The official report filed by NMCN’s administrators reveals that accountancy firm Grant Thornton has been embedded in the construction contractor for more than a year now, initially as consultant and now as administrators, winding down the business into eventual liquidation.
In a separate development, the Financial Reporting Council has revealed that it has launched an investigation into the audit work done for NMCN by BDO for the year ended 31st December 2019. BDO's second five-year term as NMCNs auditor expired at the end of 2020. It was replaced by EY. The 2020 accounts were never signed off before the business was deemed irrepairable.
Grant Thornton was first introduced to NMCN on 5th October 2020 by Lloyds Bank shortly after the departure of John Homer as chief executive. It was first engaged by NMCN and Lloyds Bank on 19th October and then on 14th December to review short term cash flow forecasts.
Grant Thornton was then engaged by NMCN and Lloyds Bank on 23rd February to undertake an independent business review – “including assessing the group’s historical and forecast financial results, preparing an estimated outcome statement, comparing possible outcomes of various solvent and insolvent options, and completion of an options review and contingency planning report, in support of the group’s refinancing exercises”.
Grant Thornton was then tasked with further analysis, including another cash flow review, on 16th August, when the refinancing was delayed.
By this stage Grant Thornton had accrued fees totalling £275,967 plus VAT. This sum has been paid by NMCN, the report confirms.
On 1st October Grant Thronton was engaged by NMVN to assist the directors in taking steps to place the companies into administration. Fees for this were £115,000. As of 13th October, this had not yet been paid and requires the approval of creditors.
Administrators were appointed on 6th October. The cause of the collapse was described baldly as “significant cash flow challenges during 2020, mainly caused by ongoing trading losses and the impact of the Covid-19 pandemic on operations”.
On 7th October the telecoms and plant divisions of NMCN were sold to Svella and Svella. On the same day, the water division and associated assets were sold to Galliford Try. The infrastructure water division and associated assets were sold to Keltbray on 11th October.
The sales preserved 1,642 of the 1,789 jobs within the business, and provided roles for 48 head-office staff during the administration process
Following a review carried out by Grant Thornton’s solicitors, Pinsent Masons, it was determined that NMCN “did not own any significant intangible assets”. Assets such as the NMCN brand name, legacy brands like Nomenca or North Midland Construction, or acquired brands such as Lintott, were deemed to have “negligible” value and were excluded from sale.
It is anticipated that secured creditors and ordinary preferred creditors will be paid I full. Secondary creditors will also get a retuned “however, the quantum cannot yet be determined with any reasonable accuracy”.
Unsecured creditors, who are collectively owed £60m (£60,528,421 to be precise), are not expected to get anything, due to lack of funds.
Since its 6th October appointment as administrators, Grant Thornton has incurred costs and expenses of more than £300,000.