Troubled Stenoak helped by clients

Stenoak is amazed at the help it is receiving from both clients and main contractors as it battles to stay in business. Many are changing the conditions of contracts so that they provide the materials for Stenoak to work on.

Shares in the AIM-listed group were suspended two weeks ago following a "bizarre" collapse in its credit rating which has resulted in the £115m-a-year turnover construction group only being able to obtain supplies by paying cash (CJ 26 June).

A company spokesman said on Monday: "The situation is still critical. However, many clients are being incredibly supportive, helping us by changing the conditions of our contracts so that they themselves provide the materials while we provide management expertise and labour.

"Likewise where we are working as a subcontractor, the main contractors are doing the same. It has amazed us. They are bending over to support us."

Stenoak said that the cause of its cash-flow problem was the purchase last August, for just £1, of the 80% that it didn't already own of Associated Facilities Services, a street lighting contractor with an annual turnover of £11m.

"The full extent of AFS's problems only became apparent after the full acquisition. We've had to take on £3m of debts, more than we anticipated. We've now stemmed the outflow and are expecting AFS to break even or make a small profit by the end of the financial year."

As CJ went to press, Stenoak's was holding another board meeting. "We're talking to credit insurers and banks and the outcome is not complete," said the spokesman. "The sad thing about our situation is that we are an 80-year-old company and have always had a good reputation for quality workmanship.

"The drop in our credit rating came from a single agency, but if you're found wanting by one, the others all follow the same line. There's a lot of nervousness in the insurance sector right now. For this to happen to us must be a concern to the rest of the construction industry."