How one manufacturer collapsed into administration owing over £100m before being rescued
The story of how a group that manufactured buses and police cars collapsed into administration owing more than £100m and led to over 150 people to lose their jobs has been revealed for the first time.
The WN VTech Group, which was headquartered in Bolton, appointed Teneo in November 2023 after suffering “supply chain issues”.
The majority of the group’s companies were later sold to firms owned by Belgian industrialist Guido Dumarey but not before a raft of redundancies were made.
Now, a new document filed by Teneo with Companies House has revealed how and why the group collapsed into administration.
What did the group do?
The group was established in 1820 as Pierceys Coachbuilders and expanded through multiple acquisitions to trade across six brands with a focus on buses, ceremonial and blue light vehicles.
WN VTech operated across two sites in Bolton and Rochdale and included Coleman Milne, which specialised in the production of funeral cars and VCS Police, which customised police vehicles. Its Mellor and Sigma brands produced short wheel-based buses and long wheel-based buses respectively. Before Teneo was appointed, 311 employees were based at the two locations.
VCS manufactured and maintained emergency vehicles for the NHS and employed 147 staff at its Bradford site.
Treka manufactured specialist passenger carrying vehicles and buses and employed 94 members of staff across two sites in Brighouse and Wakefield.
Promech employed 32 members of staff in Scarborough and was a specialist fabricator business leading on chassis development for the group.
JME was a specialist engineering business which supported the group and third-party customers. It employed 18 people in Scarborough.
What was the group’s latest financial performance?
For the nine months to September 30, 2023, WN VTech’s turnover totalled £40.2m while it made an operating profit of £1m. For 2022 its turnover was £45.4m and it made an operating loss of £3.1m.
Treka’s turnover was £19m in the nine-month period and its operating profit staff at £981,000. For 2022, its turnover totalled £11.6m and it made an operating profit of £718,000.
Turnover at VCS for the nine months totalled £12.5m and it made an operating loss of £630,000. In 2022, its turnover was £18.7m and its operating losses stood at £5,000.
Promech’s turnover for 2022 totalled £1.8m and it made an operating loss of £571,000. No financial data for the nine months to September 30, 2023, was provided by Teneo for Promech.
Why did the group collapse into administration?
According to the report complied by Teneo and published on Companies House, the group started experiencing a decline in trading performance in 2020 mainly because of Covid-19. The pandemic forced extended periods of manufacturing to shut down and disrupted the supply chain for essential parts required for production and to fulfil customer orders. Manufacturing was also impacted by the global shortage of semi-conductors for the vehicle industry.
Teneo added: “During 2023, a number of suppliers placed the companies on stop or pro-forma payment as creditor pressure mounted and cash resources were stretched. This impacted the companies’ ability to fulfil orders and meet target revenue levels.
“The directors further attribute the companies’ financial performance in 2023 to delays in product approval documentation being obtained from the Vehicle Certification Agency and delays in customer sign off on vehicles for dispatch leading to a significant extension in output time scales and subsequent drop in output volumes. the decline in output put pressure on cash resources.”
The directors approved the lenders in September 2023 with a request for further funding to meet payroll and critical suppliers. A further £2.2m was provided by NatWest in October.
At the same time, Rutland Partners and certain members of the management team agreed to provide £6.1m phased across late September and early October.
The directors and Rutland Partners also held discussions with existing minority investors regarding further participation in equity funding but no further money was secured.
The additional funding, totalling £8.3m, allowed the directors to make payments to suppliers in order to reduced creditor pressure, facilitate deliveries of critical parts and fund other critical payments such as payroll.
However, Teneo added, extended lead times and other ongoing delivery and production issues meant that these actions were not sufficient for the companies to avoid insolvency.
Were any offers made for the group ahead of administration?
Of the 45 companies and financial institutions that were approached about whether they would be interested in a deal, 7 indicative offers were received while 15 declined outright.
Teneo said the main reasons why some of the parties declined included the accelerated timeline, the extent of the turnaround required and the timing of availability of some key information.
Despite the 7 indicative offers, no deal was agreed and administration was considered unavoidable.
After Teneo was appointed as administrator, 144 VCS employees and 15 from Promech were made redundant.
How the group was sold
As part of a new push to sell the group, Teneo spoke with 44 parties.
The process resulted in WN VTech, Treka, JME and the parts of the business and assets of project which were not related to support VCS production, were sold to a group of companies owned by Guido Dumarey.
The deal included vehicle brands Coleman Milne, VCS Police, Mellor Bus, Sigma and Treka Bus as well as supporting engineering businesses Promech and JME.
The final offer for the companies was £6.2m while 444 employees were transferred to the new owner.
How much did the group owe when it entered administration?
According to Teneo’s document, around £33m was owed to Glas Trust, as security for the loans, through a fixed and floating charge.
Loan notes worth £73m was owed to Rutland Partners and BGF while there was £31m in outstanding secured facilities on top of the £2.2m provided by NatWest in October 2023.
HMRC, as a secondary preferential creditor, was owed over £2.6m while unsecured creditors, of which there were over 1,200, were owed almost £32m.
No secured creditors will be repaid in full while Teneo said there was “no prospect” of unsecured creditors receiving any money at all. The firm added that there will not be enough floating charge realisations to enable a payment to ordinary and secondary preferential creditors.