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Administrators forced to mothball Dams in face of £100,000 weekly losses

Wednesday 9 December 2009

DAMS International faced losing up to £100,000 a week when the administrators were called in to save the company in September.

The Knowsley-based office furniture supplier had seen sales plummet in its financial year to September 30 – down £17m to just £25m.

Joint administrators Paul Flint and Brian Green, partners from accountancy firm KPMG’s insolvency practice, were appointed as Dams International’s financial year ended and immediately mothballed the operation for a week, cutting 305 of the company’s 327 staff.

More than 30 expressions of interest in the company and three indicative offers were received but the company was bought by former directors Chris Scott and Melissa Moore, children of founder Barry Scott, through a new company, Dams Furniture, which was created on September 10.

They paid £365,000 for the machinery and other assets, with a further £600,000 due over 16 months for stock. The firm employed 72 people, including the retained 22 staff who transferred over.

In their report the administrators explained that Dams International was “unsustainable” after incurring losses of £2m in the 43 weeks to the end of August. They said: “The fall in sales, coupled with an unsuccessful expansion into outsourced logistics, led to substantial losses being incurred.

“The weakened trading position had a detrimental impact on cash flows resulting in the company having to therefore rely on their invoice discounting facility to fund ongoing trading.

“However, with sales not forecast to recover for the foreseeable future, and a high fixed cost base designed to support a £40m turnover business, the operation in its current structure was unsustainable.”

Administrators are forecasting a shortfall of £2.8m owed to unsecured creditors.

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