Furniture, home décor and interiors business LuxDeco experienced ongoing finance issues in the build up to its collapse.
Gary Shankland, Kevin Murphy and Paul Appleton, all of Begbies Traynor (London) LLP, were appointed as Joint Administrators of Luxdeco Limited on 15 March 2024.
Ahead of entering administration, the company experienced finance issues due to its structure as well as the withdrawal of a significant investment that would change the business model entirely.
Despite ongoing topline growth, which generated sales of circa £16m between 2012 and 2018, the company remained loss-making and relied heavily on external finance to fund day-to-day operations. These funds were raised through numerous investors, with capital typically released in tranches.
The timing of release of funding caused issues for the company and put a strain on cash flow. The company actively sourced a way to transition to a new model to create a more stable and predictable funding structure. During 2022, the company had secured a £4m investment which would fulfil this move.
However, the investor subsequently withdrew the offer, resulting in the company reverting to its former financing model. Earlier this year, following further funding delays, cash pressure continued to mount and the company was unable to meet its liabilities, as well as being issued with demands and CCJs from various suppliers.
The company was placed into administration, citing the ongoing financing model as a key contributor to its demise, alongside high barriers to entry in the luxury ecommerce sector, delays in investments, supply chain disruption and lasting impact of the Covid-19 pandemic.
Following the appointment of administrators, all 50 employees were made redundant and trading ceased. There was also a slight possibility that the business and assets could be sold to two large independent retailers who had expressed an interest, however, this was withdrawn.
Eddisons were then instructed to market the business and assets for sale, which received three offers of interest from unconnected parties and one proposal from the directors. The latter was the highest on the table and included a CVA, which would “enhance returns for creditors”, administrators said.
At the time of the administrators report, the sale was still under negotiation. Director, Jonathan Holmes, has since formed two new businesses, Luxury Commerce Limited (incorporated on 20 March 2024) and Luxury Commerce (Media) Limited (incorporated on 27 April 2024).
As for creditors, the business owed preferential creditor employee claims around £100,000, while the HMRC is also owed £1.5m. Unsecured creditor claims are estimated to total £22.5m, with consumer creditors being owed £3.2m. It is expected that creditors will suffer a shortfall of £25m.
A notice is currently displayed on the company’s website, stating: “The affairs, business and property of the Company are now managed by the Administrators who act as the Company’s agents and without personal liability.
The Administration moratorium provides a ‘breathing space’ during which we will assess whether a rescue of the Company is feasible. At present, we are unable to fulfil orders and will not for the time being, be accepting any new orders. If you are owed money by the Company, you should complete a Proof of Debt form to lodge your claim in the Administration. The form can be requested by email at Lux.Deco@btguk.com.”
