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Banham Poultry owed £41m to creditors before sale, report shows

PUBLISHED: 15:05 07 November 2018 | UPDATED: 10:56 08 November 2018

Banham Poultry signs. Picture: DENISE BRADLEY

Banham Poultry signs. Picture: DENISE BRADLEY

Archant

Norfolk chicken firm Banham Poultry owed more than £41m when it went into administration last month, a new report reveals.

Banham Poultry at Attleborough. Picture: DENISE BRADLEYBanham Poultry at Attleborough. Picture: DENISE BRADLEY

The Attleborough-based company experienced a cashflow crunch over the summer and was sold to Derbyshire-based Chesterfield Poultry in a pre-pack administration, a deal which safeguarded 1,100 jobs.

A report from administrators at Duff and Phelps shows that Lloyds Bank, the only secured creditor, was owed £19.77m by the group at the time of its sale.

A further £21.27m was owed to non-preferential creditors, which included £15.5m to other businesses in the supply chain, and £5.1m to the company’s pension fund.

Have you been left out of pocket by the administration? Contact business editor Mark Shields on 01603 772426 or mark.shields@archant.co.uk

Hundreds of suppliers are listed in the administrators’ report, including feed merchants, transport companies, hatcheries and utilities suppliers – which face the prospect of a return of just pennies for every pound they are owed.

Banham Poultry went public in early October with its financial difficulties and subsequent search for a buyer, after a summer in which it had been hit by rising feed prices, falling trade and disruption from bedding in new machinery in which it had invested.

Fears were raised that the jobs of 1,100 workers could be at risk as time ran out to secure a buyer, before Chesterfield Poultry swooped in to buy the business’s assets in a pre-pack administration. This type of deal involves a buyer being lined up before a company enters insolvency, with its assets being bought and its debts left behind.

The rescue deal was hailed by MPs for having preserved the jobs – a rival bid would have seen the Attleborough factory shut down – but there were warnings at the time that creditors could pay the price.

Banham Poultry had a turnover of around £150m and processed more than a million birds a week at its Norfolk plant.

It had embarked on an expansion in the summer of 2017, with the ambition of increasing capacity by a further 300,000 to 500,000 birds a week, with the £15m first phase ending in August 2018.

However, disruption in integrating the new systems hit production capacity, said administrators, and the problem was compounded by rising feed prices and downward pressure on prices from the group’s major supermarket customers.

Have you been left out of pocket by the administration? Contact business editor Mark Shields on 01603 772426 or mark.shields@archant.co.uk

‘It could be very challenging’

Absorbing the cost of Banham Poultry’s failure could have serious repercussion throughout the supply chain, an agricultural consultant has warned.

Charles Whitaker, managing partner in the Norwich office of Brown & Co, who works with businesses in the supply chain, said the “wafer-thin margins” in much of the poultry industry meant that many firms were ill-equipped to handle the loss.

“There is not the buffer in the margins in the supply chain to deal with it, unless you are a well-resourced and very robust concern. It could be very challenging for individual businesses,” he said. “It depends on the proportion of the debt to the balance sheet as to whether they can shoulder it.”

Mr Whitaker pointed to the recent volatility in wheat prices as piling pressure on businesses, but said demand for ever-cheaper meat from supermarkets was “just not sustainable”.

Despite the damaging ripples of just a fraction of Banham Poultry’s £41m debt being paid, he said the complete collapse of the company would have been “catastrophic”.

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