Wholesaler P&H goes into administration with loss of 2,500 jobs

Grocery and tobacco wholesaler Palmer & Harvey has gone into administration with 2,500 immediate redundancies and a further 900 jobs at risk.

The group, which delivers goods to 90,000 grocery and convenience stores, including Tesco and the Costcutter chain, has been scrambling to shore up its finances since the spring.

The UK’s biggest tobacco supplier called in administrators after hitting “challenging trading conditions” while efforts to restructure the business have been unsuccessful.

A statement by administrators at PricewaterhouseCoopers blamed cash flow pressures and a failure to secure additional funding to support the business.

Matthew Callaghan, joint administrator at PwC, said: “The Palmer & Harvey name has been a trusted partner for retailers and suppliers for nearly 100 years. This is a devastating blow for everyone who has been involved in the business. The administration team will focus on working with employees, clients and suppliers to facilitate a smooth and effective wind-down or transfer of operations over the next few weeks.”

Callaghan said the company had insufficient cash resources to continue to trade beyond the short-term and the directors had concluded that there was no longer any reasonable prospect of a sale.

Administrators are exploring options for a sale of several subsidiaries, however: P&H Direct Van Sales; P&H Sweetdirect and P&H Snacksdirect. These businesses have ceased to trade but about 450 employees have been retained.

The collapse of the main business affects thousands of jobs in P&H’s network of depots, its head office in Hove and drivers of its fleet of vans.

P&H’s demise comes amid a shake-out in the grocery wholesale market. Tesco won provisional approval of its takeover of Booker this month while the Co-op’s buyout of Nisar won the backing of shareholders a few weeks ago. The Costcutter chain is also thought to be in negotiations over a buyout or new supply deal with potential partners including the Co-op while McColl’s has signed a supply deal with Morrisons.

P&H had been in exclusive talks with private equity group Carlyle, which were expected to result in a takeover being agreed before Christmas. That deal was reportedly conditional on cigarette giants Imperial and Japan Tobacco offering £60m in loans and providing additional funding to keep the business afloat. But talks ended abruptly on Tuesday after P&H said it had uncovered a serious cashflow problem.

About 40% of P&H’s business comes from Tesco, and there had been fears the relationship would unwind as a result of the supermarket’s planned £3.7bn buyout of the Booker wholesale group. But in April, Tesco signed a new three year agreement under which P&H would distribute tobacco and stamps to every Tesco in the UK as well as some groceries to petrol forecourts and frozen food to more than 1,700 Tesco Express stores.

P&H also delivers groceries to more than 30 Morrisons Daily petrol forecourt stores run by the Rontec group.

But Companies House filings reveal that P&H’s losses nearly doubled between 2015 and 2016, rising from £8.4m to £16.4m, as operating profits were wiped out by the cost of servicing its debts.

P&H spent £36.6m on interest payments over the past two years on debts of more than £1bn.

This year’s accounts were due to be filed on on 7 October but are listed as overdue at Companies House.

Carlyle was thought to be helping P&H arrange forbearance deals with its customers, including major supermarkets, to ensure it would have enough working capital to survive while the deal was ironed out.