16.07.2006

Quigley places the blame

Shaun Quigley, managing director of Quigley UK Lifting Services Ltd (that’s the new company) has written to the customers of Quigley United Kingdom Ltd (that’s the old company) explaining why the old company was forced into administration and what the new company is doing now.

It seems that the main cause of the company’s downfall was the dreadful reliability of its all-new crane fleet, caused apparently by the brothers’ penchant for buying what it appears to suggest were cranes that were hardly past the prototype stage and bristling with “new technology that was unreliable and flawed”. This was so bad that the company’s profitability evaporated.

Then there was the expansion into London. A bank loan had, it claims, been arranged to fund the expansion. However the company did not draw down the loan immediately, choosing to fund the expansion from cash flow instead. When it finally called on the loan the bank made “a reverse decision” in light of the effect the poor reliability of the cranes was having on profits.

Then, it seems, that the customers, the very people Quigleys were addressing, were too slow in paying, with invoices taking between 60 to 90 days to be paid.

Finally it was the government’s fault as: “The Crown (Revenue & Customs) would not agree to a payment plan that was affordable for the company. In fact, it “declined the plan with vigour”. Quigley claims that, had the Revenue accepted, the company would have continued and all creditors would have been paid and brought up to date.

So, the old company was put into administration and the business was immediately purchased by the Quigleys without being offered to any other interested parties. The letter confirms that all of the cranes have been repossessed by the finance companies and sold.

The letter finishes up by saying: “The new company is now in the process of fleet building. Some immediate deliveries are planned. In the short term we have set up rehire terms with other suppliers. Please rest assured our rates remain as competitive as ever”.


Vertikal Comment

It is rare to see such a candid letter that says: sorry… we were naïve, we thought everyone would pay on 30 days and that the bank would never change its mind, even when we leveraged the company into the stratosphere with new cranes.

Then there is the matter of the government. VAT returns in this country are made quarterly (not monthly as they are in Germany) so on average a business obtains just over 60 days’ credit for VAT, a figure easily matched by average invoice terms.

As for blaming everything on the manufacturers… Yes… buying the very first units of a new model carries some element of risk, even in this day and age. However, Quigley did not have 30 odd prototypes. And even then, a new business should avoid buying unproven models.

What the Quigley’s letter totally fails to acknowledge is the fact that the company expanded at a pace far faster than the tough market conditions or demand warranted. It appears to have leveraged itself far beyond what anyone would consider to be prudent.

Finally, as highlighted in the last line, and we quote from the letter, it cut rates. No business can survive or deserves to survive, when managed in such a way. Not only do such practices cause the failure of a company, they also have a negative effect on the market as a whole, putting pressure on companies that run tighter and more conservative ships.

Hopefully no manufacturer will be unwise enough to supply the new business with cranes unless their finance company receives a healthy deposit and has sight of a well-thought-out business plan. The UK crane hire industry does not need nor can it afford another over-leveraged, price cutting new entrant. Let the market work as it is supposed to.