Below cost bids finish Watkins

Bidding below net cost is being blamed for the collapse of the London refurb builder VAT Watkins. The 47-year-old private company's building and plant divisions ceased trading last week when Barclays withdrew loans and receiver Coopers & Lybrand was sent in. The rest of the group, VAT Watkins Holdings, is still trading and is expected to survive despite bank claims upon it for the several million pounds of outstanding debts.

Uncertainty clouds the full extent of the group's debts, and Barclays' actions have inevitably created controversy. Some sources close to the company accuse the bank of being ruthlessly 'opportune' in forcing the closure when it was still fully covered by Watkins' assets. 'We are all amazed,' says one director. 'What they have done to us is disgusting. We just can't believe it.' But the receivers say the debts far outweigh assets.

Why the plug was pulled now is also unclear. Cashflow appears to have evaporated as turnover fell - and promises made to the bank may have been impossible to deliver.

There is also uncertainty about a failed rescue staged by chairman Victor Watkins, who is understood to have put up for sale his privately-owned Gloucestershire village of Salperton, valued at œ10 million. However, the receivers claim the village has, to a greater or lesser extent, already been offered as collateral for previous loans.

The group, which made its name in the local authority building market but had diversified well in recent years into the private sector, had dipped slightly into the red in 1992 with a loss of œ44,000. These last published accounts, for the year to 31 July 1992, reveal turnover had fallen to œ45 million but that debts were rising fast, with overdrafts and loans jumping from œ592,000 to over œ4 million as working capital from operating subsidiaries dried up. VAT Watkins also dabbled in property development, and had a farming and property arm called Whatband.

The problems have been building up for the past three years. In July 1991, a fortnight before the company's year-end, Victor Watkins forecast his company would make around œ1.1 million profit - in fact, it fell œ871,000 short of forecast.

Many contractors have been surprised by the collapse, but others said it had been on the cards. 'I'm afraid it highlights what people have been saying - you just can't keep bidding below cost. Even the big contract at Mount Pleasant had problems because it was so competitively priced.'

Of the group's 140 employees, 100 have been made redundant. Site agents and surveyors plus accounts staff have been kept on for the moment.

Work on the company's 34 sites has been downgraded to a purely 'care and maintenance' basis while the receivers attempt novations. This appears unlikely to be successful as much of the work is small scale and of limited appeal. The total work in progress amounts to œ20-œ25 million, with the biggest job an œ8 million Post Office contract at Mount Pleasant. Of the rest, 17 are worth between only œ200,000 to œ300,000. 'Even if there is money in them, you just can't manage that many jobs of such a small size,' claims one medium-sized contractor's managing director.

Interest of sorts has been expressed by several companies including Try, Haymills, and Willmott Dixon - but all are treading warily.

Victor Watkins joined his father's company after graduating from Queen Mary College, London in 1966. Turnover then was œ54,000, and peaked at œ70 million in 1989. He could not be contacted this week.