Receivers say collapsed IT services firm Synergy Plus in “significant trouble for some time”

The receivers of collapsed Perth-based IT services business Synergy Plus claim the business has been in financial dire straits for months, after breaching its loan covenants in October 2010.

The company, which was placed in the hands of administrators from Hall Chadwick late on March 17, with the company claiming that its secured lender, GE Commercial, had demanded that a $4 million finance facility be repaid by April 22.

A day later, GE Commercial appointed receivers from Taylor Woodings to the company’s main operating subsidiary, Synergy Plus Operations.

Hall Chadwick partner David Ross says the receivers are now in control of the business and it does not appear the business is still trading. All staff have been stood down until at least today and reports suggest the jobs of the company’s 150 staff are now at risk.

While the Taylor Woodings receivers will now have the job of selling Synergy Plus’ assets to recover the $4 million owed to GE Commercial, Ross told SmartCompany this morning he would still push ahead with plans to examine whether the business can be recapitalised and re-launched through a deed of company arrangement with “minimal impact” to the group.

“That’s still the intention at this stage,” Ross says.

But in a statement released yesterday, receiver Quentin Olde suggested the company’s finances might be in a much worse state that first thought.

“We are currently in the process of assessing the viability of the Company and its ability to fulfil existing orders or satisfy ongoing contracts.”

“Our investigations to date show that the Company has been in significant financial trouble for some time now and had been in default of its loan covenants from October 31, 2010.”

This revelation is likely to surprise some investors. Synergy Plus financial statement for the first six months to December 31, 2010, suggested that the company may be have been in some trouble, posting a revenue fall of almost 15% to $65.9 million and a net loss of $5.9 million, compared with a profit of $840,000 in the previous corresponding period.

But the fact that the company breached its covenants in October last year was not reported to the market at the time.

Instead, the company reported the breach in its December 31 financials, which were not released until February 28.

But it’s not just the loan covenant breach that will be a surprise for stakeholders – the entire collapse seemed unlikely just a few months ago.

In a bullish presentation given to the company’s annual general meeting in late November, then chief executive Garry Henley outlined how the company had acquired enterprise mobility group AirData in August 2010, a few months after acquiring South Australian ICT company C&PA.

Henley said at the time the company remained on the look-out for further acquisitions.

The company appeared to take a further leap towards safety when it announced on February 10 that it has secured a $30 million bond issue with Pacific Alliance Asia Opportunities Fund.

Synergy’s executive chairman Frank Stranges has said he will continue to talk to the fund with a view to obtaining capital to help to execute a deed of company arrangement.