West Cornwall Pasty Company, the majority of which was acquired out of administration in April by investment fund Enact, collapsed due to a combination of “unfavourable” weather and changes to VAT rules, according to a report from its administrator PricewaterhouseCoopers.
The report says that 83 potential purchasers were initially identified for the group, which was narrowed down to four that expressed the most serious interest and had the highest value offers - Enact put forward the strongest offer, and paid £135,000 for 34 of the outlets.
The report says that in the company was “historically profitable” but saw a fall in profitability in the year to 25 February 2012, which it reported an operating loss of £608,000, and this continued into the following year.
“This appears to have been caused by a number of factors, including unfavourable weather conditions and a recent change in VAT rules.
“We have been told that the warm summer, and mild but wet winter led to decreased sales levels. As a results, certain of the company’s trading sites became unprofitable,
“Additionally, we understand that the company was affected by the government requirement for VAT to be charged on pasty goods which are kept warm. The majority of this tax had to be passed onto the consumer, which may have also contributed to a decrease in sales. The decrease in sales and unprofitability of some sites led to increasing cash flow pressure.”
Private equity group Sankaty European Investments was owed c£5m as a secured creditor of the business.
