The liquidation of Exeter-based shared mobility provider Co-Cars, which ceased trading on 14 July, is expected to leave creditors and shareholders facing losses that total more than £1.3 million.
The administrators appointed to oversee the winding-up of the company, which is also responsible for Co-Bikes e-bike hire and the Co-Delivery cargo bike service, have identified more than 400 unsecured creditors which they estimate will lose more than £640,000 in addition to just under 300 shareholders who will lose another £660,000 as a result of the company’s insolvency.
In an estimated outcome statement included in a 14 September report to the company’s creditors, the administrators calculate that the company’s assets, cash and debts are likely to be worth a total of just under £160,000, provided the agreed sale of the Co-Bikes fleet and parts proceeds as planned and around £46,000 in outstanding debts are successfully recovered.
However they also estimate the total cost of winding up the company at nearly £147,000 leaving just £13,000 available to preferential creditors, including HMRC which is owed around £30,000.
This leaves a shortfall to unsecured creditors and shareholders in excess of £1.3 million.
Creditors include a Cornwall-based social investment fund which is owed £91,000 as well as around 7,000 Co-Bikes and Co-Cars customers who were collectively £38,000 in credit and/or had unexpired memberships worth £20,000 when the company ceased trading.
The company is also in debt for lease termination penalties and repayable grant funding.
While many of the company’s shareholders held relatively small numbers of shares, several invested more than £10,000 during a 2020 share issue that offered a 5% target annual interest rate when high street bank deposit rates were below 2%.
Empty Co-Cars parking bay in College Road
Administrators from Taunton law firm Milsted Langdon were initially engaged in early June to seek a purchaser for Co-Cars while it was still trading.
Despite contact with over 40 interested parties none wanted to take on either the whole business, or either of its car or bike hire services separately, because of perceived difficulties with the large number of stakeholders that would be involved and the numerous contracts that had been agreed to site car and bike charging points on land owned by third parties.
The administrators say they had to investigate the company’s charging equipment installation and use agreements by entering into “discussion with numerous parties about the existence of agreements and what obligations may exist under them” because the company’s records had “proved lacking in detail in this respect”.
They also said it had taken “significant effort and the support of a former employee” to locate missing invoices relating to the company’s debts.
Co-Bike with Next Bike franchise branding (promotional image)
Devon County Council and the University of Exeter were approached by the administrators as the organisations with the most charging site agreements. While both expressed interest in bike hire services continuing, both said they would prefer to start from scratch via new tender processes rather than transfer existing agreements.
Plymouth City Council sought to rescue an agreement that had been made to set up electric vehicle hire points in the city, but other car club providers approached by the administrators did not consider the assignable agreement to be commercially viable. As a result a new tender process will also be held for the Plymouth City Council service provision contract.
Several parties were interested in the Co-Bikes fleet bikes or the Co-Delivery cargo bikes, or both, but mostly in small quantities. The company had around 240 fleet bikes in varying states of repair, a significant proportion of which were off the road when the company ceased trading.
The Co-Bikes franchise agreement with Next Bike, which had required significant investment in bikes and equipment from Co-Cars, provided Next Bike with first refusal on buying the fleet bikes back if Co-Cars defaulted. Next Bike turned them down.
Instead, an agreement has been reached to sell all the fleet bikes with the company’s stock of spare parts and uninstalled charging equipment for a little less than £27,000, which is 4.5% of their £600,000 book value. A buyer has yet to be found for the Co-Delivery cargo bikes.
Co-Delivery cargo bike in Exeter canal basin (promotional image)
The administrators’ account of Co-Cars’ rise and fall says the company was initially profitable, although it adds that “this profit was heavily reliant on the funding that it was receiving from local authorities”.
Co-Cars’ turnover grew from £85,000 to £263,000 in the three years to the end of March 2018, although its net surplus in these years initially rose from £9,000 to £22,000 before falling back to just under £3,000.
By this time it had 2,000 business and residential customers spread across the South West with the majority of its cars in Exeter but some as far afield as Falmouth and Salisbury. The Co-Bikes network, which had been launched in November 2016, was limited to Exeter.
The following year it received more than £315,000 in capital grants and another £125,000 in revenue grants and subsidies and posted a surplus of nearly £250,000.
It continued to expand during 2019-20. Escargo Delivery, a start-up supported by the now-defunct Exeter City Futures Exeter Velocities programme, became a Co-Cars subsidiary in September 2019 and rebranded as Co-Delivery.
The administrators say the £90,000 deficit Co-Cars posted at the end of that year was a result of investment and expansion, describing the Next Bikes franchise agreement as adding to the “financial burden” Co-Cars faced.
The company also changed the way it presented revenue and capital grants in its 2019-20 accounts, with the effect that the previous year’s £250,000 surplus was restated as a £12,000 deficit.
It had by then received more than £500,000 in capital grant funding and was projecting annual income of £1.5 million by 2023-24.
Co-Cars and Co-Bikes hub in Ferryman Way (promotional image)
The administrators say COVID-19 lockdowns caused “trading problems” for Co-Cars during 2020 which were compounded by the cost of living crisis developing as pandemic pressures eased.
After successfully raising £650,000 in shareholder investment between February and August Co-Cars nevertheless reported a loss of £260,000 in 2020-21.
Its annual return for that year says it had made “significant investments in new cars and bikes” alongside increasing its workforce to 26 employees, which it said would place the company in a “strong position to meet post-pandemic operational requirements”.
It added that its board was “confident that such growth will come once more cars and bikes are added to their respective fleets”.
However Co-Cars’ problems “persisted throughout 2022”, as the administrators put it, while the board looked at recovery options including “entering into talks with its financiers and stakeholders”.
Despite 2021-22 turnover of £490,000, more than double the previous year, and revenue and capital grants of £335,000, the board reported a further loss of £350,000 that year. It then found it could raise neither further finance nor shareholder funding.
Empty Co-Bikes stand in College Road
Its 2021-22 annual return says its growth had not met expectations after global supply chain issues had restricted the expansion and renewal of its car and bike fleets, leading in particular to a fall in the number of viable bikes the company could deploy.
It also said further “significant investments” in new bikes it had been able to make, alongside increasing its workforce to 30 staff, had not been matched by the revenue increase it had expected.
When it submitted the return, in September last year, the board estimated that a “reasonable proportion” of £2.9 million in private property development and local government contract opportunities it had identified would provide up-front cash payments that would maintain business viability as it moved towards break-even.
At the same time it expected revenues to grow as car and bike hire points were established in new locations, as planned.
The company auditors, however, reported a material uncertainty regarding its ability to continue as a going concern.
By May this year Co-Cars’ cashflow position was deteriorating and it had “exhausted all possible options”, according to the administrators. While purchasers were being sought it became unable to meet all its costs before finally ceasing to trade on 14 July.
It said the suspension of its services for long periods during the pandemic, changes in travel habits and the cost of living crisis had combined with high fuel and energy costs and supply chain issues to force the company into administration.
The administrators are now expected to proceed with their liquidation proposals.
