Bathroom furnishings supplier Croydex had its trade credit insurance withdrawn in the summer as its largest customer, Homebase, changed owners after desperate Australian DIY chain Wesfarmers offloaded the struggling DIY retailer for £1.
As Croydex owner Norcros reported six-month earnings figures earlier this week, it was revealed that the mass-market bathroom accessories brand had barely traded at all in the firm’s second quarter as the group “actively reduced its exposure”.
Norcross said it had recently recommenced trading on a significantly reduced credit limit and “is continuing to work with Homebase and the trade credit insurers to reintroduce cover and a higher credit limit”.
Trade credit insurers work with the supply chain to offer them a level of reassurance should a customer not fulfil their payment commitments. Without credit insurance, a supplier is exposed to a trading relationship going sour.
The credit challenges held back Croydex over the financial period and sales fell 12.2% to £10.8 million, down from £12.3m the year before.
The Cheshire firm’s higher-end brands fared much better, despite a difficult UK market hampered by Brexit uncertainty, with Merlyn particularly benefiting from what Norcros said is a “growing emphasis on the bathroom within the home together with a premiumisation trend” that has led to an increasing share of revenue with Merlyn’s top customers.
Homebase, which is now owned by private equity firm and turnaround specialist Hilco, is currently going through a massive restructure, with about a fifth of its estate earmarked for closure following the approval of a rescue plan in August.