Modelzone

Modelzone
Subsidiary (of WHSmith)
Industry Retail
Fate Acquired by WHSmith, maintained as specialist brand
Predecessor Model Aerodrome
Successor WHSmith
Founded Bournemouth, England (8 November 1937 (1937-11-08))
Founder David Mordecai
Defunct 2013 (as ModelZone Ltd)
Headquarters Swindon, Wiltshire, United Kingdom
Brighton, United Kingdom (Main Office)
Number of locations
 10 (through WHSmith)
Area served
 United Kingdom
Key people
 WHSmith (Owner)
Products
Owner WHSmith Ltd
Parent WHSmith
Website whsmith.co.uk
Footnotes / references
[1][2][3][4]

Modelzone (often typeset ModelZone and Model Zone) was a scale model brand bought by British retailer WHSmith after total collapse and administration in 2013. WHSmith continues to use the brand under which scale models and related products are sold in selected WHSmith stores and online.[4][5][6]

Prior to the brand acquisition by WHSmith, the company operated a chain of high-street stores and had a distribution arm, Amerang; when Modelzone entered administration in June 2013, the company had 47 branches and 385 employees, and was the UK's largest model retailer.[1][7][8] On 28 August 2013, administrators announced that the company would cease independent trading during September 2013, with the remaining 18 stores closing at this point.[9] In October 2013, WHSmith announced that it had acquired the ModelZone brand, with plans to use the brand to sell products through existing WHSmith stores; 10 stores had begun to carry products under the brand name by the end of November 2013, with WHSmith also using the brand to sell online by December 2013.[4][6][10][11][12]

History

Beginnings and name change

Originally incorporated as Model Aircraft (Bournemouth) Ltd on 8 November 1937, the company started with one store in Brighton in the 1930s.[2][13] When this was sold after about 40 years under the same ownership, the store was bought in order to be "a showroom for the importers of many prestige model ranges".[13] Following success at this store, the new owners then began to purchase other shops, in Crawley, Eastbourne, Guildford and Maidstone, and brand them as Model Aerodrome.[2][13] During the mid-90s a computerised stock control system was implemented, and in 1995 and 1996 respectively, the company opened stores in Croydon and Plymouth.[13] In March 1999, after the opening of their eighth branch in Bluewater, Kent, the company expanded its range to include Scalextric and Corgi products, and with this expansion of their product line, changed their name to Modelzone.[2][13] They then eventually acquired a number of stores formerly owned by the Beatties chain of model shops (which had closed when its parent company, ERA Group, placed it into administration).[14][15]

Investor buyout and expansion

In July 2009, ModelZone's new investors sought to "defy the credit crunch" through a buyout led by self appointed CEO investor David Mordecai and non-executive chairman Terry Norris.[3] The buyout was the subject of a prolonged negotiation with private equity investor Lloyds Development Capital, who were initially sceptical of Modelzone's long-term growth forecast. Indeed, as LDC Investment Manager Miles Frost commented in 2010:

The credit crunch hit in 2008 and backing a retailer was a scary prospect for an investor, especially when Modelzone's sales were declining.
— Miles Frost[16]

Despite LDC's initial scepticism, a strong Christmas performance and internal reforms towards the end of 2008 led LDC to reappraise ModelZone's growth prospects and agree an MBO in July 2009. This agreement saw LDC invest £5.6 million supported by a further £3.6 million of funding over three years.[16] With the MBO complete, in 2010 the ModelZone board began an aggressive expansion plan which saw 15 stores open between 2010 and 2012, including in Scotland and in Wales.

By the end of 2012 the company had grown to 47 stores, but this "disastrous" expansion would prove to be too much for the company as it entered into administration at the end of the second quarter of 2013.[17][18][19] In one of their most recent accounts, Modelzone stated:

Trading performance for the year was disappointing ... Following a more realistic review of the business, it became clear that the business infrastructure and management capability was insufficient, not only to take the business forward and grow further, but also to deliver sustainable profitability.

It was also evident that the sales and profit expectations of the new stores opened between 2010 and 2012 were completely unrealistic.

