Kitchen manufacturing specialist Mereway Kitchens was sold for over £500,000 after it entered administration.

Lee Causer and Danny Dartnaill, both of BDO LLP, were appointed as Joint Administrators of Mereway Kitchens Limited on 18 August 2023.

Ahead of entering administration, the company suffered a downturn in sales volumes, which coupled with rising material costs and the impact of Covid, resulted in the business’ collapse.

Turnover did return to pre-pandemic levels in 2022 at £20.3m although losses amounted to £1.3m. Further losses were incurred moving into 2023, at around £578,000, while sales to-date-of-appointment stood at just £5.9m.

The downturn in performance saw the withdrawal of credit insurance against the company in early March 2023 after being deemed an increase risk. After a number of attempts to secure additional funding proved unsuccessful, insolvency was the only option.

Upon appointment, the joint administrators completed a sale of the business to Highlight Green Acres Limited, which was incorporated on 10 August 2023 and is owned by parent company Sigma 3 Group Limited, for a sum of £530,604.

This figure was reduced from £752,504 after taking into account employee costs and arrears, while the sales package included £350,000 for stock, £65,000 for goodwill, £337,501 for plant and equipment and £3 for IP, contracts and other assets. The balance was paid in full on completion.

Sigma 3 has been manufacturing fitted furniture for kitchens and bedrooms since 1975 and was founded by Brian Lakin, who is the named director of the newco. All 150 employees were transferred to the buyer.

As for creditors, the HMRC is owed £1.4m and is expected to receive some distribution, while unsecured creditor claims, totalling £2.8m, are expected to suffer a complete shortfall.

Lee Causer, business restructuring partner at BDO, said: “Despite considerable efforts from management and the team, the challenging business environment and ongoing economic headwinds have impacted the Company’s ability to trade and administration was the only option.

“The sale of the business is a positive one. It provides the best outcome for creditors in the circumstance, as well as saving jobs of those employed by the company.”