Farmers owed money by auctioneer Wright Marshall, which went into administration in late June, are unlikely to get even 5p in the pound.
Two farmers are owed £50,000 or more by the firm and a further 18 are owed between £3,000 and £31,000.
Among the 1,200-plus unsecured trade creditors who are owed a total of more than £1.6m, more than 260 amounts owing are listed against farm addresses.
Their prospect of any payout depends on the administrators’ ability to recover a further £400,000 owed to Wright Marshall. It is likely to be another nine months before any payment is made.
The NFU said it had been contacted by about 60 members affected by the collapse of Wright Marshall through its CallFirst service. These were mainly in the North West but members in the West Midlands and Wales are also affected.
HMRC is also an unsecured creditor, owed £253,888 in addition to the £1.6m owed to trade creditors.
The only secured creditor is RBS, which was owed £1.098m on 26 June, when administrators Ben Woolrych and Anthony Collier of FRP Advisory were appointed.
Their report, dated 16 August, says “it is likely that RBS will suffer a shortfall on its indebtedness in this matter”.
Former employees of the auctioneer are preferential creditors and have claimed £36,771 in holiday pay and pay arrears.
Deterioration in performance
The deterioration in performance of the company was mainly due to increased losses in the rural auctions division and continued under-performance of the fine art and estate agency businesses, the administrators said.
Net assets after liabilities, including creditors falling due within a year (mainly the bank loan), were negative at £126,615 in May this year, according to the administrators’ report.
Management accounts for the 10 months to May this year show a loss of £246,436 before tax compared with a profit of £222,252 in the previous full-year accounts to July 2018.
This compares with statutory (tax) accounts showing a pre-tax profit of £170,518 in the year ended July 2017.
Turnover fell from £6.06m in 2017 to £4.85m in 2018 and to £3.82m in the 10 months to May this year.
What happens next?
The value of any future payout to unsecured creditors is unpredictable.
A legal provision in the insolvency act requires in certain circumstances that unsecured creditors are paid a portion of what would be due to secured creditors, referred to as the “prescribed part”.
In this case, the statement of financial position in the administrators’ report puts £179,343 as available to unsecured creditors.
However, Simon Farr, a director of FRP Advisory, told Farmers Weekly that the actual amount was likely to be less than £100,000, which would mean a payout of less than 5p in the pound.
Assets of Wright Marshall (mainly book debtors) would continue to be realised, he said. After this process is completed as far as possible, the administration costs are paid, then any preferential creditors.
Following this, 50% of the first £10,000 available is carved out for unsecured creditors, then 20% of what remains, subject to a £600,000 cap, which in this case is unlikely to come into play.
Creditors can ask for a meeting, and while no request has been made so far, FRP is expecting that a meeting will be requested.
The next update is due from the administrators in late December.
Wright Marshall – background
- Incorporated in 2013 from merger of Frank Marshall and Wright Manley.
- Four divisions – rural auctioneers (mainly livestock), professional, fine art and estate agency.
- Administrators appointed 26 June 2019.
- Livestock market ceased trading 20 June, subsequently 66 staff were made redundant, with a few retained to help the administrators wind down the division.
- The estate agency arm was sold on 28 June and completed on 29 June, with 52 employees transferring to the new owner.
- No buyer was found for the fine art division, which has ceased trading, with its remaining employees made redundant on 9 August.