Pochin’s are a flag, fluttering in the breeze
August 15th, 2019
Readers of this blog will know that for a long time now I have been advising my accountancy colleagues to find out from their clients who they are working for – by which I mean checking to see if the companies they are supplying are sustainable in the long term and not ‘sailing too close to the wind’.
‘Sailing too close to the wind’ covers a number of business sins including being overgeared, taking on too much (or ‘overtrading’ as it is commonly referred to) or – perhaps the biggest sin of all – operating on unrealistically narrow profit margins. It is this last one, of course, that did for Carillion.
So it was with a heavy heart that I witnessed, five years after being taken back into family ownership, the local construction group Pochin’s collapsing into administration (here).
I am not leaping to any conclusions but I notice that the administrators said that the new management team had established a platform for growth and secured a pipeline of profitable new work but that “legacy issues from earlier contracts became too great a burden leading to difficult trading conditions”.
In the year to February 2018 Pochin’s Limited made a pre-tax loss of £3.4m on revenue of £59m. That loss was attributed to a residential construction contract “causing problems”.
It does appear as if the Board, and now the administrators, have done all they can but, at the time of writing, 120 jobs were on the line and several companies are heading for liquidation.
Regional television also captured local sub-contractors retrieving their equipment from a closed construction site, defying security guards to do so. These are distressing scenes for our local economy but we must prepare ourselves for more. Our local area has a number of other building and ancillary businesses that will be running on life support right now.
Part of what we do at IPD is to take a company that is hanging on by its fingernails, run the numbers and look ahead to what the future looks like. By making recommendations we can advise on how to alter that future for the better or, at the very least, show the owners the realistic options they have.
But accountancy firms who think they have construction firms, or businesses in other sectors, who look a little wobbly, need to contact us now. Pochin’s are a flag, fluttering in the breeze. Stronger winds are coming.