Baile blames Castel for Oddbins woes

Oddbins managing director Simon Baile has laid the blame for the troubled off-licence chain’s potential collapse firmly at the feet of the company’s previous owners.

Baile, who applied to place the company into administration on Friday as it awaits the outcome of a creditors’ vote on a Company Voluntary Arrangement, claims that while Oddbins is still owed money by Castel over issues relating to the takeover in 2008, the company is also having to cover overheads and “drag” that, he claims, Oddbins should not be having to pay for.

“We’ve only just found out about a shop that closed years ago and yet we are still paying for,” Baile told the drinks business. “There is a lot out there that has really dragged the company back.”

Despite the fact Oddbins is on the verge of financial collapse, Baile insists that he and his team have been steering the business in the right direction since acquiring the loss-making chain two-and-a-half-years ago.

“We started to really make inroads into bringing Oddbins back to its roots,” he said. “Like-for-like sales were on the increase and we have been generating significant media coverage. All that says to me that we have been going in the right direction.”

Oddbins has only turned a profit once in the past seven years and, though Baile has cut losses during his time at the helm, this is showing few signs of changing.

Most recent accounts for the company showed that it turned over £67 million in the year to the end of December 2009, with pre-tax losses of £4.5m, an improvement on the previous year’s pre-tax losses of £6.2m.

“The crack in the ice was the Christmas period,” he lamented. “With all the snow and poor trade, it made it impossible for us to see a way out of trouble.

“We were manfully managing the business up to that point and we had chartered a way through to the other side, but from that moment on you could see that the severe damage had been done.”

When asked why he had not communicated the chain’s problems to suppliers in January, Baile said: “At that point we had a strategy in place that would allow the business to improve. However, once it became clear that this was not going to happen, we had to make a decision.”

That decision came a couple of weeks ago, with the CVA proposal which aims to give suppliers back 21 pence in every pound they are owed in a last-ditch effort to rescue the company from liquidation.

Should the CVA be rejected at the creditors meeting this Thursday (31 March), creditors are likely to get just 13p in the pound – or possibly an even lower amount judging by the experiences of creditors of First Quench Retail, the owner of Wine Rack and Thresher’s which itself went bust in 2009. Some FQR creditors are still waiting for repayment of any sort, with latest figures suggesting they might get as little as 2p back in the pound.

“What the CVA does is demonstrate that we are offering our creditors some good money, and they could get even more if our court battle with Castel is successful,” said Baile, who applied for administration last Friday to give the company 10 days’ protection against any winding-up orders following a move by British Gas, which is owed less than £60, to have the company liquidated.

“We firmly believe the CVA is the only way forward, we have got to streamline this company,” he insisted. Oddbins announced plans to close 39 of its 128 stores across the UK on 8 March, leaving only profitable stores in the portfolio.

“It’s an ugly, brutal process,” Baile conceded. “But there is no other way around it and in order to get a good Oddbins going forward we have to lose the parts that don’t work.

“What we are left with, we believe, is the right shape for the company. It’ll be centred broadly speaking on London and the heart of Scotland, with some good, profitable stores in other areas also remaining in operation.”

Baile is acutely aware of the emotional attachment many wine trade folk feel towards Oddbins, with a lot of them having cut their teeth in the industry working at one of the chain’s stores.

Baile too has something of an emotional tie to the company, seeing as it was run by his father during its 1970s heyday, when it was widely credited for changing the way wine was sold in Britain.

His priorities right now, however, demand that he detach himself as far as possible from sentiment.

“Emotion is almost irrelevant in this case,” he said. “There is a good business there that can generate money for all future suppliers over a potentially long period of time. If Oddbins has a future it has the opportunity to generate money.”

Baile refused to be drawn on any future redundancies or store closures that might be required should the CVA be accepted, but instead looked to the wider economic picture to put Oddbins struggles into context.

“We have just gone through the worst recession in a generation,” he said. “Nobody in my age group has traded in these conditions before, but the independent wine trade is not dead and buried. There is plenty of opportunity still out there.”

Whether or not Baile – and indeed Oddbins – gets the chance to grasp those opportunities is in the hands of the creditors. With the vote just four days away, Baile is refusing to hedge his bets on the outcome.

“I’m neither confident one way or the other, I am pragmatic at the least,” he said. “They [the creditors] will make their decision based on their own criteria.

“We hope they make the sensible decision as we believe there is a sustainable business going forward and we also believe that we will be able to deliver more value to creditors than if we go into administration.”

A huge number of wine companies, utility companies, law firms and individuals are owed money by Oddbins, with the largest creditor being HM Revenue & Customs, which is owed over £8.6m.

EDF Energy is owed £51,389, while retailer Halfords is owed £173,545 and software firm Gemma SPA is owed £145,800.

Hatch Mansfield is owed £309,735 – the largest sum of any wine firm on the creditor list – Chilean wine company Concha y Toro is owed £241,583, while Château Maison Lauduc Grandeau is owed £152,845.

Mentzendorff is owed £161,567; De Bortoli wines is listed as being owed £106,789; Negociants International is owed £90,153; Laurent Perrier UK is owed £89,091; Lombard & Medot is owed £87,516; Pernod Ricard is owed £89,647 and Pol Roger is owed £273,611.

The creditors meeting will take place on Thursday 31 March in London, with a 75% approval rate required to push the CVA through.

Should the CVA fail to go through, Oddbins will be formally placed into administration at a court hearing on 4 April.

Alan Lodge, 28.03.2011