Administrators have officially been appointed for logistics and warehouse specialist Readie Construction Ltd.
A notice on the company website states that it is in administration and has ceased trading with immediate effect, after Constantinos Pedhiou and Gary Shankland of Begbies Traynor were called in yesterday to begin winding down the contractor’s operations.
In an email to staff on 6 February, revealed to Construction News, Readie Construction management stated: “Inflationary cost pressures, numerous subcontractor failures, [and] chronic tightening in the performance bond and trade credit insurance markets have put the business under considerable strain. Despite the efforts of a director to overcome these challenges by seeking external sources of finance, support and investment, we have not been successful in finding a viable solution.”
A spokesperson for Begbies Traynor confirmed that holding company Readie Management Ltd has not gone under, even though Readie Construction is its only trading entity.
Begbies Traynor is asking creditors to contact the administrators to register a claim, adding in a statement to Construction News: “Having just been appointed, we are assessing the situation and further updates will be made as and when it is appropriate.”
Chris Davies, managing director of DRS Bond Management, told CN: “It’s no secret that Readie has been in difficulties for a while. The surety sector has stopped issuing bonds for them even without cash cover.”
Readie Construction was founded in 2007 by its current executive chairman Stuart Read.
For the year ending 31 March 2023, turnover grew by 22 per cent from £345m to £421.1m as pent-up demand was released after the Covid pandemic lockdowns. This enabled the company to rise to 55th place in the latest CN100 table of top contractors.
However, it recorded a £1.7m pre-tax profit for the year ending 31 March 2023, marking a more than threefold decrease on the previous year’s total of £5.5m.
The firm delivered 3.8 million square feet of warehouse space to clients in its 2022/23 financial year and completed 22 jobs overall with 41 others in progress.
Readie Construction paid out £741,000 in dividends in 2022/23 while holding £12.3m in cash. But the firm ended the financial year owing creditors £66.8m falling due within 12 months, plus £3.5m within a longer period.
In its business review that accompanied the accounts, Readie directors stated that the firm had secured £200m of its £350m revenue target for the 2023/24 financial year.
Data from industry intelligence provider Glenigan shows that ongoing Readie projects include a £50m light industrial/storage facility and a £15m warehouse for Henry Boot Developments Essex, plus a £20m warehouse for Amazon in Bristol.
The future of these schemes remained unknown at the time of writing.
Readie Construction operated as a 100 per cent employee-owned trust (EOT), having made the move in March 2021. At the time, its advisor FRP stated that the implementation of an EOT would “provide long-term stability” to the contractor’s employees.
The firm employed a monthly average of 260 people in its most recent financial year, up from 219 the year before.
The Begbies Traynor spokesperson told CN: “The fact that the company is owned by the employee trust does not impact the way in which Begbies will run the administration.”
The demise of Readie Construction follows the collapse in the past six months of fellow EOTs Buckingham Group (August 2023) and Michael J Lonsdale (October 2023), leading some industry analysts to question the benefits of employee ownership of construction firms, especially given the thin profit margins that characterise the industry.
Davies said: “You can’t keep ignoring the fact that there’s a bit of a pattern here”. He reiterated his belief that “EOTs and construction are not natural bedfellows”, especially if outgoing dividends exceed a company’s retained reserves of cash.
Another analyst, speaking to CN on condition of anonymity, said: “The key thing is that the best EOTs are run on an arm’s-length basis from the operating company. It gets difficult where you have people with one foot in each camp.”
The analyst added that corporate governance “is going to play an increasingly relevant and important role in anybody’s assessment of what is and what is not a good EOT”, adding: “Rather than just saying this is a construction industry issue, I think it’s a wider governance issue. And that’s what needs to be addressed.”