— Modelzone[20]

Products and sales avenues

In addition to stocking a wide range of remote control, model rail, diecast, balsa, plastic kit, character and pre-school items, ModelZone also stocked a variable range of exclusive limited edition models produced by Corgi, Hornby, Scalextric, Bachmann, W Britain, Sunstar, Heljan and Minichamps.[21][22]

Alongside its own retail website, the company was also a listed seller on Amazon.co.uk[23] and eBay.co.uk where it sold items under both the ModelZone and TradeClearanceCollectables names.

Administration, store closures and total loss of workforce through forced staff redundancies

The company announced on 26 June 2013 that it had gone into administration. The announcement was made on Modelzone's website, minutes after informing staff, and with the rest of the ecommerce site having been abandoned. Many staff on leave and planned rest days learned of the administration through the website closure and social media:

On 26 June 2013, Richard Michael Hawes, Nicholas Guy Edwards and Robert James Harding of Deloitte LLP were appointed Joint Administrators of Modelzone Holdings Limited, The Amerang Group Limited, Modelzone Limited and Amerang Limited (together the "Companies"). The affairs, business and property of the Companies are being managed by the Joint Administrators. The Joint Administrators act as agents of the Companies only and contract without personal liability. The Joint Administrators are authorised by the Institute of Chartered Accountants in England and Wales (ICAEW). All licensed Insolvency Practitioners of Deloitte LLP are licensed in the UK
— Modelzone statement[24]

The administration was announced just hours after retailers were due to pay rent for the next three months on 24 June, the quarterly rent day, and after ensuring the monthly staff salary pay day run on the 25th of each month, and securing capital return to investors with Deloitte.[25] Alongside the notice on the company's website, notices were placed on the company's e-commerce website refusing all online trade (including Amazon and eBay accounts). Gift vouchers were still being accepted, but at a sub-par 50% of their face value.[26]

ModelZone had 385 employees and 47 stores at the time of administration and was majority-owned by the investment equity arm of Lloyds Banking Group, Lloyds Development Capital, to whom the company owed well over £9 million of the £11 million debt accumulated by the CEO, according to a statement of affairs prepared during administration.[1][27][28][29] The company had posted an operating loss of well over £750,000 in 2012 after a "disastrous and misguided expansion plan" left the business unable to pay basic rent bills, with this expansion being blamed alongside a "complete misunderstanding of the market and failure to adapt to the growth in online competition" for the company entering administration.[17][30]

Administrators Deloitte were reported to have been approached with a bid by former owner David Mordecai, who had been made chief executive of Tobar Group after it and subsidiary company toy retailer Hawkin's Bazaar were bought out of administration in 2012.[31][32] This bid was reported to have been for 20 to 25 stores of the then-47 store chain, but according to Mordecai, "the administrators will not look to break the chain up. They are only looking to sell the whole lot."[31]

Five stores had been closed by 5 August 2013 with the loss of 45 jobs, with a further 10 branches closed by 13 August 2013, with the loss of a further 66 jobs, taking the company's retail presence down to 32 stores.[27][33][34] A spokesman for Deloitte stated that "[t]he joint administrators to Modelzone are still hoping to find a potential buyer for some or all of the stores. Unfortunately, to date no such capital has come forward."[27]

On 19 August 2013, Deloitte announced the closure of a further 10 stores, affecting the jobs of a further 76 members of store staff, in spite of the head office and warehouse having already been closed.[35] Administrator Richard Hawes at Deloitte said, "During the administration, it has become clear that all stores will not be able to continue to trade profitably, hence the closures announced this week. The administrators would like to thank the company's employees for their support and professionalism during this time."[35]

The closure of ModelZone's stores was expected to have a negative effect on Hornby,[30] whose long-standing partnership with ModelZone saw it selling stock as a concession within ModelZone stores. Hornby itself posted pre-tax losses of £3.4 million after "disappointing" sales of London 2012 merchandise.[36] Hornby released a statement to the stock market in response to the administration of ModelZone:

Modelzone is an important business partner and, although the news of the administration is disappointing, our account management team has been well aware of Modelzone's challenging trading situation in recent months and has been able to manage our financial exposure at an acceptable level.

