
Bricks and mortar are some of the most fundamental materials to build a home or any other kind of building, and you would expect that the pandemic wouldn’t have stopped more of us needing the services of a construction firm. However, even businesses with seemingly fruitful amounts of work coming their way can fall prey to financial woes, as WRW Construction discovered this year.
A Welsh titan
Like the dragon on the Welsh flag, WRW Construction was a leading giant of the Welsh construction industry with plenty of opportunities for growth in that sector. Much of its recent work included projects with housing association Linc Cymru in Cardiff, as well as a project at a housing and healthcare development in Bridgend. However, construction hasn’t been immune to the woes of the broader economy due to COVID-19, and hit WRW Construction enormously over the last year.
WRW Construction’s latest accounts filed with Companies House suggested a business in rude financial health, with over £1 million in profits on an annual basis in both 2018 and 2019. There were also signs that its net assets were also growing in value, rising from £3.25 million in 2018 to £4.58 million in 2019. It was seemingly all systems go in 2019, especially after WRW Construction reportedly managed to clinch what it termed a “significant” lending facility with lender ThinCats in March of that year.
The assumption was that this lending facility would help finance future expansion, and from all the visible signs, WRW Construction was expected to continue being a great Welsh success story. In construction terms, the business was on a sound footing, and the only way appeared to be up.
A no-go zone
Turnover at WRW Construction grew from £60.49 million in 2018 to £64.16 million in 2019, just on the eve of the pandemic. Millions of pounds worth of construction jobs had kept the business firmly in the green for a considerable period already, but little could prepare its owners for a once-in-a-lifetime pandemic. If you think administration is something that only happens to vulnerable or heavily-indebted businesses which are making constant net losses, think again – it can happen to any business at any time.
Sites the firm had been working on vigorously experienced enforced closures due to the restrictions imposed over the pandemic, while adjudication proceedings on an unspecified matter in recent weeks were reported as having given the firm an “unfavourable” outcome. These factors prompted the collapse of the company into administration this year. This came, despite the firm leaving an order book with planned works with an estimated value of over £60 million for the coming 12 months.
As WRW Construction goes to show, no matter how rosy a business’ finances may appear, they can fall prey to sudden collapses with little warning. Such administrations are ideal opportunities for savvy investors, as you can capitalise on high-value assets, IP and brand recognition which can be hard to find in other contexts.
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