Council put £245k into Halton Transport a month before it collapsed

Halton Council said it would back the publicly owned Halton Transport financially 'if required' and in December paid the sum to the company in exchange for its Moor Lane garage.

In the same month, the company was signed off by its directors and auditors as a going concern, expected to remain in business for the foreseeable future.

But Halton Transport ceased trading just a month later, collapsing under the weight of its financial problems and putting 150 people out of work.

The council claims the immediate cause of Halton Transport’s demise was its bank’s decision to slash its overdraft by £200,000 in December, leaving the indebted company unable to continue.

However, questions continue to surround the company’s sudden collapse and the reasons for its huge losses.

A going concern?

At the end of 2019, Halton Transport was in serious financial trouble.

Its latest set of accounts, due to be signed off in December, showed it had lost £620,000 in the previous year.

The company’s overdraft had ballooned, it no longer had enough assets to cover all of its debts and in July the council had had to loan it £750,000 to bail it out.

Without that council support, the company might have been expected to issue a warning that it might not be able to carry on trading for the next 12 months.

But Halton Transport’s board of directors made no such warning when the company’s latest accounts were published on December 20.

Halton Transport

The board, made up of three full-time directors, four councillors and an officer representing Halton Council itself, instead wrote: “After making appropriate enquiries the directors have a reasonable expectation that the company has adequate resources to continue in operational existence for the foreseeable future.”

The company’s auditors, Mitchell Charlesworth, agreed that Halton Transport was a going concern.

The basis for this opinion was a letter of support provided by Halton Council on November 11, six weeks before the accounts were signed off, confirming its “continued financial support should it be required”.

Although the letter contained no binding financial commitment to the company, it was enough to satisfy the auditors that the council was willing to sustain Halton Transport for the foreseeable future.

According to Halton Council, the bank’s decision to cut the company’s overdraft limit to just £100,000 in December changed its stance.

But it is still unclear when the bank made the decision to cut Halton Transport’s overdraft and if this was something the auditors could or should have taken into account before approving the directors’ claim that Halton Transport was a going concern.

Calls to auditors Mitchell Charlesworth asking for comment for this story were not returned.

Buying the garage

On December 10, Halton Council took direct ownership of the early-20th century bus garage in Moor Lane in exchange for a £245,000 cash injection for Halton Transport.

The money is understood to have been used to pay off much of the company’s overdraft after it had been “significantly reduced” and, in the council’s view, prevented it from collapsing even sooner.

The transaction also secured council ownership of the building “as part of its longer term regeneration aspirations for the Moor Lane area”, according to a spokesperson for the local authority.

The council claims the decision to purchase the garage was taken as early as July 2019, at the same time as its decision to loan the company £750,000 as a bailout, secured against the same garage.

In the end, only £400,000 of that loan was released to the company, putting the total amount the council paid for the garage at just under £650,000.

Where did the money go?

The speed of Halton Transport’s collapse was remarkable.

In just two years, the company’s losses rose 1,100% and appear to have continued to mount since March 2019, when Halton Transport’s most recent accounts finish.

The company accounts show that while its income remained consistent at around £7 million a year, its costs ballooned.

On top of these losses, two of the company’s directors have been on long-term sick leave for most of the past year, including the finance director.

In their place, two Halton Council employees have been supplying part-time support to the company during this troubled period.

Among the reasons for the mounting losses, again according to the accounts, are the delayed completion of the Silver Jubilee Bridge refurbishment and a rise in the cost of insurance claims.

Others have blamed the cost of repairing Halton Transport’s ageing fleet, and the frequency with which the buses broke down and needed to be towed back to the garage.

The company last bought new buses in 2010 and since then has purchased vehicles second-hand.  Some of Halton’s buses were more than 15 years old when the company collapsed and maintenance had become such a concern that the Office of the Traffic Commissioner, which regulates bus operators, had called Halton Transport to a public inquiry on February 19.

With the company heading for liquidation, that inquiry now seems unlikely to go ahead.

Meanwhile, the reasons for Halton Transport’s collapse, beyond the council’s statements about difficulties common to bus companies across the country, remain unclear.

The council’s position

In response to questions about the circumstances leading up to Halton Transport’s liquidation, a spokesperson for Halton Council said: “The Council has supported the company over many years to ensure continued provision of bus services for residents throughout the borough and provide employment through the bus company.

“In recent years the company’s trading position has deteriorated, as has also been the case for many private bus operators across the bus industry and within Halton. In particular, the Council has strived to support the company during the past year.

“However, a number of circumstances led to the Board of Directors concluding, on the basis of external professional advice, that the company could not continue to trade solvently going forward and therefore they had no alternative but to decide to cease trading in order to meet their responsibility to the company’s creditors.

“It is also important to reflect that the Council has secured contracts with other bus providers to maintain bus provision for Halton residents.”