Mail order and eCommerce business Scotts suffered increased costs and declining trade in the build up to its administration as pre-pack sale price reached almost £3m.
Mark Supperstone and Ben Woodthrope, both of ReSolve Advisory, were appointed as joint administrators of Scotts Limited, trading as Scotts of Stow, Gift Discoveries, Expert Verdict and Bloom, on 9 March 2023.
In the events leading to administration, the multi-channel retail business, which relied heavily on traditional marketing methods through its catalogues, was impacted by seven-fold cost increases in freight rates, a 38% increase in print and paper costs and a reduction in trade due to the cost-of-living crisis.
The business had seen sales dive from £54.2m (with a profit of £384,000) in 2021 to £36.2m in 2022 with losses over £3.2m. In view of the declining trade and profitability, administrators were appointed and oversaw an accelerated sale process, which concluded in a pre-pack sale to direct-to-consumer retailer WoolOvers Group for a sum of £2.7m.
The sale breakdown included £274,000 for book debts, £1m in goodwill, £1.4m for stock and £100,000 for plant and machinery. The consideration was paid in full on completion on the same day as entering administration. The acquisition has also saved 150 jobs.
As part of the sale agreement, WoolOvers has a period of time to complete a sample stock take to confirm whether the value of the stock matches the records used to calculate the sale price. If the stock is higher or lower, an adjustment will be made.
Secured creditor Arbuthnot Commercial Asset Based Lending Limited is owed £1.8m and could receive an 80-100% recovery, while preferential creditors, employees owed £22,000 and the HMRC, owed £1.1m, are expected to be repaid in full.
As for unsecured creditors, owed a combined figure of £8.2m from 508 claims, it is expected that they will suffer a shortfall of the entire amount.
Upon acquiring Scotts, which also trades from a flagship store in Stow-on-the-Wold, Cotswolds, WoolOvers Group said: “The addition of Scotts Ltd enables us to accelerate our strategy to grow our market share within the over 50s market. We believe that Scotts Ltd is a perfect fit for us and our existing customer base and look forward to being able to work with the team at Scotts.”