As the summer holidays end and the season changes, we are, sadly, seeing changing times for Wilko, the high street value goods retailer, which is currently in administration. As an Insolvency Practitioner myself, in this article I provide some insights about Wilko which illustrate key issues concerning insolvency and potential business rescue options. Look out for my next article on what Administrators do when a company is in administration – but first …

Why is the landscape changing at Wilko?

Wilko Ltd, together with Wilkinson Hardware Stores Ltd, Wilko.com Limited and Kin Limited entered administration in August 2023. The news was a surprise to customers and is extremely worrying for its workforce of some 12,500 people at over 400 stores nationwide.

Many people are fond of this household name, which was a family-owned business founded in 1930 by JK Wilkinson, well known for its affordable everyday house and garden items, as well as staples like its popular ‘Pick & Mix’ sweets.

As I write, a last-minute bid by M2 Capital to save the entire Group and the whole of the ailing discount retailer's business had collapsed, leading to hundreds of potential redundancies but according to Sky News, HMV owner Doug Putman is still in talks with the Administrators, PwC, to acquire over 300 of its 400 stores - meaning that between 8,000 and 9,000 jobs could potentially be saved.

The Administrators put out a statement on 31 August confirming that they continue to liaise closely with the government, agencies, unions and large employers to help create avenues to further employment opportunities for affected staff and to support them with redundancy claims.

From this, you might well imagine the complex negotiations going on between the Administrator and interested parties and all that is at stake. Using the autumn analogy with Wilko, you may wonder ‘will the tree lose all its leaves or will it retain some – or all – and, if so, will those leaves change colour? Or could the whole tree get felled?

Wilko is a high-profile case but there are many businesses facing insolvency and administration. Their situation has been exacerbated by the Covid pandemic and volatility in the economy, high inflation, rising interest rates, supply chain issues, energy prices, tough competition, the rates on high street properties, recruitment and retention issues etc. The government’s Insolvency Service provides general help and information on many of these issues. The Insolvency Service - GOV.UK (www.gov.uk)

What can be done to try and rescue a business?

In Wilko’s case, it had been struggling with massive losses and a cash shortage. In the year to January 2022, Wilko’s sales fell by 3% to £1.3 billion and it suffered a £36.8 million pre-tax loss. Last autumn, financial firms cut credit insurance for Wilko’s suppliers so that it had to pay for stock upfront, causing further problems. Responding to the challenges, it did some pruning and cut some jobs and closed some stores.

Before going into administration this August, in 2022 Wilko’s management hired advisers (Teneo) in the hope they would help them salvage the situation. Note that the government states that ‘all liquidators, administrators, administrative receivers and supervisors taking office must be authorised Insolvency Practitioners holding an Insolvency licence.

A Licensed Insolvency Practitioner (IP) can act in matters of both company and individual insolvency. Our responsibilities will depend on the nature of our appointment and the circumstances. For example, one action might be to try to rescue the ailing company by using a Company Voluntary Arrangement.

Company Voluntary Arrangement (CVA)

In Wilko’s case, Teneo recommended a Company Voluntary Arrangement where creditor support is required. With a CVA, the insolvent business proposes a repayment plan for its debts over a specified period and if it is approved by creditors, the CVA would enable the business to continue trading while repaying its debts in line with the agreed terms. However, at Wilko the CVA plan was rejected by the management.

Meanwhile, to try and improve its financial health, in November 2022, Wilko sold its distribution centre in Worksop to DHL for £48 million. It restructured its leadership team, cut some more jobs and borrowed £40 million from the restructuring firm and Homebase owner, Hilco, in January 2023. In return, Hilco took security over Wilko’s assets, including its logo and properties.

Other potential rescue methods

• As well as the CVA, Wilko’s advisors may have considered a Scheme of Arrangement, which is a court-approved agreement between a company and its shareholders or creditors. 

However, Wilko’s management took a different path and appointed PwC to take over from Teneo. They looked for a buyer for the entire chain to raise some £75million funding, which unfortunately failed and at that point the company went into administration and Insolvency Practitioners at PwC were appointed Administrators.

My next article explains more about what an administration is.

If you would like to know more about any of the issues discussed in my article or about our insolvency services, you can get in touch with me below.