Former North East company of the year Merit has confirmed it has filed an administration notice, a few weeks after it was served with a winding up notice by HMRC.
The Cramlington offsite construction specialist has been delivering technically complex buildings for more than 20 years from its Northumberland base, building up a client list on the back of its ability to manufacture up to 95% of buildings at its base, before shipping them to their final destination.
However, in August it emerged that the company was “exploring options” after Merit Group Services was served with a winding up petition by the tax authorities.
Now the group – which has more than 300 employees – has stepped up efforts to protect the business, filing notices of its intention to appoint administrators at both Merit Holdings and Merit Health. It is understood the company is now in talks with business advisors at a leading consultancy and is considering its options. The business told The Journal that it remains “confident that a solution to this difficult situation can be found”.
The HMRC petition filed against Merit, winner of the Company of the Year trophy at the 2018 North East Business Awards, came as a surprise, following a strong period in which the group – especially its health sector-specific subsidiary Merit Health – had been involved in a steady flow of significant projects, including the construction of a new hospital in Berwick.
It has also been planning for the future with more expansion of its manufacturing facilities, laying down the groundwork for a possible 250,000sq ft extension of Factory 2 to increase production capacity and support rising demand.
At the time the winding up petition emerged, the company said it was “in discussions with one of our key customers with regards to resolution of some substantial payments that are now significantly overdue”.
Most recent accounts for Merit Group Services, the parent of 16 group subsidiaries, cover the year to the end of June 2024 and saw bosses hail strong results and continued innovation, despite seeing a fall in both sales and profits. Turnover dropped from £88.4m to £79.7m while operating profit fell from £7.9m to £6.3m.
The business has faced a number of winding up petitions this year from other companies which have been resolved, but it is still facing action from the tax authority.
A spokesperson for Merit said: “The recent filing of a winding up petition against Merit Group Services resulted in certain customer projects experiencing delays, which in turn has placed significant additional pressure on the group’s cashflow.
“We have therefore taken the decision to file a Notice of Intention to Appoint Administrators in order to protect the position of the business while we explore options. We remain confident that a solution to this difficult situation can be found.”
