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Nearly all Evans Cycles stores were profitable when chain entered administration

New owner Sports Direct has said it will have to close half the stores - but documents from administrators reveal it was head office costs that weighed business down

It has been revealed that nearly all of Evans Cycles’ 62 stores were trading profitably when the chain was sold to Sports Direct last month – despite the latter’s owner, Mike Ashley, at the time saying that around half the shops would need to be closed to save the business.

Sports Direct bought the business in a pre-pack administration deal for just £8 million, with the acquisition leaving the bicycle retailer’s 1,300 staff facing uncertainty over their future.

> Sports Direct buys Evans Cycles out of administration, will close half of its stores

Telegraph.co.uk reports says that an administrators’ proposals document prepared by PricewaterhouseCoopers said that “almost all the stores were profitable.”

However, the administrators said that Evans, founded in south London in 1921 and now based next to Gatwick Airport in Surrey, was “burdened” by fixed costs associated with its head office.

They added that debts totalled £85 million, mainly to secured creditors, with £28 million owed to the banks HSBC and AIB, and £33 million to private equity firms.

At the time Evans entered administration it was owned by ECI Partners, which had bought the business in 2015 from fellow private equity firm Active Capital.

The remaining £24 million is owed to unsecured creditors, including trade suppliers, who will receive just 2.5 pence in the pound.

All 62 Evans Cycles stores remain listed on the retailer’s website and we are not aware of any of its branches – around half of which are in its traditional heartland of London and the south-east – having  closed to date.

> Evans Cycles to begin accepting gift cards again from Friday

Simon joined road.cc as news editor in 2009 and is now the site’s community editor, acting as a link between the team producing the content and our readers. A law and languages graduate, published translator and former retail analyst, he has reported on issues as diverse as cycling-related court cases, anti-doping investigations, the latest developments in the bike industry and the sport’s biggest races. Now back in London full-time after 15 years living in Oxford and Cambridge, he loves cycling along the Thames but misses having his former riding buddy, Elodie the miniature schnauzer, in the basket in front of him.

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10 comments

Avatar
vonhelmet | 5 years ago
1 like

Shock as PE kills business.

Avatar
Griff500 replied to vonhelmet | 5 years ago
0 likes

vonhelmet wrote:

Shock as PE kills business.

Actually, in this case it is!  Typically when a PE business kills a company it is through drastic cost cutting or assett stripping in order boost investors profits, in which case at least the management could be credited with having some sort of a plan!  In the case of Evans, by running a high overhead, loss making organisation, they were merely spending any potential profits, so the investors were screwed over in addition to employees, customers, and suppliers. Should we care? Yes, because the biggest investors in ECI are pension funds, which means you and I.

Avatar
BehindTheBikesheds | 5 years ago
2 likes

Asset management company in fucking over other people shocker, these cunts should be put in jail and given electrodes to the narks! 2.5p/£ for local firms is a disgrace and it's the smaller firms that it hurts the most.

Avatar
don simon fbpe replied to BehindTheBikesheds | 5 years ago
2 likes
BehindTheBikesheds wrote:

Asset management company in fucking over other people shocker, these cunts should be put in jail and given electrodes to the narks! 2.5p/£ for local firms is a disgrace and it's the smaller firms that it hurts the most.

Don't forget to have a pop at the customers who are constantly on the lookout for cheap at the expense of service. We can only blame ourselves at the prevalence of shops that price match as part of their business model.

Avatar
Jetmans Dad replied to don simon fbpe | 5 years ago
3 likes

don simon wrote:

Don't forget to have a pop at the customers who are constantly on the lookout for cheap at the expense of service. We can only blame ourselves at the prevalence of shops that price match as part of their business model.

Sadly, that is the world we live in. My favourite local music store went under a few years ago. Product range, service and expertise were phenomenal, but they buckled under the weight of so many "customers" going in there to try out some guitars, take advantage of their expertise, then go home and buy the exact same equipment online from a bulk seller with little overhead and even less knowledge.

I don't begrudge anyone making the most effective use of their money but, for me,  being able to try out the instruments for myself and avail myself of all that knowledge and experience is more than worth the extra on the price. 

