Pension debt dragged down Simons Group amid poor trading
Family-owned construction firm Simons Group fell into administration last year because it was unable to trade sufficiently strongly to continue to afford its pension commitments, new documents have revealed.
Lincoln-based Simons Group, which employed over 120 people, called in FRP Advisory as administrators in October 2019.
It had been struggling with a £10m deficit on a legacy defined benefit pension scheme, and was paying off monthly ‘deficit repair contributions’ of £90,000 to the scheme, which relied on the construction business generating enough profit and cashflow to afford the payments.
But the company was suffering from declining cash balances and appointed FRP to explore its options in March 2019. In July that year, FRP was engaged to restructure the group and seek investment to allow for a solvent sale of the company. That was followed in October by an attempt to detach the company from its pension liabilities ahead of the scheme’s entry into the Pension Protection Fund (PPF). But the PPF rejected the company’s offer and the directors agreed to put the company into administration. The pension scheme has now entered the PPF.
In 2018, Simons Group had a turnover of £104.5m and made a pre-tax profit of £704,000, having made a £3.9m loss in the previous year on a turnover of £119.9m.
An administrator’s report for the construction arm of the business, which accounted for the bulk of the group’s turnover and profit, showed that creditors have been left £48.5m out of pocket, with trade contractors owed £12.6m and contract cost accruals accounting for another £8.9m owed.