Upholstered furniture manufacturer Acclaim Upholstery owed creditors over £5m ahead of entering administration.
Martin Buttriss and Carolynn Best, both of Begbies Traynor (Central) LLP, were appointed as joint administrators of Long Eaton-based Acclaim Upholstery Company Limited on 4 July 2023.
Detailed in a newly filed report, Acclaim Upholstery, which supplied furniture retailers including Loaf, Heal’s and Barker & Stonehouse, experienced inflationary pressure that saw it struggle with rising costs and the impact of finance repayments, alongside a drop in sales.
The business saw turnover drop from £9.1m in 2019, with profits of £533,000 to £7m in 2022 where a loss of £381,000 was reported. Sales did improve in 2021 to £10.6m, although profit reduced to £246,000.
During the course of 2022, the company implemented several price increases with customers in order to offset the increasing costs of the business but were unable to pass these on in full. The company wasn’t able to maintain payments to the HMRC as well as other finance costs associated with its management buyout that took place back in 2019 for a sum of £5.1m.
Acclaim’s order book fell by 40% in June 2023, much lower than it would ordinally be at that time of the year. The business struggled to maintain VAT liabilities due alongside other finance repayments, while also unable to meet liability to wages for staff.
Ahead of entering administration, the business was marketed for sale, with 52 parties expressing an interest. Despite strong interest being received no offers were tabled for the business as a whole and that it was more likely for offers for assets.
After the business entered administration, which saw all 128 staff made redundant, one offer of £115,000 was made for the physical assets, which was accepted and sold to a third party, ANK Manufacturing Limited, on 5 July.
With regards to creditors, secured creditor NatWest Bank is owed £212,000, while a sum of £1.6m is owed in relation to the MBO and the HMRC is owed £468,000. As for unsecured creditors, a sum of £3.5m is estimated, with £1.3m in respect of a cross guarantee on behalf of parent company Erewash and the sum of £1.1m relates to employee redundancy claims. In total, creditors are expected to suffer a shortfall of £5.7m.
A statement from administrators said: “This is a long-established business that has been beset by a number of issues, which have conspired to create an extremely difficult operating environment. A reduction in orders due to the cost-of-living crisis created problems with cashflow, which were exacerbated by inflationary pressure.”
