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Redhall Group

  • BY: Andrew Hore |
  • POSTED: 30/01/2014 |

Engineering support services provider Redhall Group has reached a settlement with Vivergo Fuels concerning an engineering contract.

Vivergo has offered £2.1m in final settlement but that is well below the £9.8m carrying value in the balance sheet. The book figure has been written down in the past. Settling with the employees on the contract cost £1.2m back in 2011.

Redhall was contracted to fabricate and install pipework for a new bio-ethanol plant on the BP Salt End site Vivergo was a joint venture between BP, British Sugar and DuPont. Vivergo took action to repudiate the contract in March 2011. At that time, Redhall estimated that there were £14m of unpaid costs. This indicates the real loss on the contract.

The board accepted the offer from Vivergo because the litigation has already dragged on and it could take even longer to secure recovery of the cash owed. On top of a £7.7m write down on the balance sheet valued there will be legal and professional costs.

The cash will be used to extinguish part of the extended bank facilities announced in January. HSBC provided maximum facilities £24.75m, reducing to £21.25m by the end of September 2014.  The additional £2.1m will cover part of that reduction. A further £1m reduction is required 12 months later.

At 51p a share, Redhall is valued at £15.2m. The NAV was £30.7m at the end of March 2013, including £23.8m of goodwill, and that included the full amount for the contract. Total trade debtors were £42.2m.

The figures for the year to September 2013 will be published on 6 February.

Download the latest AIM Journal from http://wwww.hubinvest.com/AIMPDFJanuary2014_52.pdf

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