Alistair Sloan, former chief executive, hits out over ‘insane’ way the contractor’s demise was handled
Former Benson chief executive Alistair Sloan has hit out at the handling of the firm’s demise, which has left creditors owed £23m.
Sloan, who was suspended from the £125m-turnover contracting group a month before it went into administration, claimed the sequence of events late last year (see “Sloan’s story”, below) that led to its failure were avoidable.
Speaking after a creditors’ meeting held last Friday Sloan said that the firm’s non-executive directors had forced him out and that the decision to close the loss-making Midlands division led to the collapse of the group as a whole.
Sloan said he had realised last September that cash flow problems were going to hit the group early this year and had alerted the firm’s bank and the board.
He added that he had proposed selling all or part of the business in October but the idea was thrown out by representative of venture capitalist firm 3i, which backed Sloan’s original management buyout of Benson back in 1998.
Sloan described the eventual administration in December as “absolutely totally and utterly unnecessary”, given that he felt that in the short term the firm needed an additional £1m overdraft facility for three months early this year to ride out poorer trading conditions last year.
He said: “The general view from the executive team was that if the non-executive directors hadn’t forced me out this would not have happened. There is not a day that goes past that I do not ask the question ‘Why did that happen?’. At no point in the last two to three months have I believed anything other than it was unnecessary.”
The group’s decision to withdraw support for Benson’s Midlands division was described by Sloan as “insanity” and “utter nonsense”. He argued that as soon as troubles became apparent in one part of business it would have a knock-on effect on the rest of the business.
Sloan also revealed that he had planned to buy the company back after he was suspended as chief executive in November. He said: “I was confident that that there was a good business. I am not saying everything was perfect but the good bits were bloody good and worth a lot of money.”
Sloan said he had made mistakes, especially in attempts to establish a Midlands operation but that he felt he was capable of turning things round. He said: “I‘m not painting myself as a saint. The business did have problems but I believe I would have been able to manage that situation.”
I was very pissed off and very taken aback. I couldn’t understand why they were against my proposal
Sloan, former Benson chief
Sloan said the firm had got into trouble late last summer when its fit-out division failed to win work for three months. The division was also struggling to get paid on work in progress.
“The market nosedived,” said Sloan. “I decided I had to sell either the whole business or parts of it. I thought that we could not afford to keep going the way we are.”
Sloan said he was shocked when the non-executive directors knocked back his idea of a sale at a meeting in early October. “I was very pissed off and very taken aback. I couldn’t understand why they were against my proposal,” he said.
Despite the group’s problems three profitable parts of the business were sold to Morgan Sindall – the divisions at Reigate, Surrey; Hatfield, Hertfordshire; and Southampton.
Sloan said that he felt “desperately sorry” for subcontractors owed money in the wake of the firm’s failure and admitted it had been difficult to attend the creditors’ meeting. He said: “I felt it was important for me to go along.”
PriceWaterhouse Coopers partner Mike Gercke, an administrator of the firm, denied that the closure of Midlands led to the demise of the group. He said: “That’s incorrect. This group had a negative balance sheet. It was running out of cash quickly.”
Gercke said the fact that all divisions, apart from the Midlands, were part of the same group was “unfortunate” and argued against Sloan’s proposal in October to sell all or part of it. He said: “When you have good businesses mixed up with not so good businesses it’s very difficult for a purchaser to find buying it all attractive.”
A source close to the board said that it had lost confidence with Sloan last year because of the lack of cash that had been collected on fit-out work the firm was completing that year.
Sloan’s story: The demise of Benson
September Problems with fit-out business emerge. Sloan considers future of the business
4 October Sloan puts paper to the board proposing to raise £3m extra capital or sell the whole or parts of the business
20 October Benson Group board meeting. Against Sloan’s wishes, board decides that PriceWaterhouse Coopers is brought in to carry out working capital review, but does not decide when
22 October Sloan goes to Miami for holiday
25 October PWC is brought in to do review without Sloan knowing. Sloan flies back and returns to holiday the week after
15 November Sloan is suspended as chief executive. He approaches KPMG to work on a plan to buy out the business and works on it for two weeks
27 November Sloan is told by chairman George Kynoch (3i representative) that the board intended to withdraw support for Benson’s Midlands division
30 November Closure of Midlands division, which goes into receivership. Paul Sellars is appointed chief executive of Benson Group
9 December Subcontractors of Benson Midland are furious at not being paid
10 December Sloan speaks to Morgan Sindall chairman (and former colleague) John Morgan about his firm buying three regional divisions
13 December Administrators called in at Benson. Three profitable regional divisions bought by Morgan Sindall for £3m