How the tide turned against Canute Haulage Group

A bad debt and the loss of its largest client set off a chain of events that sunk old Canute leading to a controversial rebirth in May, MT takes a closer look.

Canute Haulage Group’s demise and phoenix-like resurrection in May courtesy of a pre-pack sale led to shock, confusion and anger.

Here was a company that had a turnover of £106m in the year to 31 July 2016 and had been a fixture on the UK road network since 1977.

Its sale to Almtone for £1.3m left unsecured creditors facing a deficit. The firm’s administrator FRP Advisory estimated that creditors could ultimately see a return of 15p in the pound. But that leaves them to shoulder an approximate £5.3m shortfall, and they will not see any money at all until it is liquidated.

Some 900 businesses have so far registered as creditors.

New owner Almtone shares a common director with Canute Haulage Group in the form of Glenn Marshall, and the Marshalls have controlled the company since its genesis as a building materials haulier.

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The other listed director, and sole shareholder of Almtone, is Michael Ventham.

The administrator’s report makes it clear that a pre-pack sale ultimately became the only game in town to secure the firm’s 841 jobs. While a CVA was considered, Canute’s top six customers had insolvency clauses in their contracts. Therefore, these would likely have been terminated as soon as a CVA was proposed.

Liquidation would have left nothing for the insolvency practitioners to work with, and approximately £4.5m in staff redundancy to be paid.

At the time the directors of Canute Haulage Group were reassuring people there was nothing to see, creditors were chasing unpaid bills, some dating back to last year.

According to records at Companies House, the group in administration had 23 county court judgments against it and owed creditors close to £207,000 at the point it was sold.

Almtone has also secured the Canute name as part of the deal, so despite the new ownership structure, its livery remains a familiar sight on our roads. It adds up to the feeling among many creditors that the process, although legal, has been unfair on them.

John Jones, director at Swift Driver Recruitment, Newport, said his firm had worked with Canute Haulage Group for 15 years, supplying drivers in and around the area.

He is owed £7,212 by the firm and has had almost no correspondence since.

Jones has been forced to absorb the loss but argued that it cannot be right that “everyone takes a hit” under current legislation, which allows companies to stop trading and essentially start up again the next day, citing saving jobs as an excuse.

“The trust is gone now. They don’t pay their bills. This was all premeditated, pre-planned. It’s the manner of it all that has left a bad taste in the mouth,” he said.

Is it fair?

A haulier based in the North East, who wished not to be named, was owed £38,500 when Canute went into administration. However, as it was executing a load for them, it kept hold of it and got its money in two payments.

The MD told MT that the business had invoices outstanding from last September with the operator.

“It’s not very ethical. It’s a big company. It did what it had to do but it has left a lot of debt behind. It will need subcontractors and it is going to have to work very hard to get confidence back in the market,”he said, summarising the views of many creditors that have contacted MT.

Andy Davies, MD of A Davies Transport, which is owed £3,500 by Canute, said in May: “We may as well all run our businesses this way – build up debt, not pay, and start again.”

Speaking to MT, Canute group sales director David Emslie said: “We have saved 841 jobs. It was a difficult situation and the business was, to a degree, a victim of circumstance brought about by decisions taken by our customer base. It was almost the perfect storm.

"Much of what occurred was unforeseen and we had little alternative. We have given the business a chance to continue under a new structure.”

Death of the king - the timeline

• 2015 Long-standing customer William Sinclair Holdings goes intoadministration leaving the group with a £1m debt. This is addressed via thecompany’s discount invoicing facility. However, this creates cashflow problemsand leads to the sale and leaseback of two large sites.
• May 2017 Canute is informed that a major long-standing contract (Wilko) is tobe terminated in September 2017. This represents more than 30% of grouprevenue at this time (£30m).
• August 2017 The business’s loss-making materials division is sold to EddieStobart.
• September 2017 Canute refinances with Aldermore Invoice Finance (AIF),completing on 28 January 2018. Before this, HMRC issues winding-uppetitions against the group for £1.55m in respect of unpaid PAYE and VAT. Thetaxman is repaid and the petitions dismissed following the refinancing.
• January/February 2018 Immediately after the refinancing another largecustomer quits. A drop in turnover and quiet trading period leads to a cashcrunch, which is compounded after a £1m cash deposit is held while Canutetransfers to a new clearing bank.
• 23 February HMRC issues new petitions for £780,000 in PAYE. These arewithdrawn as Canute’s directors have issued Notice of Intentions to settle thedebt.
• 15 March AIF makes an application to appoint administrators in a bid to exitthe business. A return hearing date is set for 11 April. Efforts to market Canutefor sale get under way.
• 26 March No formal offers for the business are made. The application forinterim O-licences under Almtone is begun in case administration isunavoidable.
• 29 March The group completes another refinancing. The intention is to repayAIF in full. Personal guarantees secured against the property of Canutedirectors Arthur Marshall, Noel Marshall and Steve Ely secure £3.9m fromNucleus.
• 10 April Canute Haulage Group director Noel Marshall issues a statementafter staff wages are paid late blaming the move to a new bank. It comes asthe Almtone O-licences enter the public domain. Marshall tells staff that thecompany’s previous funder had obliged Canute to apply for “a number ofchanges to be made to our O-licences and structures. Nobody should bealarmed about this process”.
• 11 April AIF submits a request to withdraw its application for administration.Nucleus attends the hearing and effectively replaces AIF.
• 11 May The firm is placed into administration with FRP Advisory handling affairs.
• 12 May Canute Haulage Group is sold in a pre-pack sale to Almtone.