Collapsed kitchens maker Bernstein owed £11m

CASH flow problems at the kitchen maker Bernstein Group Holdings were exacerbated by the demise of MFI, according to a new document.

A creditors’ report has shed new light on the circumstances surrounding the failure of Bernstein which called in administrators in December with debts of £11.5m.

It said the group had been losing money since 2006 and its situation became more difficult when large customers like MFI and Trade Depot closed down.

In the 18 months to April 30 2007 the Bolton-based group lost £3.5m on turnover of £43.4m. In the 16 months to August last year it lost £1.8m on turnover of £33.3m.

The business turned a small £25,000 profit in August but trading soon deteriorated. Administrators at PricewaterhouseCoopers (PwC) said: “It became clear to the directors that the company was incurring losses, it was facing significant cash outflows, and that there was little prospect of a return to profit in the short to medium term.”

The cash shortage meant Bernstein was unable to meet the conditions of a company voluntary arrangement (CVA) established in early 2007 following a previous period of administration in 2006.

Its failure to pay an instalment of £50,000 into the CVA fund led to the appointment of administrators. Creditors seeking a payback from the CVA are still owed £494,000. Their claims are now being handled by PwC which does not anticipate a payout for unsecured creditors.

Significant creditors, who have debts secured by floating charges, include the asset-based lender Burdale, which is owed £3.2m, and investor Endless, owed £1.5m. Trade creditors are owed a total of £4.7m and Bolton Council is owed £170,000.

The Bernstein Group was originally acquired from administrators in 2004 by chairman Bill Gleave. But administrators were called in again in 2006 following problems at its retail arm The Kitchen Studio.

Turnaround specialist Endless took a majority stake in early 2007 when the CVA was agreed. It sold most of its holding at the end of 2007 but still held 10% of the shares when PwC was appointed.

Around 180 jobs have been cut at Bernstein by PwC which said it is still trading the company with 68 staff while it realises assets.