The plight of Scotch Frost of Glasgow Limited, which collapsed into administration with the loss of all 17 jobs in the closing weeks of last year, is outlined in an administrators’ report.
The firm that supplied fresh and frozen food to restaurants and retailers throughout the UK ran into the red in its closing months, making a net loss of £3.6m on turnover of £25.6m.
UK restaurant supplier fell into administration owing £10m (Image: Getty Images)
The firm went into administration after a petition to Hamilton Sheriff Court by its directors and Kevin Mapstone and Paul Webber of BTG were appointed joint administrators.
Based in Bothwell Park Industrial Estate near Uddingston, the company had a 33,000-square-foot warehouse and head office which has now been sold in a deal worth £2.5m.
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The administrators said in their report: “Over the last three years, the business offering has shrunk as the market in this industry has become very price driven with the core customers being more price focused.
“The industry had changed and was now easily accessible with lower barriers of entry which led to new competitors in the market.
“This had the effect of lowering the prices and thus making it extremely difficult to support the company’s relatively fixed overheads.”
Declining revenue
They said that “with declining revenue, the business was focused on reducing the overheads wherever possible”.
The administrators also said: “The main area was around staffing, which the company greatly reduced. This meant that those staff remaining, were required to assist in other areas of the business. The workforce gradually reduced to 17.
“More recently, the sites at Newcastle and Harlow were moved out of the company’s name in an effort to reduce costs and the company centred the business and operational activities at the main site in Glasgow.”
Industry pressures
The administration reflects pressures in the supply chain of the hard-pressed hospitality industry.
BTG said the firm was hit by reduced sales “due to customers closing down and reducing number of trading days”.
There were “reduced operational costs for core customers” and “fierce competition resulting in reduced margins”.
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Another significant factor which could be addressed at Westminster level was the company’s higher staff costs “due to recent National Insurance increase”.
In the update, BTG said £1.6m was repaid in full to secured creditor Japan Food Express and HMRC has submitted a claim for £213,000.
Drax, the company’s energy provider, was paid nearly £70,000 and British Gas was paid £3,400, while Business Stream water service provider was paid £5,300.
Unsecured creditors
Claims of unsecured creditors were estimated at £7.8m, while, to date, claims totalling £5m had been lodged.
BTG said: “Based on current information, it is unlikely a dividend will be available to the unsecured creditors.”
The administrators said: “The company was incorporated on October 26, 1967 and was founded by the Louden family.
“The business operated as an ethnic food distributor covering fresh, frozen and ambient produce.”
Thomas McKay, BTG managing partner, said earlier that “this is a sad day”, adding “but after consultation with the firm’s secured creditor in Japan the directors had no viable way to continue trading”.
