Havelock collapsed after Fife firm failed to find new investment

Suppliers demanded to be paid up front, adding to pressures

Deteriorating market conditions and suppliers demanding to be paid up front led to the financial stress that caused the collapse of Havelock, a new report by the Fife firm’s administrators has claimed.

Kirkcaldy shopfitting firm Havelock had debts of almost £9 million when it entered administration on July 31, with the loss of around 250 jobs.

A new report by joint administrators David Baxendale and Zelf Hussain of PwC shows the failure of private equity group Rcapital to revive the fortunes of the firm it purchased in July last year.

Explaining the demise of the company, they said: “Following the successful acquisition of the business and assets from Havelock Europa plc, the company suffered from deteriorating market conditions in the sector.

“This created a challenging trading environment and reduced sales across major contracts, with the business unable to successfully win enough new work to be profitable.

“In addition, the majority of suppliers were continuing to supply on a pro forma basis, resulting in increased working capital requirements.

“These factors left the company in significant financial stress.”

The administrators revealed the company’s directors implemented a “two fold” strategy to try to save the business.

“The company first approached a number of parties to try and secure additional funding and secondly sought to achieve a sale of the shares of the company or its business and assets,” the report added.

“Unfortunately, no transaction was able to be concluded in the time frame needed and, as the company was unable to secure additional funding, the directors were left with no other option but to place the company into administration.”

The administrators predict Rcapital will suffer a “significant shortfall” on its investment.

Havelock owed around £1m to IGF, which provided invoice discounting facilities, and £5m in the form of a debenture to Deasil, a company that is part of the Rcapital group.

As part of the IGF’s terms it has the first chance to recover assets from Havelock’s debt book.

The administrators’ report said it expected IGF to recover its debt in full but that Deasil would “suffer a significant shortfall”.

Claims by employees, who are preferred creditors, total £250,000 with unsecured trade and other creditors put at £1.8m. The dividend prospects for these groups is unknown.

The report added: “We think we’ll be able to pay a dividend to preferential creditors (mainly employees), but, we do not know at this stage what the timing and quantum of any dividend might be.

“The outcome for preferential creditors is heavily dependent on retention realisations and any book debt realisations after IGF has been paid in full.”

The company approached a number of parties to try and secure additional funding and secondly sought to achieve a sale of the shares of the company

Picture: Mhairi Edwards.