UK retailer Made.com enters administration

January 2023 | DEALFRONT | BANKRUPTCY & CORPORATE RESTRUCTURING

Financier Worldwide Magazine

January 2023 Issue

A little over a year since it floated on the London Stock Exchange, online furniture retailer Made.com has entered administration.

The company, which had a valuation of £775m when it floated in June 2021, has appointed Zelf Hussain, Peter David Dickens and Rachael Maria Wilkinson of PwC as administrators after talks to find a buyer for the company were unsuccessful.

On 23 September, the company announced a strategic review, including a formal sale process to sell the business. The company and its advisers held discussions with a number of interested parties and explored possible offers. However, on 25 October, the retailer said that the select number of interested parties were unable to meet the deadline for the end of October, and discussions were consequently terminated.

Following the failed negotiations, trading of the group’s shares was suspended on the London Stock Exchange in early November, a week after Made stopped taking new customer orders pending the outcome of its rescue bid. Prior to the appointment of the administrators, the business said its operating subsidiary Made Design Ltd (MDL) had “taken the decision to temporarily suspend new customer orders”.

In an update to the London Stock Exchange, Made said: “In light of the fact that MDL is reliant on Made for any further funding requirements and in order to preserve value for its creditors, the board of MDL has taken the decision to temporarily suspend new customer orders. This decision remains under review and a further announcement will be made as appropriate. The board of Made will continue to look to preserve value for its creditors and shareholders in light of this decision.”

Following the appointment of PwC, fashion and homeware retailer Next announced that it had agreed to buy the company’s brand, domain names and intellectual property for £3.4m. Next has acquired stakes in or purchased outright smaller retailers in recent years, including brands such as Victoria’s Secret UK and Reiss.

PwC, as administrators, have taken control of Made’s remaining assets, including payments made to creditors.

“Having run an extensive process to secure the future of the business, we are deeply disappointed that we have reached this point and how it will affect all our stakeholders, including employees, customers, suppliers and shareholders,” said Susanne Given, chair of Made, in a statement.

Made, which was founded in 2010 by former chief executive Ning Li, employs up to 700 staff and has offices across London, Paris, Berlin, Amsterdam, China and Vietnam.

The company was listed on the London Stock Exchange in 2021 after it experienced bumper sales boosted by people revamping their homes during the coronavirus (COVID-19) pandemic. However, its shares, which debuted at £1.99 per share, have been on a steady decline since its IPO, which accelerated amid the volatile environment of 2022 that has pummelled tech stocks. The company’s shares fell 7 percent on its first day of trading. In July 2022, its shares hit 20 pence, when the company cut its revenue and profit forecasts for the third time in a year. At the time of suspension they were worth less than 1 pence.

Made was a notable startup in the UK. The company optimised its entire furniture design and manufacturing process, while keeping its overheads down through a mostly online platform. However, the company had its detractors, many of whom were concerned about long delivery times on some items, particularly as global supply chain issues intensified in 2021. Despite these concerns, Made reported £372m revenue in 2021, up 50 percent on the previous year, but its earnings before interest, taxes, depreciation, and amortisation (EBITDA) losses grew from £2.9m to £18.3m. The company’s losses widened in the first half of 2022, growing from £10.1m in H1 2021 to £35.3m.

The retail sector in the UK has come under increased pressure as a result of the increasing cost of living crisis and inflation in double digits. Consumers are typically shying away from purchases of items such as TVs, computers and furniture.

Mr Li, who stepped down as chief executive in 2017, said that the brand had lost sight of its focus in recent years, and as a result, lost its strength. He remained the company’s third largest shareholder with an 8.56 percent stake, behind Level Equity Management and Partech Growth.

Richard Summerfield