Henry Construction Projects Limited

Background

On 8 June 2023, we received instructions to provide valuation and disposal strategy advice in connection with the machinery and business assets of Henry Construction Projects Limited (HCPL) following the appointment of Geoff Rowley and David Hudson of FRP Advisory as Administrators.

HCPL was incorporated in June 2010 and traded from leasehold premises at Parkway Farm, Church Road, Cranford, Hounslow, TW5 9RY.

Since 2010, HCPL operated as a high rise, reinforced concrete and multidiscipline construction contracting company employed by private developers and housing associations with a geographic focus predominantly in London and the South-East evolving to become one of the UK’s largest privately owned main contractors with a projected turnover exceeding £400 Million prior to administration and involvement on over 60 live construction sites.

Over the years, the company experienced significant revenue growth due to the size of contracts it was undertaking and keen pricing with a focus on bigger building projects.

However, as a result of several factors, including a steep rise in construction and material costs linked to the COVID pandemic during 2021/22 impacting on fixed price contracts and the consequences of the Truss-Kwarteng 2022 minibudget, it became clear by first quarter of 2023 that substantial losses were wiping out the company’s cash reserves and undermining their ability to complete contracts.

It is estimated that the company faced a 25 to 30% increase in costs of materials, labour and energy costs during this period.

With no further funding available and creditor supported winding up petitions being issued it was not possible to continue trading and therefore all ongoing works on all sites ceased on the appointment date. In many instances works had already ceased.

Our Role

Prior to the appointment, we prepared an initial desktop valuation of the assets from available information and reference to HCPL’s fixed asset register on a pre-appointment basis to provide an outline view of potential recovery values in the event of an administration.

The existence of the petitions was widely reported in the construction industry press causing extreme difficulties with numerous subcontractors who were owed monies. We were made aware that HCPL mechanical plant assets had been removed prior to the administration from sites and, against the backdrop of fast-moving events, it was important for us to take immediate steps to secure the company assets in the earliest stages of our involvement.

HCPL’s record keeping of their assets was deficient with no live data available to confirm which sites held equipment, no trackers on the larger equipment within the fleet and little information forthcoming from management to assist in the identification of machinery and equipment assets.

As a result, all site owners were identified and contacted to advise of the appointment and seek confirmation that the sites and equipment therein were secured.

The dialogue between us and the developers provided an overview of assets at each of the sites and we arranged and coordinated visits to attend and physically identify equipment understood to be HCPL owned and subject to finance.

Mobilising our teams to undertake immediate site inspections at HCPL’s Cranford Yard and the 50 plus development sites across London and the South-East provided information from which we were able to;

Understand the nature, characteristics, specifications, capacity and status of the machinery and equipment assets within the estate.
Collate and secure assets to carry out site visits to catalogue the plant and liaise with Euro Auctions who we partnered with to assist with the collection of identified secured plant, catalogue and undertake sales by auction at the earliest opportunity.
Collate assets for private treaty sales to developers/ new contractors, such as site accommodation and welfare units, cantidecks and tower cranes.
Provide a formal valuation and inventory of the assets identified, agree marketing process and assist with security and other aspects throughout.
Establish the position with regards assets on finance and arranging for assets to be returned to owners or included in sales as part of any asset disposal exercises by agreement in advance. The company held 41 separate Hire Purchase agreements with 17 different lenders for mechanical plant as well as scaffolding and formwork.

The Assets

In terms of main items of mechanical plant within the fleet this consisted of;

Excavators; minis to 22 tonners
Dumpers; 1 ton to 9 ton
Telehandlers
Compressors; 2 and 3 Tool
Generators; 65/70 KVA up to 330 KVA
Rollers; ride-on tandems
Lighting Towers

All kit by industry recognised OEMs, however condition status overall was found to be poor and varied in terms of age with very little less than 5 years old where HCPL owned.

Non-Mechanical plant primarily consisted of;

Site Accommodation and welfare units
Traditional scaffolding
System type formwork

Accommodation and welfare units typically HCPL owned with numerous finance companies funding system type formwork and third-party claims from scaffolding contractors.

The tower crane fleet comprised approx. 40 tower cranes of which approx. 50% held an interest as part of the administration. The balance was made up of third party hire or financed cranes.

The HCPL tower crane fleet was primarily city type luffing jib cranes manufactured by Jost, Comedil and Raimondi ranging in age from early 2000’s in the main up to 2017.

Sale Outcome-To Date

Asset Sales;

Cranford Yard; July 2023
Online Auctions; August, September, October 2023
Private Treaty Sales including Tower Cranes and Other Assets
Remaining Assets including Tower Cranes and Other

Assets to be sold will result in approximately £2,000,000 net of VAT in terms of sale realisations before costs for the machinery and equipment assets.

Across the auctions to date we have sold;

53 Excavators
22 Telehandlers
12 Concrete Pumps
21 Rollers
36 Dumpers
29 Generators

The majority of tower cranes owned by HCPL were erected on sites and others held in third party storage. A small number of cranes were sold directly to site owners as the projects are resurrected by new contractors and others to the incoming contractors and/or third parties by private treaty sales. Negotiations are ongoing to secure purchasers for the remaining elements of the crane fleet.

An independent specialist formwork and scaffolding agent has been instructed to undertake an audit of the HCPL stock and we await their findings with a view to assisting in sales in the first quarter of 2024.

We have provided continuous updates with regards to proceeds from the various auctions and series of private treaty sales with funds being reconciled and transferred by Hilco to the administrators at regular intervals.

Observations and Take-Aways

This has been a challenging case in many aspects including poor record keeping and issues relating to identifying assets at third party locations following the shut-down.

In addition, the condition of the equipment on inspection in overview was poor and there had clearly been little recent investment in acquiring new equipment or maintaining the existing fleet which had to be reflected when providing valuation advice.

We recognised the requirement to partner with Euro Auctions to assist us with the recovery of assets and this has been worthwhile given the levels of recovery achieved compared to initial expectations. Communication throughout the case with the client team, site owners, finance companies and other stakeholders has been constant and key to maintaining momentum in terms of focussing on the recovery and sale of assets to as broad a market as possible where circumstances permit.