fridgemaster corporation limited - ernst &...

Ernst & Young LLP 100 Barbirolli Square Manchester, M2 3EY Tel: 0161 333 3000 Fax: 0161 333 3008 www.ey.com/uk

The UK firm Ernst & Young LLP is a limited liability partnership registered in England and Wales with registered number OC300001 and is a member firm of Ernst & Young Global Limited. A list of members’ names is available for inspection at 1 More London Place, London SE1 2AF, the firm’s principal place of business and registered office.

To all Creditors 16 November 2012

Ref: CR/SJW/TV/EG/NWM1137 Direct line: 0161 333 2566 DirectFax: 0161 333 3008 Email: [email protected]

Dear Sir

HI Group plc Hardman Isherwood Limited HI International Limited Frigidaire Consolidated Limited H.I. Investments Limited Fridgemaster Corporation Limited Whitwood Warehouse Limited (all in Administration) (together ‘the Companies’)

I write further to the appointment of Jonathan Peter Sumpton, Thomas Andrew Jack and I as Joint Administrators of the Companies on 26 September 2012.

The Joint Administrators will shortly be issuing their proposals to creditors in accordance with paragraph 49 of Schedule B1 to the Insolvency Act 1986.

In accordance with Section 246B of the Insolvency Act 1986 and Rule 12A.12 of the Insolvency Rules 1986 the Joint Administrators hereby give notice that their proposals are available for viewing and downloading via the website www.higroupadministration.co.uk with effect from 19 November 2012.

Creditors may also request a hard copy of the proposals free of charge by contacting the Joint Administrators at the postal address, email address or telephone number set out in the letterhead.

Meetings of creditors will be held on 4 December 2012 to consider and vote on the following matters:

1. The approval of the Joint Administrators’ proposals.

2. The formation of a creditors’ committee. To be validly constituted, a creditors’ committee must have at least three and not more than five members.

3. In the event that a creditors’ committee is not formed, to fix the basis of the Joint Administrators’ remuneration as provided for in the proposals.

4. In the event that a creditors’ committee is not formed, to authorise the Joint Administrators to draw Category 2 disbursements in accordance with the statement of disbursements set out in the proposals.

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5. In the event that a creditors’ committee is not formed, to approve payment of unpaid pre-administration costs which were incurred with a view to the company entering administration, as set out in the proposals.

Key documents to be made available at www.higroupadministration.co.uk will include the following:

Joint Administrators’ proposals From 19 November 2012

Formal notice of the meeting (Form 2.20B) From 19 November 2012

Initial Creditors’ meeting proxy form (Form 8.2) From 19 November 2012

Notice of claim for voting purposes From 19 November 2012

To be eligible to vote at the meeting you must provide me with written details of your claim by 12 noon on the business day before the meeting and, unless you are attending the meeting in person, you must download and complete and return the proxy form by the date of the meeting.

Please ensure that you only complete forms relating to the company or companies in which you have outstanding amounts owing to you.

Creditors seeking further information regarding the Administrations can email [email protected] or write to the Joint Administrators at Ernst & Young LLP, 100 Barbirolli Square, Manchester, M2 3EY.

If there are any matters concerning the company’s affairs which you consider may require investigation and consequently should be brought to our attention, please forward the details to me in writing as soon as possible.

Yours faithfully for the Companies

S J Woodward Joint Administrator Samuel James Woodward and Thomas Andrew Jack are licensed in the United Kingdom to act as insolvency practitioners by The Institute of Chartered Accountants in England and Wales. Jonathan Peter Sumpton is licensed in the United Kingdom to act as an insolvency practitioner by the Association of Chartered Certified Accountants. The affairs, business and property of the Companies are being managed by the Joint Administrators, S J Woodward, J P Sumpton and T A Jack, who act as agents of the Companies only and without personal liability. We may collect, use, transfer, store or otherwise process (collectively, 'Process') information that can be linked to specific individuals ('Personal Data'). We may Process Personal Data in various jurisdictions in accordance with applicable law and professional regulations including (without limitation) the Data Protection Act 1998.


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HI Group plc Fridgemaster Corporation Limited Frigidaire Consolidated Limited Hardman Isherwood Limited HI International Limited H.I. Investments Limited Whitwood Warehouse Limited (all in Administration) (together ‘the Group’) Administrators’ Statement of Proposals

16 November 2012

Abbreviations

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Abbreviations

California Drive Freehold property at California Drive, Normanton

Crown Crown Corporation (UK) Limited

Directors David Isherwood, Andrew Trotter, Nick Isherwood, Debbie Tennant

EY Ernst & Young LLP

FCL Fridgemaster Corporation Limited

Frigidaire Frigidaire Consolidated Limited

FYXX 12 month period ending 28 February 20XX

the Group FCL, Frigidaire, HI Distribution, International, Investments, Plc and Whitwood

Wider Group the Group, ISDAL and Crown

HI Distribution Hardman Isherwood Limited (t/a HI Distribution)

HIF HSBC Invoice Finance (UK) Limited

Hilco Appraisal Hilco Appraisal Limited

Hisense Hisense Kelon Electrical Holdings Co Limited

Home Delivery A division of HI International Ltd t/a HI Way Express Home Delivery

HSBC Bank HSBC Bank plc

HWE The unlimited partnership trading as HI Way Express

International HI International Limited

Investments H.I. Investments Limited

ISDAL Independent Service (Domestic Appliances) Limited

Plc HI Group plc

ROT Retention of title

Sanderson Weatherall Sanderson Weatherall LLP

TUPE Transfer of Undertaking (Protection of Employment) Regulations 2006

Tuscany Way Freehold property at Tuscany Way, Normanton (the Group’s head office and principal warehouse)

White Goods Business

A division of International and Frigidaire that traded as a distributor of refrigeration white goods

Whitwood Whitwood Warehouse Limited

Contents

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Contents

1. Introduction, background and circumstances giving rise to the appointments ..... 1 1.1 Introduction .................................................................................................................................................... 1

2. Purpose, conduct and end of Administrations ......................................................... 4 2.1 Purpose of the Administrations ..................................................................................................................... 4 2.2 Conduct of the Administrations ..................................................................................................................... 5 2.3 The End of the Administrations ................................................................................................................... 14

3. Statement of affairs .................................................................................................. 15 3.1 Secured creditors......................................................................................................................................... 16 3.2 Preferential creditors ................................................................................................................................... 17 3.3 Non-preferential creditors ............................................................................................................................ 17

4. Prescribed part ......................................................................................................... 18

5. Administrators' remuneration and disbursements and payments to other professionals............................................................................................................ 19

6. Pre-administration costs ......................................................................................... 20

Appendix A Statutory information .............................................................................. 21

Appendix B Directors' statement of affairs ................................................................ 28

Appendix C Statement of administrators' charging policy for remuneration and disbursements pursuant to Statement of Insolvency Practice No. 9..................... 29

Appendix D Administrators' receipts and payments account for the period from 26 September 2012 to 9 November 2012 ...................................................................... 38

Appendix E Summary audited financial results ........................................................ 45

Section 1: 1. Introduction, background and circumstances giving rise to the appointment

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1. Introduction, background and circumstances giving rise to the appointments

1.1 Introduction On 26 September 2012 the Group entered Administration and Samuel James Woodward, Jonathan Peter Sumpton and Thomas Andrew Jack were appointed to act as Joint Administrators. This document, including its appendices, constitutes the Joint Administrators’ statement of proposals to creditors pursuant to paragraph 49 of Schedule B1 to the Insolvency Act 1986 and Rule 2.33 of the Insolvency Rules 1986.

Certain statutory information relating to the Group and the appointment of the Joint Administrators is provided at Appendix A.

