Mike Booker
Moving from New Zealand suppliers to Chinese ones and the resulting cash flow pressures is listed as a prime reason for Shanton Fashions crashing to a $824,000 loss in the nine months to the end of 2014.
The financially troubled women’s clothing chain was put into voluntary administration in January after a creditor bank pulled the plug. The company owes $7.8 million to more than 200 creditors.
Back to owners
Latest developments have left the company, which has had store and staff numbers slashed as part of the administration, back in the hands of the original owners, despite there being a buyer in the wings.
A Shanton Fashions’ spokesperson said the company was “working towards the best possible outcome for all stakeholders.”
Five reasons
A report by administrator Bryan Williams of BWA Insolvency, presented to creditors ahead of creditors’ watershed meeting, listed five ‘primary’ reasons why he had to be appointed: 1. Cash flow pressures created by the payment terms of Chinese suppliers following last year’s move from using New Zealand suppliers to purchasing direct from China 2. The seasonal impact of a prolonged 2014 winter and a late start to summer 2014/2015, which had an adverse effect on sales 3. The negative impact of competitive pressures in the retail market and customer moves to online shopping 4. Shanton’s reaction to its circumstances by discounting product to achieve turnover and release cash, which caused margin and profitability to be lost 5. The sales and cash flow uplift of the 2014 Christmas period did not occur to the extent expected and required
Financial performance
The report summarises Shanton’s financial performance that led to the $824,000 nine-month loss and the $376,000 loss for the year to the end of March 2014.
For the nine months to the end of 2014, the company made a $6 million gross profit on sales of $12 million. Expenses were listed as $6.6 million, including depreciation, directors’ remuneration and ‘one-off’ expenditure.
Earnings before interest and taxes (and before shareholder remuneration and one offs) pointed to a $518,000 loss.
The administrator’s report, which was pushing Shanton to be sold as a going concern, also set out decisions creditors needed to make at the March 30 meeting regarding the future of Shanton.
Credit reject
The result of votes taken at the meeting was for the company ending up back in the hands of its original owners after creditors failed to approve a deed of company arrangement that would have allowed Shanton to keep trading. Liquidation was also rejected.
Companies Office records show the owners as Pala Petrochem (owned by Mandeep Pala), Inderjit Luthera and Vijesh Bhagwan Nangia.
Out in the cold is a prospective buyer of Shanton Fashion.
The report said, “There is clearly merit in concluding a sale of the going concern trading activity to a person that is prepared to make such an investment.”
It set out the sale process, which looks to have been well advanced by the time of the watershed meeting. Williams said enquirers were “of substance in the industry and have demonstrated a genuine interest in pursuing a purchase.”
Mike Booker is the Editor of Retail News, a web-based newsletter and communication service from Wellington. The above article appeared on April 6, 2015. Retail News supports the Indian Newslink Indian Business Awards, especially the ‘Business Excellence in Retail Trade’ category.
