Tuesday, March 25, 2014

News: Redirack bought out of administration

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Rotherham based RediRack, the creator of the world's first adjustable frame and beam pallet racking, has been acquired by Stakapal, the UK's leading supplier of pallet racking, cantilever racking and industrial storage equipment.

Redirack has an 100,000 sq ft manufacturing plant in Kilnhurst and was due to celebrate 40 years of continuous UK manufacturing in Mexborough in 2014. Instead, Lyn Vardy and Toby Underwood of PricewaterhouseCoopers LLP (PwC) were appointed as joint administrators in January.

Established in 1973, the firm underwent a management buy out from its former owners, the Norwegian based multinational Dexion Group Limited, in 2004. Since the takeover, Redirack has expanded its headquarters to accommodate the growing demand for its mezzanine floor product, Redifloor. It enjoyed a turnover of £11m for 2011 and secured backing from the Government's Regional Growth Fund in 2012 and Finance Yorkshire in 2013, putting plans into action to invest over £4m over the next five years.

The administrator's report shows that the company had been loss making for a number of months due to delays with two large contracts, a general downturn in business and significantly reduced profit margins.

Primarily financed by a £1.25m invoice discounting facility from Yorkshire Bank, PwC were brought in during December to assess viable options for the company. After a management buyout failed to materialise, attempts to sell the business began.

Following initial interest, a sale could not be agreed and following a winding up petition from trade creditors and a threat from the HMRC, Redirack directors, Andrew Forsythe and Jack Holden with Phil Culling as chairman, invited Yorkshire Bank to appoint the administrators.

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Following a review of the business, 87 redundancies were made after it was decided to cease trading immediately. Shortly after, the administrators sought offers for the business and the business and certain assets were sold in February for £150,000.

Redirack's address and contact numbers have since been changed to those of Stakapal in Cannock, Staffordshire.

At the time of appointment of PwC, Redirack had a large book of trade debtors and was still owed around £1.4m, against which the bank had lending of £744,000. So far £365,000 has been collected and paid directly to the bank.

With the bank holding a charge over Redirack's assets making them first in line for any recovered cash, and the difficulty in collecting the rest of the company's debts, the administrators state that whilst a preferential claim exists from the staff that were made redundant, "it is hard at this stage to estimate the level of book debts which will be recovered which will directly impact the ability to pay any preferential dividend."

One glimmer of hope is the prospect of the new owners taking on the staff at Kilnhurst. One of the key benefits for the administrators selecting the new owner was that it was predicated on the assets remaining in situ, whereas other offers involved removing cherry-picked assets from the site.

Redirack website

Images: Redirack

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