iCandy goes into administration due to cash flow problems
11-May-2017iCandy has gone into administration due to cash flow issues that have persisted since the start of 2017.
The company was founded by Clinton Lewin in 2012 after his previous company – Clinton Cards – went into administration in the same year.
Why has iCandy gone into administration?
Administrators FRP have cited two primary reasons for iCandy falling into administration; a reduction in consumer spending and a drastic increase in business rates. In combination, these factors prevented the company from generating sufficient cash flow to continue operations as they had done previously.
Supported by Lewin's personal savings, iCandy opened a total of 14 stores between being founded in 2012 and 2016. This was facilitated by a lengthy period of strong overall revenue growth, evident from the revenues of £4.3m for the year ending July 2016. However, the aforementioned pressures caused growth to slow to unsustainable levels in the period between then and the start of 2017.
In terms of customer numbers, administrators blamed increasing fuel and food prices. Customer spending was especially low in many of iCandy's smaller branches. These circumstances led Lewin to call in the administrators with a view to finding a more sustainable long-term solution.
What will the administrators do?
FRP Advisory, led by partners Glyn Mummery and Jeremy French, have been appointed as administrators.
While iCandy and its assets are up for sale, the administrators have outlined their intention to keep 10 stores open for trading.
These stores currently employ a total of 79 full and part-time employees. However, four stores across Hertfordshire, Suffolk and Essex will be closed, with 22 staff set to be made redundant.
On 9 May, Mummery stated: "Many of the stores continue to trade well from desirable locations in the more thriving market towns of Essex, Hertfordshire and Suffolk, and they continue to capture the purses of shoppers looking to spend within the wider gifts market."
FRP claim to have already communicated with a number of parties that have shown potential interest in a buy-out. Total unsecured liabilities are thought to be in the region of £2m.
The question really is would a CVA have been a better option? A CVA could have allowed the unprofitable stores to be closed down and given the company breathing space to restructure. Of course, it does depend on the support of the creditors at 75% by value and there may have been an immediate threat in the form of a winding up petition. But it is worth remembering that many business can be saved by the CVA mechanism. See our page on how we can rescue retailers