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Kerry Foods is latest food company in difficulties

Following the sudden fall into administration of DBC Foodservice it appears that another food company has found itself in difficulties.

This time it is Kerry Foods, in Gilesgate Moor, Durham City, which has launched a consultation period with workers after a drop in profits.  They are looking to urgently cut costs and possibly close a factory.  346 jobs are at risk.  Any production will be transferred to other factories.  Kerry foods is the 3rd largest private sector employer in Durham.  

If a rescue plan fails, the business proposes to transfer production from Durham to other sites in the UK and Republic of Ireland.

A spokesman for the company said market conditions had become “highly competitive and intensely challenging”. In a pessimistic note he went on to say “While we have made significant adjustments to our cost base and have sought to win new business, to date we have not identified a plan or a strategy to restore profitability to a sustainable level,”   That is obviously worrying.

It is not clear what is happening as the company last reported profits of £24m on turnover of £576m.  However, These figures relate to the end of 2010 so not very uptodate.  Also lots of new board members were taken on at the end of last year and it has recently had a few county court judgements against it.  Looks like margins have suddenly been squeezed.  Could it have been the sudden loss of a contract with a major customer?  Seems a bit of coincidence that 2 large food suppliers have got into trouble so soon after Tesco announced its first profit warning for 20 years.

If you are an employee of Kerry Foods please see our help for employees pages

Bradford Bulls need £500,000 to avoid administration

It's not just football clubs that get into trouble with HMRC

The Bradford Bulls, the rugby league team, have to raise £500,000 by the 6th April in order to pay HMRC and avoid administration.  The super league team have struggled financially for many years as they do not have a wealthy benefactor.  However in a desperate plea to their season ticket holders they have already raised £100,000.   The club has blamed the Royal Bank of Scotland for pulling their overdraft facility without warning meaning they couldn't pay their tax bill.  Err but really the fact that they have racked up a massive bill for PAYE might be the real reason for their demise.  HMRC are expected to issue a winding up petition if it is not paid. 

We have recently put some pages up about why football clubs tend to get into trouble and the reasons that a rugby club is facing similar problems is not that surprising.  However, the Super league does not have the same power as the "football creditors rule" that ensures that all the players will be paid ahead of other creditors but it will have a big say in  any restructuring as it has the power to grant franchises to clubs that allows them to play in the league.

So what is the likely outcome?

The club is likely to go into administration if it can't pay the first tranche of money but if it can then it may propose a company voluntary arrangement to allow it to buy more time.  Even if the club does go into administration then it may exit the process by a CVA as a way to keep going.

Millionaire businessman and Guiseley AFC benefactor Steve Parkin has previously spoken to the Bulls and is understood to be on the club’s radar again as a potential investor.

Colliers International in pre pack administration

Colliers International, the property agency founded by Sir John Ritblat, has been sold in a pre pack administration deal to its major shareholder the Canadian Firm FirstService.  Colliers joins the list of humbled property consultancies such as DTZ that have seen their share prices plunge and eventually  be sold in pre pack administrations. 

The credit crunch hit the commercial property industry particularly hard when deal volumes collapsed.  Volumes have since recovered but as many firms grew rapidly on debt backed deals when the commercial sector was riding high they have been left with large debt overhangs.

So who loses out?

Many of the shareholders will be left with nothing and it is understood that Barclays have lost £18m.  The employees who had share schemes may also be hit although it very much depends on how they were structured. 

DBC Foodservice in administration

I have been informed that DBC Foodservice, which recently put itself up for sale following a challenging trading period, has gone into administration with Baker Tilly as the administrator.

The firm had a last reported turnover of £300m but made losses of more nearly £5m upto March 2011. The company employs 1000 people in 12 different locations. DBC Foodservice was previously called The Danish Bacon Company but now supplies a wider range of products, such as egg and cheese. The firm has a major contract with the Ministry of Defence to supply the armed forces.

No announcement has yet been made by the administrators but I have confirmed with Baker Tilly that they are appointed as the administrator. As such any enquiries should be directed to their Manchester office 0161 830 4000. When I know more I will update this blog.

update 28/3: Russell Cash from Baker Tilly has said ""We are in discussions with a number of interested parties, some of which are at an advanced stage. We are hopeful that we will be able to secure a future for certain areas of the business."

If you are an employee of the business then you can read our help for employees page

If you are a supplier to the company read help for suppliers

Winding up petitions being issued by banks over interest rate swaps

It has come to light that there is a potential mis selling scandal about to break again. This time regarding the selling of interest rate swaps as part of loan agreements offered to small businesses. The fact that these were sold to businesses as opposed to individuals means the scandal will perhaps not be on the same scale as the PPI scandal

However, that does not mean it has been any less distressing for small businesses that have taken on interest rate swaps without fully understanding what they are buying.  In essence the argument has been that these swaps were complex financial instruments and should not have been sold to small businesses.  For instance did the small businesses realise that if the interest rate went down then the payments for their loan went up.  Of course in 2007 when these were being sold many people never thought that interest rates would go down, but did they understand the risks?  In some cases, post credit crunch, the loan repayments have doubled...! 

In one instance we know of, the company has been issued a winding petition by their bank as well as the bank trying to enforce their security as a way to quickly kill this issue off. 

