Nutrafeed won the contract in 2011 and it boosted its turnover from £3.9M in the year ended December 31 to £9.8M in the 18 month period to June 2013, the report stated.
However, although the deal represented a sizeable increase in sales, it had a major impact on gross margin and compliance costs, slashing net profit from £151,000 in 2011 to £21,000.
Nutrafeed had agreed a fixed price for cereal waste with Weetabix, which was sold on as animal feed. But a large 2013 wheat harvest followed by a mild winter led to a fall in wheat prices this year.
Loss-making
As a result, the Weetabix contract became loss-making and Nutrafeed ended up making a loss of £290,000 for the six months to the end of June 2014.
Nutrafeed’s directors tried unsuccessfully to amend the terms of its contract with Weetabix. Nutrafeed, which operated from two sites at Corby and Wrexham, consequently experienced growing cash flow difficulties which culminated in Weetabix putting the contract on notice and limiting supplies.
After a meeting with advisors from Duff & Phelps on August 4 this year, Nutrafeed recognised that it had become effectively unable to pay its debts according to its contracts and was insolvent.
Administrators appointed
Although Duff & Phelps attempted to sell Nutrafeed, there was limited interest and administrators for the firm, John Whitfield and Matthew Ingram, were appointed later in August.
“The business had effectively ceased trading in the early part of August 2013 as a result of cash flow pressure and the restricted supply of materials from Weetabix,” the administrators’ report stated. “This, coupled with the niche nature of the industry and the ability of competitors to poach contracts directly, meant no offers were ultimately received.”
The administrators said they were continuing to work to meet all creditors’ bills.