1.1.1 Background Group structure diagram

Principal trading activities

The Group’s principal trading activity is as a national distributor of white and brown goods to major high street retailers, supermarkets, DIY stores, cash & carry outlets, web based retailers and independent retailers.

The Group owned or held exclusive licences to a number of brands including Frigidaire, Fridgemaster, Crown, Philco and Univa.

These brands were predominantly traded by the following entities:

International (through divisions named ‘Fridgemaster,’ ‘Crown’ and ‘Philco’); and

Frigidaire; and

HI Distribution.

Hardman Isherwood Limited (T/A HI

Distribution

Frigidaire Consolidated Limi ted

HI In ternational Limited HI Investments Limited

Dormant companies(Whitwood Warehouse Limited, FridgemasterCorporation Limited)

Key:The Wid er Group

The Group

HI Group PLC

Independent Service(Domestic Appliances

Limited)

Crown Corporation (UK) Limited (Dormant)


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Other trading activities

The Group also operated a warehousing, logistics and business to consumer distribution business, from California Drive, known as Home Delivery (a trading division of International).

Other Group entities

The Group also includes a property holding company (Investments) which owns the Tuscany Way site (including adjacent development land) and two dormant entities (Whitwood and FCL). All other land and buildings owned by the Group are owned by HI Distribution.

The ultimate controlling entity within the Group is Plc, a holding company.

All entities within the Group are incorporated in the United Kingdom and the Group is primarily operated from Tuscany Way and California Drive, Normanton, West Yorkshire.

The Wider Group

ISDAL is a domestic appliance warranty and servicing business which operated as a single entity and is a fully owned subsidiary of Plc.

Crown Corporation Limited is a dormant entity.

On 26 September 2012 ISDAL and Crown Corporation Limited also entered Administration and Samuel James Woodward, Jonathan Peter Sumpton and Thomas Andrew Jack were appointed to act as Joint Administrators.

ISDAL is a distinct business with largely separate creditors to the Group and its Proposals are covered by a separate document.

As Crown is a dormant entity and has nominal assets and no creditors, its Proposals are also covered by a separate document.

Hi Way Express (“HWE”)

HWE is an unlimited liability partnership whose partners include three of the four Directors of the Group (David Isherwood, Nick Isherwood and Debra Tennant). It is a warehousing and bulk distribution business that provided services to the Group as well as its own third party customers.

Whilst HWE provided services to the Group it did this by utilising the Group’s operational assets and employees. This lead to a complex series of recharges which has resulted in a debt being due from HWE and is discussed further later in the document.

We understand that HWE has ceased trading but is not subject to any form of insolvency proceedings.

Connected party transactions

As per the statutory accounts, connected party transactions include:

Plc (consolidated) (representing charges from various group entities)

Recharges to HWE for management charges (FY11: £72,000, FY10: £23,000);

Recharges to HWE for property costs (FY11: £1,349,000, FY10: £1,257,000);

Recharges to HWE for staff costs (FY11: £3,935,000, FY10: £4,232,000).


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In the individual accounts of Frigidaire, HI Distribution and International cumulative distribution costs charged by HWE total £4,423,000 in FY11 (FY10: £4,643,000).

In addition, we are also aware of trademark royalties paid by International to Hardmark Pension Scheme (of which some of the Directors are members) (FY11: £104,000, FY10: £104,000).

The audited financial results of the Wider Group are summarised below. The individual results of each entity are summarised in Appendix E. HI Group Plc (consolidated)

Period year or period ended

Type audited/ draft

Turnover£000

Gross profit £000

Gross profit

%

Directors’ remuneration

£000

Net profit

after tax £000

Accumulated reserves

£000

29/02/2012 Draft 51,254 6,998 14% n/a (6,302) 14,142

28/02/2011 Audited 59,164 10,859 18% 578 679 19,142

28/02/2010 Audited 68,207 11,772 17% 988 745 18,550

28/02/2009 Audited 75,002 10,833 14% 981 (429) 17,454

28/02/2008 Audited 86,618 11,315 13% 938 879 18,718

1.1.2 Circumstances Giving Rise to the Appointment of the Administrators The turnover of the Wider Group has been in decline since FY08, primarily due to difficult market conditions in the Group’s principal white goods business. As the table above highlights, turnover peaked at £86.6m in FY08 but had declined by 41% to £51.2m in FY12. As a result, in FY12 the Group incurred a net loss of £6.3m including exceptional costs of £4m.

The financial position of the Wider Group was further impacted by the losses made by HWE, which provided warehousing and logistics services mainly to the Group but also to third party customers. As the turnover of the Group reduced, the level of income for HWE also reduced and its losses were effectively funded by the Group.

As a result of the losses incurred in FY12 the Directors identified and implemented a number of restructuring initiatives in order to improve profitability and cash flow.

By early August 2012, it became apparent that trading performance was falling materially below forecast due to continuing difficult market conditions and that the Wider Group would be unable to continue to trade without further funding, which was not available.

In August 2012, EY were engaged to commence an accelerated sale process of the Wider Group.

A solvent sale of the Group was not possible however, two separate sales of business and assets as a going concern were concluded shortly after our appointment as Administrators and are explained in detail below.

Pre-appointment costs incurred by the Joint Administrators

Prior to our appointment, EY incurred certain pre-Administration costs that remain unpaid. The Administrators are seeking approval for these costs as an expense of the Administration. Please see section 6 of these proposals for further details.

Section 2: Purpose, conduct and end of administration

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2. Purpose, conduct and end of Administrations

2.1 Purpose of the Administrations The purpose of the administrations is to achieve one of three objectives:

a. To rescue the Group as a going concern

b. To achieve a better result for the Group’s creditors as a whole than would be likely if the company were wound up (without first being in administration)

c. To realise property in order to make a distribution to one or more secured or preferential creditors

Insolvency legislation provides that objective (a) should be pursued unless it is not reasonably practicable to do so or if objective (b) would achieve a better result for the company’s creditors as a whole. Objective (c) may only be pursued if it is not reasonably practicable to achieve either objective (a) or (b) and can be pursued without unnecessarily harming the interests of the creditors of the company as a whole.

As a result of the work undertaken by EY prior to Administration, we consider it unlikely that the first objective could be achieved due to the following:

Significant losses had been incurred in FY12;

No further funding was available from the existing lenders or shareholders, with no further unencumbered assets to offer as security to existing or new lenders; and

No offers were received for the shares of any of the businesses during the marketing process.

In addition, the Group’s complex operational and legal structure made a solvent sale of any of the individual businesses unlikely as:

Several trading divisions straddle a number of Group entities;

Significant intercompany debts exist between Group entities, which would have needed to be satisfied as part of any going concern sale; and

The accounting and finance function within the Group was poor, with insufficient time available for the due diligence that would have been required by an equity purchaser.

As a result, the Administrators have concluded that it is not reasonably practicable to achieve the rescue of the Group entities as going concerns in accordance with paragraph 3(1)(a) of Schedule B1 to the Insolvency Act 1986.

Accordingly, the Joint Administrators’ strategy focused on objective (b), to achieve a better result for the Group’s creditors as a whole than would be likely if the Group was wound up, without first being in Administration.


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2.2 Conduct of the Administrations 2.2.1 Pre-packaged sale of the Group’s business and assets

Shortly after our appointment, we completed two separate sales of part of the Group’s business as a going concern as follows:

On 26 September 2012, the business and assets of Home Delivery were sold to Key Sales Limited for a total consideration of £1,017,339.

On 28 September 2012, a sale of certain assets of the Group’s White Goods Business was completed to Hisense UK Limited for a total consideration of £632,328. This involved the sale of certain assets of Frigidaire, HI Distribution and International.

As far as the Joint Administrators are aware, none of the directors of the Group have given any personal guarantees in respect of the company’s debts.

