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Six still in for The Works

27.03.08 Graeme Neill

Beleaguered discount bookseller The Works is expected to be sold by the end of next week.
Administrator Kroll says that six possible buyers have moved into the due diligence stage. When The Works went into administration in January, 104 companies expressed an interest in the business.

In a report on the woes of the bargain chain, Kroll disclosed that the retailer ­realised that by the end of 2007 it would be unable to pay rent for the quarter beginning March 2008.

"The current management team have attributed the poor trading performance to a loss in marketing direction, a store layout that alienated the customer base, over-reliance on the Christmas trading period and a more competitive trading environment," it said.

In the period between 31st January and 15th March, The Works has made a trading profit of £1.1m, around £700,000 ahead of expectations. The company had a cash balance of £7.7m for the period and accrued expenses of £6.6m, including £1.39m of administrators' costs. The administrators have been paid an average of £263.49 per hour for their time dealing with The Works.

In a bid to turn the business around, earlier this month Kroll closed 85 of The Works' 319 stores, at a loss of 450 jobs. It also discounted more than 46,000 lines to shift stock classed as "old" or "slow moving".

This led to sales growing by 2.9% compared to the same period last year. Kroll said that "by trading on, selling stock at retail prices and effecting transfers and/or assignments, and implementing a going concern sale process, [we] believe an improved return will result".

The Works owes creditors, including more than 200 publishers, a total of £22m. But Kroll has now reached agreement with 95% of suppliers regarding retention of title, allowing them to take their stock back in lieu of unpaid bills. When the retailer went into administration, it had historic debts of £56m.

Kroll will be holding a meeting of creditors on 9th April at the Hilton Birmingham to present its proposals for the business.

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