Wholegood owed creditors more than £7m when founder Carl Saxton-Pizzie saved the business in a pre-pack administration just before Christmas, new documents have revealed.
The organic fresh produce wholesaler was forced to call in administrators from Mazars last year after running out of cash following an 18-month turnaround battle.
The rescue deal struck by Saxton-Pizzie, who founded the London-based business in 2007 with one van and a disused warehouse, saved the jobs of 96 staff and allowed Wholegood to start fresh and free from its debt burden.
However, unsecured creditors, including suppliers and landlord Segro, were owed £4.6m, with administrators estimating in their report that there will not be sufficient funds available for repayment.
The Grocer understands the new company has made arrangements with a number of ongoing suppliers and customers to cover some of the outstanding payments.
HMRC will also miss out on the £660k owed in taxes, while banking partner HSBC is expected to claw back about half of its £1.2m deficit. The report does not spell out how much shareholders lost, but the business secured millions in investment in 2023 to support a turnaround plan.
Mazars highlighted in the report the outcome for creditors would have been much worse if the business had been allowed to collapse, with the taxman facing an estimated additional £250k burden if the jobs of 96 staff had not been saved. And the insolvency firm added the overall deficit to creditors could have been almost £2m higher if the company had shut down.
Wholegood is now expected to be profitable thanks to the turnaround plan in place as it continues to make efficiencies and operational changes, with a refocus on the core fresh wholesale operation to result in higher margins and reduced warehouse space.
Saxton-Pizzie had bootstrapped Wholegood to grow revenues to more than £30m, with the business expanding to meet booming demand during the pandemic as it partnered with q-commerce operators and won a lucrative contract with Milk & More.
Its fortunes changed in 2023 as the rapid delivery bubble burst and important trading partner Planet Organic went bust owing the business almost £500k. Milk & More also underwent a change of ownership with a surprise takeover by Freshways, leading to reduced orders for Wholegood and, ultimately, the termination of its contract.
Wholegood was left with an excess of warehouse property and onerous leases as a result, as well as a £2.5m debt – taken out to fund the expansion – to service.
The business secured a fresh multimillion-pound investment in late 2023 and embarked on a turnaround push to trim costs and pivot back to its roots as a fresh wholesaler, scaling back its dealing with brands. It also made 40 redundancies and agreed deferred payment plans with creditors, its landlord and HMRC.
But, despite progress being made, the remaining business still wasn’t able to generate sufficient cash to service debts.
Backers put in a further £800k to keep the business afloat, but it proved insufficient and, eventually, Mazars was engaged to weigh up options.
Saxton-Pizzie paid £180k to buy the business out of administration, including stock and the hiring of the vehicle fleet and other plant & machinery, according to the report. The deal did not include the debtor ledger, which is being collected by HSBC Invoice Finance to repay the bank as a secured creditor.
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