ICSM Credit news: concerns at BooHoo’s slump; ‘Big Four’ accountants under spotlight; commercial print in trouble; more professional football clubs in danger; and issues with bounce back loans

BooHoo are in crisis over concerns of work practices in Leicester

ICSM Credit news: print trade body warns over post Covid-19 business; haulage firm’s CVA; BooHoo’s slump; ‘Big Four’ accountants given a ticking off; and newspapers in crisis

With tens of thousands of retail jobs being axed by the week as retailers struggle to come out of lock down Ian Carrotte of ICSM Credit issued a warning about supplying services and goods to firms ‘on the slide.’

He said: “A feature of this transition from shutdown to open in the new normal has been cash strapped companies who are on stop with their suppliers shopping around for a new firm to supply them. It is a huge concern as many of these firms are essentially insolvent so don’t fall for the line that as a household name they will pay their invoices. They are the worst as they are preying on smaller outfits who they will give orders to with no intention to pay. Whether it’s disconnect between the buyers and the financial director – it is immoral at best and illegal at worst.”

Ian Carrotte said always ensure the first order is paid either up front, in part payment up front or with a solid payment plan. Accepting the terms of the likes of Carillion he said of 120 days are unacceptable and it is best to turn down business on those terms.

He said so many retailers in particular are reliant on printers, sign-makers and suppliers of clothing, stationery, food, beverages and gifts and so will seek new suppliers if lines of credit are denied. BooHoo have seen their share price collapse over question marks over their low payment of staff who produce clothing in Leicester and other related employment issues. And they are not the only ones experiencing problems with anyone from the big department stores like Debenhams to smaller outfits like Harveys Furniture who have collapsed.

Big Four given a ticking off

Like school boys summoned to the head teacher’s study for a dressing down the so-called big four accountancy firms - KPMG, EY, PwC and Deloitte – have been told to ring-fence their audit arms from their consultancy units by 2024 following criticism of how they operate.

The Financial Reporting Council (FRC) has told them they must submit separation plans by October so that disasters like the Carillion affair can be avoided in future. Essentially they have given firms a clean bill of health with an audit only for that firm to collapse due to a black hole in their accounts soon afterwards.

The FRC said separating accountancy firms' audit departments from the rest of their operations would help to protect auditors "from influences from the rest of the firm that could divert their focus away from audit quality". Ian Carrotte of ICSM Credit welcomed the move but remained sceptical and said ‘the proof will be in the pudding’ rather than fine words.

He said Carillion, Thomas Cook and Wirecard revealed how they had failed society, business and their own shareholders in the past with the Government, businesses and the general public picking up the bill for their incompetence.

Newspaper empire slashes jobs

One of the effects of the lock down has been the collapse of newspaper sales as people had problems managing to buy a copy of their daily paper. The already frail business model of weekly, daily and free newspapers has suffered a major blow in the last three months and as a result some of the big names are cutting jobs and trimming costs including the hiring of freelancers.

The trade journals Hold The Front Page reported on how Newsquest were ‘unable to support’ staffing levels pre-lockdown and would be making redundancies on July 3. While this week Reach (formerly Trinity Mirror) is set to slash 12% of its workforce. The publisher of Daily Mirror and a stable of regional newspapers, said about 550 people would lose their jobs after it saw revenue slip nearly 30% in the quarter to June.

In the past newspaper groups have not always had the best reputation for paying their invoices on time, but now there is a real danger they may not get paid if they were to enter administration.

“The credit crunch of 2008 saw the end of the Midlands Newspaper Group, “said Ian Carrotte, “and two years ago Johnston Press went bust, so there is precedent. All publishers are big users of marketing literature, freelance services, transport and courier support to operate. Be very careful if your company is approached to help them out – ensure they sign up to your terms and conditions and if they refuse then don’t work for them.”

BPIF on print industry’s recovery

The print industry trade magazine Print Week has reported on a webinar held by the trade body British Printing Industries Federation (BPIF) in which their CEO Charles Jarrold detailed current industry sentiment. Jo Francis writing for the

She reported that Jarrold said: “We’re now in stage three which is a lifting of lockdown, and heading towards stage four which is that much longer-term recovery.”

The BPIF’s industry survey during lockdown found that three-quarters of respondents had seen demand fall by 65%. There are also concerns about how long it will take for the economy to recover, detailed in its latest survey.

