Derby News Comment

The decline of S&A Foods, and Perween Warsi’s loans

main picThe fact that a company with one major customer is incredibly vulnerable is self-evident to any student of business – it doesn’t require much experience to realise that this is not a sustainable position. As far back as the 2011 accounts this was well known, and declared in the annual accounts. The role of the Chief Exec, on behalf of the 500+ employees at the time was to develop a strategy to remove this risk – that is sound business practice where the Board has a keen eye on a thriving and prosperous future.

Since 2011, to March 2014 ( the last set of published accounts), the turnover plummeted by 28%. The operating margin ( after all direct costs and admin costs) was 1% – a wafer thin level which meant that for £44m worth of sales, the profit was a meagre £368k. After tax and interest this was reduced to £63k – basically break-even with zero scope for investment in new equipment and technology. The capital asset base was allowed to wither away from £10m to £8m in 3 years – this is not a company building for the future it was one that was just about staying alive.

The cash in the bank was a healthy £2m in 2011 which, by March 2014 had become £755k – eroded by simply supporting poor margins.

As the turnover reduced, the employees left quicker, with a 35% reduction in numbers of people, albeit only a 20% reduction in the overall staff costs –  meaning a healthy increase in average salary.

Whilst the company was paying interest on loans it saw fit to lend Mrs Warsi money at zero % interest. At 31 March 2014, the amounts outstanding from her were £360,000. This was not the only one there was a balance outstanding at 31 March 2013 of £60k, and £400k at 31 March 2012.

The Highest paid director ( not named in the accounts – but there are only 2 directors) received £288k ( the other director got £80k)  in the year to 31 March 2014 up from £98k in 2011. A pay rise not consistent with the growth in any other financial performance measures.

Suffice it to say that it was only a matter of time before the company collapsed as cash slowly haemorrhaged from within. A company with no long term strategy for customer development, investment and growth was living on borrowed time. Sadly for the 350 people who are going to be made redundant the well-paid, Highest Paid Director seems to have failed them.

 

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