Traffic control group Evolution in financial jam

A traffic control company that worked on the light rail project has put one of its subsidiaries into administration, with auditors warning the group’s large debt level puts its future in doubt.

Evolution Traffic Management secured the contract for the Gold Coast Light Rail.

TRAFFIC control company Evolution Group has put one of its subsidiaries into administration with auditors earlier warning the group’s large debt level could threaten its future as a going concern.

Brisbane-based Evolution, which is one of the largest traffic control companies in Australia and New Zealand, this week put a subsidiary firm called Evolution Traffic Control into administration owing creditors an estimated $14 million.

Evolution Group, which up until April included Howard Government minister John Moore on its board, has accrued losses of more than $11 million in the past two years.

Last month in a filing to the Australian Securities and Investments Commission, the company’s auditors PKF said Evolution had debts last financial year of $23.3 million compared with $8.5 million the previous year.

PKF said that given the debt level, the company’s ability to continue “as a going concern” needed to be considered. A going concern is a business that is assumed will meet its financial obligations when they fall due.

The auditor said the company’s financial position stemmed from the impact of a capital restructuring in 2013 when it conducted a share buy back and capital reduction of about $20 million.

Evolution traffic control on the Gold Coast during building of the first stage of the light rail.

Evolution, which is a public, unlisted company with about 1000 shareholders, funded the capital restructuring with loans and through acquisitions.

Evolution Group chief operating office John Macnamara said the group was not under threat of collapse and continued to operate. “All existing traffic management contracts are being fulfilled and all employees remain on site with all existing jobs preserved,” said Mr Macnamara. “Furthermore, notwithstanding COVID lockdowns, the Group has not retrenched any staff and continues to be hiring.”

He said the group’s auditors signed off on the company’s accounts in December on a going concern basis and the concerns about liabilities related principally to the debts in the subsidiary now in voluntary administration.

He said the administration followed an internal restructure involving a non-operating subsidiary of the group that had no staff or customers to address legacy debts.

The auditor said the future of the company as a “going concern” would be dependent on the continued support of its creditors and financiers, further funding from shareholders and future profit contributions. Evolution Group’s chief executive officer, financial controller and executive director all left the business last June.

John Park and Kelly-Anne Trenfield from FTI Consulting were appointed as voluntary administrators of a Evolution subsidiary, formerly known as Evolution Traffic Control, on Tuesday.

Mr Park will now investigate and report to creditors on the company’s business, property, affairs and financial circumstances, with the first creditors meeting on June 12. The company had no current projects or employees.

Originally published as Traffic control group Evolution in financial jam