EXCLUSIVE: Bathstore debts revealed

Bathstore collapsed owing millions of pounds to customers and installers, according to the initial administrator’s report seen by kbbreview.

The company appointed administrator BDO at the end of June, following two years of poor revenue and losses. It was bought on July 22 by Homebase for £1.24m.

When BDO was appointed on June 26, Bathstore’s creditors were owed £17m – including £2m to suppliers, £1.2m to installers, £8m of customer deposits and £2.6m to the tax man.

Some of those liabilities have since been mitigated by selling off existing stock via some stores and the company’s website.

Bathstore operated from 135 leasehold stores across the UK and its head office in Welwyn Garden City, employing 531 staff. It also had 20 franchisees, which were owned and operated independently but bought product from the company and were licensed to use the brand.

The company was a wholly owned subsidiary of Bathstore Group Ltd, which was itself owned by Bathstore Holdings LLC.  Bathstore Holdings, whose ultimate shareholder is US banking tycoon Warren Stephens, acquired the business in 2014. The administrator’s report reveals that, since then, Bathstore Holdings provided over £65m of debt funding for Bathstore Group.

A prolonged period of difficult trading is ultimately blamed for Bathstore’s decline. For the year ending July 31, 2017 Bathstore saw a pre-tax loss of £29m against a turnover of £141m. For the same period in 2018, there was a pre-tax loss of £20m against a 19% fall in turnover of £115m. In the nine-month period to April 30 2019, management accounts show a pre-tax loss of £17.5m.

All 135 stores initially continued to trade immediately after the BDO appointment. However, all installation projects were instantly shut down, as was all support for franchisees – including fulfilling any orders. In the head office, 85 staff were made redundant. On July 19, 36 underperforming stores were shut and, following the Homebase sale, the remaining 53 were closed by August 7.

All of Bathstore’s stock  – valued at around £9.7m when the administrator was appointed – was held and managed by third-party logistics company DHL Excel Europe.  It was owed £3.5m by Bathstore at the end of June and had already stopped all deliveries as a result.

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DHL Excel Europe then agreed to resume deliveries on the understanding that the revenue from new orders would be used to offset the sum owed to them.

Equally, at the end of June Bathstore was holding around £9m of customer deposits – representing 8,120 unfulfilled orders – made up of product, installation or both. As of August 13, 4,934 of those (61%) were fulfilled – all of them product-only orders, as the majority of the remaining orders involve installation.

Of this £9m, £8.34m had been paid by credit or debit cards via Bathstore’s merchant service provider, leading to fears of a potential unsecured claim against the company to that amount.  Alongside the agreement with DHL Excel Europe, administrators agreed with the merchant service provider to continue to process and fulfill orders in order to mitigate that risk. As of August 13, that figure has dropped by 57% to £3.6m.

In total, sales during the administration totaled £5.4m including stock and ex-display product. Any display stock not sold has been “abandoned”.

At the time of BDO’s appointment, franchisees owed Bathstore £1.7m and while some have simply ceased to trade, others are now subject to formal insolvency processes themselves. Chances of redeeming this money are, according to BDO, “uncertain”.

All staff have been paid and there were, according to BDO, no arrears of wages.

Suppliers left out of pocket include Aqualisa (£60,000), International Decorative Surfaces (£50,000), Just Taps (£92,000), Kohler Mira (£92,000), and Traymate (£58,000). Many of the supply creditors are based in the Far East.

There are around 225 installation companies listed as creditors, totalling £1.16m. The chances of these installers receiving any significant return is unlikely.

Homebase paid £1.24m for Bathstore, broken down into £830,000 of warehouse stock, £308,000 of ex-display product, and £100,000 of intellectual property.

The sale process saw approaches to 121 different parties, with 15 trade and eight financial investors considering serious bids. In the end, three formal offers were made and Homebase won out with a deal that included a licence to occupy 44 stores and transfer 154 store employees.

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