Botched accounting system helped send roofing firm under | News

A flawed accounting system that staff couldn’t use properly and buying up too many firms led to the collapse of one of the country’s biggest roofing contractors, an administrators’ report has said.

Lancashire firm Avonside Roofing sank into administration earlier this month leaving unsecured creditors facing the prospect of not getting a penny back of their missing money which the report said amounts to more than £17m.

In its 105-page report on the collapse, administrator Begbies Traynor said Avonside was hobbled by an accounting system which was too complicated to work.

“The implementation of the system led to some inaccuracies of the financial management information and reliability of the data. This meant staff found it difficult to operate and caused a strain on internal resources.”

The report added: “This led to concerns over billing which caused cash flow difficulties, working capital funding issues and margin erosion and ultimately led to the point where there the group’s financial records were considered to be materially inaccurate.”

It said the problem led to the “inaccuracy and reliability of financial management information” that it had been asked for by its bank, NatWest, which at the time was running the rule over an application from Avonside for a further £3.5m in working capital .

“The group was unable to provide the bank with the requested management information and forecasts to support their request. As such, the request for additional facilities was withdrawn.”

Begbies Traynor said the firm, which was originally set up in 1987 as Lee Roofing, grew from 11 branches and 150 at the time of a management buyout in 2003 to 37 branches and 350 staff by the time it collapsed. It added: “This resulted in integration issues which has contributed to the [company’s] failure.”

Nine of the 37 branches were sold to a company called Andrew Morley Business Consultancy on the same day the firm sank into administration for £473,500. The administrator said the sale had saved 78 jobs.

Morley is a former chief operating officer of Avonside who stepped down as a director last June.

Begbies Traynor said NatWest, the company’s sole secured creditor, is due £9.9m and is expected to receive two payments of £262,500 and a further £2.2m. Employees are owed a further £352,000 while HMRC, listed as a secondary preferential creditor, is owed a further £4.7m.

Unsecured creditors who are owed £17.3m have been told there are “insufficient funds” to enable them to get any of their missing cash back.

In all, four Avonside firms collapsed with the administrator’s report detailing how much creditors are owed. The biggest creditor is a major materials supplier owed more than £7m, while a leasing firm is owed a further £1.5m. A roofing supply firm is also owed close to £340,000.

In its last set of accounts filed at Companies House, the firm saw turnover slip one third to £48m in the year to December 2020 with Avonside sinking into the red, racking up a £1.7m pre-tax loss from a £1.2m profit last time.

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