Same with my local bike shop. 

Avatar
don simon fbpe replied to Jetmans Dad | 5 years ago
2 likes

Jetmans Dad wrote:

don simon wrote:

Don't forget to have a pop at the customers who are constantly on the lookout for cheap at the expense of service. We can only blame ourselves at the prevalence of shops that price match as part of their business model.

Sadly, that is the world we live in. My favourite local music store went under a few years ago. Product range, service and expertise were phenomenal, but they buckled under the weight of so many "customers" going in there to try out some guitars, take advantage of their expertise, then go home and buy the exact same equipment online from a bulk seller with little overhead and even less knowledge.

I don't begrudge anyone making the most effective use of their money but, for me,  being able to try out the instruments for myself and avail myself of all that knowledge and experience is more than worth the extra on the price. 

Same with my local bike shop. 

Is it the most effective use of their money though?

I say not, especially as the likes of Jeff Bezos can become the wealthiest man on the planet in the blink of an eye and many many people have lost their jobs or are being forced into zero hour contracts are a result of this. Skills and knowledge are being lost.

 

I say it's a very short sighted and inefficient use of money.

 

As a slight aside, I find it quite amusing that supemarket chains are complaining about being found out for charging more in their local stores than in their supermarkets for the same products. Their excuse? Overheads. The same overheads that local shops were complaining about before the supermarkets squeezed them out.

When I say amusing, etc...

Avatar
BehindTheBikesheds replied to don simon fbpe | 5 years ago
0 likes

don simon wrote:
BehindTheBikesheds wrote:

Asset management company in fucking over other people shocker, these cunts should be put in jail and given electrodes to the narks! 2.5p/£ for local firms is a disgrace and it's the smaller firms that it hurts the most.

Don't forget to have a pop at the customers who are constantly on the lookout for cheap at the expense of service. We can only blame ourselves at the prevalence of shops that price match as part of their business model.

And yet despite that the stores were making a profit, it isn't all about punters accepting cheap deals and if a company pushes its prices down to make sales at the expense of going under/getting into huge debt then that's no business model at all is it and most dfinitely not the fault of the punters.

Avatar
don simon fbpe replied to BehindTheBikesheds | 5 years ago
1 like

BehindTheBikesheds wrote:

don simon wrote:
BehindTheBikesheds wrote:

Asset management company in fucking over other people shocker, these cunts should be put in jail and given electrodes to the narks! 2.5p/£ for local firms is a disgrace and it's the smaller firms that it hurts the most.

Don't forget to have a pop at the customers who are constantly on the lookout for cheap at the expense of service. We can only blame ourselves at the prevalence of shops that price match as part of their business model.

And yet despite that the stores were making a profit, it isn't all about punters accepting cheap deals and if a company pushes its prices down to make sales at the expense of going under/getting into huge debt then that's no business model at all is it and most dfinitely not the fault of the punters.

My bad, the head office and its debts are an entirely different entity..... How could I have forgotten that? kiss

Avatar
antigee | 5 years ago
3 likes

presumably head office costs would have included management service fees to ECI partners and possibly some hefty directors salaries? pre pack administration should be criminal - the business was trading and for sale so the directors were running a business that was insolvent?  the suppliers lose out big time and their employees meanwhile business as usual for the so called equity partners.........

think this is the same ECI? 

"We're delighted to have won the award for Mid-Market Exit of the Year at this year's Unquote British Private Equity Awards for the sale of Great Rail Journeys. ECI exited Great Rail Journeys earlier this year generating a 3.6x return and an IRR of 29%"

 

https://www.ecipartners.com/news-and-insights/news/2018/mid-market-exit-...

 

Avatar
Freddy56 | 5 years ago
3 likes

Fixed costs my bum!

Unless you include paying for stock. Evans owed Specialized UK at least 3 million ( I know )and Other brands similar (I hear).

Their model of matching internet prices from retaillers with little overheads, while maintaining stores with massive overheads- is broken.

Bike Retail has to be service, not price led to survive.

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