A dispute over product quality with a customer was one of the main reasons bespoke furniture manufacturer and interior fit-out company Zero Point Eight filed for insolvency, as cash flow became significantly impacted.
Miles Needham and Rajnesh Mittal, both of FRP Advisory Trading, were appointed as joint administrators on 6 June 2022.
Detailed in newly filed documents on Companies House, the business experienced delays in materials from the US, as well as drawings from its largest customer, which setback orders and commencement of projects at the beginning of 2022, where the company ultimately lost several orders.
Latest accounts show how the business had suffered a sharp decline in turnover from £3.7m in 2021 to £1.7m to February 2022, posting an operating loss of £116,000.
As a result of the order losses, the business required external short term funding to meet critical payments. Following this, in April 2022, the company’s largest customer withheld payment of £354,000 due to alleged quality disputes of finished products. Furthermore, the customer had advised of extra costs to rectify the quality, which led to counterclaims to reimburse these costs, with a combined total of £437,000.
Despite several meetings, an agreement never materialised, which significantly impacted the company’s cash flow. Due to the dispute, the businesses finance facility, Close Brothers, was restricted, preventing the ability to draw down further funds.
Ahead of its administration, the company made all its 35 employees redundant on 23 May 2022 due to insufficient funds to enable payments of wages. On the same date, the business was issued with formal demand of payment of outstanding sums totalling £572,000 to Close.
Following the appointment of administrators, FRP worked quickly to market a sale of the company and received 14 expressions of interest, with only one, Aspen Concepts, engaging further to acquire the business.
Aspen, which has been established since 2007 and operates from its Swindon manufacturing plant in Cradley Heath, made four bids for the assets, with £60,000 initially agreed. However, due to outstanding finance agreements, which encompassed the number of company assets, administrators were restricted in selling these. Aspen made a revised offer of £25,000, which was accepted.
A license to occupy the trading premises was also granted, with the terms being six months.
It is understood from the administrators report that secured creditor Close Brothers will suffer a significant shortfall, while other creditors, including HMRC, owed £404,000, employee claims of £147,000 and trade claims of £280,000 are expected to suffer a shortfall of the entire respective sums.
The total deficit to all combined creditors is just over £1.6m.
