Manufacturer and wholesaler of domestic flat-pack and contract furniture, Addspace Furniture Ltd, suffered significant losses and reduced orders in the build up to its administration.
Stephen Clancy and Steven Muncaster, both of Kroll Advisory Ltd, were appointed as joint administrators of Rotherham-based Addspace Furniture Ltd on 20 January 2023.
Detailed in a newly filed administrators report, the business had made significant losses for the 12-month period ending September 2021 and September 2022. This was due to reduced customer orders, together with lower margins resulting from cheaper overseas competitors entering the UK market.
As a result of the losses, HMRC liabilities and trade creditors had been stretched. Repayment plans were put in place in order to improve the short-term cash flow of the business, with the directors securing additional investment of £250,000 in February 2022. However, these funds were utilised to fund restricted trade credit facilities and were unable to invest in machinery upgrades. In November, further investment was sought, which failed to materialise.
A month later, the business was marketed for sale but no offers were received despite 10 parties expressing an interest. The main areas of concern were the high debt levels and the machinery being too dated, which would mean a buyer would have to significantly invest in the business.
This prompted the appointment of administrators and a wind down process, which resulted in 62 redundancies. Sales of remaining stock and fulfilment of outstanding orders were achieved during the wind down period.
Following the appointment, administrators did sell the company’s unencumbered plant and machinery to an independent third party.
In total, around £363,000 was realised and has been paid to secured creditor, invoice finance facility Close, owed £190,000. However, HSBC bank, owed £231,000, are not expected to be repaid.
Preferential creditors, which include claims to RPS of £43,000 and the HMRC of £490,000, could receive a distribution from the remaining value of £309,000, while unsecured creditors, owed a combined figure of £2.1m, will not. These include trade claims of £918,000, employee redundancy claims of £199,000, hire purchase creditors of £444,000 and intercompany creditors of £597,000. A total creditor shortfall is expected to be over £2.1m.
Upon entering administration, it was alleged that the company failed to consult with staff before making redundancies. Making redundancies without consultation could give rise to claims for up to 90 days’ pay by way of a protective award.
It is understood that former employees of the business contacted Leeds and Bradford-based employment law specialists, Morrish Solicitors, in this matter.
Where 20 or more employees are made redundant at one workplace, a company is under an obligation to engage in an information and consultation process, which must start at least 30 days before the first redundancies are made.
It is alleged Addspace Furniture Ltd did not start that process and that staff have been made redundant without any prior warning.
