BusinessBusiness RecoveryTwo distribution firms enter administration

Two distribution firms enter administration

Roller-coaster month ends badly for the sector as experts predict more companies could follow

Stormclouds continued to gather over the distribution sector last week as two
established firms went into administration.

The first to fall victim was Stevenage-based storage distributor Abtec
International, which partnered with vendors such as Iomega, Imation, Seagate and
Maxtor and had been in business for over 12 years.

Steven Law, business recovery partner at accountancy firm Ensors, which has
been appointed as official administrator for Abtec, said the firm was up for
sale as a going concern.

‘The company has been through some bad fortune and sales were not up to
budgeted levels. However, it has a profitable track-record.

‘We are looking for a purchaser for the business and a few companies have
expressed an interest,’ he said. Law added that the firm had made a ‘number of
redundancies’ before it went into administration.

Separately, Brentwood-based distributor East Central also went into
administration.

The firm, founded 30-years ago, specialised in telecommunications equipment,
printers, fax machines and office consumables. Although nobody from East Central
was available for further comment, a representative confirmed to CRN that the
company had gone into administration.

Abtec and East Central are not the only distributors to feel the heat. Just
last week, InTechnology posted a restructuring charge of £4m, citing pricing
pressure, and earlier this year Tech Data reported a loss of $59.4m for its
second quarter.

Eddie Pacey, director of credit at Bell Microproducts said: “It is extremely
tough out there. Pressure on margin coupled with slow activity will cause
difficulty for a lot of businesses. This includes second and third tier as well
as primary distributors.”

Jeremy Davies, senior partner at channel analyst firm Context, said the
administrations were a sign of things to come.

‘This is what we expected. There is only so much room for so many firms b
ecause margins are so thin.’

But he added: ‘Those firms that have been optimising their business are in a
stronger position. Businesses have to work much harder to be more competitive,
and to do this they need to invest in IT, therefore our industry finds itself in
a funny paradox.’

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