Further information regarding the transactions is given below. This information was previously included in our letter to all known creditors dated 5 October 2012.

Marketing process

On 1 August 2012, EY were instructed by the Directors to undertake an accelerated sale process of the Wider Group. Based on discussions with the directors and EY’s own network of contacts, a list of potentially interested parties was produced who were considered to be able to complete a purchase in accelerated timescales. This list consisted of:

15 financial buyers, including specialist turnaround investors;

11 trade buyers, including direct competitors of the Wider Group; and

3 specialist stock dealers.

Shortly after the the sale process began, the Directors were approached by Hisense Kelon Electrical Holdings Limited (‘Hisense’), the Group’s main supplier of white goods and major creditor, who expressed an interest acquiring all or part of the Wider Group.

Hisense requested a two week period of exclusivity in order to undertake due diligence, which was granted by the Directors on 22 August 2012.

Although there were intensive negotiations, at the end of the exclusivity period further time was required by Hisense to formulate an offer.

Accordingly, on 6 September 2012, the sale process was resumed. In total, 30 parties were contacted, with 19 parties signing up to confidentiality agreements and subsequently receiving detailed information relating to the Wider Group.


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Offers received

Three offers were received for different parts of the Group, one of which was subsequently withdrawn. The remaining two offers are summarised below.

1. Home Delivery

One offer was received in respect of Home Delivery, which was from Key Sales Limited (a subsidiary of Pacifica Group Limited). This offer consisted of:

Consideration of £50,000 for the trade and fixed assets of Home Delivery;

Acquisition of the book debts relating to Home Delivery for consideration of £967,339 (these debts had a book value of £1,662,610 and had been assigned to HIF;)

Transfer of 57 employees in accordance with TUPE;

A 15 month lease to be granted by HI Distribution to Key Sales Limited (annual rental of £282,000) to enable the business to continue operating from the current trading address; and

All consideration to be paid on completion.

2. White Goods Business

A second offer was made for the White Goods Division by a subsidiary of Hisense, Hisense UK Limited. This offer consisted of:

Consideration of £608,225 for the Group’s refrigeration stock originally supplied by Hisense (split £275,492 for International stock and £332,733 for Frigidaire stock);

Consideration of £4 for the goodwill and certain other assets of the Group including the Fridgemaster brand and a license in relation to the Univar and Atlant brands;

Transfer of 11 employees in accordance with TUPE;

Hisense UK Limited to fulfil all of the Group’s historical warranty obligations in respect of refrigeration stock, thereby potentially mitigating the risk of counter claims by the Group’s customers and improving the realisation prospects in respect of the Group’s white goods book debts;

Hisense UK Limited to collect the three largest book debts of the Group on its behalf, in return for a commission based on collections achieved;

A two month licence to occupy part of the warehouse and office space at the Group’s Tuscany Way premises; and

All consideration to be paid on completion.

Rationale for the transactions and the decision not to trade in Administration

Home Delivery

There were no other offers received for the Home Delivery business (an alternative offer was previously submitted but subsequently withdrawn). The alternative course of action would be to try and sell the business and assets as a going concern during the Administration.

We did not consider it possible for the Home Delivery business to continue trading during Administration for the following reasons;


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The key contracts included insolvency termination clauses and it would have been relatively straight-forward for these customers to seek alternative service providers. As a consequence, the customer base of the business would have quickly eroded; and

The business was reliant on over 20 sub-contractors to deliver customers products in the UK. The sub-contractors were owed c.£0.5m which would have required to be paid in full to ensure continued service and avoid lien being taken over customer’s stock. It was not possible to fund this level of ransom creditor payment given the likely termination of customer contracts.

Based on the above factors, we considered that a period of ongoing trading to achieve a sale as a going concern was not achievable and an immediate closure of the business would have been necessary, which would have significantly impacted debtor realisations and employment.

Therefore the only option to achieve a sale of the Home Delivery business as a going concern was a pre-packaged sale which could be completed immediately following the appointment of Administrators.

Valuation

We instructed Hilco Appraisal Limited (‘Hilco Appraisal’) to value the limited tangible assets included in the Home Delivery sale which comprised office fixtures and fittings, IT equipment and goodwill. Market valuations of the assets of Home Delivery were at £6,500 on an “in situ” basis and £3,500 on an “ex-situ” basis. Accordingly the offer of £50,000 from Key Sales Limited was significantly in excess of both valuations.

In addition, as a part of the sale Key Sales Limited has also agreed to enter into a 15 month lease in respect of the property at California Drive. This equates to rental income of £282,000 which represents additional income in the Administration of HI Distribution and also mitigates vacant property holding costs.

With regard to the sale of the book debts (which had been assigned to HIF), there was a risk that collections in an insolvency scenario would have been significantly impacted by counter-claims from customers. It was therefore considered that the certainty afforded by the offer to purchase the sales ledger outweighed the collection risk.

White Goods Business

No other offers were received for a going concern sale of the White Goods Business. We did not consider it was possible to continue to trade the business in Administration (other than in a wind down) for the following reasons;

This part of the business had incurred significant losses in recent years and it was unlikely this position could be materially improved in an Administration scenario;

It was unlikely that existing retail customers would wish to continue to purchase goods (without a significant discount) given the lack of warranty and after-sales service required by consumers; and

The Group did not have the necessary stock to meet major customers’ requirements and it was considered unlikely that this stock could have been sourced on a timely basis from existing suppliers.

In addition, Hisense are the Group’s major supplier and strategic partner in the UK and it appeared highly unlikely that any other party would have the same strategic interest in acquiring the business as a going concern and preserving employment.

We instructed Hilco Appraisal to undertake a valuation of the Group’s stock, which indicated a potential realisation of c.42.6p/£ before costs of realisation.


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The Hisense UK Limited offer equated to a realisation of approximately 40p/£ in respect of the stock, broadly similar to the valuation received from Hilco Appraisal (before costs) and similar to alternative offers from parties interested in acquiring the stock only. However, the other parties were not willing to fulfil the Group’s warranty obligations which at previous run rates were estimated to be c.£1m.

As a result of the warranty provided by Hisense, the debtor collections from the White Goods Business have the potential to be significantly higher as customers should not seek to make deductions to cover future warranty claims which the Group is unable to honour.

Furthermore, the transfer of 11 employees in accordance with TUPE, will restrict preferential claims and maximise realisations available to creditors.

Consultation with creditors

Consultations were held with HIF (which holds a fixed charge over certain of the Group’s book debts and a second ranking debenture over the other assets of the Wider Group) and HSBC Bank (which holds a first ranking debenture over the other assets of the Wider Group) before the offer was accepted. In addition, Hisense are by far the largest unsecured creditor of the Group.

Given the imminent Administration appointment (as the Group no longer could trade within its facilities) and the need to complete a transaction to preserve value in the business, it was not possible to consult other unsecured or preferential creditors.

Significant assets not included in the sale agreements

All other assets relating to other divisions of the Group were excluded from the transactions, including but not limited to: the freehold properties and other fixed assets; intellectual property; stock; cash balances; trade debts; and contingent assets such as the right to prepayments, insurance claims and corporation tax refunds.

2.2.2 Strategy Following the completion of the sales, our strategy is focused on, but not limited to, the following:

The sale of the Group’s freehold properties;

Managing the clearance of a significant volume of third party stock from the warehouse at Tuscany Way;

The sale of residual Group stock;

The collection of the Group’s book debts;

Realising value from any other assets; and

An orderly wind down of the Group’s operations.

2.2.3 Third party stock clearance On appointment approximately 19,000 pallets of third party owned stock was held at Tuscany Way (using c.80% of the warehouse capacity).

