Collapsed contractor Jehu Group received £7.5m in taxpayer-funded grants and loans while it was struggling, it has emerged.
A report by the Bridgend-headquartered company’s administrators revealed that the circa £70m-turnover firm received £5.1m in loans from the Welsh Government-owned Development Bank of Wales in the year before it went under.
It was also granted £2.4m-worth of grants from a Welsh Government scheme to help social housing providers deal with construction-material price inflation.
Jehu Group, Jehu Projects and Waterstone Homes ceased trading in late October and filed for administration in November. Some 104 employees were made redundant across the group.
Jehu specialised in construction and development projects for registered social landlords and councils in Wales and the South West of England.
Administrators Begbies Traynor also revealed in the report that the contractor went under owing creditors a total of £23.43m across its three companies.
Those creditors, including dozens of subcontractors, are owed £10.48m by Jehu Project Services, £5.8m by the Jehu Group and £7.15m by Waterstone Homes. Most are not expected to get their money back through the administration process.
The report said that the firm had been trading well up until 2019 and had £7m in assets, but got into a series of challenges – initially as a result of its own rapid growth.
Its final published accounts show it turned over £111.27m in the 18 months to 30 September 2020, making a £4.01m pre-tax loss. In the 12 months to 31 March 2019, it made a pre-tax profit of £1.15m on revenue of £51.7m.
The administrators added that several projects failed to start in 2019, causing the business serious issues when the industry was hit in 2020 by COVID-19 lockdowns and subsequent material cost inflation. It was hit hard as a result of being on fixed-price contracts with single-digit margins, they said.
In the summer of 2021, the company looked at UK government support such as the Coronavirus Business Interruption Loan Scheme, but found it was ineligible to borrow from them. Instead, it applied for, and was granted, a £3m business-support loan from the Development Bank of Wales.
Later that year it was also able to claim two tranches of £1.2m from the Welsh Government scheme for social housing providers. It also held discussions with officials in Cardiff Bay about taking an equity stake in the company – although this ultimately did not happen.
In July 2022, Jehu’s directors transferred the land it held into two special purpose vehicles, the report said. They agreed a deal with a client to buy the special purpose vehicles for £2.25m. The client is not named in the report.
On the strength of having apparently secured that deal, the company was able to secure a further £2.1m loan from the Development Bank of Wales. However, delays in completing the deal led the company back to the Welsh Government to request more support.
Company directors, who supplied the information relayed by the administrators, met with officials from the government and Development Bank of Wales in mid-October “in an attempt to find an emergency bridging solution”, but “no solution was available” and the directors moved to shut down the business.
Begbies Traynor said it was still trying to sell the special purpose vehicles.
If it is able to do so, the Development Bank of Wales will be reimbursed most of its money, although it is set to lose more than £180,000 regardless of any deal.
The administrators added that HMRC was set to miss out an unspecified amount of money, while other unsecured creditors are not expected to receive any cash through the administration process.
A Welsh Government spokesperson said: “We have worked closely with the social housing sector over many months in order to try and prevent this unfortunate situation.
“We recognise the pressures the construction industry is under with soaring prices and material shortages and [in 2021] backed the industry with £11m in additional grants to social landlords to help mitigate increases in material costs.
“We are providing further support to the industry [in 2022], and to date have paid £7m towards additional costs on schemes.”
Read More
Ian Weinfass