Jobs saved as Evolution Group gets capital injection

A troubled Brisbane-based traffic control giant will get a new injection of funds after another key subsidiary collapsed owing creditors more than $14m.

The Evolution Traffic Management DOCA will see the preservation of 700 jobs. Picture: David Crosling

Troubled traffic control giant Evolution Group will be propped up with a new injection of funds after a key subsidiary collapsed owing creditors more than $14m.

Creditors last week agreed to a deed of company arrangement (DOCA) for Evolution Traffic Management that employs more than 700 workers in Queensland, New South Wales and Western Australia. The arrangement will see Evolution Group provide funding of up to $5.6m to pay creditors and for working capital.

FTI Consulting administrators John Park, Joann Dunn and Kelly-Anne Trenfield were appointed administrators of Evolution Traffic Management in March after the company ran into financial difficulties due to Covid-19 lockdowns, lack of capital and rising debt levels.

“There was a loss of key personnel, poor management of accounts receivable, decreased support by financiers and escalating tax liabilities,” the administrators said in a report to creditors. “In addition there was a reduction in spending by state government road authorities and adverse weather events in southeast Queensland.”

The DOCA will see the preservation of 700 jobs and a return to unsecured creditors and ongoing trade creditors of between 21 cents and 46 cents in the dollar.

The administrators said that in the 20 months between July 2020 and February this year, the company only made a small profit.

“Insufficient liquid assets were held to meet current liabilities.” the report said. “The company experienced difficulties in invoicing clients in a timely manner and collecting monies owed.”

The rescue package comes after Evolution Group reported losses last financial year of $21m, compared to $4.9m in 2020, sparking a warning from auditors about the company’s future as a going concern.

Evolution Group chairman Kerry Daly told shareholders last year that beyond Covid-19 business disruptions, “profitability remains constrained by insufficient working capital and expensive and restrictive debt levels, arising from an over-leveraged balance sheet.”

In June 2020, Evolution Group put another one of its subsidiaries, Evolution Traffic Control, into administration with auditors earlier indicating the group’s large debt level could be unsustainable.

Evolution Group as a whole recorded $102.6m of revenues last financial year which represented a marginal increase on the prior year. Evolution Traffic Management recorded revenue of $65.2m.