The vast majority of this stock related to five parties (Greencore Grocery Limited, Exel Europe Limited (DHL), Combined Independent (Holdings) Limited, Olympia Tools (UK) Limited and Renshaw Napier Limited).

We contacted these parties to arrange an orderly removal of their stock and negotiated an agreement for the settlement of outstanding book debts and for the customers to cover the


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incremental costs of the Group associated with the removal of their goods (to include wages, rates, utilities and equipment hire over an estimated removal period of four weeks.

This agreement represented a cost effective solution to a potentially time consuming matter, whilst at the same securing book debt collections of c.£0.6m for the Group.

All third party owned property relating to these customers has now been removed from site.

2.2.4 Employees At the date of our appointment, the Group employed 249 employees.

As a result of the Home Delivery and White Goods Business transactions, a total of 68 employees have been transferred to the respective purchasers (Key Sales Limited and Hisense UK Limited).

To date 152 employees have been made redundant as part of the Administration process or have resigned.

The remaining 29 employees have been retained in the short term to assist with the Administration.

2.2.5 Asset realisations 2.2.5.1 Freehold Properties

The Group owns five freehold properties, all of which are located on the Wakefield Europort distribution park in Normanton, West Yorkshire and are summarised below.

These properties are all subject to fixed charges in favour of HSBC Bank.

Property name Owned by Total square feet Tenants

Tuscany Way Investments 281,000 unit plus 6.2 acres of development land

-

California Drive (Units A,C, E) HI Distribution 200,000 Key Sales Limited

California Drive (Unit B)

HI Distribution 65,000 Polymer Logistic UK Limited

Unit 1, Midway Point HI Distribution 40,372 Asda Stores Limited

Unit 2, Midway Point HI Distribution 28,000 Sigma ACC Limited

Disposal Strategy

In the current economic climate, there are a wide range of potential outcomes regarding the sale of the properties in terms of value and timescales. The Joint Administrators have instructed Sanderson Weatherall and Jones Lang Lassalle to advise on disposal strategy and market the Group’s properties for sale and are working closely with our agents to maximise realisations. The ultimate values achieved from the sale of the freehold property will largely dictate the outcome for the Bank and other creditors and we will provide a further update in our next report.


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Rental income

California Drive Warehouse A, C & E

As part of the sale of the Home Delivery business, a 15 month lease was granted to Key Sales Limited. Rental income will be £282,000 over the term of the lease.

Warehouse B

This property is currently leased to Polymer Logistics for 5 years from May 2012 at £250,000 per annum.

Unit 1, Midway Point

This property is currently leased to Asda Stores Limited under a short term (12 month) lease which expires in March 2013 with an annual rent of £169,000.

Unit 2, Midway Point

The property is presently occupied on a temporary ‘Tenancy at Will’ arrangement by Sigma ACC Limited who are vacating on 15 November 2012.

2.2.5.2 Book debts

At the date of our appointment, book debts across the Group totalled £7.8m across the three trading entities (Frigidaire, HI, International) from c. 600 customers.

All debts at the date of appointment have been assigned to HIF under the terms of a Confidential Invoice Discount agreement.

As at 26 September 2012, £1.7m was due to HIF from the Group before contractual post appointment interest and charges.

Summary of Group debtor collections from appointment to 9 November 2012

In the six weeks to 9 November 2012, we have collected c.£3.0m of the £7.8m opening balance at the date of appointment.

Around £1.0m of collections in International (£1.3m in total) relate to the sale of the Home Delivery book debts to Key Sales Limited for 60p in the pound, as detailed earlier in the report.

The other £2.0m of collections to date relate to:

Customers of HI Distribution (£1.0m) relating to purchases of small domestic appliances, third party branded stock and warehousing services; and

Customers of the White Goods Business (£1.0m) with the majority relating to purchases of Frigidaire branded products (£0.64m). The remaining £0.36m collected in International relates to purchases of the Group’s other brands (predominantly Fridgemaster).

Provisions for uncollectible amounts

At present we estimate that there will be uncollectible amounts of £2.4m which relate to the following:

Currency: £ 000Opening balance on

appointment *Payments

receivedProvisions for

uncollectible amountsOutstanding pre-

appointment balancePost appointment

invoicesNet collectible

balanceFrigidaire 1,790 (638) (57) 1,095 (3) 1,092HI Distribution 2,243 (1,046) (142) 1,055 96 1,150International 3,795 (1,286) (2,188) 321 0 321

Total Group debtors 7,829 (2,971) (2,388) 2,470 93 2,564

* Opening balance on appointment ex cludes any intercompany debts or amounts ow ing to Group companies from HWE


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International and Frigidaire: £1.6m in respect of debts owed by Comet Group plc (“Comet”). Comet entered Administration on 2 November 2012. Whilst we are pursuing claims in respect of ROT and VAT Bad Debt Relief, the Group will rank as an unsecured creditor of Comet and therefore future recoveries are highly uncertain.

International: a £0.6m write off relating to the sale of the Home Delivery book debts at 60p in the pound;

HI Distribution: £0.1m relating to full and final settlements completed with two customers.

Whilst we believe the level of collections achieved have been enhanced by the sale of the White Goods Business, specifically the ongoing servicing obligations to be performed by Hisense, warranty counterclaims remain a risk to debtor collections in all three entities.

We continue to pursue the remaining collectible balance of £2.6m.

2.2.5.3 Stock

At the date of appointment, the Group held stock with a book value of c.£4.4m.

Frigidaire, HI and International

To date, we have sold stock for consideration totalling £0.6m as part of the sale of the White Goods Business to Hisense UK Limited. This included all refrigeration products manufactured and supplied to the Group by Hisense and resulted in realisations of £333,000 in Frigidaire and £275,000 in International.

We have subsequently agreed a deal with Stratton Partners Limited, a subsidiary of GA Europe Investments 3000 Limited, in respect of a sale of the majority of the remaining stock held by the Group that is not subject to ROT claims (a book value of c.£1.4m). The consideration of c.£429,000 is subject to a final stock count and is currently expected to result in realisations of circa £0.2m in Frigidaire, £0.1m in HI Distribution and £0.1m in International.

Further realisations in Frigidaire, HI and International may be achievable from the following:

Goods in transit:

At the date of our appointment, Cosco International Holdings Limited (“Cosco”) took a lien over c.£0.6m of stock in transit in respect of debts owing to it from the Group (c.$2.0m).

Our legal advisors consider that it may not be cost effective to challenge the validity of the lien. However, we are in negotiations regarding a potential sale of the Group’s interest in this stock.

Damaged stock

The Group has c.300 pallets of damaged or returned stock. We have recently engaged In2c Auctions (a specialist clearance auctioneer) to dispose of this stock. It has been agreed that they will be paid on a commission basis.


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2.2.5.4 Other assets

Motor vehicles

At the date of our appointment, the Group’s fixed asset register indicated that it operated 36 motor vehicles of which 24 were owned 12 were subject to finance agreements.

Summary of motor vehicles by entity on appointment

To date, we have sold six cars via private treaty (five owned and one subject to a finance agreement) with net realisations (after amounts paid to the finance provider) of £31,335 (£21,750 in International and £9,585 in HI Distribution).

The remaining vehicles will be sold at auction by our agents.

Number plates

There are nine private number plates owned by International that will be marketed and sold by our agents.

IT Equipment, fixtures and fittings

To date, we have realised c.£50,000 (in International) which relates to the sale of Home Delivery to Key Sales Limited.

Debt due from HWE

At the date of appointment, the most recently available management accounts (July 2012) indicate that there was a net debt due to the Group from HWE of c. £4.0m, as per the following table:

Amounts owing by HWE to Group entities as per most recent management accounts (July 2012)

We understand that this position has built up over a number of years through intercompany recharges.

