1st Fleet goes into administration as spiralling costs and stringent loan conditions conspire to bleed the company dry
By Brad Gardner | April 27, 2012
1st Fleet has gone into administration on the back of spiralling costs and stringent loan conditions that have conspired to bleed the company dry.
Sydney-based accountancy firm deVries Tayeh was appointed yesterday as administrator of the well-known transport operator, which runs warehousing, logistics and express services across the nation.
deVries Tayeh Partner Riad Tayeh says 1st Fleet has run out of cash but he hopes to work out a solution to the business’s problems within the next fortnight
1st Fleet General Manager of National Operations Darren Garvin told SupplyChain Review’s sister trucking title ATN the conditions imposed by financiers, along with diesel prices, lengthy payment terms and the cost of compliance crippled the company’s cashflow.
“The financiers have forced us into paying off our assets in a 12 month to 18 month, two-year period as opposed to three to five years and increased the interest rates upwards of 15 percent due to the risk of our industry,” Garvin says.
“The transport game is a risk for the finance industry because of all the previous companies that have gone into administration.”
Garvin says the shortened repayment terms have stripped about $1 million in cashflow from the business each year for the last two years.
“Over the last two-year period it just blows you apart and you pile that on top of clients who want to push you out to 30 days, 60 days payment terms you’re just robbing Peter to pay Paul on a continual basis,” he says.
Garvin says some clients are settling accounts after 90 days for bills totalling hundreds of thousands of dollars, which has had a “detrimental effect”.
“People think it doesn’t but I’m telling you factually that it does,” he says.
Garvins says 1st Fleet has been unable to recoup the money spent on safety and training programs, due in part to dodgy operators which cut corners to run down rates.
“[Managing Director] Stephen [Brown] is that fanatical on safety. We just don’t have any tolerance for any breaches so we ensure our drivers are fully rested and arrive in a safe manner,” he says.
“It’s only now that the authorities are coming down on the cowboys in the industry but it’s all too little too late for us. When you’re competing against…the people that can worm their way around the true cost of operating safely it’s very difficult to maintain.”
At least one of 1st Fleet’s competitors has been quick to act upon news of the business going to administration, falsely telling clients it was no more.
“Even yesterday we were advised one of our express competitors was already ringing around our major customers telling them that 1st Fleet had closed the doors,” Garvin says.
1st Fleet’s move into administration comes just months out from the introduction of new heavy vehicle charges that will increase registration fees by more than 20 percent in some cases and add an extra 2.4 cents per litre to the fuel excise.
Western Australia and the Northern Territory were the only jurisdictions to decide to introduce lower fees. Garvin is scathing of the remaining governments that signed up to introduce the new round of charges on July 1.
“The rego fees are just disgraceful. The government have got a lot to answer for. They’re not in touch with reality one little bit,” he says.
Brown warned in February of the problems afflicting his business and the transport industry in general.
Amid a Transport Workers Union (TWU) campaign for an 18 percent wage rise for 1st Fleet’s Queensland drivers, Brown told ATN that trucking was suffering its worst slump since his time in the industry.
“Our industry’s in trouble. This is the toughest f**kin’ year of my life. We’re in trouble, we’re getting caned everywhere. We’re getting caned on shortened terms, we’re getting caned on interest rates, residuals, everything,” he said at the time.
He also unloaded on finance companies, describing them as “the worst f**kin’ animals”.
“I hope they’re all going to get punished. They are a f**kin’ disgrace.”
But as deVries Tayeh combs over 1st Fleet’s books and deals with creditors to get the business back on track, Garvin points to optimistic signs for the NSW-based carrier.
“We’ve picked up some extra work, some new contracts with Nestle in the last couple of months and the turnover is increasing and we were working heavily on reducing our costs with different leases on properties and restructuring the company and the responsibilities,” he says.
“It was all going to be a positive move forward but things just caught up with us.”
Garvin says customers have phoned 1st Fleet to offer support, and employees are remaining positive in the face of uncertainty.
“We’ve got a very loyal team. I’ve been here for 22 years and come from the bottom to the top. It’s a very rewarding place to work.”