Pattern book manufacturer calls in administrators

A Nottingham-based manufacturer of pattern books and shade cards which employs over 60 people has slipped into administration after the acquisition of a counterpart turned sour.

CEPS, the parent company of CEM Press, has called in administrators to look after the day-to-day running of the Netherfield firm.

Last December, CEPS said that it expected to exit its investment in the CEM group of companies, which include two operating companies, CEM Press and Travelfast, which trades as Sampling International. CEM is 97.86 per cent owned by CemTeal with the remaining 2.14 per cent being owned by a private shareholder, while Sampling is 100 per cent owned by CemTeal. CEPS owns 80 per cent of CemTeal, the remaining 20 per cent being owned by management and external shareholders.

Sampling was bought on 27 March 2019 in a deal worth just over £1.2 million payable in cash over three years based on performance. However, due to the deferred and performance related nature of the consideration, only £9 has been paid to date.

The decision to acquire Sampling was made to introduce a complementary business within the CEM Group with a view to creating one of the largest individual pattern book and shade card makers in the UK. Under a new management structure, and with two production facilities, it was hoped that the CEM Group would continue to expand and grow, offering a breadth of services to customers.

A statement from CEPS on 4 December read: “Despite management’s efforts and cash injections from CEPS since March 2019 as stated below, it has not been possible to achieve the envisaged savings and efficiencies from consolidating CEM’s and Sampling’s operations and streamlining processes.

“As at 31 December 2018, prior to the acquisition of Sampling, the consolidated net liabilities of CemTeal were £2,960,000. CemTeal’s turnover in the year was £2,824,000 and the consolidated operating loss was £495,000. Hence, if CemTeal had been excluded from the 2018 results, CEPS consolidated revenue from continuing operations would have reduced from £18,474,000 to £15,606,000, but operating profit from continuing operations would have increased from £391,000 to £886,000.

“In addition, in the year ended 31 December 2018, the CEPS Board decided to write-off completely the value of the intangibles in CemTeal. Consequently, there was a customer list impairment exceptional item of £588,000 which also impacted negatively on CEPS’ overall profitability. In the year to date, the loss before tax of CemTeal and its subsidiaries, excluding Sampling, was £954,000 based on management accounts to 31 October 2019.”

From the date of acquisition to 31 October 2019, unaudited management accounts show that Sampling made a loss before tax of £236,000 and net liabilities were £636,000 as at this date.

The company was owed, after impairment, £2.1 million at 31 October 2019 by the CEM Group. This largely comprises the cash injected into the CEM Group since the acquisition of Sampling of £1.8 million.

Insolvency and turnaround specialists Moorfields Advisory was engaged by the CEM Group to provide advice and outline the options available given its current financial position.

Moorfields recommended an accelerated marketing process for the businesses with a view to effecting their sale as going concerns if possible and has been engaged to oversee this process.

Then, on 13 December, CEPS announced that CEM Press and Travelfast had filed a notice to appoint an administrator.

The statement added: “It is anticipated that the remaining entities in the CemTeal group of companies will be wound-up in the near future.

“It is anticipated that there will be no cash cost to CEPS in respect of this action. The losses relating to the CemTeal group of companies will be reflected in the company’s accounts to 31 December 2019.”

Yesterday, CEPS announced that an unnamed administrator has been appointed to CEM Press, which has been trading for over 50 years.

It is unclear if any jobs are affected in Nottingham as, as we went to press, CEPS had not responded to our enquiries.

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