We are in the process of investigating the background to this debt with a view to pursuing HWE for recovery. As stated above, HWE has ceased trading and we understand from intital discussions that this debt is disputed.

£000sAmounts owing from HWE

to GroupAmounts owing from the

Group to HWE Net HI Dis tribution 7,083 - 7,083Investments 754 - 754International - (3,195) (3,195)Frigidaire - (645) (645)Total as per July management accounts 7,837 (3,840) 3,997

EntityNo. cars

owned No. cars

subject to HP TotalFrigidaire 1 2 3HI 7 7 14International 16 3 19Total 24 12 36


Ernst & Young 13

Administrators’ receipts and payments

A summary of the Administrators’ receipts and payments for the period from 26 September 2012 to 9 November 2012 is attached at Appendix D.

2.2.6 Initial Meeting of Creditors The Administrators will be holding an initial meeting of the Group’s creditors on Tuesday 4 December 2012 at 12.00pm at The Park Plaza Hotel, Boar Lane, Leeds, LS1 5NS.

The meeting will be held to consider and , for each of the Group entities, on the following:

The approval of the Joint Administrators’ proposals;

The formation of a creditors’ committee and if approved, the membership of a Creditors’ Committee. To be validly constituted, a Creditors’ Committee must have at least three and not more than five members;

In the event that a Creditors’ Committee is not formed, to fix the basis of the Joint Administrators’ remuneration as provided for in the Proposals;

In the event that a Creditors’ Committee is not formed, to authorise the Joint Administrators to draw Category 2 disbursements in accordance with the statement of disbursements set out in the proposals; and

In the event that a Creditors’ Committee is not formed, the approval of the payment of unpaid pre-appointment costs incurred by the Administrators’ firm as an expense of the Administrations.

As detailed in our letter to creditors dated 16 November 2012, formal notice of the meeting, together with a proxy form and notice of claim form are available at www.higroupadministration.co.uk. To be eligible to vote at the meeting you must provide:

Written details of your claim by 12.00pm on the business day before the meeting; and

Unless you are attending the meeting in person, you must complete and return the proxy form by the date of the meeting.

The Joint Administrators are of the opinion that it is not yet possible to make a reliable estimate as to which entities within the Group will have sufficient property to enable a distribution to be made to unsecured creditors.

2.2.7 Future conduct of the Administrations It is proposed that the Joint Administrators will continue to manage the affairs, business and property of the Group in order to achieve the purpose of the Administrations, namely to achieve a a better result for the Group’s creditors as a whole than would be likely if the Group’s entities were wound up, without first being in Administration. This will include, inter alia:

Realising the Group’s remaining tangible assets, principally freehold property, stock, motor vehicles and number plates, fixtures and fittings and IT equipment;

Collection of outstanding book debts;

Investigating and pursuing the recovery of any debts owing to the Group from HWE;

Collection of rent from tenants occupying the Group’s freehold properties;

Agreeing preferential creditor claims, including dealing with employee claims, queries and the Redundancy Payments Office;



Ernst & Young 14

Dealing with unsecured creditor and customer enquiries;

Distributing realisations to the secured and preferential creditors

Calculation of the final corporation tax and VAT positions of the Group for the period of trade up to 25 September 2012 and realisation of any value;

Assisting creditors in the return of third party assets;

Dealing with any ROT claims;

If the Joint Administrators deem appropriate to seek an extension, or further extensions, to the Administration from the Court as required, without recourse to creditors;

Dealing with statutory reporting and compliance obligations;

Finalising the Administrations including the payment of all Administration liabilities; and

Any such actions required to be undertaken by the Administrators to fulfil the purpose of the Administrations.

2.3 The End of the Administrations The Administrations will end automatically on 25 September 2013 although they can be extended by creditors or by the Court.

It is proposed that, at the end of the Administrations, the Companies will move straight into Creditors’ Voluntary Liquidation upon the filing with the Registrar of Companies of a notice pursuant to paragraph 83 of Schedule B1 to the Insolvency Act 1986. It is proposed that the liquidators will be Samuel James Woodward, Jonathan Peter Sumpton and Thomas Andrew Jack of Ernst & Young LLP and that any act required or authorised under any enactment to be done by the liquidators may be done by either or all of them. In accordance with paragraph 83(7) of Schedule B1 to the Insolvency Act 1986 and Rule 2.117A(2)(b) of the Insolvency Rules 1986, creditors may nominate a different person as the proposed liquidator, provided that the nomination is made after the receipt of these proposals and before the proposals are approved. It should be noted in this regard that a person must be authorised to act as an insolvency practitioner in order to be appointed as liquidator.

If at the end of the Administration the Companies have no property which might permit a distribution to their creditors, the Joint Administrators will send a notice to that effect to the Registrar of Companies. On registration of the notice the Joint Administrators’ appointment will come to an end. In accordance with the provisions of paragraph 84(6) of Schedule B1 to the Insolvency Act 1986 the Companies will be deemed to be dissolved three months after the registration of the notice.

If there is property available at the end of the Administration, but the Joint Administrators think it is insufficient to enable a distribution to be made in a Creditors’ Voluntary Liquidation, the Joint Administrators will petition the court, pursuant to paragraph 79 of Schedule B1 to the Insolvency Act 1986, for an order to bring the administration to an end with a consequential order for the compulsory winding up of the Companies.

Section 3: Statement of affairs

Ernst & Young 15

3. Statement of affairs

The Directors have submitted their Statement of Affairs as at 26 September 2012. A summary is attached at Appendix B.

We would make the following comments in relation to the Directors’ Statement of Affairs:

Freehold properties (Hardman Isherwood Limited and H.I. Investments Limited)

As mentioned previously, there are a wide range of potential outcomes in respect of the freehold properties and we would highlight that we consider the Directors’ estimate is a very best case outcome which is unlikely to be achieved in an Administration scenario.

As a result the outcome shown for creditors in Hardman Isherwood Limited (HI Distribution) in particular is considered unrealistic.

Group bank indebtedness

The Directors’ Statement of Affairs include individual cash positions of each company. In practice a Group overdraft facility was operated with the individual balances being aggregated. As a result, the Bank is entitled to offset individual balances to arrive at its overall net indebtedness of £18.7m.

Once all assets have been realised and the outcome for the Bank and creditors is known it may be necessary to perform a marshalling exercise to allocate any surplus funds prior to distribution to creditors. As a result it is difficult to estimate at present which companies may have surplus funds for distribution to creditors.

HWE (Hardman Isherwood Limited and H.I. Investments Limited)

As mentioned above, certain of the Directors (who are also partners of HWE) dispute the existence of debts totalling £4.0m (on a net basis) owing from HWE to Group entities and have omitted any balances owing to Group entities from the Statement of Affairs. Our limited knowledge to date indicates that this potentially relates to amounts due to HI Distribution and Investments.


Ernst & Young 16

3.1 Secured creditors HSBC Bank

HSBC Bank had total indebtedness at the date of appointment of £18,898,669, subject to accruing interest, charges and the maturation of two forward exchange contracts and a duty deferment bond with HMRC.

Including ISDAL (the Wider Group) the total indebtedness (subject to accruing interest and charges) totals £18,747,879.

Summary of indebtedness for Group and Wider Group to HSBC Bank

HSBC Bank holds fixed and floating charges over the Group’s assets and chattel mortgages over certain motor vehicles and the number plates.

The Bank also holds unlimited composite guarantees across the Wider Group (the Group, ISDAL and Crown).

HIF

HIF holds a fixed charge over the book debts at the date of appointment of Frigidaire, HI Distribution and International.

Total amounts owing to HIF by the Group at appointment were £1,706,767 excluding post appointment interest and termination charges. Post appointment termination charges total £365,096.

