Palletways bought member company Systematic Logistics International (SLI) for just £100,000, the firm's administrator has revealed.
The company, which had an annual turnover of approximately £10m, was sold via a pre-pack administration in November.
The move saved one of the pallet network’s longest serving haulier-members and protected 64 jobs - consisting mainly of drivers and administrative staff – all of whom transferred via Tupe to new owner Palletways.
In a report to creditors, administrator FRP Advisory said SLI’s problems could be traced back several years to a financial controller at the company who falsified management accounts to hide the company’s deteriorating position.
The report said no financial gain was obtained, but that the controller had tried to protect the director from “bad news”.
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The problem only came to light during 2016/17 when SLI struggled for cash and a financial review uncovered the problem.
FRP said that for the year ending 31 August 2016 the company made a loss of £400,000 and director Richard Triolo was forced to restructure the board and dismiss a fellow director.
Palletways then agreed to alter the terms of its contract and gave additional financial support to the beleaguered business but a reduction in turnover in 2018 and a loss of two contracts, increasing fuel costs and the uncertainty of Brexit left SLI struggling to make a profit.
Despite additional funding from Palletways it was eventually decided that selling the business would preserve the value of the company’s assets and produce the best outcome for creditors and stakeholders.
However, Palletways was the only company to make an offer, of £85,000, although this was later increased to £100,000.
The report added that the sale ensured “the upmost continuity in business and trading for customers with minimal disruption, which will enable the administrators to maximise realisations from the debtor ledger".
“This will ensure the secured creditor is repaid in full and gives the best opportunity for a dividend to become available to unsecured creditors.”
Creditors of the company are estimated to be owed around £2.5m. DVSA records show the business held a combined O-licence authorisation for 15 vehicles and 11 trailers.
