Queensland company's fleet up for auction after going into liquidation
It was a business that serviced much of Queensland for the best part of three decades but now Tim Fisher Transport (TFT) is another cautionary tale for other operators after winding up operations towards the end of 2018.
The Brisbane-based company was established in 1990 and employed around 40 people. Online reviews showed workers and clients had a solid rapport with the company but, by October 2018, an administrator was appointed with expressions of interest or indicative offers due later that month.
It eventually went into liquidation in December and its fleet of about 30 trucks and trailers are now being sold on auction site GraysOnline (link below).
Its liquidator, Darryl Kirk of Cor Cordis, has used the example of TFT to provide an insight into the “challenging” conditions of the industry for big and small operators, and issue a warning that pressures don’t discriminate between new ventures and long-established entities.
“There is no doubt that the transport industry is a challenging industry to operate in,” Kirk says.
“With a high level of competition and large volume of operators, from the large national organisations to the mum-and-dad operators, there is extreme pressure on pricing and contract tenders are highly competitive.
“Rising costs of fuel, rent, wages, maintenance and compliance are also tightening margins and impacting profitability.”
Unprofitable contracts and external factors
TFT’s example is unfortunately not an isolated case.
It transported a range of goods from general freight such as white goods, consumables and other electrical goods to ammonium nitrate used in mining activities.
However, like the higher-profile case of Redstar Transport at a similar time, ambitions for expansion became unsustainable, Kirk explains.
Redstar Transport bled out financially say liquidators: read more
“From June 2016, TFT underwent an expansion of operations, which included purchasing additional vehicles for the fleet.
“While revenue increased over this period, the profitability of the company deteriorated substantially indicating unprofitable growth.
“Through my investigations, I identified unprofitable contracts where contract rates had remained unchanged for over five years.”
The job costing model was also “flawed”, according to Kirk, and quotes and tenders were submitted “without real understanding of the cost of work”. Total creditors (includes all classes of creditors) now total up to $4.9 million.
“Margins were either too thin to generate sufficient gross profit to cover overheads and finance costs or in some instances not profitable even at a gross profit level,” Kirk says.
“Underutilisation of the fleet and high gearing of debt created a cash strain on the business as it grew.”
ASIC regularly reports that the effect of cash flow – or lack thereof – has an enormous impact on a business’ day-to-day operations.
It was an issue that also hit TFT and the majority of 379 transport and logistics businesses that became insolvent in 2018 – as was a lack of adequate contingency for periods of financial difficulty.
“During the 2017 financial year, the company had a number of bad debts caused by customers entering external administration,” Kirk says.
The company was weighed down by further setbacks that it was unable to resolve, Kirk adds.
TFT’s assets are now available through auction site GraysOnline and include 2011-2017 model Western Star prime movers, a 2013 Freightliner Coronado, Hino and Isuzu rigids, and numerous trailers.
Auction starts at 10am Queensland time tomorrow. Bidding is available on site in Hamilton and online via live simulcast.
Lessons to be learned
Kirk’s main takeaway is that there is no shame in acknowledging and understanding when a business is not performing well. However, assistance needs to be sought early and from appropriately qualified advisors.
“Early intervention may have been able to salvage the business,” Kirk says.
“Detecting early warning signs of operational and financial distress is so essential. Unfortunately, the value of good external advice is sometimes not understood until business failure is imminent.
“Understand the importance of a good accounting function (internal or external) and job costing system. There is no need to ‘buy’ turnover – entering into unprofitable contacts is more damaging in many cases than having no work.”
Flexibility to adjust the fleet size to work on hand and succession planning are also key, according to Kirk.