“We can expect that demand isn’t going to come back for quite some time yet and I think that has implications for how businesses operate,” Jarrold added.

Commenting on the print industry’s situation Ian Carrotte of ICSM Credit said: “We have many members of our credit intelligence group who are printers or in the allied industries such as paper and printing press suppliers.

“We have had a lot of news from members who have seen a drop in business which is understandable considering the Covid-19 crisis however there are concerns for traditional printers who have seen long standing customers go under.

“Print will never go away as packaging and label printing has seen a boom in recent years but clearly there are tough times ahead.”

More football clubs could go bust

Following the news that Wigan Athletic have gone into the English Football League (EFL) chairman Rick Parry has warned the 71 clubs in the league have a £200m black hole caused by the lockdown.

The competition were facing a collective £200m cash hole by the end of September, primarily due to the loss of match-day revenue this campaign and uncertainty over when or if supporters might be able to return next season. The EFL have warned the Government that another 10 clubs could go under due to the loss of match-day revenue this spring. To save the clubs Charlie Methven of Sunderland FC and MP Damian Collins have produced a blueprint called 'A Way Forward For Football' setting out financial plan backed by the Government.

Before the Covid-19 crisis Bury and Bolton were in trouble while in Scotland Dunfermline have released 17 players due to fears that next season may not restart. There are also doubts over the future of other clubs in the Scottish lower leagues and the English Championship. ICSM Credit has consistently warned suppliers of football clubs not to fall for the moral blackmail of supporting their local club.

“Football clubs are businesses,” said Ian Carrotte, “there is no reason why the printer of the programme, the maker of soft signage or the supplier of wines and spirits to the board room should accept anything other than normal credit terms. Those who allowed Wigan Athletic FC to have extended terms now may not get paid – and that can sink a small business.”

Beware of the preference bounce back loans

Even in 20 years’ time a liquidator can order a borrower of one of the Government’s Covid-19 bounce back loans if it is discovered the money was used to pay off personal debts. The loans were for small businesses and with up to £50k on offer and were backed by the government. No personal guarantees were needed and they were quick and easy to apply for – although ICSM Credit heard on from members who said this was not always the case.

Mostly the loans were used to support businesses when there was no cash flow during the lockdown although some have been used to repay business loans and overdrafts at higher interest rates. What they aren’t allowed to be used is to pay of personal debt – even if it is pay off a member of the family of the owner who lent money to get the business started. That would create a preference.

“A preference is not allowed by a liquidator,” said Ian Carrotte, “as you are effectively preferring one creditor over another. And you can then be ordered to return the cash up to 20 years in the future by the liquidator. Despite changes to the legislation with the government relaxing insolvency rules regarding wrongful trading it has not relaxed other parts of the insolvency legislation such as the creation of a preference. In the small print surrounding a bounce back loan there is a note on what it can be used for. To pay off personal debts is considered fraud.”

Pre-pack for logistics outfit

Carol Millett has reported in Motor Transport the news that the Midlands logistics company Amco Services that crashed in April has been saved in a pre-pack deal.

It means 160 jobs may be saved after CBW Resources bought the firm out of administration meaning the logistics operations in Redditch, Worcester and Telford can continue.

The journalist for the trade magazine said: “CBW Resources management team includes director Paul Andrews, who is also operations director at Amco Services International and a director of Amco Services European. According to Companies House, Andrews has been employed at CBW Services since 2010 and at Amco Services (International) since 2002.”

About ICSM Credit

ICSM Credit has more than four decades of experience as a credit intelligence group whose members gain inside information about firms in trouble allowing them to avoid bad debts and rogue traders. To join costs less than a tank of fuel - while at the moment there's a special free temporary membership offer during the Covid-19 crisis which gives access to free legal letters. ICSM also has an effective debt collecting service which has a global reach - ask for details from Paul.

For details about ICSM Credit call 0844 854 1850 or visit the website www.icsmcredit.com or email Ian at Ian.carrotte@icsmcredit.com on how to subscribe and to join the UK’s credit intelligence network to avoid bad debts and late payers. Follow ICSM Credit on FaceBook, Twitter and YouTube and Ian Carrotte on LinkedIn.

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For details for the work of the journalist Harry Mottram visit www.harrymottram.co.uk

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