Pic: BBC
Pizza Express: suppliers be warned as chain begs for a CVA; collapsed haulage firm left £6.5m in debts; and July's unfeasibly low insolvency figures (we explain why)
It’s the summer of redundancies and autumn of recession. If you are ever invited into a time machine in the future then don’t go back to 2020. With the news that the once mighty Marks and Spencers are to slash 7,000 jobs, John Lewis 1,300 jobs, Boots 4,000 jobs at risk and WHSmith with 1,500 staff likely to go it has been a jobs blood bath.
Pic: The Sun
Suppliers be warned
When a firm seeks a CVA (company voluntary arrangement) you know things are bad. Pizza Express are seeking one with their suppliers and lenders with the crunch day of decision on September 4. That’s when 75% of creditors need to agree on their slashing 73 outlets, cutting hundreds of staff and pleading for rearranged payment of debts and rent from landlords and suppliers.
“It looks touch and go,” said Ian Carrotte of ICSM Credit, “as the casual dining market has suffered excess competition before the pandemic and Pizza Express have yet to reopen even half of their restaurants it could go either way. Suppliers be warned – CVAs can help some companies renew themselves if the business is there - but if it isn’t then it’s only a matter of time before a company begs for another CVA or collapses.”
Hony Capital own the chain of pizza restaurants having acquired the business in 2014 for £900m.
Tipped into the red
Carol Millett of Motor Transport has reported that the tipper truck haulier firm PJ Brown (Construction) went bust owing £6.5m.
She reported: “The Crawley-based firm was tipped over the edge by the impact of the Covid-19 pandemic, which saw construction sites in lockdown from March. The report, by joint administrators Nicholas Cusack and David Perkins of Parker Andrews and Andrew Andronikou of Quantuma, said the company reached peak performance in 2017 achieving £1.3m in profits. However, by the end of 2018 profits at the firm, which specialised in construction transport and had an operating licence for 79 vehicles, had fallen to £794,240. The joint administrators said that whilst PJ Brown (Construction) ‘still appeared to be trading well moving into 2020 - it had begun to struggle to keep up with its ongoing obligations due to its aged debtors’”.
Ian Carrotte noted the firm had blamed the Covid-19 crisis for their cash flow problems. “The pandemic has become the catch-all excuse for firms going bust," he said, “although many of these excuses are genuine, the fact is many have underlying financial problems before the virus arrived by aeroplane from China. Any business worth its salt has to address long standing issues such as debt, lack of contracts and over expansion. As soon as there is a down turn they are the first to go to the wall.”
Car parts firm up for grabs
Ian Carrotte of ICSM Credit has warned suppliers to be wary of companies that are putting themselves up for sale this year.
“It invariably means they are in trouble and are looking for a way out,” he said, “it’s often a last ditch attempt to stay in business and for the directors to retain a lifestyle having exhausted funding from lenders. For suppliers it is a red light. Don’t allow credit until the firm has been sold and is solvent.”
Business Sale website lists companies that put themselves up for sale with the latest one being Moutune in Essex. The company makes parts for Ford performance cars and are working with KPMG to find a buyer.
The website reported: “The company’s accounts at Companies House are overdue by close to a year, with the last available accounts made up to the year ending December 31 2017. Those reports show Mountune registering a £107,429 loss for the year, down from £149,917 in profits a year earlier. In its strategic report, the company said these results 'needed to be viewed in the light of the continuing investment in research and development projects principally relating to low carbon powertrains and performance parts.' The company calculated the internal cost of this R&D at £578,430. At the time of that report, the company’s total assets less liabilities were valued at £4.8 million, with net assets at close to £3.7 million.”
July’s unfeasibly low insolvency figures
The Insolvency Service has again reported another month where insolvencies have remained low despite the Covid-19 crisis. With firms failing left right and centre with CVAs being requested by famous names by the day, it may seem counterintuitive.
“The reasons are two fold,” said Ian Carrotte of ICSM Credit, “firstly the Insolvency Service itself has been affected by the Covid-19 crisis. Many of their staff are furloughed or working from home which means processing insolvencies has slowed down. Also the HMRC has reduced its enforcement activity, reduced operational running of the courts, put in place temporary restrictions on the use of statutory demands and some winding up petitions and enhanced government financial support for companies and individuals.
“Secondly the furloughing scheme has delayed the demise of many firms. Once that lifeline is taken away more firms will collaps."
The Insolvency Service said: “Though overall there was a drop in company insolvencies, there was a rise in the amount of companies entering administration in July 2020, by a quarter, compared to July 2019. Compulsory liquidations remained low, compared to the same month the year before, but increased to the highest monthly level since lockdown was implemented (23rd March).”
In July, the breakdown of the 995 total company insolvencies in England and Wales is as follows:
590 creditors voluntary liquidations (CVLs)
182 administrations
166 compulsory liquidations
17 company voluntary arrangements (CVAs)
0 receiverships
About ICSM Credit
ICSM Credit has more than four decades of experience as a credit intelligence group whose members gain inside information about firms in trouble allowing them to avoid bad debts and rogue traders. To join costs less than a tank of fuel - while at the moment there's a special free temporary membership offer during the Covid-19 crisis which gives access to free legal letters. ICSM also has an effective debt collecting service which has a global reach - ask for details from Paul.
For details about ICSM Credit call 0844 854 1850 or visit the website www.icsmcredit.com or email Ian at Ian.carrotte@icsmcredit.com on how to subscribe and to join the UK’s credit intelligence network to avoid bad debts and late payers. Follow ICSM Credit on FaceBook, Twitter and YouTube and Ian Carrotte on LinkedIn.
To keep up to date subscribe to the FREE ICSM Credit Newsletter to hear all the latest insolvency news and to see who has gone out of business click on the orange panel on the top left of the home page of the website www.icsmcredit.com or send an email to Ian.carrotte@icsmcredit.com
For details for the work of the journalist Harry Mottram visit www.harrymottram.co.uk