On 10th January 2023 TXM Plant Limited crashed into administration. It joins a growing list of construction industry leaders that have not been able to weather the post-COVID economic storm despite their multimillion-pound turnovers, strong position in the market, and good reputation. This leaves their employees out of a job and their creditors facing an uncertain future as they try to absorb the bad debt caused by the collapse.
Red Flag Alert identified that TXM Plant was a critical risk and alerted our customers as early as August 2023. Giving them a five-month warning to avoid offering credit and to chase debts.
In this article, we will look at who TXM Plant Limited were, the issues they faced, and how Red Flag Alert identified the critical business distress.
Who were TXM Plant Limited?
TXM Plant Limited were the UK’s largest supplier of rail/road plant in the UK. Headquartered in Wigan, they had eight depots across the UK and employed more than 380 people.
What pressures did they face?
The economic environment since the arrival of COVID has been a stormy one and the ending of the pandemic and global lockdowns has been followed by a succession of serious macroeconomic shocks. These have affected all UK businesses and include:
· Significant increases in the cost of materials
· A significant increase in the cost of energy. Especially to businesses, which saw a major decrease in government support at the end of March 2023
· Delays in the global supply chain
· Interest rates rise
· Rising levels of bad debt caused by insolvencies
The construction industry has been more vulnerable to these pressures than any other sector and has contributed more insolvencies in 2023 than any other industry, this is paired with the slowdown in construction projects that accompanies all major economic downturns. This decrease in demand and increase in business distress in the sector they serviced likely means that TXM saw a reduction in demand for their plant machinery, which is also suggested in their turnover figures since 2018.
What went wrong?
TXM saw turnover plummet from £59 million to £29.8 million in just two years from 2018 to 2020. Whilst turnover did recover somewhat to £38.9 million by 2022 it was still significantly short of pre-pandemic levels.
Paired with this huge reduction in turnover was the fact that TXM Plant Limited had been unable to turn a post-tax profit since 2018. In an industry that operates on a low margin model, four years of consecutive losses left them especially vulnerable to the issues facing the construction industry and the UK economy as a whole.
TXM elected not to file their accounts for the 22/23 financial year, which is a serious sign of poor results, and in August suffered a winding up petition. Whilst this petition was withdrawn before it was advertised in the gazette, it spelt the beginning of the end and administrators were appointed in early Jan 2024.
How did Red Flag Alert spot the insolvency early?
At Red Flag Alert we understand that to accurately understand a company’s financial health and risk you need the most accurate and up-to-date data possible. It was this obsession with understanding the real time health of businesses that allowed us to identify and warn our customers that TXM Plant Limited was at critical risk of failure as early as 11th August 2023.
Key to this was Red Flag Alert flagging the unadvertised winding up petition submitted against the company. Whilst this was withdrawn it spoke of serious payment issues at the company and mounting pressure from its creditors.
Most providers do not ingest this data but rather wait until the petition is published in the gazette, typically 6-8 weeks later, and which only gives a week’s warning.
Critically in this case the petition was withdrawn before being advertised in the gazette. Which means that not only did Red Flag Alert give our clients advanced warning but that other providers would not even have been aware that a petition had been submitted at all, and the serious risk of failure it represented.
It is not just unadvertised winding up petition data that Red Flag Alert brings early to market, we lead the way in bringing our clients up-to-the-minute fresh data that allows them to gain advanced warning and be the first to react.
To see how Red Flag Alert will help your business avoid bad debt and seize opportunities, download our free company report on TXM Plant Limited below or get a free trial.
See the full report of TXM Plant Limited