Administrators have been appointed to CEM Press Limited, the Nottingham-based manufacturer of pattern books and shade cards.
The news follows an announcement from parent company CEPS on 13 December 2019 of an intention to appoint an administrator to CEM Press Limited and Travelfast Limited (trading as Sampling International) (“Sampling”).
On 4 December 2019 the Board of CEPS announced that it expected to exit its investment in the CEM group of companies, comprising of the two operating subsidiaries CEM Press Limited and Travelfast Limited.
CEM is 97.86% owned by CemTeal with the remaining 2.14% being owned by a private shareholder and Sampling is 100% owned by CemTeal. CEPS owns 80% of CemTeal, the remaining 20% being owned by management and external shareholders.
Sampling was acquired on 27 March 2019 for £1.2m, payable in cash over three years based on performance. However, due to the deferred and performance related nature of the consideration, only £9 has been paid to date.
The decision to acquire Sampling came with the aim to introduce a complementary business within the CEM Group, with a view to creating one of the largest individual pattern book and shade card makers in the UK with two production facilities. Under a new management structure, it was hoped that the CEM Group would continue to expand and grow offering a breadth of services to customers.
However, “despite management’s efforts and cash injections from CEPS since March 2019 […] it has not been possible to achieve the envisaged savings and efficiencies from consolidating CEM’s and Sampling’s operations and streamlining processes.
“As at 31 December 2018, prior to the acquisition of Sampling, the consolidated net liabilities of CemTeal were £2,960,000. CemTeal’s turnover in the year was £2,824,000 and the consolidated operating loss was £495,000. Thus, if CemTeal had been excluded from the 2018 results, CEPS consolidated revenue from continuing operations would have reduced from £18,474,000 to £15,606,000, but operating profit from continuing operations would have increased from £391,000 to £886,000. In addition, in the year ended 31 December 2018, the CEPS Board decided to write-off completely the value of the intangibles in CemTeal. Consequently, there was a customer list impairment exceptional item of £588,000 which also impacted negatively on CEPS’ overall profitability. In the year to date, the loss before tax of CemTeal and its subsidiaries, excluding Sampling, was £954,000 based on management accounts to 31 October 2019.”
From the date of acquisition to 31 October 2019, unaudited management accounts show that Sampling made a loss before tax of £236,000 and net liabilities were £636,000 as at this date.
The Company was owed, after impairment, £2,100,000 at 31 October 2019 by the CEM Group. This largely comprises the cash injected into the CEM Group since the acquisition of Sampling of £1,805,000.
Moorfields Advisory Limited was engaged by the CEM Group to provide advice and outline the options available in its financial position. Moorfields recommended an accelerated marketing process for the businesses with a view to effecting their sale as going concerns if possible and were engaged to oversee this process. However attempts to find a buyer were unsuccessful.