The insolvency practitioner working on behalf of Francis Catering Equipment is holding a creditors’ meeting today as part of the ‘deemed consent’ procedure.
The Birmingham branch of FRP Advisory is gathering creditors of the Midlands-based distributor, which was forced into administration on 4 September, to discuss how the firm intends to pay the creditors.
Unitech Industries has stepped in to buy the business, assets and intellectual property rights of Francis Catering Equipment along with its associate company, Stockport-headquartered Design Catering Equipment, with the new business trading under the name of Francis Commercial Kitchen Services.
Catering Insight has seen the administrators’ report for Francis Catering Equipment, which states that there are 174 creditors, with debts totalling over £1.8m.
The top creditor is predictably HMRC, which is owed over £362,000, with industry creditors headed by fabricator Proline, owed more than £131,000. Next largest is Falcon Foodservice Equipment, at over £84,000, Philmar Fabrications and Rational are both owed nearly £71,000 and rounding out this unwanted top five is Foster Coldstores at just over £70,000.
The report goes on to detail: “Historically, Francis has made small annual profits, however, at the start of 2017, in addition to its regular turnover generated from the private and public sectors, the company secured a substantial new contract to install the catering units at a new nuclear power station.
“Whilst this was a significant contract for the business, that would boost revenues by £1.5m-£2m and also generate additional profits, following its commencement in April/May 2017, it caused working capital difficulties due to the significant manpower and catering equipment supplier costs arising.”
The report further explained: “Due to a substantial proportion of the company’s revenues being generated during the second half of the calendar year, there has always been cash pressure during the first four to five months of the calendar year. This, coupled with the working capital requirements of the aforementioned contract, led to the company falling behind with its trade creditors and HMRC.
“Attempts were made to secure an alternative invoice discounter that would also have the ability to fund the large nuclear power station contract. Meanwhile, MD Neil Humphries commenced some exploratory conversations with a potential investor/acquirer.
“By the middle of August 2017, it was believed that a refinance solution had been secured, however, after a late withdrawal from the potential funder it became apparent that the company would have to explore alternative options in addition to continuing discussions with funders. At this point, FRP were formally engaged (engagement letter dated 18 August 2017) to provide assistance with contingency planning as well as their ongoing discussions with potential funders and investors.”
The report concluded: “Following a further deterioration in the company’s position in terms of cash pressure and imminent customer slippage that would potentially be detrimental to the ongoing business, a board meeting was held on 30 August 2017.
“At this meeting, it was confirmed that a solvent sale was not achievable. Consequently, it was necessary to take immediate steps to preserve the value of the business and assets, and mitigate further creditor claims, by commencing the process to place the company into administration in view of a sale of the business and assets being completed by administrators immediately upon their appointment.”