The report by administrators Steve Adshead and Gregory Palfrey of Smith & Williamson details how the £19.2m turnover magazine and catalogue printer failed just three months after being demerged from holding company Headley Brothers (Holdings) in September 2016.
Managing director Simon Bingham had a 60% stake in the demerged printing company, with the original Pitt family shareholders retaining 40%.
The holding company retained its property interests but provided support to the business by granting a charge over its freehold for Headley Brothers’ borrowings, as well as a guarantee related to part of the printer’s debt with its biggest paper supplier, Denmaur Independent Papers.
Headley Brothers then refinanced in October 2016, with a new invoice discounting and hire purchase facility.
“It had been anticipated the refinancing would provide sufficient funding to reduce the previous build up in creditor account arrears, particularly with key paper and print suppliers,” the report stated.
“However, an unforeseen £750k reduction in funding available, which the plant and machinery could not support, meant there was insufficient cash available to achieve this.”
A reduction in credit from its principal paper supplier after the supplier’s credit insurance cover was reduced “meant that the company was no longer able to achieve sales at or above break-even level and so no longer had a viable business model”.
Smith & Williamson was engaged in January to advise on the firm's options, which resulted in a fast-track sale process. Smith & Williamson advised that the company was insolvent on 10 January.
Shortly afterwards the printer’s largest customer, Northern & Shell, pulled its work.
After filing four NoIs (Notice of Intention to Appoint Administrators), the business was eventually purchased by Stones Ashford, a new company set up by the owners of Henry Stone and Wheatons Exeter, at the end of February. Stones Ashford paid £100,000 for certain assets, work in progress and goodwill, and took on 113 employees at the Ashford site.
Major trade creditors of Headley Brothers included Denmaur (£1.13m), Stehlin Hostag (£445k) and Fujifilm (£231k). PrintWeek understands that a number of suppliers were “heavily insured”.
Invoice finance provider IGF had secured its debts on certain assets and The Invicta Press property, while the Close Brothers debt related to its HP agreement with the business.
Denmaur managing director Mike Gee told PrintWeek: “As Headleys were unable to meet the payment plan as agreed, with both us and our insurers, our insurers lost confidence and significantly reduced the level of cover going forward. As a direct consequence and to protect our own interests we had to inform them we were unable to supply,” he said.
“This was a sad and difficult decision, as we had enjoyed a good business relationship for over 20 years. Ultimately their inability to make payments left us with no other choice.”
A number of Headley Brothers employees who were made redundant on 20 February will have preferential claims for holiday pay. Smith & Williamson also stated: “We understand there are also a small number of former employees who will have preferential claims for unpaid wages”, of up to a maximum of £800 each.
The pension scheme was owed £76,000.
The administrators said they did not believe there would be sufficient property to enable them to pay a dividend to unsecured creditors, nor was there any prospect of there being a 'prescribed part' distribution following the pre-pack sale.
