‘Financial Irregularities’ Caused Broadway’s Demise
During November one member of Grouptyre entered administration and four more formed a joint venture to maintain supply to national customers. Now that the joint venture is poised to make another acquisition, this time of WJ Wood & Sons, Tyres & Accessories exclusively interviewed Grouptyre managing director Karl Naylor in order find out more about the reasons behind the recent events. Needless to say a lot has been happening within Grouptyre over the last few weeks, with what Naylor diplomatically described as “unforeseen problems at one of its larger member companies…resulting in rapid changes having to be put in place to maintain its national coverage and service to customers.”
However, while the market officially got wind of the story in November, it appears Grouptyre’s members had been making every effort to secure Broadway’s future as far back as the summer. At this point plans were being discussed to address concerns that Broadway’s financial performance was weaker than Grouptyre was comfortable with.
According to Naylor, various options to bolster the company were considered but the conclusion was a move to purchase the business by a joint venture (JV) of other existing members of Grouptyre.
Grouptyre Wholesale Ltd. established to maintain supply to national contracts
This JV (called Grouptyre Wholesale Ltd) was established in September with an equal shareholding between Oak Tyres, Tanvic, Elite and B A Bush, with the purpose of reaching an agreement to purchase the operational assets of Broadway as a going concern. However, this plan was disrupted when, at the beginning of October, what are being described as “significant financial irregularities” were discovered within Broadway’s accounts.
The obvious question is what kind of irregularities were involved? Naylor was understandably unable to comment in detail about the issues that occurred with Broadway’s accounts, pointing out that “there is likely to be some investigation into the causes of these irregularities”.
Suffice it to say that T&A understands the errors went back to at least the previous financial year’s audited accounts – with three separate sources suggesting debts totalled between £2.5 million and £6 million pounds – resulting in Broadway being declared insolvent. The situation grew more complicated with banks getting involved and eventually an administrator being appointed.
Nevertheless, Karl Naylor reports that throughout the developing situation the Grouptyre JV was still working to secure the asset purchase from the administrators to enable them to continue the supply and distribution of tyres in the area. It also continued to supply tyres during the administration period to maintain supply to its national customers.
Traxx not invited to join Grouptyre
As a result of its insolvency and subsequent administration, the company was indeed – as we have seen – put up for sale. In mid-November the marketing of the Broadway business was brought to an end but the Grouptyre Wholesale JV was, as has been reported, outbid for the assets by Traxx Tyres.
Speaking to T&A, Karl Naylor confirmed earlier suggestions that Traxx had not been invited to become a part of Grouptyre, however he also explained that neither did the company approach Grouptyre to suggest it had any desire to join. For their part, Traxx representatives told T&A that they did try to work with Group Tyre and “attempted contact on numerous occasions prior to the deal going ahead.”
Nevertheless the joint venture partners agreed to set up a competing company in the area in order to be able to service the Grouptyre national accounts. In a matter of days a functioning warehouse and distribution operation was established – quite a feat when considering the amount of time and resources usually dedicated to such a project. The warehouse premises in High Wycombe are now said to secured, equipped and stocked. A logistics operation has been set up and a call centre with all the necessary telecoms, IT systems and staff are already in place.
Referring to the support and understanding of Grouptyre’s customers during the period of disruption, Karl Naylor commented that they have all “maintained that they want to continue with their agreements for Grouptyre to supply their tyres, and are pleased to see Grouptyre react so quickly to re-establish their service offer.”
Here’s how the Grouptyre managing director summed up the joint venture’s intentions: “The primary aim of the new Grouptyre member company is to match the service levels previously offered by Broadway, but with four financially strong companies backing the new venture, it enables significant investments to develop and improve the service offer to emulate that offered by other Grouptyre members in the UK – rapid response, multi-same day or on demand deliveries. In doing so the new company aims to surpass the volume and market share previously achieved by Broadway, and therefore increase purchases from its suppliers, who have understandably been badly affected by Broadway’s problems.”
Grouptyre Wholesale Ltd to takeover WJ Wood & Sons
Following the successful – and rapid – established of the High Wycombe wholesale operation, the Grouptyre Wholesale Ltd JV are also plans to take over the operations at another Group tyre member – WJ Wood & Sons in Essex. Naylor characterised this as the kind of consolidation within the group that provides stability saying: “This will give a significant additional geographic area to the new company, in which to invest in the tried and tested model of rapid delivery and high availability.”
For its part Traxx Tyres describes itself as a “cash rich wholesale tyre operation” which “has not required bank support for this launch.” Although new to the UK, Traxx directors said in a statement that they “have the benefit of many years experience from their global partners and huge knowledge from the Broadway acquisition.” Looking forward Traxx Tyres pledged “complete commitment to the Broadway Tyres customer base, utilising its High Wycombe and Watford facilities to the full.”
Traxx aiming to expand Broadway business ‘into other regions’
The company also signalled its intent to “expand into other regions.” T&A understands that Traxx Tyres, which is ostensibly new to the UK market, has informal links to successful tyre wholesaling in Australia. Regarding the current development of the Broadway business, Traxx director Rob Critchley said “key staff did join the Group Tyre joint venture, but have now returned to Broadway Traxx.”
Established in 1991, Broadway started life as a 13-man business with just £50,000 worth of stock. By 2007 the company had grown to a £25 million annual turnover company with a 13 per cent share of the South East Tyre market, according to founder and chairman Jonathan West. At this point the business was selling 600,000 tyres per year, and employing 100 staff at its three depots in Watford and High Wycombe. Prior to administration the company was reporting turnover of £26 million a year.
For more details about Broadway’s new owners’ plans for expansion look out for further coverage in future issues of Tyres & Accessories and at www.tyrepress.com.