Mail nails Lenark

[Uploaded to BikeBiz.co.uk on 23rd September]

By Lisa Buckingham

Sturmey Archer, one of the most famous names in British cycle making, is

just seven days from crashing into liquidation with the loss of more than

300 jobs.

The dramatic end comes just two months after the 98-year old company was

bought for only £30 from its American parent by a Sussex-based company

called Lenark in what was hailed as a rescue bid.

But an investigation by Financial Mail shows that Sturmey Archer is just

one of a string of corporate failures associated with the directors of

Lenark, a group that specialises in buying distressed companies.

As Sturmey Archer – known for bicycle gears and brakes as well as Brook’s

saddles – scrambles to salvage parts of the business, Financial Mail can

reveal that two other firms owned by Lenark, including stationery firm

In-a-Flap Limited, have just gone into liquidation. Another four are said

by insolvency practioners to be within days of the same fate.

Yet Lenark passed as a well-endowed investment firm running four divisions

containing some 17 companies.

Derby Cycle Corporation, the US group that owns the Raleigh brand, was

apparently convinced of Lenark’s credentials and had no qualms selling

Sturmey Archer in the summer. That was despite the fact that Derby Cycle

chief executive Gary Matthews knew £4 million would soon have to be spent

to move Sturmey into a new factory as he had sold the freehold of its

Triumph Road plant to Nottingham University.

Other firms that were already on their knees were desperate to believe the

stories of successful business rescues which the executives of Lenark had

to tell.

‘They seemed to me to be people who were going to rescue my business,’ said

Rowland Blake, whose 25-year old family paper firm was bought by Lenark but

has now shut. ‘The impression was that they had plenty of capital to invest

and my company would be part of the set up.’

Blake says he was paid only a quarter of what he had expected from Lenark

and has now moved from Surrey to Devon with his wife and two teenage

children to make ends meet.

Derby Cycle’s Matthews, a former senior executive with Guinness, told

Financial Mail he was ‘surprised’ that Sturmey Archer was now facing ruin.

‘We understood them (Lenark) to be a robust investment firm and they were

represented by top-flight counsel.’

And Matthews claimed that Derby had carried out the ‘appropriate due

diligence’.

Yet some simple checks on Lenark and its directors and employees could have

sounded an alarm. The Department of Trade and Industry has revealed that

Simon Allso, one of Lenark’s chief movers, was declared bankrupt in 1992

and has been linked with a string of insolvencies. The DTI provided a list

of eight firms, but insolvency experts say the true figure is much higher.

Allso negotiated the purchase of Sturmey Archer along with director and

major shareholder Barry Robinson, who lives in Las Vegas and lists his

occupation as professional gambler. Clive Walton, who resigned as a

director as the Sturmey Archer crisis erupted, was also on the negotiating

team.

The Experian credit rating firm described Lenark’s financial position as

‘weak’ with current assets of just £48,000 at the end of the year to May

1999 and liabilities of £600,000. A credit alert is attached to Experian’s

report on the company.

One of Lenark’s major shareholders, Quniborne, also has two notices of

intention to dissolve, it was late filing accounts for the year to March

1999 and has two County Court judgments totalling £8,000 against it.

One banker who has loaned money to a Lenark company said he discovered that

Lenark had transferred assets and stock from one firm to a company set up

as a ‘phoenix’ or successor company. When the winding up of the first firm

was started, money was then transferred, too.

A person familiar with Sturmey Archer’s finances said it was unlikely that

the company would find a buyer willing to take on liabilities for new

factories and redundancies totalling nearly £5 million when the company’s

turnover is less than £15 million, its assets only £2 million to £3 million

and which incurred losses last year.

Yet despite the parlous state of Sturmey’s finances and the need to vacate

its production plant in time for a year-end deadline, Lenark still charged

the company a ‘management fee’ of £62,000 a month.

The financial crisis came to a head when Sturmey’s managing director, Colin

Bateman, approached his new bosses asking them to pay a cheque for £75,000.

A do-or-die board meeting was held last Monday to decide the future of the

Nottingham company, which is just two years away from its centenary.

Only one of the Lenark board, Clive Walton, turned up. His attendance was

brief. While the others round the table thought he had popped outside for a

cigarette, Walton apparently slipped down the fire escape and has not been

seen by Sturmey or its advisers since. He has now resigned.

Duncan Swift of insolvency practioners Grant Thornton is representing

Lenark and has been struggling to avoid liquidation and try to continue

trading Sturmey Archer to sell it as a going concern. But the gulf between

the company and Lenark had become so wide and bitter that Bateman and his

colleagues decided to move for liquidation.

That will almost certainly mean employees get only the £5,000 state

redundancy, even though many have spent a lifetime at Sturmey, whose future

appears doomed.

Little wonder there is so much recrimination. One manager said: ‘We’ve been

sold down the river,’ while a colleague added: ‘Having put an enormous

amount of work into saving this business, it was a kick in the nuts when

they announced they were shutting up shop.’

The hourly paid shopfloor workers have already disappeared. The managers

are likely to follow suit when their contracts expire on Friday. Yet

Sturmey Archer should have been a tale of UK export success with nearly 90

per cent of its sales overseas.

Lenark executives declined to speak to Financial Mail, though they issued a

statement saying they were ‘upset’ about Sturmey Archer and felt it should

have continued to trade. Lenark intends to ensure that a number of ‘issues’

about the final days of the company will be raised at the meeting of

creditors on October 2.