BUYER SOUGHT FOR WA FIRM STAR FREIGHTLINES
Western Australian freight and logistics operator Star Freightlines has called in administrators who are seeking a quick solution to its financial problems. The company’s business is centred on refrigerated transport and warehousing, servicing regional WA and interstate needs, with a focus on the mining industry catering. McGrathNicol administrators Rob Kirman and Matthew Caddy are in charge and are seeking expressions of interest for the firm that controls about 20 trucks, including Kenworth and Mack prime movers and Isuzu rigids, along with a fleet of refrigerated trailers and some forklifts. It has storage and coolroom facilities in Canning Vale, with services to Port Hedland and Karratha in the Pilbara, and employs 25- 30 people. Though Kirman says it is very early in the process, he has seen “some good levels of expressions of interest” in the company. “With the general reduction in revenues and contracting margins we have been experiencing in Western Australia … it got to the stage where the level of the company’s debt wasn’t sustainable,” he says. “It’s a good, viable business but the level of secure debt just wasn’t sustainable, and so the director took the proactive action of appointing a voluntary administrator to stabilise the business and allow various options to be pursued. The administrators are open to options that might include sales of the business and assets and/ or an equity investment or recapitalisation by way of a deed of company arrangement. Kirman put its current difficulties down generally to difficult times affecting cashflow of what is an otherwise solid company. “It’s quite a diversified customer base, there are about 200 customers, not one particular large client, supplying major resources companies and smaller operators,” he says. He adds a common issue with midsized firms in the WA trucking market is an inherent lack of flexibility can make it difficult during downturns, even for well-run operations. “It’s a capital intensive industry where it can be very difficult to restructure,” Kirman says. “Yes, you can reduce variable costs such as wages. But outside of that, it’s a fixed- cost base predominantly around machinery and property.” There is a certain level of cost- cutting and restructuring a business can do including the sale of equipment that is generating a deficiency or termination of employees or quitting of property leases, but these can only go so far. “What we’ve generally seen in the mid-market businesses, particularly in the transport sector, as revenues have declined and competition is a lot more fierce and margins have declined, a lot of businesses have seen a reduction in trading performance,” Kirman says.