Stone restructures to tidy up 'unwieldy' balance sheet

Stone Group puts two holding companies into administration in corporate housekeeping measure

Stone Group has rejigged its corporate structure in a bid to tidy up its balance sheet, but has insisted its main trading vehicle has not gone into administration.

The company's suppliers, customers and employees will not be affected by the changes, the company said, claiming it continues to be "business as usual".

Two of the Stafford-based system builders' holding companies – Stone Bidco and Stone Topco – were put into administration last night, only for a newly created vehicle – Granite One Hundred Holdings Limited – to take over.

Stone's chief executive Simon Harbridge (pictured) told CRN the move was made to clean up its balance sheet, partly for the benefit of suppliers and credit insurers. He said the structure put in place following the MBO in 2008 – which saw backer RJD come on board – was "long past its sell-by date" and needed refreshing.

"A lot of the investment by management and RJD originally in 2008 wasn't all in share capital; a good proportion of it was in loan notes, which carry an interest that accumulated every year," he said. "In the old holding company, you've got a significant balance of loan notes which build up and make the holding company look completely unsustainable.

"In dealing with suppliers and credit insurers and people like that, it looks very unwieldy. So we've drawn a line under that, creating a new structure for the existing management and investors which when people see it on paper, it will be recognisable as a sensible, sound structure and credit insurers and suppliers will be a more comfortable with it."

He added that there were no specific flash points where suppliers or credit insurers were particularly concerned about working with Stone.

"Everyone understands the situation so it's not like a critical issue, but everyone is saying 'you've got all these loan notes' all the time, and it was a situation which needed dealing with at some stage," he said. "We've chosen to do it to clear the decks."

Harbridge stressed that RJD is still backing the company, Barclays remains its bank and he will continue in his role as CEO. He said the restructure was a "vote of confidence" from RJD, which will remain as a backer for the foreseeable future.

"Your typical timeframe for a buyout is five years, or a bit longer," he said. "Bearing in mind this was done in 2008, they've been very supportive for a long period of time and they continue to be extremely supportive of the business. They're still there and... I guess it's a vote of confidence from them."

He stressed that Stone, which is one of the UK's largest remaining system builders with 2013 revenues of £77.3m, continues to operate as usual and moved to calm any concerns from those involved with the company.

"Suppliers will have on their radar any notices of administration... it will be their normal credit-control procedures. Because we're a major customer for a lot of people in the channel for distributors and manufacturers, they will have picked it straight up.

"But the the companies that have gone into administration are Stone Bidco and Stone Topco and they are the original investment vehicles of the group and are nothing to do with any supplier, customer or employee. The jungle drums should die down fairly quickly."