Unsecured creditors of collapsed furniture retailer Sofa Workshop face a significant shortfall, while details of the order book sale and trading ahead of its closure have been revealed.
Detailed in newly filed documents on Companies House, the company, which was placed into administration earlier this year, owes unsecured creditors a total of £19.4m.
Toby Banfield, David Baxendale and Zelf Hussain, from PwC, were appointed administrators on 31 March 2022.
Following the appointment, Sofa Workshop’s 16 stores and website ceased to trade, impacting around 77 jobs. The existing company order book was sold to Timothy Oulton United Kingdom Limited with the aim to fulfill customer orders.
At the time of this sale, which was for a total consideration of £183,005 – with the amount payable of £41,605 due to a number of reasons and costs attached to ordered stock, Sofa Workshop had 2,319 consumer deposit creditors, valuing over £2.8m.
The company had realised assets valuing just under £1m, which was largely from stock at £836,000, reduced from its £3.1m book value, as well as a bank balance of £150,000.
According to the statement of affairs document, secured creditors HMRC are owed over £600,000, although no claim has been made to date with directors estimating this figure. Meanwhile, employees are owed a combined figure of around £106,000 and are expected to receive a distribution of approximately 55-90p in the pound within 6-8 months.
It is expected that unsecured creditors will not be repaid, representing a shortfall of more than £19.2m, with the Halo Group owed around £10m.
Upon ceasing to trade, administrators said the company had suffered trading losses, especially in light of Covid-related supply chain disruption and significant increases in transportation costs on importing goods from Asia into the UK over the last year.
Despite best efforts, the company continued to trade at a loss, although a slight profit of £300,000 was made during the period between July 2019 and December 2020, which was only achieved as a result of the write off of an intercompany creditor balance of around £13m. The accounts for the period January 2021 to December 2021 indicated a loss of £5.5m.
If the business looked to continue to trade for a further six months, it required funding in excess of £4.4m. This was unsustainable.
Sofa Workshop was acquired by Halo Furnishings (now known has Timothy Oulton United Kingdom Limited) from DFS back in 2020 for a sum of £300,000.