If you feel you have been sold an interest rate swap product that was not properly explained to you and the bank is aggressively seeking repayment then we know a solicitor who specialises in interest rate swaps misselling. They will give you a free initial consultation. 

The doubling of loan repayments because interest rates have gone down is definitely going to hammer cashflow!

Game Group Closes 277 Stores as rescue bid fails

Game Group, which went into administration this morning, has announced that it is to close 277 stores with the loss of 2100 jobs.  The company had been trying to thrash out a deal to save the whole business over the weekend after the company filed a notice to appoint administrators last week.  When the sale fell through the business had little choice but to go ahead with the administration.  The administrators have said that they will concentrate on trying to sell the remaining 333 stores.

The Royal Bank of Scotland is trying to put a rescue package together with the other lenders but as always it seems strange that a public owned bank might be the majority owner of a video games business.

The writing has been on the wall with regard to Game Group and many people appear to have been waiting for the inevitable.  First of all, the firm had a terrible Christmas trading period, then suppliers refused to supply, the company announced an intention to appoint, a rescue or sale was mooted and then the deal failed.  This failure also has striking similarities to the collapse of Woolworths in 2008.  The staff appeared to have been left a little in the dark which may lead to some morale problems making the sale of the remaining stores more problematic. 

If you are an employee of Game Group please refer to our help for employees pages

Donns LLP in administration

Donns LLP, a personal injury compensation law firm, based in Manchester  has gone into administration.  PricewaterhouseCoopers are the administrators.  The firm had  offices at City Wharf, in Manchester.   The most recent accounts for Donns LLP said that the firm's liabilities exceeded its total assets by £5.5m. The firm was attempting to renegotiate its banking facilities at the time.         

Another Manchester based law firm, Irwin Mitchell,  has bought “several hundred” personal injury cases from the stricken firm in a deal with the administrators.  The firm can now write to all the clients and advise them that their cases can be continued.

So how come law firms such as Donns LLP can get into trouble?  The simple fact is cashflow.  Much work done by lawyers is only paid once the case goes to court and the outcome determined.  In no win no fee cases the firm has to take out an insurance policy to get paid if they don't win.

Also lawyers are notoriously bad at chasing debts for the simple reason that the time spent is not "billable time"  Consequently they can end up with huge amounts of work in progress but not actual money in.

So how can lawyers get help if they face cashflow issues.  Well, the first step would be to look at our help for struggling lawyers webpages.

USB toolkit for directors who are worried about insolvency

Worried about your business? Concerned it may be failing? Need help fast but dont want to meet anybody face to face yet? Get all of our best guides and expert advice on one USB Drive – FREE! 

This toolkit is available as a discreet USB device ( we do not mention insolvency on the drive itself ).  You do not need to be connected to the internet to read all the guides to your options.

What does it cover?

  • The tests for insolvency
  • Establishing if your business is viable.
  • How to ask for time to pay your debts to HMRC
  • Extensive guides on pre pack administrations, liquidation, company voluntary arrangements. 
  • A guide to all the legal actions that creditors might take and the issue of personal liability.
  • What is an overdrawn directors account and why does it matter.
  • How to raise finance to ease cashflow pressure.
  • Your duties as a director of an insolvent company.

  Just plug in the drive and you can easily navigate to all the menus: http://www.companyrescue.co.uk/directors-guides-insolvency/directors-toolkit

The USB drive also includes all the products that are on our shop - so free of charge.

  • Dissolution programme with all the letter templates and resolutions. 
  • A time to pay programme with all the letters and information needed to ask HMRC for more time to pay VAT/PAYE
  • Daily cashflow spreadsheet to help you budget.

Order your free toolkit and start taking action to save your business now.  Please email robertm@ksagroup.co.uk to receive your complementary copy in the post.

Retail volumes in surprise fall

Looks like George Osborne has his work cut out if he is going to stimulate some growth and consumer spending.  The latest figures from the Office of National National Statistics show that retail volumes fell by 0.8% compared to the previous month. 

Now, we don't like to make too many month on month comparisons as last month the ONS reported a increase of 0.9%.  But wait, this month they have said they made a mistake and that the growth was only 0.3%.  The year on year picture is not too bad as sales volumes have risen overall by 1.7%  but the fall by 0.8% has taken the markets by surprise.  Some of the biggest sales falls were seen in clothing and footwear, where sales volumes were down 0.4% in February, the ONS said. Heavy discounted in earlier months were previously supporting volumes but this was unsustainable.  Note that these figures relate to volumes not actual spending which are published by the British Retail Consortium.  As such, they measure the size of the shopping bags as opposed to the amount actually spent as it were..  That said it is still a useful indicator.

Game Group plc is the latest large retailer to go into administration which has 1,300 stores in the UK. 

If you are a struggling retailer then perhaps a CVA can save your business.  Take a look at our retailer rescue pages or give us a call on 0800 9700539

Business Recovery Services From KSA Group

KSA Group can offer business recovery advice to struggling companies.  A formal insolvency procedure is not necessarily the only solution as an informal deal may be agreed with the creditors. 

Please see our new page on business recovery services from KSA Group.

Blogged by Robert Moore
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