The financial downfall of UK greenhouse company UK Salads Limited (UKSL) was triggered by a series of significant challenges, resulting in the company owning its creditors almost £18m when it went into administration. This is revealed by the recently published Statement of administrator's proposal.
In December 2022, the company's largest client rejected a substantial number of deliveries, prompting an investigation. This rejection set the stage for a cascade of issues. By February 2023, a decrease in turnover was experienced due to a lack of availability of overseas products, resulting in shortages and increased costs. Furthermore, a 20-40% hike in cost prices was attributed to earthquakes affecting overseas suppliers. Unfortunately, several clients of UKSL became insolvent, leading to significant bad debts. In an attempt to mitigate these challenges, the company underwent a restructuring in July 2023, resulting in 84 staff redundancies. Despite these efforts, the company faced continued issues, including another client entering administration, which further strained the company's cashflow. This information is shared in a recently published insolvency
Background Information
UK Salads Limited was incorporated on 23 June 2004 and was acquired by Aquila Food Group Holding Company Limited on 26 March 2021. Initially relying heavily on a leading UK supermarket, which accounted for 95% of its turnover, UKSL sought additional contracts to diversify its client base. The company employed 129 staff members in various roles, with additional personnel transferred to UK Salads Partners LLP. The business was funded through leveraged buyout models, government loans, and cash injections, allowing for expansion of farming operations and increased turnover.
Events Leading to Administration
In February 2024, UKSL requested an increase in its facility limit with financial services company Novuna to meet critical payments. However, an analysis by FRP highlighted significant financial concerns, with limited available cash. Despite discussions with Novuna, no additional funding was secured, leading to the decision to place the company into administration. Alastair Massey and Glyn Mummery of FRP were appointed as Joint Administrators on 28 February 2024.
Administrators' Proposals
The Administrators' statement of proposals to creditors outlines the company's financial position and future cashflow forecasts.
UK Salads Limited finds itself owing nearly £18 million to a total of 189 creditors. This debt accumulation stems from the company's regular business operations, primarily involving transactions with suppliers of goods and services. A substantial portion of this debt, approximately £7.6 million, is attributed to 39 fruit and vegetable growers and suppliers, highlighting the widespread impact of the company's financial woes on the agricultural community.
Among the affected parties, several Dutch and Spanish producers and trading companies are listed. A Dutch fresh produce supplier stands out, with over £1 million owed at the time of UK Salads Limited's downfall. Furthermore, the report sheds light on significant debts owed to energy suppliers and banks. Notably, Genie Gas is reported to be owed £1.8 million, and Euro Pool £1.3 million, at the time of the company's collapse. Novuna is registered for over £2 million.
FRP's primary duty is to the company and its creditors, taking over management responsibilities from the board. The appointment of the Joint Administrators was in accordance with the company's Qualified Floating Charge Holder (QFCH) status.