A Noble & Son Ltd entered into voluntary administration on June 15 when its directors decided the company was unable to repay its debts and a restructure was urgently needed.

James McPherson and Austin Taylor of Adelaide-based Meertens Chartered Accountants have been appointed administrators and say the company is insolvent.

A second creditors meeting will be held tomorrow (Wednesday, July 20) where a proposed bailout by E&A Limited will be presented.

Kilburn-based Nobles provides lifting and rigging equipment, technical services and engineering design for a range of heavy industries including mining, oil and gas, construction, shipping, manufacturing and defence.

The latest creditors’ report published last week shows the company reported net losses after tax for the five financial years to June 30 2021 of $18.3m.

In the same period, the financial accounts indicate that Nobles sold assets totalling $14.7m to help cover losses.

Over the five years, the company’s holding of stock reduced by $1.7m and the amount due to trade creditors increased by $1.2m.

At the end of the period, the company still had $9.79 million in net assets, or shareholder equity.

Despite this, shareholders are being asked to hand over their shares to ensure the company’s survival under new ownership.

However, the creditors’ report provides limited current financial information and does not include any financial accounts for the 2021-22 financial year, which ended almost three weeks ago.

Nobles’ board advised the administrators it had been making efforts to restructure the Company for a number of years prior to the appointment, which resulted in a $2 million reduction in operating costs in FY21.

According to the administrators following meetings with the company’s directors, its failure was due to:

• The COVID-19 pandemic adversely affected the company’s restructuring, which failed to achieve its objectives;
• The pandemic reduced demand for the Company’s products and services;
• The pandemic disrupted and caused delays in the company’s supply chains;
• The company failed to achieve its short-term goal of a return
• Inadequate cashflow;
• Ongoing trading losses and the uncertain trading environment;
• Ongoing fixed annual expenses with regard to staff and property costs; and
• Loss of key staff

Nobles owes at least 628 unsecured creditors a total of $5,249,827.38

Under the DOCA, these creditors will be paid between five and 33 cents in the dollar. In a liquidation scenario, they will receive nothing.

Secured creditors, including Meertens Chartered Accountants, Westpac and financier Scottish Pacific as well as all outstanding employee entitlements will be paid out in full.

The company owns three properties where the land and buildings have a net book value of  $2,698,382. However, two of the properties, one in Roxby Downs and one in Karratha WA, are subject to a mortgage. Under the proposed DOCA, EAL will acquire all three properties.

It has motor vehicles worth $260,000. The company’s accounts disclose a net book value for the various items of plant and equipment at $1,870,135.

“On face value there may seem like there are some assets of value that might be available, especially upon the liquidation of the company,” McPherson and Taylor wrote in the latest creditors’ report.

“However, in our experience items such as office equipment, leasehold improvements, computer equipment and computer software will obtain a low to negligible return once sold at auction.”

Nobles owes the Australian Taxation Ofiice $1,547,910 for PAYG Tax ($1,204,801.81), outstanding superannuation contributions ($254,329) and Fringe Benefits Tax ($52,843).

It also owes $31,034 in state taxes to Revenue SA.

The company employed 155 full-time employees at 11 locations across Australia and owes them about $2.48 million in unpaid entitlements such as annual leave and long-service leave.

Keswick-based E&A’s companies employ more than 1400 people and have historically retained business names through subsidiaries.

If the takeover goes ahead, about 100 Nobles staff will be retained and the brand established in Adelaide in 1911 will survive.

In a letter to shareholders dated June 28, Nobles chairman Ian Stirling said E&A’s suggested Deed of Company Arrangement (DOCA) was based on achieving a better return for creditors than the liquidation of the company.

He urged Nobles shareholders to hand over their shares for no return.

“It is a key term of the proposal that EAL acquire all the shares and therefore the business of Nobles,” Stirling wrote in the letter seen by InDaily.

Nobles’ administrators have asked shareholders to agree to the transfer of their shares by today (July 19), ahead of tomorrow’s creditor meeting.

“The DOCA cannot be completed unless your shares are transferred as required under the E&A Limited proposal,” McPherson wrote in a letter to shareholders this month

“Further, if the shares are not transferred as required under the terms of the E&A Limited proposal, the company would then enter into liquidation upon a resolution being passed by the creditors or by order of the court.”

It is not apparent from the creditors’ report whether any competitive sale or recapitalisation process was explored by the administrators.

Nobles’ revenues reached almost $48 million in FY2018 but have steadily fallen since and totalled $43.8 million in FY21.

The company has slid down the rankings in InDaily’s South Australian Business Index in recent years, falling from 70 in 2019 to 79 in 2020 and 93 in 2021.

Under the Corporations Act, administrators can seek court orders allowing them to transfer shares.

“In the event that some shareholders do not agree to the transfer of their shares in the company, you should know that we are applying to court to seek orders enabling us to sign the Share Transfer in place of any shareholder who does not execute their share transfer, if the E&A Limited proposal is accepted and the company enters into the DOCA,” McPherson wrote this month.

Ultimately, if there are dissenting shareholders, they are within their rights to ask questions and oppose any transfer application that is brought by the administrators.

However, costs then potentially becomes a factor as they would likely need to engage lawyers and an opposing expert to argue the administrators’ application.

Under the Corporation’s Act, tomorrow’s meeting has three possible outcomes: Nobles could be declared solvent, which has already been ruled out by the administrators; creditors could agree to adopt the DOCA proposed; or, the company could be placed into liquidation.