Scallans food company placed in examinership due to Covid-19
THE owner of well-known Wexford food company, Scallan’s, which has gone into examinership due to the Covid-19 pandemic, said this week that he is optimistic about the future of the firm.
Efforts are currently being made to save the Meehan Family Food Group trading as Wert Capital Ltd. which incorporates Scallan’s Food Services at Whitemill Industrial Estate and Dublin Food Sales Ltd.
The owner Richard Meehan said the coronavirus crisis which resulted in the closure of restaurants and hotels, had a major impact on the company’s cash flow, forcing the difficult decision to seek examinership through the courts.
‘As soon as Covid-19 impacted the market, it resulted in the closure of many of the businesses we supply, and if they’re not open, they can’t trade, and if they can’t trade, they can’t fulfill their financial obligations,’ he said.
‘As a smaller independent wholesaler, we didn’t have immediate sight of the liquidity needed. We didn’t have the means to keep going because our cash flows dried up.
‘The second factor was that apart from the Wage Subsidy Scheme, the Government supports are not fit for purpose as they apply to SMEs. The Government wants SMEs to borrow money to keep going and that is not the solution.
‘We had to take the decision to go into examinership because our cash flows dried up.’
Mr. Meehan described the company as ‘a very viable business’ and added amid efforts to salvage the firm: ‘I am optimistic about the future.’
Staff at Scallan’s of Wexford account for about 30 of the company’s 73 employees, many of whom are currently on temporary lay-off and availing of the Covid-19 Wage Subsidy Scheme.
The company is continuing to operate and is supplying customers such as takeaway restaurants, shops and nursing homes which have not closed as a result of the coronavirus crisis.
‘We are doing the best to serve all the customers who are still open and we are doing everything we can for the staff,’ said Mr. Meehan.
A legal notice was placed in the Irish Independent last Thursday, announcing that Neil Hughes of Baker Tilly in Dublin had been appointed examiner to Wert Capital Ltd, Scallan Food Services Ltd and Dublin Foods Sales Ltd, on foot of an order made by Justice Quinn of the High Court under Part 10 of the Companies Act, 2014.
The three companies are involved in the delivery of mainly food and some non-food products to restaurants, pubs, offices, hotels, nursing homes and catering companies in the Leinster area and south-east.
In the High Court, the court was told the companies are currently insolvent and unable to pay their debts and have a reasonable prospect of survival if certain steps are taken.
Those included securing fresh investment in the firm, and the examiner putting together a scheme of arrangement with creditors, which would allow them continue trading if approved by the court.
The firm, represented by Ross Gorman, B.L., petitioned the court for Mr. Hughes’ appointment.
Counsel said they had been profitable in recent years but had run into cash flow difficulties.
The outbreak of Covid-19 and the resultant closure of businesses, schools, pubs and restaurants, had seen the companies’ turnover fall by 70%, he said.
The companies have also had to layoff a significant part of their workforce, counsel said.
The Creditors include Bank of Ireland, Revenue, a financial fund BDO Davy E11S, from which companies borrowed to fund acquisitions in 2017, and a significant number of trade creditors. Other causes of the companies’ difficulties included a shortfall on an invoicing facility entered into with Grenke Invoice Finance.
The court was told that the appointment of an Examiner would help in putting a scheme of arrangement together which could also help to resolve any issues with Grenke over the invoicing, counsel said.
Counsel also said there have been expressions of interest in what are profitable businesses by investors and the firm was looking to diversify in these troubled times and establish a home delivery service.
Wexford food firm Scallan’s was acquired for an undisclosed sum by Dublin Food Sales in April 2018, having been established more than 40 years earlier by local man Martin Scallan who developed it into a major wholesale operator, supplying food products to commercial and catering outlets throughout the south-east, and was joined in the business by his son Graham. Martin retired from the company about 12 years ago.
IT IS A VERY VIABLE BUSINESS AND I AM OPTIMISTIC ABOUT THE FUTURE. WE HAD TO GO INTO EXAMINERSHIP BECAUSE CASH FLOWS DRIED UP