Posted: Wed 8th Jan 2020

Administrator report reveals financial impact of Tomlinson’s Dairies collapse

Wrexham.com for people living in or visiting the Wrexham area
This article is old - Published: Wednesday, Jan 8th, 2020

Documents filed by the administrator of Tomlinson’s Dairies have revealed the financial impact to a wide range of farms, suppliers and employees; as well as detailing several failed attempts to sell the business in November, despite a range of interested parties.

Yesterday saw a notice of deemed approval of proposals lodged with Companies House, following the formal administrator’s proposals submitted before Christmas.

The statement of affairs documents recently made public include a statement of affairs PDF detailing a range of creditors from the company that is now in administration. They include £10m to HSBC Bank, with a further £2.4m for HSBC equipment finance, £2m to HSBC invoice finance and a further £1.8m to the Development Bank of Wales.

A range of entities that appear to be farms due to the nature of the addresses stated are also each owed a range of four and five and even six figure sums.

As is common in large administrations the list contains creditors large and small locally and across the UK. Wrexham Council are listed as being owed £58k.

Claims from employees and former employees total £177k. At the time of entering administration the company had 331 employees with 247 made immediately redundant. Currently just eight remain employed who are assisting the administrators.

In a later document administrators state: “We anticipate that secured creditors will not be repaid in full, sufficient funds will be available to pay the preferential creditors in full and there will only be a prescribed part dividend to unsecured creditors.”

They go onto say: “…based on an initial estimate of unsecured creditors as per the directors Statement of Affairs circa £11.9m this would give a dividend to unsecured creditors of between Nil to 3 pence in the pound.”

The documents give a narrative of the company history and why it ended up in administration. It notes in 2017 the revenue was around £50m and by 2018 had reached £85m and the draft audited accounts show £100m for 2019.

In 2017 the company tendered for a three year contract to October 2020 which required it to double in size, with added processing and storage capacity. This was funded a mix of debt, equipment finance, grants and equity. Having won the contract the company made very significant trading losses in the ensuing two years.

In 2018 the company’s secured creditors agreed to a capital repayment holiday from spring 2018 and HSBC agreed a significant increase in the level of the overdraft facility. It adds that ‘key customers provided some price support’ but not at a level that the company needed to restore it to profitability.

“Given the extent of the ongoing trading losses the company approached a number of parties for an equity injection. These efforts were unsuccessful.” However at that point the blow-moulding operation was sold that helped reduce debt, and gave a cash injection.

The report notes that spring weather typically brings a flush of milk, which in 2019 meant a drop in demand. From May 2019 onwards ‘the company started to experience negative variances against the revisited profitable forecasts’ with energy prices, commodity cream prices and plastic bottle costs given as examples.

The report states by September the directors had arranged regular ongoing legal and financial advise ‘on the challenging position the company faced’. The report concludes noting ‘ultimately sufficient support / funding was not forthcoming’ and although trading during a possible sale of the business was sought, the company ended up in administration.

After administration 58 prospective buyers were contacted with non-disclosure agreements sent to 39 of them, with 29 returning them. Several visited the premises and had ‘extensive discussions’ with offers excepted up to the end of November. “Regrettably” that exercise did not result in any acceptable offers.

Due to that the administrators will be seeking to realise the value in the plant, machinery and property on a break up basis.

Llyr Gruffydd, Plaid Cymru’s North Wales AM, commented on the newly public documents: “The report by PwC, which has taken over the running of Tomlinson’s dairy business, makes it clear that things look very bleak for unsecured creditors – this includes dozens of dairy farmers across north Wales and Cheshire as well as many small businesses in the locality.

“The larger secured creditors, such as HSBC, are expected to get the majority of the money owed them back and are in a position to withstand any financial hit.

“Farmers who haven’t been compensated are now facing a return of just 3 pence in the pound. That’s scandalous. When you consider that some are owed more than £100,000, it’s a real body blow for any small business.

“We need a better system to ensure this kind of financial failure in one company doesn’t end up taking down others further down the supply chain.

“I’ll be raising questions with the minister about how the Welsh Government can ensure farmers and small businesses are not left high and dry like this. I’d like to see better protection for the future, so that there was more security that payments for milk received would be made regardless of the company’s financial situation.

“I hope the minister, who authorised substantial loans to Tomlinson’s in the months leading up to their financial problems, doesn’t try to duck his responsibility to those suppliers.

“We need a flourishing food and drink sector in Wales and losing a large processor like Tomlinson’s has been a blow to our economy in terms of jobs in the Wrexham area but also the wider dairy industry.”



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