Wednesday, April 8, 2015

News: MTL downed by £25m defence contract

By

Ten bidders were in the running to take over Rotherham-based manufacturing specialist, MTL Group, when it entered into administration following difficulties with an overseas defence contract.

MTL Group was one of Europe's fastest growing project manufacturing specialists in the metal sector and a global exporter of secondary steelwork. It works with a global blue-chip customer base in the defence, construction equipment, rail and off-shore wind energy sectors.

John Sumpton and Hunter Kelly of EY's Restructuring team were appointed earlier this year as joint administrators at the Brinsworth firm. The Lancashire-based WEC Group, which comprises 14 companies specialising in welding and fabrication, brought the company out of administration, saving 135 jobs.

Details of the administration have been published which showed that problems with a £25m contract with NIMR Automotive, a military vehicle manufacturer based in UAE, was key to MTL going under.

Advertisement
MTL moved to a new facility at Brinsworth in Rotherham in 2011, with a larger 300,000 sq ft modern manufacturing facility set to accommodate anticipated future growth. The same year saw the firm hit a peak turnover of £50.3m having secured two large UK defence contracts.

Recognising a decline in UK defence markets, MTL sought to replace the income from overseas exports and almost doubled its export sales to £7.3m. However, the export contracts did not fully replace the decline in UK contracts and turnover fell by £11.6m. Problems also appeared with unexpectedly loss-making contracts in the offshore market and investment in a quayside facility in the Port of Blyth came to nothing and it closed in 2014.

The NIMR contract, worth half of the group's sales, was initially delayed due to design changes and once production commenced, the level of complexity led to unexpected production delays and significant losses. This led to losses of over £3m for the first eight months of the 2014 financial year, resulting in cash flow pressures and the need for additional funding.

A number of parties were approached by EY in November 2014 but the two interested parties withdrew from discussions with concerns regarding the future profitability of the business. Administrators were appointed to the MTL Group and MTL Group Holdings in February and a total of 157 employees were made redundant and 146 employees were retained to assist with ongoing operations whilst a purchaser was sought.

The NIMR contract was terminated which reduced production requirements but the business was supported by key customers continuing to place orders and varying payment terms which meant that book debts were significantly enhanced. MTL Group had an order book of more than £20m at the time.

47 expressions of interest were received by the administrators regarding the sale of the business, ten parties visited the Rotherham facility and two offers were received to acquire the majority of the business and assets on a going concern basis. WEC Group funded a £1.97m partnership deal to acquire the business and certain assets of MTL which made the group the largest laser cutting operation in the UK's fabrication and engineering sector.

As part of the deal, MTL Group's sales director Karl Stewart, finance director Howard Kellett and operations director Darren Bradley remain in the senior management team following the creation of the new partnership - MTL Advanced.

Discussions are ongoing with the landlord over future occupation of the Brinsworth site.

Major creditors facing a £20m shortfall due to the administration include lenders, Bank of Scotland and Lloyds Bank. Around £11m is owed to unsecured trade creditors. Administrators believe that an agreement whereby NIMR pays up £1.2m in relation to the large contract is the best outcome for MTL's creditors.

MTL Advanced website

Images: MTL Advanced

0 comments:

Sponsored by:
Members:
Supported by:
More news...

  © Blogger template Newspaper III by Ourblogtemplates.com 2008

Back to TOP