Anger as Customade Group crashes into Administration
Hundreds lose their job at failing double glazing firm as fingers point to leadership team. Business Leader Magazine caught up with CEO David Leng to uncover the story.
In a much-talked-about episode in the UK glass and glazing industry, anger is mounting as one of the sectors biggest names Customade Group has reportedly walked away from creditors and hundreds of employees in a ‘pre-pack’ administration.
On 30th June 2020 Dutch Private Equity firm Nimbus – alongside debt providers MidCap Financial – acquired most of the assets of the £120 million turnover Customade Group from administrators, in a deal that sees almost 300 people lose their jobs.
Of Customade’s eleven factories across the UK, nine will stay open and two (Livingston and Halifax) will close.
Over 800 jobs have been protected due to the deal.
But Customade Group CEO David Leng, who masterminded the deal, will continue as CEO of the new group in a move that has angered many in the business community.
Leng took over at the Customade Group in 2018 after jumping ship from Synseal, a £100m+ double glazing firm, which also subsequently went bust. He has also been linked to Eurocell and other firms in the industry.
So what’s the story?
In an interview with Leng, he blames the company’s collapse on Brexit, a General Election, a ransomware attack by organised Russian criminals and Covid-19.
When put to Leng that the trading conditions were no different to other firms in the sector he said: “At the end of 2019 we were dealing with Brexit and there was a General Election, which impacted consumer confidence. To add to this, in December two of our biggest customers went bust.
“Then in January 2020 we suffered from a Russian ransomware attack. Following this we managed to get the business back up and running in February and we had a decent order book going forward. Then we went into lockdown and this hit the business once again.”
Leng also says that he inherited a difficult business that had an enormous amount of debt and which was highly leveraged.
He continues: “Throughout this process I have been working to find what was initially a solvent solution and we were looking at a debt for equity swap. We didn’t end up receiving a credible offer for the business in a solvent state and went into administration. We were then acquired by Nimbus who have bought most of the business.”
It is understood the debt referred to by Leng includes loan notes from Private Equity firm Cairngorm Capital, the major shareholders. It is not yet understood how much the new Private Equity owners, Nimbus, have paid for the assets or invested in the newly formed group – however, according to the Customade Group press release, Nimbus have brought in MidCap Financial, a specialist provider of senior debt – which suggests the new group will once again be burdened with high debt levels.
Leadership question marks
Leng is bullish when criticised about his leadership and says that the firm would have traded comfortably if it would not have been for the Russian attack and Covid-19, but he says he recognises the pain that suppliers and employees will be going through.
He comments: “I understand there are some suppliers that have not been paid and why they are angry. I also feel super disappointed that we have had to let staff go, of course I do.”
However, Leng has come under serious criticism with a high profile social media backlash after the collapse of the Group, which employed 1,150 staff across 11 factories and nine distribution depots.
Stories are also emerging that he paid his daughter’s marketing agency, Winsoc, hundreds of thousands of pounds to manage Customade’s marketing activity.
It is alleged that Winsoc provided websites to Customade business customers but retained ownership of the sites – thus preventing customers from going elsewhere without putting their own business at risk.
On the deal Livingston MP Hannah Bardell has said – when referring to the closed factory in her constituency: “They have closed Polyframe Livingston without notice, with over 100 people losing their jobs. I’m disgusted to hear the way staff have been treated, many being notified by text message.”
Leaders in the glass and glazing industry have been equally outspoken, with one of Customade Group’s major suppliers publicly refusing to supply the newly formed group.
One industry leader, Gary Morton, commented on social media: “Customade Group have completed a pre-pack dressed up as an acquisition that is saving hundreds of jobs.
“In reality, hundreds of jobs have been lost, creditors are losing millions, businesses have been closed down and customers warranties are in tatters. If you supply this company, I would think hard about continuing; and if you buy from them, I would question about continuing to do so. It is appalling this is allowed at this level.”
Mark Dicconson, of John Fredericks Plastics added: “The business was decimated the minute the corporate management took over. At that point the investors put their valuable assets in the hands of individuals who may talk a good story but in reality are incompetent and unable to run and succeed with a business on their own and manage to convince VC investors that they are the men to grow their recent acquisitions.
“Then when it all goes wrong, they instigate a pre-pack; dressed up as a moral crusade to save jobs and peoples livelihoods. What about all the suppliers who now must reduce their workforce to survive?
One small business owner that was owed money by Customade Group, Deborah Hendry of Kolorseal, also made a public statement: “This is a message to David Leng. I have never met you David. Whether that is a blessing or misfortune I’m not sure. I have sat in the shadows and seen what you did to Synseal. I have also heard about the chaos you left Eurocell in. But this time you have taken money from my businesses. Why? I am a very small business compared to many. The companies you took charge of were well respected and profitable. What did you do?”
European private equity fund Nimbus and MidCap Financial are the new owners who have acquired the group.
Business Leader asked Nimbus for an interview but they issued only this statement from Alexander de Haas.
He said: “We are delighted to invest in the Customade Group. The business has market leading product and customer service proposition but has faced unprecedented challenges in the last six months.
“Our investment will allow the group to recover and focus on a long-term growth strategy which will include significant investment in the manufacturing capability of the group.”
Further developments on Customade Group and the David Leng saga are emerging daily, however Customade isn’t the first and certainly won’t be the last company to ‘pre-pack’.
Indeed, a month earlier one of the biggest brands in the glazing industry, Everest, went through a pre-pack administration with Private Equity firm Better Capital.
In light of Covid-19 a new Bill has been rushed through parliament, and on 25th June the Corporate Insolvency and Governance Bill received royal assent and is now an Act of Parliament. The new Act gives more protection to directors of companies trading insolvent, and gives more support to failing companies.