul Cooper of PC Engineering said:
"The engineering sector was going through a tough time anyway, so when our customer wouldn't pay us it tipped us over the edge.
"Thanks to Clarke Bell we were able to work through this difficult situation. The PC Engineering core business and brand have survived, enabling us to again trade successfully."
John Bell, the senior partner at Clarke Bell, said:
"This is a situation we have seen many times - where a company gets into difficulties because of a problem with one of its customers.
"However difficult the situation can seem for the company concerned, this is a clear example that, if you know what you're doing, it is possible to turn things around successfully."....