Summary of indebtedness to HIF (Group only)

HIF have now been repaid in full and any surplus funds for book debts are charged to HSBC Bank under the terms of a Deed of Assignment.

Currency: £ 000

Indebtedness at the date of appointment (subject to further

charges)Frigidaire 1,170FCL (2,414)HI Distribution (10,239)International 7,087Investments (17,065)Plc (20)Whitwood 2,583Group (other than ISDAL) (18,898)ISDAL 150Wider Group (18,748)

Currency: £ 000 Debt Charges Total indebtednessFrigidaire 710 95 805HI Distribution 697 94 791International 300 176 476Total 1,707 365 2,072


Ernst & Young 17

3.2 Preferential creditors We currently estimate preferential creditors of c. £165,000 in respect of claims for employees’ salaries, holiday pay and pension contributions.

At this stage it is too early to confirm the outcome for preferential creditors with certainty.

3.3 Non-preferential creditors These creditor claims continue to be submitted. It is estimated that total non-preferential claims for the Group will be in the region of £17.7m, as per the Directors’ Statement of Affairs for all Group entities.

As mentioned above, the outcome for creditors is largely dependent on the realisations of the freehold properties where a wide range of outcomes is possible. We currently believe there may be sufficient realisations to enable a distribution to non-preferential creditors of some Group companies however for the reasons previously set out it is too early to give any indication of dividend prospects by entity.

Once all assets have been realised and the outcome for the Bank and creditors is known it may be necessary to perform a marshalling exercise to allocate any surplus funds prior to distribution to creditors. As a result it is difficult to estimate at present which companies may have surplus funds for distribution to unsecured creditors.

Currency: £ 000 Estimated preferential creditorsHI Distribution 148International 11Frigidaire 6Total Group debtors 165

Section 4: Prescribed part

Ernst & Young 18

4. Prescribed part

The prescribed part is a proportion of floating charge assets set aside for unsecured creditors pursuant to section 176A of the Insolvency Act 1986. The prescribed part applies to floating charges created on or after 15 September 2003.

The date of the charges means that the Prescribed Part applies to all Group entities, however in the event that HSBC Bank is repaid in full and there are surplus funds, the Prescribed Part will not apply.

It is not currently possible to accurately calculate the Prescribed Part. However, we consider it possible that HSBC Bank will be paid in full and therefore the Prescribed Part would not apply.

Section 5: Administrators' Remuneration and Disbursements

Ernst & Young 19

5. Administrators' remuneration and disbursements and payments to other professionals

Remuneration

The statutory provisions relating to remuneration are set out in Rule 2.106 of the Insolvency Rules 1986. Further information is given in the Association of Business Recovery Professionals’ publication ‘A Creditors’ Guide to Administrators’ Fees’, a copy of which may be accessed from the web site of the Insolvency Practitioners Association at http://www.insolvency-practitioners.org.uk (follow ‘Regulation and Guidance’ then ‘Creditors’ Guides to Fees’), or is available in hard copy upon written request to the Joint Administrators.

In the event that a creditors’ committee is not formed, the Joint Administrators propose that their remuneration be fixed on the basis of time properly given by them and their staff in dealing with matters arising in the Administration.

Attached at Appendix C is a detailed analysis of time spent, and charge out rates, for each grade of staff for the various areas of work carried out to 9 November 2012, as required by the Association of Business Recovery Professionals’ Statement of Insolvency Practice No. 9.

Disbursements

Appendix C also includes a statement of the Joint Administrators’ policy for charging disbursements. In the event that a Creditors’ Committee is not formed, the Joint Administrators propose they be permitted to charge Category 2 disbursements in accordance with the charging policy set out in Appendix C.

Payments to other professionals

The Joint Administrators have engaged the following other professionals to assist them. They were chosen on the basis of their experience in similar assignments.

Name of firm Nature of service How contracted to be paid

DLA Piper UK LLP Legal advice relating to sale and purchase agreements, appointment matters, leases, ROT claims, general advice

Time costs basis

Sanderson Weatherall LLP Valuation advice, marketing of freehold, properties and property management services

Time costs basis for valuation advice Commission based on realisations

Jones Lang Lassalle Marketing of freehold properties

Commission based on realisations

Hilco Appraisal Limited Valuation of and marketing of other assets

Time costs basis for valuation advice. Commission based on realisations

In2c Auctions Auctioning damaged / returned stock

Commission based on realisations

No fees have been paid to date.

http://www.insolvency-practitioners.org.uk

Section 6: Other matters

Ernst & Young 20

6. Pre-administration costs

The payment of unpaid pre-administration costs as an expense of the administration is subject to approval under Rule 2.67A, and not part of the proposals subject to approval under paragraph 53. This means that they must be approved separately from the proposals.

As previously reported, Ernst and Young LLP had been engaged from 1 August 2012 to undertake an accelerated disposal of the Wider Group and also plan for a potential insolvency appointment.

It is our view that with effect from Monday 10 September 2012 the time costs of certain individuals related solely to negotiating and executing the two business sales as ‘Administrators in waiting’ and therefore these unpaid costs are payable in accordance with Rule 2.67A of the Insolvency Rules.

Our unpaid costs for those people solely involved in the sale of business total £124,660 plus VAT and are set out below. We intend to seek approval for payment of these costs from the Administrations at the Initial Meeting of Creditors.

We have allocated these costs pro-rata based on the realisations achieved as a result of the two sales:

International - £99,144

Frigidaire - £25,516

In the event that a Creditors’ Committee is not formed, the Joint Administrators propose to seek approval of unpaid pre administration costs by a resolution of creditors.

Par t n erEx e c ut iv e

D i rec to rAs s is tan t

D ir ec to rSen io r

Ex ec u t iv eT o ta l

H ou r sTo t al T ime

C o s tAv e ra ge

hou r ly r a te

Sale of business 25 76 91 99 291 124,660 428

Total hours 25 7 6 91 99 291

Time cost (£) 14 ,250 41 ,42 0 37 ,310 31 ,6 80 12 4 ,660

Average hourly rate 570 545 410 320

Appendix A: Statutory Information

Ernst & Young 21

Appendix A Statutory information

Company Information

Company Name: HI Group plc Registered Office Address:

100 Barbirolli Square Manchester M2 3EY

Registered Number: 02437316 Trading Name(s): Hl Group plc Trading Address(es): Tuscany Way

Normanton Nr Wakefield West Yorkshire WF6 2UA

Details of the Administrators and of their appointment

Administrators: Samuel James Woodward, Jonathan Peter Sumpton and Thomas Andrew Jack

Date of Appointment: 26 September 2012

By Whom Appointed: The appointment was made by the Company Directors

Court Reference: 1283 of 2012 in the High Court of Justice, Chancery Division, Leeds District Registry

Any of the functions to be performed or powers exercisable by the administrators may be carried out/exercised by any one of them acting alone or by any or all of them acting jointly.

Statement concerning the EC Regulation

The EC Council Regulation on Insolvency Proceedings does apply to this administration and the proceedings are main proceedings. This means that this Administration is conducted according to UK insolvency legislation and is not governed by the insolvency law of any other European Union Member State.

