Home improvement business was sold for £100k in pre-pack

Customer finance offer restructure, landlord legal threat and HMRC pressure all contributed to the downfall of kitchens, bedrooms and bathrooms furnishings business, Kitchen Plus Ltd.

Iain Nairn and Rochelle Schofield of Leonard Curtis were appointed administrators of Kitchens Plus Ltd on 9 May 2023.

Detailed in documents filed on Companies House, the business experienced a number of financial difficulties in the build up to its administration, while seeing profit fall into the red.

During the Covid-19 pandemic period, the company secured a Coronavirus Business Interruption Loan in June 2020 in the sum of £500,000, as well as another Recovery Loan in the sum of £260,000 during December 2021. Upon appointment, the business owed respective amounts of £325,000 and £250,000 on these loans.

Over the recent years, the business saw sales of £18m and a profit of £187,000 for the year ended April 2020, rise to £20.1m in revenues and £877,000 profit a year later. However, despite sales rising further to £24.3m, profit dived to a loss of £656,000 in April 2022. In the period ended January 2023, sales reached £17m with losses at £144,000.

Adding further strain, the company had to make significant changes in the way it offered finance to customers following legal proceedings with the FCA, which cost the business over £300,000 in professional fees. In addition, the company experienced a c£100,000 decline per week in contracts written.

This restructure, coupled with reduced demand from customers, the business fell into arrears with the HMRC, owing around £407,000. Despite a repayment plan being agreed, of which £120,000 was paid back, the business has also fallen behind payments to landlords of its five showrooms, who then threatened legal action.

Upon appointment of administrators, Kitchen Plus Ltd, which has 77 employees and showrooms across the regions, including Gateshead, Durham, Hexham and North Tyneside, was acquired by sister company Windows Plus Roofs Ltd, saving all jobs under TUPE.

Ahead of the sale, around eight expressions of interest were received following a marketing process with six declaring further interest. Only one offer was made and that was to the purchaser, as mentioned above, for a total sum of £100,000. This included £10,000 for goodwill, £80,000 for motor vehicles, £5,000 for fixtures and fittings, £4,000 for showroom displays and £1,000 for work in progress. Upon completion, £50,000 was received with the remaining balance of £50,000 to be paid on or before 9 August 2023.

As for creditors, secured creditor Barclays Bank, owed £325,000, received a distribution of £10,000 following the sale of the business, while also offsetting a credit balance of £102,000 under the terms of its security. No other distribution is expected to be made.

With regards to preferential and unsecured creditors, administrators said it is unlikely a distribution will be made available. It is expected that creditors will suffer a total shortfall of £1.5m.

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