Two waste companies set up to capitalise on a business opportunity resulting from the insolvency of Sterecycle have gone into administration.
Waste Recycling and Diversion Ltd and its “supply arm” Leeds Recycling Ltd started trading in 2013 on the same site in Templeborough, Rotherham, from which Sterecycle had operated. They now owe creditors a combined total of more than £8.2m.
Andrew McGee, director of both companies and landlord of the site, appointed Howard Smith and Jonathan Charles Marston of KPMG as joint administrators in September.
Reports outlining their proposals reveal the “most likely exit route” will be dissolution. The majority of the 118 members of staff employed between the two companies have been made redundant.
Sterecycle’s Rotherham facility was billed as the world’s first commercial scale autoclave waste treatment operation when it started up in 2008. However the company closed in October 2012, following a downturn in trading, after failing to attract a buyer.
In November, Sterecycle (Rotherham) Limited was fined £500,000 after being found guilty of corporate manslaughter following the death of an employee at the plant in January 2011.
According to the administrators for Waste Recycling and Diversion and Leeds Recycling, it was in 2012 that Sterecycle’s assets and site were returned to McGee because a buyer could not be found for the stricken business.
That year, it was decided that an alternative waste treatment facility could be developed using part of the plant and equipment installed by Sterecycle.
Waste Recycling and Diversion started trading in March 2013 “to take advantage of a perceived business opportunity resulting from the insolvency” of Sterecycle, according to the administrators’ reports. However it “failed to meet projected trading levels”. By April 2013, one contract had been secured for 35,000 tonnes per annum, against a forecast of 120,000 tonnes per year.
In April 2013, Leeds Recycling, initially set up as the “supply arm” to Waste Recycling and Diversion, bought a company with waste collection rounds in North and West Yorkshire to utilise the spare processing capacity at the Rotherham facility. Despite this, however, the site was only operating at an average of 80% capacity.
Income was significantly lower than anticipated due to fluctuations in the commodity market, which, combined with higher landfill fees and larger than expected maintenance costs, resulted in substantial trading losses for Waste Recycling and Diversion, the administrators note.
By August, the plant was closed for the receipt of waste while the company considered whether a revised layout could provide operational savings.
Leeds Recycling found that operational and travelling costs for the new rounds were high, meaning several collections were loss-making.
Over the next 12 months, McGee focused on reducing costs and expanding the customer base in South Yorkshire, but the age of the fleet meant there were significant maintenance costs. In September, after 16 months of trading losses, the company sold the collection rounds in the West Yorkshire area to Biffa for £253,000.
As a result of the demise of Waste Recycling and Diversion, and without a processing plant to support the growth of the business in South Yorkshire, Leeds Recycling could no longer continue to trade.
Leeds Recycling owes creditors £2,575,714, including £871,207.08 to McGee. Waste Recycling and Diversion owes £5,670,809.00, including £3,846,306.40 to McGee.