Share capital

Class Authorised Issued and fully paid

Number £ Number £

Ordinary 1,000,000 1 1,000,000 1

Directors and secretary and their shareholdings

Name

Director or Secretary

Date appointed

Date resigned

Debra Margaret Tenant Director 26/07/2000

David Michael Isherwood Director 30/10/1991

Nicholas Charles Isherwood Director 30/10/1991

Michael James Turnbull Director 26/07/2000

Andrew Trotter Director 26/07/2000

Harold Jevons Both 17/08/1993


Ernst & Young 22

Company Information

Company Name: Hardman Isherwood Limited Registered Office Address:


Registered Number: 01222293 Trading Name(s): HI Distribution Trading Address(es): Tuscany Way










Share capital


Number £ Number £

Ordinary 275,000 1 275,000 1 Directors and secretary and their shareholdings

Name


Date appointed

Date resigned





Malcolm Unitt Director 26/07/2000

Simon Lister Director 26/07/2000

Frank Bailey Director 08/11/1991

Harold Jevons Secretary 05/03/1997


Ernst & Young 23

Company Information

Company Name: HI International Limited Registered Office Address:


Registered Number: 01419464 Trading Name(s): Fridgemaster, Crown, Philco, Univa, HI Way Express Home

Delivery

Trading Address(es): Tuscany Way Normanton Nr Wakefield West Yorkshire WF6 2UA









Share capital


Number £ Number £

Ordinary 100 1 100 1


Name


Date appointed

Date resigned

David Michael Isherwood

Director 12/11/1991

Nicholas Charles Isherwood

Director 11/12/2003

Michael James Turnbull

Director 26/07/2000




Ernst & Young 24

Company Information

Company Name: Frigidaire Consolidated Limited Registered Office Address:

100 Barbirolli Square Manchester, M2 3EY

Registered Number: 01469364 Trading Name(s): Frigidaire (trading name)

HI Developments (Leeds) Limited (previous name) Trading Address(es): Tuscany Way










Share capital


Number £ Number £


Preference 100,000 1 100,000 1


Name


Date appointed

Date resigned





Howard Peter Grinrod Director 26/07/2000

Debra Margaret Tennant Director 09/11/1991



Ernst & Young 25

Company Information

Company Name: H.I. Investments Limited Registered Office Address:


Registered Number: 01446316 Trading Name(s): Trading Address(es): Tuscany Way










Share capital


Number £ Number £



Name


Date appointed

Date resigned





Debra Margaret Tennant Director 26/07/2000



Ernst & Young 26

Company Information

Company Name: Fridgemaster Corporation Limited Registered Office Address:


Registered Number: 03604284 Trading Name(s): Dormant company Trading Address(es): Tuscany Way










Share capital


Number £ Number £

Ordinary 100 1 100 1 Directors and secretary and their shareholdings

Name


Date appointed

Date resigned

David Michael Isherwood

Director 11/12/2003

Nicholas Charles Isherwood

Director 28/07/1998

Michael James Turnbull

Director 28/07/1998


Howard Peter Grinrod

Director 17/03/2005



Ernst & Young 27

Company Information

Company Name: Whitwood Warehouse Limited Registered Office Address:


Registered Number: 02578370 Trading Name(s): EDC Limited (previous name)

Pointcatch Limited Trading Address(es): Tuscany Way










Share capital


Number £ Number £

Ordinary 1,000 1 1,000 1


Name


Date appointed

Date resigned






Appendix B: Directors' Statement of Affairs

Ernst & Young 28

Appendix B Directors' statement of affairs

Please find the Directors’ Statement of Affairs in respect of each Group company attached to this document.

Appendix C: Statement on Administrators' Remuneration Pursuant to Statement of Insolvency Practice No. 9

Ernst & Young 329

Appendix C Statement of administrators' charging policy for remuneration and disbursements pursuant to Statement of Insolvency Practice No. 9

Charging and disbursement policy

Administrator’s charging policy for remuneration

The Administrators have engaged managers and other staff to work on the Administration. The work required is delegated to the most appropriate level of staff taking account of the nature of the work and the individual’s experience. Additional assistance is provided by accounting and treasury executives dealing with the company’s bank accounts and statutory compliance diaries. Work carried out by all staff is subject to the overall supervision of the Administrators.

All time spent by staff working directly on case-related matters is charged to a time code established for the case. Each member of staff has a specific hourly rate, which is subject to change over time. The average hourly rate for each category of staff over the period is shown below, as are the current hourly rates used. The current hourly rates are higher than the average rates, since hourly rates have increased over the period covered by this fee request.

Charge Out Rates

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C urrent ra te f ro m 1 July

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Restructuring Partner 570

Executive Directo r 545

Assistant Directo r 410

Senio r Executive 320

Executive 230 - 310

Analyst 130 - 140

Intern 95

Tax Partner 1,115

Senio r M anager 545

M anager 540

Executive 320 - 345

Analyst 170

FIDS Senio r M anager 570


Ernst & Young 30

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Ernst & Young 37

Administrators’ charging policy for disbursements

Statement of Insolvency Practice No. 9 divides disbursements into two categories.

Category 1 disbursements are defined as specific expenditure relating to the administration of the insolvent’s affairs and referable to payment to an independent third party. Such disbursements can be paid from the insolvent’s assets without approval from the Creditors’ Committee or the general body of creditors. In line with Statement of Insolvency Practice No. 9, it is our policy to disclose Category 1 disbursements drawn but not to seek approval for their payment. We are prepared to provide such additional information as may reasonably be required to support the disbursements drawn.

Category 2 disbursements are charges made by the office holder’s firm that include elements of shared or overhead costs. Statement of Insolvency Practice No. 9 provides that such disbursements are subject to approval as if they were remuneration.

It is our policy, in line with the Statement, to seek approval for Category 2 disbursements before they are drawn. To date, the following Category 2 expenses have been incurred. It is proposed that Joint Administrators be permitted to draw these expenses.

H ar dman I sh e r w o od L imite d H I In te r na t ion a l L imit ed

N atu re of Ex p en s e mou n t (£ ) N a tur e o f Ex p e nmou n t (£ )Travel 1,542 Subsistence 19Printing 780 1 9

Postage 48 Subsisitence 1,399 Phone 10 Accomodation 6,381

1 0 ,16 1

H ar dman I sh e r w o od L imite d

N atu re of Ex p en s e Amou n t (£ )Mileage - Own Car 1,892 Mileage - Firm Car 1,596

3 ,4 88

Administrators' receipts and payments accounts for the period from 26 September 2012 to 9 November 2012

Ernst & Young 338

Appendix D Administrators' receipts and payments accounts for the period from 26 September 2012 to 9 November 2012

HI Group Plc

Notes Receipts

1. Intangible assets of £5,000 relate to the sale of a website owned by Plc Payments

2. Other professional fees relate to payments to third parties to disable the Group’s websites on appointment and to provide valuation advice relating to the sale of the website as noted above.

General

3. All amounts are stated net of VAT 4. All monies are held in interest bearing accounts

Note Reference Fixed Floating Total

Receipts £ £ £

8,033,905 Investments - - - - Motor Vehicles - - -

1 - Intangible Assets - 5,000 5,000VAT - 1,000 1,000

- 6,000 6,000Payments

2 Other Professional Fees - 960 960Bank charges and interest - 6 6VAT - 192 192

- 1,158 1,158Represented By:

Floating Current Account - 4,842 4,842

- 4,842 4,842

Estimated to Realise as per

Directors' Statement of

Affairs


Ernst & Young 39

Hardman Isherwood Limited

Notes Receipts

1. Recovery of warehouse charges relates to amounts received from former customers who required assistance to remove third party owned stock.

2. Rent receipts relate to the September rental quarter for the property occupied by Asda.

Payments

3. Secured creditors of £905,859 represents distributions made to HIF in respect of book debt receipts.

4. Gross wages, NIC and Pension contributions relate to employee costs for the final week in September and October for employees that were retained to assist with the Administrations of the Group.

5. Payments made for professional services for the Group are for third party assistance required by the Directors in order to produce the Statement of Affairs

General

6. Once the final costs and asset realisations are known across the Group, we intend to reallocate a proportion of certain costs to other Group companies (including but not limited to employee costs, professional services and utility costs relating to the Group). These costs have been incurred in Hardman Isherwood Limited to date as previously it met these costs on behalf of the Group, which were subsequently recharged.



