Companies House has now published the full ‘administrator’s proposal’ statement for Bob Crosby Agencies, trading as Crosbys, which reveals that the distributor garnered more than £1.8m of debts in the lead-up to entering administration on 20 March.
Administrator RSM Restructuring Advisory subsequently helped the Newcastle-based dealer to sell its assets to Unitech Group Investment Fund, with the new entity, Crosbys Catering Supplies, commencing trading on 6 April.
The administrator’s proposal details that Bob Crosby Agencies owed HM Revenue & Customs a total of £79,000 – however, the government body was not the biggest creditor.
Nearly £1.7m of the total debt comprised trade and expense creditors, with Lincat topping that list at almost £125,000.
Other major manufactures left severely out of pocket include Williams Refrigeration, at nearly £82,000; Rational with £81,000; Hobart with close to £79,000, Blue Seal at over £73,000; Essity UK with nearly £65,000; Nevilles at more than £64,000; Nisbets with over £56,000 and wholesale arm Uropa Distribution at almost £56,000 itself; while ARC Tableware and RS Vents were both owed over £55,000 apiece.
The statement of affairs also stipulates the valuation of the business and its assets for the sale transaction. Two main offers were received, with Unitech’s bid of a going concern sale for all of the business comprising £30,000 for goodwill and miscellaneous assets and £85,000 for stock, with everything payable in cash on completion. Unitech did not adopt any of Crosbys liabilities as part of the deal, with the report adding “unless they subsequently agreed to with any party”.
The second offer was a going concern sale for part of the business only. The second party offered £100,000 for goodwill and miscellaneous assets, with the stock offer at 95% of the agreed balance. The terms were £100,000 on completion, with the balance payable across 2 months following stock taking. However, for the second offer, the administrators reported: “Subsequent to acceptance of any offer, the majority of employees advised us that they would not be prepared to work with buyer 2. Following this, buyer 2 withdrew their offer.” The report did not disclose the identity of the second bidder.
The report further stated that Bob Crosby Agencies recorded a turnover of over £9.6m in the period ending 30 June 2017, making nearly £53,000 in operating profit during that period. That was a sharp decline from the more than £408,000 of operating profit in the year to 31 March 2016. However the £7m revenue for that year was 37% lower than the subsequent results.
According to the administrator’s proposal, events leading up to the administration followed a root to branch review of the company, undertaken when Mark Gubbins was appointed as a new (non-statutory) MD in November 2017.
The report outlined: “Following a full reconciliation of the stock during February 2018, the actual stock versus book value was considered overstated by approximately £289,000. In addition, prior year accounting adjustments of approximately £60,000 had also been identified which would have to be reflected within the accounts.
“The combined effect of both items suggested the balance sheet would move to a net liability position of approximately £109,000.
“At this stage, the directors were introduced to Allan Kelly at RSM Restructuring Advisory, who met with the board on 13 February 2018.
“Management had prepared a number of forecast scenarios but these were dependent on margin assumptions, which could not be clarified until a further stock take was performed at the end of February 2018. The directors were confident, subject to margin clarification, that the position was recoverable.”
However, the proposal goes on to reveal: “At a subsequent meeting during late February 2018, management advised that as part of a further review they had identified non-qualifying invoices relating to project work within the company’s invoice finance facility. The removal of these invoices from the facility created an overdrawn position and management agreed with the invoice finance provider to restore the position over a number of weeks.
“The directors had already begun the process to seek investment from existing or new investors and/or a solvent trade sale with dialogue in progress with a number of parties. Despite positive discussions with at least one third party investor, it became apparent to directors that the increasing level of investment required would be difficult for any investor to deliver, especially within the required period.
“RSM held further discussions with the directors regarding insolvency options and whether a Company Voluntary Arrangement (CVA) would be appropriate coupled with a restructure of the company operations.
“On 19 March 2018, RSM met the directors again who advised that they did not consider a CVA would be successful within the forecast performance of the company given working capital requirements and the required CVA contribution. Following this, RSM commenced an accelerated sale process and files a notice of intention to appoint administrators on 20 March 2018.”
The report records Roger and Ben Crosby as directors, with Joseph Docherty resigning his directorship on 16 February 2018.