Subcontractors and suppliers that worked alongside collapsed cladding firm Jessella Ltd are not expected to receive any of the money they are owed.
Administrators from FRP Advisory do not expect to pay out any of the £14.6m owed to more than 140 firms, they announced in an update yesterday (24 September). “It is not anticipated there will be any funds available for distribution to unsecured creditors,” they said.
The administrators now expect to dissolve the £40m-turnover firm, 18 months after it collapsed into administration.
FRP Advisory has struggled to recoup retentions owed to Jessella. The administration period was extended for a year in February and is now set to end on 26 February 2025.
That extension will allow it to “collect the retention from customers in relation to the novated contracts as they fall due for payment”, the administrators said.
In its last annual accounts, for the year to 31 March 2022, Jessella said that its projects were impacted by “inflationary increases in staff and materials costs”. It had also struggled with the “increased use of subcontractors to help fulfil contracts”.
Its pre-tax profit more than doubled to £1.4m that year, while turnover increased to £39.8m compared with £21.8m the year prior. But the firm paid out a dividend of £478,000 despite its cash position collapsing from £1.4m to nothing.
In strongly worded comment to Construction News, DRS Bond Management managing director Chris Davies said that combination “never should have happened”, adding: “If they didn’t have any cash in the bank, why are they paying themselves a dividend?
“All you are doing is chipping away at the foundations of your house.”
Jessella noted in its 2021/22 annual report that the overdrafts and zero-cash situation “weaken the liquidity position of the company”, but it claimed that receipts recovered over the past year meant there was still “adequate working capital” at the firm.
Insolvency rates in the construction industry have been high since the Covid pandemic as a lack of work, inflation and a lack of staff have squeezed margins.
But administrations were down in July – though construction industry company failings still accounted for 16.9 per cent of all insolvencies in England and Wales.
ISG’s collapse into administration last week was the largest since Carillion went under in 2018.
Around 2,200 staff were made redundant immediately when ISG collapsed last week. Another 200 roles are expected to go when the administration process for the the £2.2bn-turnover firm is complete.
