Kinetics shuts down northern business

Social housing contractor Kinetics Group is to wind down all of its operations in the north of England and retrench into its core gas and electrical servicing business under a major restructure.

The group, which closed two of its subsidiary companies yesterday after they were served winding up petitions by HM Revenue and Customs, will lose up to 40% of its approximately 1,000 staff in the restructure.

Kinetics Group chief executive Chris Cheshire, said only about 20 of the staff affected would actually be laid off, with the remainder being transferred back to the client organisations for each contract. Cheshire said: “We’re ceasing trading in the north. It’s now so cut-throat and prices are far too low in the market for a viable business in that region. This allows us to retrench on our £70m M&E, gas servicing and solar installation business where we still have strong and profitable customers in the midlands and the south.”

Cheshire said the company would hand back its remaining contracts in the north, including ending its work for Liverpool Mutual Housing Association earlier than originally planned. He said the group had been forced to write-off £4m of bad debt for contracts in the north, and the company will now exit all construction-related work.

The restructure will see the firm turn over £70m in 2011, compared to a predicted £115m. Between 300-400 staff will leave the firm in total. Cheshire said the move allowed the firm a base on which to expand into the new market for the installation of solar panels on homes for the firm’s traditional housing association customers.

The move follows similar decision by contractor Renew, which closed its northern subsidiary Allenbuild in March, with the loss of 60 jobs, citing the tough northern market.

Last year Kinetics, which is backed by venture capitalist Sovereign Capital and has grown rapidly by acquisition since being set up in 2006, reported revenue of £102m.

Sovereign Capital invested a further £2m in the firm in January, to pay off third party debt in order to strengthen Kinetics’ financial position.

The two subsidiaries which were wound up yesterday were DC Group, closed down under order of the court, and Seaflame, closed down by Kinetics itself. Cheshire said that a group restructuring will see the 20 separate legal entities reduced to just five organisations: a holding company; group company; and three operating divisions.

In a letter to staff, sent yesterday, David Blount, Kinetics’ director, said: “We have identified that some of the group’s contracts, primarily based in the North West of the country, have been hit severely by the economic downturn during 2010 and 2011 and as such have generated considerable losses…The reorganisation will ensure that these loss-making contracts continue with a different contractor and the rest of the group continues on a much stronger financial standing.”