UK-based datacentre cooling systems management company FEL Group has ceased trading, citing “protracted negotiations” over a key contract as the reason.
The £5.5m-turnover company entered administration in June 2022, with insolvency practitioner RSM Restructuring Advisory appointed to take over the running of its operations.
FEL Group’s most recent set of financial results, filed in May 2021 and covering the 12 months to 31 December 2020, confirmed that the company made a loss of £29,999 during this period, following an internal restructure and a degree of refinancing.
The accompanying report painted a picture of a firm that had faced some struggles as a direct result of the dampened economic conditions caused by the Covid-19 pandemic, but was optimistic that its financial situation had turned a corner.
“In light of the restructure and change in management, improvement can be seen as the company returns to a break-even position,” said the report.
On this point, the company posted a loss of £1.2m during the previous financial year.
“For the majority of businesses, 2020 represented a hugely challenging year,” said the report. “FEL Group has been able to show a result that shows the business is in a strong position to make the most of the upturn in activity expected in 2021. The net result of a near break-even position, compared with a loss of 2019 of £1.2m, is a very encouraging result.”
The onset of the pandemic saw a steep rise in demand for cloud services and, by extension, datacentre capacity, especially where the hyperscale cloud firms were concerned.
But at the same time, it also had a destabilising impact on equipment supply chains, making it difficult for some operators to get the kit they needed in a timely fashion, while some enterprise datacentre operators scaled back investments in their facilities to use more cloud.
According to FEL’s accounts, it was one of the infrastructure companies to have exited 2020 poised to take full advantage of the predicted uptick in economic activity that was expected to happen once the UK left lockdown.
“Work winning on datacentre projects has been positive, with key projects acquired with household name companies,” the company’s 2020 financial results report stated. “The business has a long-term strategy to be a key delivery partner to national businesses in the datacentre sector.
“Despite seeing some slowdown in capital expenditure items by our customers within installations, that part of the business performed well and we engaged several new customers.”
However, it seems that an unforeseen issue with a “key contract” ended up becoming the firm’s undoing.
In a statement to Computer Weekly, a spokesperson for RSM said FEL came under “significant financial pressure” because of “protracted negotiations associated with a key contract, which impacted its ability to win other business”.
The statement confirmed that attempts to source additional investment to keep the business afloat were made, and a sale of the business was also explored, until its directors realised they were unable to avoid insolvency.
The statement continued: “Graham Bushby and Gordon Thomson of RSM UK Restructuring Advisory were appointed joint administrators on 1 June 2022 and the company ceased to trade.
“The steps taken by the joint administrators will allow the realisation of key assets, which will result in best return available to the creditors of the company.”