Star Freightlines up for sale

By: Rob McKay


WA firm in voluntary administration with McGrathNicol in charge

Star Freightlines up for sale
Star Freightlines has generated interest, McGrathNicol says.

 

Administrators overseeing Western Australian freight and logistics operator Star Freightlines are seeking a quick solution to its financial problems.

The company’s business is centred on refrigerated transport and warehousing, servicing regional WA and interstate needs, with a focus on the mining industry catering.

McGrathNicol administrators Rob Kirman and Matthew Caddy are in charge and are seeking expressions of interest for the firm that controls about 20 trucks including Kenworth and Mack prime movers and Isuzu rigids, along with a fleet of refrigerated trailers and some forklifts.

It has storage and coolroom facilities in Canning Vale, with services to Port Hedland and Karratha in the Pilbara, and employs 25-30 people.

Though Kirman says it is very early in the process but he has seen "some good levels of expressions of interest" in the company.

"With the general reduction in revenues and contracting margins we have been experiencing in WA … it got to the stage where the level of the company’s debt wasn’t sustainable," he says.

"It’s a good, viable business but the level of secure debt just wasn’t sustainable, and so the director took the proactive action of appointing a voluntary administrator to stabilise the business and allow various options to be pursued.

"Pleasingly, it has been business as usual since the appointment."

The administrators are open to options that might include sales of the business and assets and/or an equity investment or recapitalisation by way of a deed of company arrangement,

Kirman put its current difficulties down generally to difficult times affecting cashflow of what is an otherwise solid company.

"It’s quite a diversified customer base, there are about 200 customers, not one particular large client, supplying major resources companies and smaller operators," he says.

He adds that a common experience with mid-sized firms in the WA trucking market is that an inherent lack of flexibility can make things difficult during downturns, even for well-run operations.

"It’s a capital intensive industry where it can be very difficult to restructure," Kirman says.

"Yes, you can reduce variable costs such as wages. But outside of that, it’s a fixed-cost base predominantly around machinery and property."

There is a certain level of cost-cutting and restructuring a business can do including the sale of equipment that is generating a deficiency or termination of employees or quitting of property leases, but these can only go so far.

"What we’ve generally seen in the mid-market businesses, particularly in the transport sector, as revenues have declined and competition is a lot more fierce and margins have declined, a lot of businesses have seen a reduction in trading performance," Kirman says.

"They take various steps along the way, as this business has, to try and reduce costs and improve sustainability.

"You get to a stage where there is only so much you can do without actually undertaking some form of formal restructuring to do with a voluntary administration regime, which is what it is there to do when there is a viable business."

"There’s no particular one or two events for this business … it slowly got to the stage it is now."

 

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