On the money with Gavin Hinks

gavin hinks, editor accountancy age

The news that Bilimoria could not make a go of the company will come as a
shock. Cobra is a great brand built almost from grass roots. It’s business model
was clever too. First sold through Indian restaurants and then transformed into
a cool supermarket brand.

But Cobra seemed to focus on building turnover, spending adventurously on
marketing, while perhaps making the bottom line secondary.

The method of its rescue underlines another point. Pre-packs are becoming the
dominant way of keeping ailing companies alive. Bilimoria was unable to get an
earlier attempt at a Company Voluntary Arrangement off the ground because of the
blocking moves of one particular creditor.

That left the pre-pack as perhaps the only alternative. And it looks as if
it’s going to be the way through the recession for many decent companies ­ but
it doesn’t help everyone.

Unsecured creditors don’t always benefit as they would under a CVA. At Cobra
around £75m of unsecured credit could be shelved. That’s going to hurt some
people, particularly suppliers.

I can’t imagine it will make Bilimoria feel very good about himself either.
In 2007 he told Director magazine: ‘You create an environment where people
flourish. You respect them, and you treat your customers and your suppliers
equally. A lot of companies worship their customers and bully their suppliers
and employees — and make massive profits. Well, I’m sorry that’s not my way.’

Things don’t always turn out the way you planned.

Gavin Hinks is editor of Accountancy Age

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