Monday, 04 December 2017 16:23

Palmer & Harvey in administration after debt burden bites

Wholesaler Palmer & Harvey has entered administration after failing to restructure significant debts owed to suppliers. The Palmer & Harvey Group, the UK’s fifth-largest privately owned business and the country’s largest tobacco supplier, had been in takeover talks with Carlyle, the private equity firm.

But after talks broke down, directors from several Palmer & Harvey group companies made an application to London’s High Court to enter administration to help ease an increasingly unmanageable debt burden.

The application was granted, with PwC appointed administrators. PwC announced that the move would result in the immediate loss of 2,500 jobs.

The company supplies around 12,000 products across the grocery retail market, including tobacco, confectionery, food and alcohol. Its subsidiary Palmer & Harvey McLane Ltd is the UK’s largest convenience store supplier. Other group companies supply customers ranging from petrol station forecourts to supermarkets

Spotting the warning signs

A statement from PwC said the company had been struggling with “challenging trading conditions” in recent months which had led to cash flow pressures and mounting debts owed to suppliers.

However, for a company the size of Palmer & Harvey to go under, it is likely that the warning signs of trouble were there a lot longer than a few months ago. Whatever ‘challenging trading conditions’ refers to - rising overheads, increased competition, suppliers putting prices up and squeezing margins - the only way they lead to a large company failing is if they add to existing underlying problems and expose a lack of capacity to absorb additional costs.

Content continues below

Business overdrafts - the hidden credit crunch

Business overdrafts have been called the 'hidden credit crunch' following the news that while traditional bank business loans have fallen 9% in the past two years, the banks have called in 23% of…

50% Off Experian Credit Reports

If your business doesn’t lay the right groundwork when working with customers, you’re leaving yourself wide open to the risk that you’ll never get paid at all. Time and again, we hear of well-meaning…

Prompt Payment Code fails to stop large firms making slow payments

Slow payments represent a substantial risk to small and medium-sized businesses, who must often meet the cost of materials and labour for a month or more while waiting for customers to settle…

'Who's Gone Bust?' report makes for sobering reading

The Centre for Retail Research has published its latest Who's Gone Bust? report, giving an insight into how retail companies have been affected by five years of economic turbulence. Worryingly for…

Debt is often the main culprit. While it poses no immediate threat to a business - i.e. when cash flow is good - companies are all too often happy to let debts quietly accumulate, reluctant to grasp the nettle and deal with them.

But mounting debt is never a good thing for any business. However quietly and slowly it creeps up, there comes a time when it becomes unmanageable. As suggested in this case, trading conditions might change, and suddenly there is no liquidity left in the business after you have made your repayments.

Palmer & Harvey clearly made attempts to resolve its debts by looking for a takeover to inject some cash and restructure the finances. That a deal couldn’t be struck raises the question of whether executives tried to act too late. The worse your debts become, the less attractive a business is to potential investors.

So the moral to take from another sad demise of a big name British company is never take debt for granted. The best and safest course of action is always to pay debts early and be vigilant in how they are managed.

Over 150 Years Of Industry Experience

Our modest but highly skilled team has a combined total of over 150 years of experience in commercial credit management and B2B debt collection. From independent IT contractors to major film and TV publishers, Safe Collections has the knowledge and experience you need to get paid quickly and cost effectively.

Image "Debt" by flickr user Christian Schnettelker is licensed under CC BY 2.0

8:00 - 20:00

8:00 - 20:00

Our Opening Hours Mon. - Fri.

+44 (0) 1772 454505

+44 (0) 1772 454505

Got questions? Call us today. No hard sell, guaranteeed. 

© Safe Collections is a trading name of Safe Collections Limited. Incorporated 1984. Company Number: 01815264. VAT Number: GB407358159. All Rights Reserved.