Charge ChargeReceipts £ £ £

15,400,000 Property - - - 1 Recovery of Warehouse Charges - 182,177 182,177 2 Rent 42,188 - 42,188

1,225,017 Book Debts 1,046,458 - 1,046,458 1,582,560 Inter Group Debts - - -

60,000 Motor Vehicles 585 9,000 9,585 34,100 Fixtures and Fittings - - - 81,587 Stock - - -

1,339 Cash - - - Sundry Income - 11,977 11,977

93,983 VAT 8,438 36,435 44,873

1,097,668 239,590 1,337,258

Payments

3 Secured Creditors - HIF 905,869 - 905,869 4 Gross Wages - 159,932 159,932 4 Employers NIC - 11,931 11,931 4 Pens ion Contributions - 3,229 3,229 5 Professional Fees - 750 750

Motor Expenses - 1,245 1,245 Travel and Accommodat ion - 356 356 Bank Charges & Interest 40 - 40 VAT - 3,460 3,460 Payments made for professional services for the Group - 15,707 15,707

905,909 196,610 1,102,519 Represented By:Fixed Current Account 191,758 - 191,758 Floating Current Account - (65,878) (65,878) Adminis trators funds held by HIF - 108,858 108,858

191,758 42,980 234,738



Affairs


Ernst & Young 40

HI International Limited

Notes Receipts

1. Equipment, plant and machinery relates to consideration for the sale of assets of Home Delivery;

2. Stock of £275,000 relates to amounts received from Hisense in respect of the pre-packaged sale of the White Goods Business.

Payments

3. Payments to date include amounts repaid to secured lenders of £1,175,913. 4. As per the notes for Hardman Isherwood Limited, a proportion of certain central costs

incurred to date by Hardman Isherwood Limited will be recharged to other Group companies.

General




1,484,481 Book Debts 1,286,789 - 1,286,789 1 50,000 Equipment, Plant and Machinery - 49,994 49,994 2 392,201 Stock - 275,492 275,492

Fixtures and Fittings - 1 1 17,000 Motor Vehicles 21,750 1 21,751

5,265,804 Cash - - - Debtors not subject to Fixed Charge - 11,162 11,162 Information Technology - 1 1 Customer List - 1 1 Intellec tual Property - 2 2 Goodwill - 2 2 Work In Progress - 1 1 Contracts - 1 1 Bank Interest - 24 24 VAT - 2,232 2,232

1,308,539 338,913 1,647,451

Payments

3 Secured Creditors - HIF 925,913 - 925,913 3 Secured Creditors - HSBC 250,000 - 250,000

1,175,913 - 1,175,913 Represented By:Fixed Current Account 132,626 - 132,626 Floating Current Account - 338,913 338,913

132,626 338,913 471,538

Estimated to Realise as

per Directors' Statement of

Affairs


Ernst & Young 41

Frigidaire Consolidated Limited

Notes Receipts

1. Stock of £332,733 relates to amounts received from Hisense in respect of the pre-packaged sale of the White Goods Business.

Payments

2. Payments to date include amounts repaid to HIF of £493,823 3. As per the notes for Hardman Isherwood Limited, a proportion of certain central costs


General




974,206 Book Debts 637,664 - 637,6641,252,001 Inter Group Debts - - -

1 545,048 Stock - 332,733 332,73312,000 Motor Vehicles - - -

Fixtures & Fittings - 1 1Intellectual Property - 1 1Goodwill - 1 1Bank Interest - 17 17

637,664 332,752 970,416

Payments

2 Secured Creditors - HIF 493,823 - 493,823

493,823 - 493,823

Represented By:Fixed Current Account 143,841 - 143,841 Floating Current Account - 332,752 332,752

143,841 332,752 476,592



Affairs


Ernst & Young 42

H.I. Investments Limited

Notes

1. As per the notes for Hardman Isherwood Limited, a proportion of certain central costs incurred to date by Hardman Isherwood Limited will be recharged to other Group companies.

Fixed Floating TotalCharge Charge

Receipts £ £ £

17,300,000 Property - - - 2,064 Office Equipments - - -

1,160,662 Inter Group debts - - - - - -

Payments

- - -

Represented By:Floating Current Account - - -

- - -




Ernst & Young 43

Fridgemaster Corporation Limited

Notes

1. As per the notes for Hardman Isherwood Limited, a proportion of certain central costs incurred to date by Hardman Isherwood Limited will be recharged to other Group companies.


£ £ £Receipts

- - -

Payments

- - -

Represented By:

- - -



Affairs


Ernst & Young 44

Whitwood Warehouse Limited

Notes 1. As per the notes for Hardman Isherwood Limited, a proportion of certain central costs



Receipts £ £ £

2,583,313 Cash - - - - - -

Payments

- - -

Represented By:Float ing Current Account - - -

- - -



Affairs


Ernst & Young 45

Appendix E Summary audited financial results

Hardman Isherwood Limited


Type audited/ draft

Turnover£000

Gross profit £000

Gross profit

%


£000

Net profit after tax

£000


£000

28/02/2011 Audited 25,878 3,376 13% 363 232 14,864

28/02/2010 Audited 27,527 3,807 14% 368 164 14,948

28/02/2009 Audited 32,890 3,897 12% 366 (168) 14,394

28/02/2008 Audited 33,858 3,825 11% 363 301 15,629

28/02/2007 Audited 33,818 3,703 11% 330 426 15,337

HI International Limited


Type audited/ draft

Turnover£000

Gross profit £000

Gross profit

%


£000


£000


£000

28/02/2011 Audited 24,579 3,263 13% 187 363 312

28/02/2010 Audited 26,163 3,465 13% 280 387 (51)

28/02/2009 Audited 23,183 2,523 11% 279 (11) (438)

28/02/2008 Audited 26,121 2,690 10% 271 102 (427)

28/02/2007 Audited 4,929 235 5% 26 23 (529)

Frigidaire Consolidated Limited


Type audited/ draft

Turnover£000

Gross profit £000

Gross profit

%


£000


£000


£000

28/02/2011 Audited 17,455 2,386 14% 316 51 370

28/02/2010 Audited 22,097 2,689 12% 325 77 319

28/02/2009 Audited 23,521 2,722 12% 335 30 242

28/02/2008 Audited 22,074 2,506 11% 302 74 212

28/02/2007 Audited 21,960 2,572 12% 325 72 138


Ernst & Young 46

H.I.Investments Limited


Type audited/ draft

Turnover£000

Gross profit £000

Gross profit

%


£000


£000


£000

28/02/2011 Audited 835 512 61% - - 1,201

28/02/2010 Audited 858 601 70% - 70 1,017

28/02/2009 Audited 855 379 44% - (312) 787

28/02/2008 Audited 1,195 946 79% - 171 1,067

28/02/2007 Audited 1,119 874 78% - 31 725

Fridgemaster Corporation Limited


Type audited/ draft

Turnover£000

Gross profit £000

Gross profit

%


£000


£000


£000

28/02/2011 Audited - - n/a - - (136)

28/02/2010 Audited - - n/a - - (136)

28/02/2009 Audited - - n/a - - (136)

28/02/2008 Audited - - n/a - - (136)

28/02/2007 Audited 18,192 2,173 12% 110 86 (136)

Whitwood Warehouse Limited


Type audited/ draft

Turnover£000

Gross profit £000

Gross profit

%


£000


£000


£000

28/02/2011 Audited - - n/a - - 2,558

28/02/2010 Audited - - n/a - - 2,558

28/02/2009 Audited 2,294 100 4% - 79 2,558

28/02/2008 Audited 12,624 270 2% - 187 2,479

28/02/2007 Audited 11,014 269 2% - 134 2,292

Ernst & Young 347

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