Discovery Store bought out of administration

The Discovery Store, a Scarborough-based business which sold gadgets and toys in shops around the UK, went into administration in January after suffering cash flow problems.

The business and assets were sold as a going concern on February 23 by the administrators, Andrew Nichols and John Butler, of Redman Nichols Butler, to TDS GRP for £76,000.

Geraldine Jones, who is a director of the purchaser, is the mother of the company director of the Discovery Store and a former employee, according to a report compiled by the administrators.

Mrs Jones was also a shareholder in the Discovery Store, along with Jonathan Ricketts, Barry Ricketts, and Frontline Investment Opportunities LLP, the report states.

According to documents stored at Companies House, TDS GRP was incorporated on January 26 this year, the day before the joint administrators were appointed for the Discovery Store.

The document of incorporation names Mrs Jones, from Scarborough, as the sole director of TDS GRP. At the time The Discovery Store went into administration, it faced claims of £592,767 from unsecured creditors and £807,723 from HM Revenue & Customs.

The report of the joint administrators, which was written by Mr Butler, says: “The company had made the majority of its employees redundant prior to my appointment as joint administrator.

“At the date of my appointment, the company employed nine people, including the company director and shareholders. I continued to trade using the company’s existing employees and fulfilled a number of orders over the internet. The company’s employees were paid monthly, but we understand that they had not been paid for some period of time. Accordingly, a decision was made to pay the staff on a week by week basis. However, the director and two shareholders were dismissed shortly after my appointment.

“Given the internet sales were low, there was a limited window in which to market the business and assets. Other than wages, purchases during the administration trading period were kept to a minimum.”

In his report, Mr Butler says “it is uncertain as to what the final trading position will be”.

The Discovery group of companies sold gadgets and toys through a network of shops, over the internet and directly to wholesalers. According to the report, when the Discovery Group opened a new retail store, a subsidiary company was set up for this purpose. The subsidiary company occupied the store on a short-term lease and licence and the company supplied it with stock.

The report adds: “The company also provided staff, stock and shop fittings to the various subsidiaries across the UK.”

The administrators’ report says: “However, each individual outlet operated as a separate legal entity. Each shop was opened towards the end of the year and traded over the Christmas period. They were then closed early into the next year, the staff dismissed, and if there was any substantial stock left over this, along with the shop fittings, were returned to the head office.”

The company’s peak trading was traditionally the run up to Christmas and the post-Christmas sales.

The report continues: “Trading during the period 2010 to 2011 was poor due to the bad weather and macro-economic conditions. The internet sales suffered during this period due to the company not being able to get stock from its warehouse in Scarborough.

“During 2011, the company continued to open stores and tried to keep some stores open for the entire year. This created significant cash-flow pressures for the company and in late 2011, the company embarked on a store closure programme. Sales for the 2011 Christmas and post-Christmas trading periods were low leaving the company unable to pay staff wages for December 2011 and January 2012.

“There were also various creditors applying pressure for unpaid invoices.”

Eleven offers were received for all or part of the business as a going concern, with the highest coming from TDS GRP, the report says. The deal secured the jobs of the company’s remaining staff.