Hornby has a wide, multi-channel distribution platform, which it is continuing to broaden. In the UK, Hornby hopes to supply over 100 independent model shops and national retail chains, as well as selling direct to consumers via its online platform.

— Hornby statement[30][37]

The administration of the business also included Modelzone's wholesale and distribution arm, Amerang Ltd, operating from the same head offices, same warehouses and stame staff, and under the same management. On 17 July 2013 administrators announced that major competitor Ripmax Ltd had bought Amerang from the Modelzone group through newly incorporated company Pinehurst 104 Ltd, safeguarding the jobs of the wholesaler's 18 remaining employees. Joint Administrator Richard Hawes said that they "are delighted to have secured a buyer for Amerang, which continues to be an attractive brand given the strength of its customer and supplier base and its reputation in the market".[38][39]

End of trading

Modelzone Newcastle upon Tyne after its closure in September 2013.

Administrators confirmed on 28 August 2013 that "they had received no offers for the business on a going concern basis", and would be closing the last 18 stores by mid-September 2013, with the loss of the remaining 126 jobs.[1][9]

Joint administrator Richard Hawes stated:

We sought to find a potential buyer for some or all of the stores, but unfortunately no viable offers have come in since our appointment two months ago. Modelzone has been generating losses over the past few years, largely through an increase in online competition and having taken leases on new stores that proved to be unprofitable.

Once again, we would like to thank the company’s employees for their support and professionalism during this time.

— Richard Hawes, Deloitte[1][9]

Relaunch of brand

In October 2013, WHSmith, a British retailer known for its high street stores selling books, stationery, magazines, newspapers and entertainment products, announced that it had bought the ModelZone brand, selling products under this brand through existing WHSmith stores, a model employed by the company with other brands.[5][10][11][12] WHSmith announced through the ModelZone Twitter page in November 2013 that 10 stores were to carry products under the ModelZone brand name by 23 November 2013.[4] This was later accompanied by usage of the Modelzone brand on WHSmith's website to sell Airfix, Hornby, Corgi, and Scalextric products.[6]

