Entatech opens up over financial and legal issues
Distributor confident of reaching settlement with liquidator of Changtel as it unveils full-year loss
Entatech's new boss says his priority is to instil a culture of integrity and openness at the distributor after its latest annual accounts laid bare the legacy of financial and legal difficulties he inherited.
Dave Stevinson (pictured) joined as Entatech's managing director on 1 March, a day after the end of the firm's fiscal 2015, the annual accounts for which were published on Companies House on Monday.
Stevinson admitted the results – which showed operating losses hitting £1.6m on revenues of £119.7m – were "poor" and that the Telford-based wholesaler was "in need of serious investment" upon his arrival.
Entatech also used the accounts to reveal that it is being pursued by the liquidator of Changtel, a former subsidiary of Enta UK that was wound up in June following a long-running dispute with HMRC. The UK tax authority claimed Changtel owed it £15.5m in unpaid VAT.
Stevinson said he was confident of reaching an early settlement with the liquidator, which has made a claim against Entatech in relation to assets – which CRN understands is property – it acquired from Changtel before Enta UK disposed of it in January 2014.
He admitted that the issue had caused uncertainty during his tenure and the accounts noted that if the liquidator is successful in obtaining a court order to void the transactions, the company's assets would be "significantly depleted".
"The directors believe that such an outcome, however remote, would give rise to a going concern issue," the accounts stated.
Stevinson added: "The values I am trying to instil in the company are integrity, openness and ethical behaviour. If you look at our accounts, we have chosen to fully disclose the position of the [Changtel] aspect and the statement goes into a lot of detail. We've been through some uncertainty but at every stage we have tried to be open with our key stakeholders, be they staff, vendors, customers or press.
"We fully expect to reach a compromise agreement imminently."
For the 12 months ending 28 February 2015, Entatech saw operating losses hit £1.58m, compared with a profit of £3.92m a year earlier, although included in that figure is a cost of £1.5m for foreign exchange "largely attributable to the poor performance of a structured forex product".
Revenues inched up from £118.2m to £119.7m.
"It is a poor set of results," said Stevinson. "There is a legal legacy there and the company has been left in need of serious investment, which is why I'm here. I relish the challenge and the reason I'm here is to try to transform the company."
Two new directors were appointed on 1 November in the form of finance director Robert Davis, a former financial controller for e-tailer Expansys who joined Entatech at the same time as Stevinson; and operations director Colin Lee who has been at the distributor for more than two decades.
"This goes to show the confidence the directors have in the business," Stevinson said.
"2014 was a very challenging year for Entatech but a new team has been brought in and a transformation project is under way with specific goals and deadlines, and we are on target now. We have done a fairly big investment in new ERP systems and BI systems, we have a new senior management team, and we have strengthened our legal and our treasury. As a company we are trying to be easier to do business with and much more humble. Our strategy is to be a credible alternative to the big four [Tech Data, Ingram, Westcoast and Exertis]."
The transformation plan centres around four 'Ss' of stabilisation, structure, strength and solutions, Stevinson explained.
"We need to focus on areas where we can compete and where opportunities exist for a company like us in the next five years. Over recent months, you've seen us making a series of investments around solutions. We are turning Entatech from a company that sells tin to one that empowers our resellers and vendor partners," he added.