Pickfords, Britain’s oldest and largest removals company, is on the verge of a fire sale to avoid a financial crisis that would put up to 1,300 jobs at risk, The Times has learnt.
The loss-making company is trying to sell some or all of its business as it seeks to secure additional funding to help to pay staff and creditors.
If it failed, Pickfords would become the first high-profile British casualty from the slowdown in the UK housing market and the collapse of the American property sector.
Pickfords, which is registered in Britain as Sirva UK Limited, managed to pay its January wage bill two weeks ago with a £350,000 cash injection from Sirva Inc, its troubled American parent, according to company filings. Pickfords’ US parent, part-owned by Clayton, Dubilier & Rice, the private equity firm, filed for Chapter 11 bankruptcy protection last week, adding to the pressure on the UK business to find a cash injection to keep Pickfords afloat while it seeks a buyer.
Pickfords, which dates back to a 17th-century Pickford family packhorse business, is suffering from what its American parent called “significant short-term cash obligations. If a solution is not found to the short-term funding requirement, the directors of Sirva UK Limited must consider filing for an appropriate UK insolvency procedure.”
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Talks are under way to sell parts of Pickfords to a London-based company. The buyer would take the UK group’s assets in return for “taking on certain liabilities”, Sirva Inc said in documents filed with US regulators. Without extra cash, Pickfords may be forced to try to sell itself “in an insolvency procedure, for example administration”, company filings said.
Brad McCarthy, Pickfords’s finance director, said that the company had sufficient cash to pay its staff this month. The payment from its US parent, he said, was “nothing out of the normal ... Quarter one for the moving industry is quieter and we send money to them in busier times - it is the same as has been happening in the past ten years.”
Administration would afford Pickfords similar protection from creditors as that granted to its American parent through Chapter 11 bankruptcy, but Pickfords’s management would hand control of the British business to an independent insolvency expert.
“If the sale cannot be completed at all, the company [Sirva Inc] will likely wind up the UK and Irish businesses pursuant to an appropriate UK insolvency procedure,” Sirva Inc said.
However, Mr McCarthy said: “I am very confident at this stage. There is no issue of short-term cash. We have a number of alternatives. I can say with a reasonable level of confidence we are able to find those needs.”
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Sirva UK made a post-tax loss of £1.7 million for the year to December 31, 2006, on turnover of £88 million, after accruing post-tax losses of £15 million and £30 million in 2005 and 2004.
Mr McCarthy said that the Pickfords UK removals business and the group’s Irish insurance business together made a loss of about £1 million in 2007 and he forecast combined losses of about £1.5 million in 2008.
“We are experiencing a difficult first half of the year due to the housing market, so we are not expecting to improve from 2007. Current trading volumes are above where we expected as we were pessimistic on quarter one,” he said.
Sirva UK has a deficit in its defined benefit pension scheme of about £10 million and has agreed with pension trustees to pay £1.6 million per year into the scheme over ten years, starting in April 2008, company filings indicated.
Sirva UK is owned by Sirva Holdings, whose latest published accounts record £34.8 million of pre-tax losses on turnover of £139.8 million for the 63 weeks ending March 13, 2006. That followed a £32 million pre-tax loss on £157 million of turnover for the year to December 25 2004. Sirva Holdings registered total liabilities of £151 million at March 13, 2006.
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Sirva Inc obtained court approval last week for $150 million of emergency funding from JPMorgan, its main bank lender, as part of its move into debtor-in-possession bankruptcy protection for between 60 and 90 days. That loan matures at the end of June.
Moving account
1695 First reference to Pickford family as hauliers
1756 James Pickford, the London-to-Manchester wagoner, has two London headquarters
1817 Pickford family saves business by selling it to Baxendale family
1919 Firm has 1,580 horses, 1,900 horse-drawn vehicles and 46 others
1946 Pickfords merges with Carter Paterson
2002 Becomes part of Sirva Inc, the world’s largest removals firm