Botes divisions go into administration

Botes Construction and Botes Maintenance went into administration last week amid accusations of asset stripping by angry staff.

The accusations arose after it emerged that the new buyer of Botes Maintenance, sold on by the administrator Kroll last week, is owned by Epic Reconstruction, a majority shareholder in the two Botes businesses.

A statement by Kroll last week announced the sale of the maintenance division to Hamsard 2989, but failed to point out that the latter firm is owned by Epic. A spokeswoman for Kroll said the omission was “an administrative error”. However, former staff and suppliers are questioning Epic’s original intentions when it bought into Botes earlier this year.

Documents leaked to CJ reveal Botes managing director Ian Botes handed over control of the company to Epic in March, securing a refinancing deal worth up to £4m.

Epic, an AIM-listed firm that buys up struggling companies, installed a new chief executive, Roddy Grant. In April, he announced a cost-cutting programme that saw 20 staff made redundant. Shortly after Ian Botes wrote to staff reassuring them that the restructuring was over and that the construction division’s problems “were coming to an end”.

In early May, Grant and Epic’s Rob Leeming presented an upbeat overview of the company’s prospects to staff. A week later Botes’ auditor BSG Valentine resigned and was replaced by Hazelwood. BSG would not comment.

Former staff questioned Epic’s motives. One said: “Just last month Epic promised us it would turn the company round in four years. There was no indication it planned to pull the plug. This feels like asset-stripping.”

Epic said administration was the “only option” after “three or four problematic construction contracts” had caused cashflow difficulties and that “a quick sale was deemed necessary in order to save Botes Maintenance”.

Staff were told last week they would not be paid last month’s wages. Fifty eight staff have been made redundant with another 30 expected to leave after the administration is completed. Two hundred and twenty staff have been transferred to Hamsard.

Kroll said the combined companies’ turnover was £84m, generating a loss of £1.6m. It declined to disclose the level of debt.  

Subcontractor Pan Interiors, which is owed a small amount by Botes, said: “Botes had not been the most stable of companies for a while. It was always slow to pay, so we were already moving away.”

A former Botes Construction site manager said: “It was taking on more and more risky refurbishment contracts just to keep up turnover and it finally got caught out by some of them.”

Rudi Klein, chief executive of the Specialist Engineering Contractors Group, said: “The ease with which poorly performing companies can be put into liquidation, then acquired again without any obligation to the previous supply chain is something the Construction Act needs to address. This is akin to phoenix company syndrome.”

However, an Epic spokeswoman said: “It is not a phoenix operation. Epic is not buying back Botes Maintenance in order to avoid repaying creditors.”

Botes-related firms HN Edwards and Botes Interiors are unaffected and continue to trade.