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Firewall for Spicers as Paperlinx UK goes up in smoke

Thursday, 02 April 2015
By Print 21 Online Article

Paper merchant’s profitable local operations are protected from the closure of most of PaperlinX UK operations as insurers withdraw credit ahead of voluntary administration.

Despite a conflagration that sees six of 11 PaperlinX UK sites consumed in a cash crisis, the Australian and New Zealand operation is fireproof and continues to trade without any impact. According to newly appointed CEO, Andy Preece, the profitable Spicers businesses in Australia, New Zealand and Asia are insulated from the financial liabilities of the UK businesses. ‘In this region, PaperlinX’s primary focus will be to continue to develop its businesses beyond paper merchanting and into sign, display and packaging.’

A total of 14 businesses are in voluntary administration following the decision by ING, the local receivables financier of the UK Group and PaperlinX’s Dutch subsidiaries, to withdraw credit insurance for the UK operation. The Dutch-based-insurer is extending to 15 April its coverage of the Benelux merchants in the hope that someone will buy them.

Hundreds of PaperlinX UK workers have lost their jobs after administrators from Deloitte moved quickly to shut down most of the company’s struggling UK operation. About 693 of 1,200 PaperlinX UK staff have been made redundant, with just five sites remaining open.

Businesses in Australasia, the Republic of Ireland and Northern Ireland, mainland Europe and Asia, are continuing to trade normally, with the threat of insurance credit withdrawal imminent in Holland. PaperlinX maintains that so far there are no takers for the Benelux operation and that even if it is sold there will be no material benefit for the company.

Administrators are keeping five of the UK sites open including the Northhampton head office, trading on a limited basis to secure the best value available from current stock holdings and other assets. Many of the sales office locations were closed down yesterday. Attempts are being made to find a buyer for all or parts of the businesses.

An announcement from the Administrators said that employment specialists will be making sure affected employees are supported in making their claims to the Redundancy Payments Service for redundancy, pay in lieu of notice and any other appropriate claims.

There are four principal trading companies of the PaperlinX UK’s businesses in administration; Robert Horne Group ; Howard Smith Paper Group ; The Paper Company ; and PaperlinX Services (Europe).

The UK packaging businesses (Parkside Packaging, 1st Class Packaging and Donington Packaging Supplies) of PaperlinX UK will remain outside of administration and continue to trade normally.

The bonfire comes as a result of a cash flow problem in the PaperlinX UK business, which was flagged in the company’s interim report in February when PaperlinX Chairman, Robert Kaye, warned that a fall in European sales had led to pressure being placed on European lending covenants.  The European business, a long-time drag on the company’s otherwise relatively buoyant Asia Pacific operations, reported a loss of A$20.7 million (Euro154.9 M) for the six months to the end of December.

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