EATON ISSUES OPEN LETTER TO INDUSTRY

Ben Eaton, managing director of industry supplier Starleaton, has issued an open letter to the industry, as the much slimmed down operation begins trading again under a deed of company arrangement.

Starleaton, which had operated as a supplier to the sign and display industry since 1978, was placed into voluntary administration by its shareholders in January. The company, which had facilities in most capital cities, went down with debts in excess of $20m. Unsecured creditors were looking at losing all the money they had with Starleaton. Employees would have been paid out through the government's Fegs scheme, although that did not cover super entitlements. The vexed status of the monies paid by various print businesses as deposits or advance payments for equipment and goods that did not arrive by the time of the VA caused anger amongst the print businesses involved, and disquiet in the wider supplier community.

Starleaton came out of VA by means of a DOCA, deed of company arrangement, which saw a slim majority of creditors, including staff, accept the schedule proposed by the company. That schedule Included a reduction in employees from 35 to six, the closure of all sites except the NSW head office and warehouse, a focus only on consumables, and an $800,000 cash injection at $33,000 over each of the next 24 months to run the company.

Ben Eaton writes:

To all across the industry,

I would like to firstly make a public apology to all our customers and supply partners who have been caught up in the tragedy of our recent Voluntary Administration (VA).

There were a number of factors that ultimately contributed to us making the tough decision to enter VA, none of which were taken lightly, all of which were deeply disappointing. Coming into COVID we were well engaged in our long-term strategy to grow our three key complimentary business units (consumables, capital, and service support). As we then embarked on our post pandemic recovery, we were mistakenly buoyed to the economic recovery, investing heavily in head count in particularly in our engineering team.

As economic conditions slowed due to a combination of inflationary pressure and a significant shift in the global financial landscape, we ultimately saw a shift in spending habits across all three business units and the way in which the customer base was looking to have their equipment serviced. Our cost base for the geographical footprint we were supporting versus the volume of trade had hit a critical point.

Unfortunately, due to additional coinciding factors including the longer-term hangover from the pandemic, impacts of rising costs due to the Ukraine crisis and some significant changes to our level of insurance cover with our key suppliers, we experienced a knock-on effect to our ability to continue to import both capital and consumables consistently. Whilst we had started a restructure of the business at the start of the FY24 year, the impact of these changes was not impactful enough, and the overall financial stability of the company continued to come under pressure. As we came out of the Christmas closure period the stakeholders met and it was disappointingly determined that VA was the only option.

During the eight (8) weeks of VA, there were several parties who investigated acquiring parts of the business, however a deal was unable to be struck that supported our employees and customers nor able to be finalised inside the time frame required under appointment of Cathro Partners. When liquidation was recommended as the only option available at this point, I was not willing to accept this as this would have been catastrophic for all those involved, in particular our employees, the unsecured creditors and our customers with whom we had outstanding sale contracts with.

The proposal to restructure the business back to its core foundations of consumable sales with a reduced footprint and smaller workforce sees us in the best possible position to make good on our obligations moving forward. In many respects liquidation would have been an easier option with the FEG scheme providing for the staff entitlements however this in my view was not an acceptable outcome as the result for all the other creditors would have been a NIL return. It is important for the message to be clear that the intention from my side to enter a Deed of company arrangement (DOCA) is to do everything in my capacity to make good on the companies past commitments, in particular the staff entitlements in their entirety. I am working with the various individual unsecured parties to find an amicable outcome.

I want to thank all our customers and suppliers who have supported us during the VA period. It was overwhelming both for me personally and the rest of the business to see so many companies wanting to see Starleaton ultimately survive the VA process. It is a real testament to the community we operate in. Having spent many years working with various industry associations, it was comforting to see that in a time of crisis, there is no shortage of people to support and offer sound advice.

I especially want to apologise to all the staff. It was a horrible situation they found themselves in, with many of them having to be stood down on day one. We have been fortunate to have staff that worked with us for long periods of time. Thanks to those who worked with us in the early weeks of the administration. I was proud to see so many find roles within the industry so quickly. It is a true sign of the quality of people we employed. I wish them all the best in their next endeavours. And to those that have chosen to remain as part of the team moving forward thank you for believing in the task ahead.

The financial health of the business is ultimately my responsibility.  Starleaton has been a trusted partner for many businesses over the 45 years we have operated, and it is my mission and intention to see us continue in business and rebuild from here. Actions speak louder than words, and my focus is clearly on the task at hand. Again, I want to apologise to all of those caught in the crossfire and give my commitment to rectify where we can.

Many people of have questioned my silence up util now. I was strongly advised during the process to hold off making a comment until there was a clear path forward of which we now have. I invite anyone to contact me directly to have a more open discussion about Starleaton’s past, present, or future position. Someone said to me through this, that it is the true measure of an individual when things are challenging, and I hope to prove that statement right. I am committed to reconciling with all involved and rebuilding a strong, reliable, and service focused Starleaton that will continue to play a future role in this great industry of ours.

 Ben Eaton