Online flooring retailer UK Flooring Direct was sold for over £6m in a prepack deal after entering administration.
Paul Meadows and Daniel Smith, both of Teneo Financial Advisory Limited, were appointed as joint administrators of UKFD Realisations Ltd, trading as UK Flooring Direct, on 4 July 2023.
Ahead of entering administration, the company suffered losses of £3.1m for the financial year 2021 and again the following year with losses amounting to £2.7m. This was due to adverse trading as a result of the Covid pandemic, as well as a decline in consumer confidence. Sales during this period fell from £64.9m to £49.2m in FY22, while revenues for the six months into 2023 stood at £18.3m with losses of just under £1m.
Despite steps being taken to boost performance, trading has continued to be challenging in 2023, while the withdrawal of credit from the company’s major EU suppliers, due to a delay in the filing of its financial statements, put further pressure on liquidity. Furthermore, the HMRC, owed £2.9m, raised the possibility of a winding up petition.
The company tried to secure further funding support of £3m from the Business Growth Fund, which holds a 14.5% stake in the business, but this did not materialise. It was therefore seen as administration, with the intention to secure a prepack sale, was the best route to take.
A subsidiary of Carpetright owner Nestware Holdings acquired UK Flooring Direct in a prepack administration, saving all 85 jobs in the process.
Nestware’s online flooring subsidiary Keswick Flooring Limited bought the etailer on 4 July 2023 for a sum of £6.4m. Breaking the figure down, £2.3m was for the IP, £1.5m was for stock, while £1.2m was for goodwill and £850,000 was for the social media accounts and domain names associated with the business.
As part of the deal, a license to occupy the leasehold property in Coventry was granted for a period of six months, with the costs provided at completion of the purchase. Assets excluded from the sale include cash at the bank, insurance policies and tax assets.
With regards to creditors, the business had two secured creditors, the Bank and the Business growth Fund, both owed respective amounts of £2.5m and £6m. Administrators anticipate that there will not be enough funds to repay the amounts owed in full.
Meanwhile, the HMRC, a secondary preferential creditor, owed £2.9m, is also expected to suffer a shortfall. As for unsecured creditors, which consists of 100 claims, these are owed a combined figure of £3.7m and are expected to also suffer a shortfall.
Following the sale, lead administrator, Paul Meadows, said: “I’m very pleased that following an accelerated sale process run by our Special Situations M&A team, we have been able to secure a future for UK Flooring Direct. The sale safeguards all of UKFD’s 85 employees in Coventry and gives the business the strategic backing it requires to fulfil its ambitions. As part of the sale agreement, any outstanding customer orders will also be fulfilled.”
Commenting on the transaction, UKFD CEO Jason Ashby added: “I’m pleased to say that we’ve found in Nestware the ideal partner to continue our long-standing heritage as a leading provider of flooring to the UK consumer and trade markets.”
Keswick CEO James Davey stated: “This acquisition brings together two powerhouses of the online flooring retail sector, creating an entity that is well-positioned to capitalise on the evolving market trends towards convenience, service and value.”