Oddbins owner lost £10m and AWRS prior to administration
The parent company of UK wine retailer Oddbins lost £10 million in 2018, and was stripped of its alcohol wholesale registration scheme licence (AWRS) six months before its retail businesses were placed in administration, db can reveal.
Walsall-based European Food Broker Ltd (EFBL) lost over £10 million in the 18 months to 31 June 2018, according to accounts filed at Companies House this week – an annualised increase of more than 2,000% compared to the previous year’s loss of £450k.
The losses were recorded less than six months before the company’s decision to put its retail business, EFB Retail Ltd – which comprised Oddbins (Whittalls Wine Merchants 1 and Wine Merchants 2) and sister company Wine Cellars Trading Limited (WCTL) – into administration in January 2019.
Oddbins’ losses amounted to £2.24 million, with WCTL amassing losses of £1.87 million, it said, while overall debts were recorded as £17.9 million, down from £23.6 million in 2017.
Turnover was recorded as £53.76 million in the 18 months to 31 July 2018, compared to £52.26 million in the 12 months to January 2017 – representing a fall of around a third in revenue, although it retained net assets of £20.77 million.
The losses came as a result of two main factors: the loss of its excise approvals by HMRC in February 2018 (as previously reported by db) and the revocation of its AWRS license revoked by HMRC, confirmed in the accounts, which barred it from operating as a wholesaler from July 2018.
This cut a valuable revenue stream from wholesaling and prompted the directors to take the decision to close depots and reduce the headcount by 50% to cut the payroll by 68%, it said.
“The fairly large one-off costs associated with the restructuring of the business have increased the losses of the company during the period,” the strategic report stated.
The HRMC decision in February 2018 to revoke the the parent company’s excise approvals, followed an appeal at the First Tier tax courts, had already prevented it from operating its bonded warehouse and forced it to pay duty on all stock – meaning the company could no longer buy in bulk to secure competitive pricing from suppliers – and put a severe strain on cashflow.
However the company is currently appealing the decision in the UK’s highest tax court and says it is confident of over-turning the decision.
Buy-back of the company
The accounts which were signed on 8 August 2019, also confirmed that the business was in “advanced talks” with the administrator and brand owner to acquire a portfolio of profitable retail outlets – although a spokesman for administrators Duff & Phelps told db today there was no further update on the sale.
The directors stated that, were this discussion to lead to an acquisition, then the directors believe “the structural changes already made would mean the company would be on an even keel to deliver sales and profit growth going forward”, the report said. However, the notes refer to “significant doubts” on the company’s ability to continue as a going concern”, despite the director’s belief that the £12.5 million in reserves and support from the shareholder (Rajinder Chatha) would enable it to continue operating as a going concern, until plans could be put in place “to revive the lost trade”.
However they added that the company would hold off major investments until the full impact of an unpredictable, potentially disorderly Brexit was “quantifiable and understood”.
In June, db reported that nearly half (45%) of the retail stores owned by European Food Brokers Retail Ltd were unprofitable and had been shut by the administrators, substantially higher than had been originally thought with two thirds of the closed stores coming under the Wine Cellars Trading Limited (WCTL) banner, and under a third (13) of Oddbins stores.
According to administration proposal documents filed at Companies House in April, 58 stores remained trading, but further store closures during the potential sale process were not ruled out.
In June, reports surfaced that the UK wine merchant may be rescued from administration by its former owners four months after being placed in administration, although European Food Brokers did not responding to db’s requests for comment.
For our analysis of the potential sale and buy-back of Oddbins which was published in June, please see here.