Stock woes force 45-year-old IT hardware supplier into liquidation

Watford-based Hills Components ceased trading last month and its current inventory will be auctioned off

Hills Components has ceased trading after 45 years, appointing liquidators to sell off its stock.

The Watford-based firm described itself as a trade and educational supplier, primarily offering IT hardware and accessories to its clients.

It listed Acer, Dell and Epson among the brands on its website and boasted a headcount of 20, according to its 2017 financial report.

It ceased trading on 31 August 2018, and went into liquidation on 13 September, appointing Mercer & Hole accountants on the same day.

Lee Benmore, administrator at Mercer & Hole, confirmed to CRN that the company had incurred a lot of debt and was sitting on outdated stock.

"The stock that they had available for distribution had become obsolete and redundant, and the stock that was current was insufficient to cover the liabilities," he said.

The e-tailer reported assets of £2m in its financial 2017, but Benmore said that since those documents were filed it "became apparent" that a lot of that stock was outdated and was removed from the company's catalogue, causing it to sit unsold.

Benmore also confirmed that the stock would be auctioned off in order to realise dividends for the firm's creditors, though he said he could not predict how much of a dividend creditors will see.

"It was hopeful that we could have sold the stock as a going concern which would have given us a greater realisation," he explained.

"We estimated the stock would realise around £150,000 and we have some book debts to collect.

"I am certain there will be a dividend but I don't know the level. We have taken the view that auction is the best option to get as many realisations in as possible."

Due to recent changes to insolvency rules, administrators now notify creditors about the appointment of the liquidators, and then the onus falls on those creditors to object to that appointment by a certain date, which was 13 September in this case.

The stock woes that befell Hills Components are symptomatic of a larger stock issue in the channel, according to Paul Cubbage, MD of distributor Target Components.

"It's a game of musical chairs. If you're significantly overstocked on something, then when the music stops and the price comes down it is a problem and there is quite a bit of that still in the market," he told CRN.

"It's a double whammy: you've got stock that you need to turn into cash but you can't because it's too expensive - the only way to turn it into cash would be to lose money on it, and you've got cautious credit insurers so you have a double restriction on your working capital.

"I think the tightening of the credit position by underwriters will put the squeeze on a number of people. It will get tougher for those that don't typically generate a decent amount of cash or have a decent amount of liquidity in the business."