Moorfields advises Sunline Direct Mail as firm weighs administration

Sunline Direct Mail, which provides print, marketing and direct mail services, is planning to bring in an administrator because of a falling order book. The company, which cited changing regulations and the BBC’s Blue Planet as the causes of its decline, has engaged Moorfields Advisory to consult with its board and outline any options available.

E-commerce and direct mail specialist Sunline Direct Mail (SDM) has been under pressure to cut costs for some time now. The Loughborough headquartered firm provides print, marketing and direct mail services, as well as running a packing and dispatch operation in Chartwell Drive, Wigston, however a drastic fall in demand for plastic wrapping seems to have dealt SDM a fatal blow.

Last year, turnover fell by more than £1 million to less than £6.7 million, while the firm faced net liabilities of almost £2.6 million. Parent company Chelverton Equity Partners (CEP) attempted to reassure onlookers that improved efficiency and automation had helped SDM cope with a “continued gentle downturn in the direct mail polywrap market”, and added that there had been investment over the past two years to grow the letter and paper part of the business to the point where they were expected to overtake plastic mail wrapping services in 2019.

In spite of these predicted trends, however, SDM has reportedly filed a notice of intention to appoint an administrator, while its owner has blamed the introduction of the new General Data Protection Regulations, coupled with the widespread condemnation of wasteful plastic use prompted by the BBC's Blue Planet television series. Drawing a viewership of almost 12 million in Britain, Blue Planet II’s series climax ‘Our Blue Planet’, which aired in mid-December 2017, showcased how plastic is damaging the world’s oceans, with 8 million tonnes of the substance entering the marine ecosystem each year. The episode – which depicted albatross parents unwittingly feeding their chicks plastic and mother dolphins potentially exposing their new-born calves to pollutants through their contaminated milk – shocked viewers watching at home, and prompted the liked of consulting firm KPMG, fast food chain McDonalds, and the British Government, to crack down on single use plastics.

GDPR, which was also cited as a major contributor to the firm’s potential demise, was predicted to cost FTSE 100 companies as much as £5 billion in fines should they fail to comply. Leading up to its launch, Britain’s Royal Mail warned that the law could reduce marketing mails, causing a fall in letter volumes, as the new requirements alter how companies collect and process personal information about European Union users, as of the end of May 2018.

Interestingly, while holding company CEP said the twin factors have had an impact on the sector "more than SDM can stand in its current form", the firm had already been experiencing difficulties two years before either came to the fore. According to Companies House, SDM turned over £7.9 million in 2016 – an increase of £1 million on 2015 – but still managed to record a loss of £379,000. At the time, it had 136 staff.

While the firm might have prepared to soldier on through another year in spite of its disappointing results in 2017 though, SDM’s order book was not filling at the rate that management had hoped for in order to improve its situation, as business in the traditional "golden period" from August to November was muted. This left the business likely to require significant amounts of additional funding to move forward, something which pushed its owners into the apparent administration filing.

Moorfields role

Moorfields Advisory has already been engaged by SDM to provide advice to the board and outline the options available to the company given its current financial position. The consulting firm reportedly recommended an accelerated marketing process for the SDM business, with a view to effecting its sale as a going concern if possible and has been engaged to oversee this process.

The notice of intention to appoint administrators has meanwhile been obtained to gain a court-sanctioned moratorium over the business, protecting it from enforcement action by creditors while it continues to trade as usual and is marketed for sale. Any sale of SDM's business and/or assets will be completed by the administrators once they have been appointed – with Moorfields thought to be a front-runner, though as the appointment of PwC over EY for the recent administration of Carillion shows, this is no guarantee it will be the choice on the day.

Since late February, Moorfields has been orchestrating the orderly wind-down of the UK wing of Toys R Us. Moorfields was appointed to conduct the liquidation of the company's store portfolio, as the company failed to pay of a massive tax bill, having already been over-encumbered by debt from its private equity purchase.

Speaking at the time, Simon Thomas, joint administrator, and a Partner at Moorfields, said that all stores will remain open until further notice and stock will be subject to clearance and special promotions. He added that Moorfields would, “make every effort to secure a buyer.”