Magnus Group was making a £1m loss before it was sold in a pre-pack deal for £20,000, according to a report to creditors.
The Ipswich-based haulier entered administration on 23 November following almost a year of difficulties that began with electricity charges jumping from £3,000 a month to £22,000.
Larking Gowen LLP said business rates also increased in 2023 and Magnus Group was struggling with delays in pending new business commencing.
It was forced to make redundancies that helped save it £500,000 and as the transport division was continually underperforming the decision was made to remove the transport director in March as well: “This decision was made too late but indicative of the ethos of the business to try and back its employees with loyalty,” the report said.
“A more ruthless and earlier decision would have been a much better option with hindsight.
“Added to the warehouses being up to 50% less utilised than just six months prior, the company really started to feel the pinch financially.”
In April, the business took on an unsecured loan of £250,000 at an interest rate of 42%, enabling it to pay remaining staff and Magnus believed this would buy the firm time for one of the many contracts which it was told would begin imminently: “Added to that there was the Christmas rush, a notoriously busy time in the industry; however, this didn’t materialise and it’s believed this was felt throughout the whole industry.”
According to management accounts, in the year to 30 September, Magnus Group reported a turnover of £17.3m but it was making a loss after tax of £1m.
Larking Gowen said the pre-pack sale of the business to Hemisphere Freight Services was seen as the best option because Magnus was running at a loss with cash reserves depleting every day and so it needed to enter into an accelerated sales process:
“A pre-pack sale of the business and assets was in the best interests of the creditors as a whole as it will allow the company to make a return to the secured and preferential creditors,” it added.
“The sale means 25 members of staff have kept their jobs which in turn has reduced the liabilities of the company compared to a liquidation.”
Unsecured creditors are estimated to be owed almost £4m.