Fast-growing drinks wholesaler Interbev Ltd was pushed into administration after new HMRC alcohol regulation hammered revenues and drained its cashflow, according to a new report lifting the lid on the collapse.
It owed creditors more than £5m at the time of the failure late last year, with unsecured trade suppliers, including the likes of Diageo, AB InBev, Heineken and Barcardi, unlikely to be repaid.
The Berkshire-based business, which sold beers, wines and spirits direct to retailers, cash & carries, international distributors and importers, had grown rapidly since being formed by Stephen Brogan in 2008, with sales soaring from £7m in 2009 to more than £60m by 2016.
However, new regulations brought in by HMRC under the Alcohol Wholesale Registration Scheme in the second half of 2016 hit the company. As well as needing to meet the new regulatory requirements, Interbev had to ensure its UK supplier and customer network were also compliant.
The company exited some relationships where it was unsure about the customer’s compliance with the new scheme to ensure approval, according to the report filed by FRP at Companies House.
The move immediately wiped more than £1.5m of regular monthly revenues from Interbev’s top line, and monthly turnover decreased from £4.8m in October 2016 to £2m by March 2017, which put a strain on working capital.
Due to the reduction in sales, the cash position deteriorated quickly as the business could not generate enough invoices to drive its asset-based lending facility, FRP added.
“The liquidity crash has affected the company’s ability to purchase stock, creating a downward spiral of reduced revenue and profitability,” the report said. “Given the rapid nature of this adverse working capital flow, the directors initially could not reduce their overheads by sufficient levels to maintain profitability.”
FRP was engaged to provide turnaround advice in April 2017, with Interbev taking steps to try to improve performance, including selling off slow-moving stock and reducing customer payment terms.
It also refinanced its working capital facilities, but wasn’t able to replace the £1.3m of lost trade finance to purchase stock from suppliers.
FRP also assisted with a proposed company voluntary arrangement (CVA), a formal process used by struggling businesses to buy time with creditors.
However, Diageo, which was one of the company’s largest creditors and was owed more than £700,000, refused to support the CVA and threatened to issue winding-up proceedings, the report said.
A notice of intention to appoint an administrator was filed at the end of September to protect the business from potential winding-up proceedings.
Interbev’s directors subsequently put together an offer to buy the business as a going concern in a pre-pack administration. But the deal failed to win the support of the Pre Pack Pool - an independent body set up by the government that offers an opinion on purchases of troubled businesses by connected parties.
Interbev ceased trading and appointed administrators from FRP on 8 November , with all remaining 11 staff made redundant.
No comments yet