微密圈

A rescue deal with a would-be white knight for failed contractor Geoffrey Osborne collapsed in April at the last minute with the historic firm then forced to announce on the same day it was going into administration, an update from the firm鈥檚 administrators has revealed.

RSM said Osborne, which was set up in 1966, had been having discussions throughout most of last year with 鈥渟ignificant businesses in the industry鈥� about a sale but by November 鈥渘one of the potential trade buyers had agreed to move forward鈥�.

However, earlier this year a sale seemed on the cards with RSM saying Osborne had been close to striking a deal with one potential purchaser, which would have seen the unnamed firm take a majority stake in the business 鈥� only for this to hit the buffers at the end of February.

Another bidder, who had already been looking at buying the firm, then 鈥渆xpressed real interest in acquiring the company鈥�.

RSM鈥檚 update, filed at Companies House this week, said Osborne鈥檚 auditors would only sign off its delayed accounts for the year to March 2023 once 鈥渁n agreed investor鈥� was lined up.

RSM, which had been originally brought in by Osborne in December 2022 to carry out a review of the business, said: 鈥淎t this stage, there was still a reasonable expectation of being able to reach a deal with the trade purchaser and so it was agreed to defer the signing of the accounts to enable a deal to be concluded.鈥�

But rumours about the health of the company began to spook the supply chain and RSM said: 鈥淭he filing of the accounts became overdue, which caused uncertainty in the market.

鈥淭he public sector projects that the company was negotiating as preferred bidder had been very slow to get to contract and were further delayed as a result of this uncertainty. The further delays caused even greater uncertainty, which in turn increased pressure from the supply chain for payment.鈥�

RSM added that 鈥渘oise in the marketplace put additional strain on the cash flow, via an additional run on the company鈥檚 credit鈥�.

On 18 April, the would-be buyer decided it was only interested in a 鈥渓imited number of [Osborne] projects. As the projects they did not wish to take forward were forecasting a cash outflow over the next few months, it became clear that there was no viable future for [Osborne].鈥�

RSM said a notice of intention to appoint an administrator was filed by Osborne later that day.

Administrators added the ongoing delays in signing off Osborne鈥檚 accounts further undermined confidence in the firm because auditors 鈥渨ere not able to provide a going concern sign off which in turn prevented the securing of new contracts which were predicated on the accounts being filed. Regrettably, the company faced a profound 鈥楥atch-22鈥� situation.鈥�

RSM said Osborne first ran into serious problems following the covid-19 lockdown in March 2020 with the firm鈥檚 construction business having to shut a number of sites in London as a result.

鈥淭his resulted in significant delays to completion of projects. The JCT form of contract did not allow for compensation for these delays and thus the delays had a very significant impact on the construction division鈥檚 financial performance.鈥�

RSM said that in order to cover losses from its construction business, Osborne 鈥渁ccelerated鈥� the sale of if its infrastructure business 鈥� which it had decided to sell back in 2016 鈥� 鈥渢o ensure that there were sufficient cash reserves to enable the group to survive its losses in construction鈥�.

The infrastructure business was eventually sold in September 2021 to private equity having 鈥渁bsorbed a great deal of management time, which meant focus on other areas of the group was diminished鈥�.

That month, former Wates COO Dave Smith joined as a non-executive director with, RSM said, 鈥渁 view to bringing his construction expertise to help support the ailing construction business鈥�.

But RSM added it 鈥渧ery quickly became apparent that the full quantum of losses in construction was significant鈥�. The then chief executive Andy Steele left in November and was replaced by Smith while the finance director, Stuart Hammond, also stepped down and was later replaced the following year by former Laing O鈥橰ourke finance director Peter Duff 鈥渨ho brought an immediate and increased focus on cash and cost reduction鈥�.

Having sold infrastructure, RSM said Osborne鈥檚 plans to move into the development and BTR markets were 鈥渢orpedoed鈥� by Liz Truss鈥檚 mini-Budget in September 2022 which 鈥渘egatively affected market sentiment in the construction sector generally鈥�.

Two months later, in November, finance firm Woodford Tradebridge told Osborne it was pulling a 拢3.5m working capital facility which was 鈥渇ully withdrawn by the end of March 2023鈥�.

RSM, which had initially recommended a CVA for Osborne, said other problems which beset the firm included rampant inflation, subcontractors going bust and a 鈥渇ailure to achieve [an] expected settlement on a number of covid related claims鈥�.

At the time of its collapse, Osborne had work in progress of just 拢1.8m across eight sites and 拢126,000 of cash in the bank at the time of RSM鈥檚 appointment.

In the year before covid, the firm had a turnover of 拢380m and a pre-tax profit of 拢4.5m but by the time it collapsed, the sale of its infrastructure arm as well as other divisions, including an offsite firm, and dwindling workloads at the remaining business meant turnover had shrunk to around 拢100m.

According to RSM鈥檚 update, unsecured creditors are owed just under 拢35m. HMRC is owed a further 拢1.8m while the firm鈥檚 100 former employees are owed close to 拢135,000. Secured creditors Osborne Group Holdings is owed 拢8.4m.