The directors of stricken haulage firm TEF Transport were unaware of the scale of its debts until just days before it was forced to close down, its administrator has revealed.
The Scarborough-based company, which offered curtain-sided general haulage operations and chilled storage and counted McCain Foods as one of its main clients, is now in the process of being wound up after it ceased trading at the end of November.
According to FRP Advisory, which was appointed on 9 December, the haulier had historically traded with success, but it had struggled in recent years to generate a profit.
It made losses of £267,000 and £279,000 in 2021 and 2022 respectively and, based on its Sage accounting records, recorded a loss of £360,000 during 2023.
“The company saw its costs rise significantly in the past 12 months,” the administrator explained in a report to creditors.
“This can partly be attributed as a consequence of rising levels of inflation that have had an impact on things like fuel and insurance costs, but the company also became increasingly reliant on agency drivers and hiring vehicles.
“These costs came at a premium and impacted the company’s viability.
“The company utilised staffing agencies for the provision of its agency drivers. The company exceeded its credit limit with one agency by a significant amount and fell behind with payments.”
Motor Transport revealed last month that TEF Transport was estimated to owe recruitment firms more than £400,000 alone and a total of £1.2m to all of the companies with which it traded.
However, according to FRP, the situation the haulage firm found itself in was not fully understood by its directors until the eleventh hour.
The report said: “In the following 11-month period from January 2024 to the end of November 2024, whilst the company was able to generate a higher turnover during the period, its losses also severely increased.
“The company had to extend its overdraft position to £100,000 in this period to assist with essential cash flow and set up a payment arrangement with HMRC.
“The directors were not aware of the extent of the company’s loss-making until November 2024, when they became appraised of deficiencies within the financial information that had been presented to them.
“Upon further inspection, they identified the company’s loss-making was significantly higher than they had been led to believe.”
TEF Transport borrowed £300,000 from its sole shareholder to allow it to trade in the immediate term while the directors scrambled to understand its true financial position.
But with pressure increasing from creditors and legal demands mounting, the decision was taken to cease trading after more than 50 years in business and make almost all of its 50-strong staff redundant on the same day.
However, there remains hope that all classes of creditor could end up being paid what they are owed.
FRP cautioned that an estimation of its fees had not yet been calculated and the figures they hold for unsecured creditors remained an estimation.
It also said liabilities that arose as a consequence of TEF Transport breaching two pallet network membership agreements had not been taken into consideration, but the administrator added: “It is currently estimated that there will be sufficient funds available to make a sizeable distribution to unsecured creditors.
“Creditors will note that based on the director’s [statement of affairs], the company’s assets exceed its liabilities.
“However, the administrators cannot confirm with certainty at this stage whether there will be sufficient realisations to discharge the company’s unsecured liabilities in full.”
