Homeform collapsed with £80m debts
By David Casey
The administrators of kitchen and bathroom showroom group Homeform have admitted that customers, employees and businesses owed a collective £30m following the company's collapse are unlikely to see a penny of their money.
A new report seen by Insider has revealed that the company, which operated the Sharps Bedrooms factory in Bilston, failed owing creditors more than £80m.
The business traded from 170 showrooms and employed 1,200 staff at the time Deloitte was called in as administrators in July, but about half the employees have since been made redundant. The failure was the group's second in the past four years.
Management accounts have revealed that turnover fell to £134.1m in the year to 31 March 2011, down from £151.2m a year earlier, as customers shied away from big-ticket purchases. Losses before interest and tax had also multiplied from £3.7m in 2010 to £15.1m this year.
Deloitte said that in the run up to the insolvency, director Chris Pavlosky had identified the need for £10m so that the group could remain in business until the end of the year, but private equity owner Sun European Partners had refused his request for further investment. The private equity firm had, however, indicated it would be willing to buy back Sharps and Kitchens Direct should administrators be appointed.
On 6 July 2011 – the date Phil Bowers and Bill Dawson from Deloitte were confirmed as joint administrators – a pre-pack deal was completed to sell Sharps back to a new company controlled by Sun, a sale that saved about 550 jobs, including at its factory in Bilston and offices in Camberley, Surrey. But a deal to rescue Kitchens Direct could not be agreed.
Deloitte said the sale price for Sharps was £7.5m, with £2m paid up front and the rest to be paid in two instalments over the next two years. However, the cash raised from the sale will be insufficient to pay back the hundreds of customers and businesses owed money following the collapse.
The report to creditors from Deloitte said there would be no money to pay the £13.5m owed to trade creditors; the £5.4m to HM Revenue & Customs; the £1.8m owed to customers; the £1.5m owed to sub-contractors; or the £6.6m owed to other trade creditors. Staff are also unlikely to get any of the £2m owed to them in wages and holiday pay.
But Deloitte said that Barclays should get its £5.5m back as the first-ranking secured creditor, and Sun should be able to recoup some cash from its £62m investment. However, the private equity firm is likely to take a hit of about £53.8m and the total deficiency to creditors will be in the region of £84.8m.
The administrators also revealed that further cash could be raised from the sale of the Moben Kitchens, Dolphin Bathrooms and Kitchens Direct brands and "advanced negotiations" with one party are now underway.
