GFC woes blamed as engineering company turning over $19 million collapses into receivership

A South Australia-based international engineering and manufacturing company with a turnover of $19 million has collapsed as initial investigations reveal it was unable to recover from the impacts of the global financial crisis.

Priority Engineering Services was placed in receivership last Thursday and operations have ceased.

The company was established in 1984 and offered general engineering services in Australia and Malaysia and manufactured purpose-built machinery for the defence, mining and automotive sectors.

BRI Ferrier administrators Alan Scott and Andre Strazdins have been appointed and Ferrier Hodgson has appointed receivers and managers.

Scott told SmartCompany investigations were yet to reveal the precise amount of debt, but the largest creditor, the company’s bank, was owed a “significant” sum.

“At this point I have no idea how much debt the company is in, but I know the banker is the major creditor, and the employees are also owed a significant sum of money,” he says.

At this point, the business is up for sale, but Scott believes there is a high chance it will fold.

“I will be investigating and forming an extensive report to the creditors. I think I know what the company’s future is, I think it will fold, but that really depends on how the receiver goes in selling the business.

“I know myself and others are hoping the sale is managed well, but it clearly won’t continue to trade at the moment, that’s already been decided, because there is simply not enough work to do,” he says.

At its highest point, Scott says the business had around 110 employees, but when it collapsed the number was closer to 86. The workers were told on March 18 they were being made redundant. Half-a-dozen employees currently remain as business matters are finalised.

The receiver of PES, Ferrier Hodgson partner John Hart, is meeting with interested parties to discuss the sale of the business.

Hart says preliminary indications suggested the business had been negatively impacted by the global financial crisis and had never recovered.

A confidential data room has been established and an advertising campaign has been launched as part of the sale process. On Tuesday an advertisement was placed in The Australian Financial Review regarding the sale of the company.

Hart said in a statement if the work in progress could be sold, he hoped the buyer would be in a position to re-employ a proportion of the former PES staff.

“We’ve had a significant amount of interest in PES’s portfolio of work in progress as well as plant and equipment from other regional engineering groups. If we can finalise a sale, I hope there will be some good news for PES employees,” Hart says.

The first creditors’ meeting is due to be held on Monday, March 25 and the second creditors’ meeting will take place on or around April 29, 2013.