About 240 companies are owed money and unsecured creditors are also likely to be out of pocket after liquidators Colin Gower and Diana Matchett from BDO Christchurch combed through the company’s assets and debts in their first report.
“Unfortunately, we do not anticipate that there will be any funds available for a distribution to unsecured creditors,” they said.
Founded in 1918, the Christchurch institution operated nine stores mainly in the South Island with a focus on furniture, electronics and appliances.
About 130 staff were employed before the company wound down operations and closed its doors.
At a creditors’ meeting on Wednesday last week the company, owned by Smiths City Holdings (2020) Ltd under sole director Colin Neal, was placed in liquidation.
This followed it going into voluntary administration on September 2 after restructuring and failed attempts were made to sell the business amid declining trading conditions.
Total assets were estimated in the report at more than $8.7m, and included bank cash from sales of stock during the voluntary administration, inventory, trade debtors, fixed assets and intellectual property.
Included in the total liabilities of $26.8m, were debts of more than $10.7m to trade creditors and nearly $4.8m to other unsecured creditors.
Secured creditors and the preferential creditors, the IRD and ASB, were owed a total of about $11.3m.
The liquidators noted Inland Revenue had claimed outstanding preferential entitlements of $1.02m. Employees were paid preferential entitlements in full during the administration period with ASB Bank making funds available for wages valued at $211,000.
“Based on asset realisations achieved during the administration process, and subject to final administration costs and expenses, there will be funds available in the liquidation for a further distribution to preferential creditors. The liquidators reserve the right with respect to the timing and level of any distribution to preferential creditors.”
Polar Capital LP is the sole shareholder of Smiths City Holdings (2020) Ltd and bought the company in 2020.
After Smiths City was relaunched with a major rebrand, positive trading results were achieved in the 2022 financial year, following Covid-19 lockdowns.
The liquidators pointed out sales dropped last year during a challenging economic environment and reduction in consumer spending. Rising costs also had a significant impact.
They said the reduction in both sales and margin, combined with a high fixed-cost structure, made the company unprofitable.
“Steps were taken to restructure the company in FY24 to reduce costs and drive margin and profitability. This included the rationalisation of stores and a reduction in staff across the company as management took steps to vacate unprofitable stores where possible. Given the nature of the continued costs associated with closed stores for a period of time post-closure, the attempts to reduce costs were unable to be completed within the timeframe or at the level to turn around the company and become viable in the current economic environment.”
Attempts to sell the business were unsuccessful and trading conditions worsened this year.
Increased pressure from creditors, reduced stock on hand and lack of available funds to support trading led to the company appointing administrators.
Administrators controlled operations and continued to trade eight of the nine stores for two weeks to sell remaining stock before holding the October 1 meeting when creditors put the company in liquidation.