References

  1. 1 2 3 4 5 "Modelzone – update on administration". Deloitte. 28 August 2013. Retrieved 27 September 2013.
  2. 1 2 3 4 "Modelzone Limited - Company No. 00333459". Companies House. Retrieved 2013-05-11.
  3. 1 2 Thomson, Sam. "Sussex-based model shops chain defy crunch". The Argus. Retrieved 29 June 2013.
  4. 1 2 3 4 Tweet by @ModelZone on 13/11/13, Twitter. "9 more to open by 23/11/13 in the following locations- CARDIFF, CROYDON, GATESHEAD METRO, GLASGOW SAUCHIEHALL..."
  5. 1 2 "WH SMITH PLC PRELIMINARY RESULTS ANNOUNCEMENT FOR THE YEAR ENDED 31 AUGUST 2013" (PDF). WH Smith. Retrieved 27 November 2013.
  6. 1 2 3 "Modelzone for modelling, die-cast models & RC". whsmith.co.uk. Retrieved 22 December 2013.
  7. ↑ "Model Zone". St. John's Shopping Centre. Retrieved 2009-01-26.
  8. ↑ "UK's largest specialist toy and model chain collapses into administration putting 400 jobs at risk". ThisIsMoney.co.uk. Retrieved 29 June 2013.
  9. 1 2 3 Brazier, John (29 August 2013). "Last Modelzone stores to close". Insolvency News. Retrieved 1 September 2013.
  10. 1 2 Holland, Tiffany (10 October 2013). "WHSmith reveals full-year profit ahead of expectations". Retail Week. Retrieved 3 November 2013.
  11. 1 2 Creevy, Jennifer (10 October 2013). "WHSmith boss Steve Clarke: "Our numbers speak for themselves"". Retail Week. Retrieved 3 November 2013.
  12. 1 2 Ruddick, Graham (10 October 2013). "WH Smith profits rise again despite falling high street sales". The Telegraph (London). Retrieved 3 November 2013.
  13. 1 2 3 4 5 "About us". Modelzone. 2008. Archived from the original on 18 March 2012. Retrieved 2009-01-26.
  14. ↑ "ERA Group". UK Business Park. 2001. Retrieved 2009-01-26.
  15. ↑ "Is this the era of penny dreadfuls?". London: The Independent. 2000-04-05. Retrieved 2009-01-26.
  16. 1 2 Harris, James (3 February 2010). "Modelzone Completes Management Buyout". Growth Business. Retrieved 21 September 2013.
  17. 1 2 Neville, Simon (27 June 2013). "Modelzone goes into administration". The Guardian (London). Retrieved 29 June 2013.
  18. ↑ "MP signals opening of new store". Yorkshire Evening Post. 2007-03-14. Retrieved 2013-05-11.
  19. ↑ Shaw, William (2008-08-22). "Model-making: it's a small world". London: The Daily Telegraph. Retrieved 2009-01-26.
  20. ↑ Neville, Simon (28 August 2013). "Modelzone toy retailer collapses after failure to find buyer". The Guardian. Retrieved 2 September 2013.
  21. ↑ "MZ Exclusives". Modelzone. Retrieved 2009-01-26.
  22. ↑ "2013 Product Delays and Modelzone Announcement". Hornby. 9 July 2013. Retrieved 27 September 2013.
  23. ↑ "Model Zone". Amazon.co.uk. Retrieved 2009-01-26.
  24. ↑ "Holding page". Modelzone. Archived from the original on 29 June 2013. Retrieved 29 June 2013.
  25. ↑ Ruddick, Graham (25 June 2013). "Internacionale and ModelZone head for administration". Yahoo! Finance. Retrieved 4 August 2013.
  26. ↑ "Ipswich: Uncertainty for ModelZone staff following appointment of administrators". EADT. 27 June 2013. Retrieved 4 August 2013.
  27. 1 2 3 Holland, Tiffany (5 August 2013). "ModelZone to shutter another 10 stores in next two weeks". Retail Week. Retrieved 6 August 2013.
  28. ↑ Ruddick, Graham (25 June 2013). "2,000 jobs at risk as Dwell, Internacionale, Ark and ModelZone head for administration". The Telegraph (London). Retrieved 4 August 2013.
  29. ↑ Brazier, John (30 July 2013). "Modelzone administration costs creditors £11m". Insolvency News. Retrieved 4 August 2013.
  30. 1 2 3 Ruddick, Graham (27 June 2013). "Hornby hit by collapse of key customer ModelZone". The Daily Telegraph (London). Retrieved 4 August 2013.
  31. 1 2 Lowthorpe, Shaun (13 July 2013). "Modelzone founder’s bid to buy part of business". EDP.com. Retrieved 7 August 2013.
  32. ↑ Holland, Tiffany (26 June 2013). "The founder of ModelZone, and chief executive of parent to Hawkins Bazaar, David Mordecai, hopes to buy back the models specialist". Retail Week. Retrieved 8 August 2013.
  33. ↑ Holland, Tiffany (24 July 2013). "ModelZone administrator Deloitte starts closing stores". Retail Week. Retrieved 7 August 2013.
  34. ↑ Frost, Richard (6 August 2013). "Yorkshire Modelzone stores to close". Insider Media. Retrieved 11 August 2013.
  35. 1 2 "Modelzone to close Manchester store as takeover hopes fade". Insider Media. 19 August 2013. Retrieved 25 August 2013.
  36. ↑ "Toy firm Hornby suffers losses after poor Olympics sales". ITV.com. Retrieved 4 August 2013.
  37. ↑ "Statement Re: Modelzone". Hornby Investor Relations - Regulatory News Item. 27 June 2013. Retrieved 27 September 2013.
  38. ↑ Holland, Tiffany (24 July 2013). "ModelZone's wholesale business Amerang acquired out of administration by rival firm Ripmax". Retail Week. Retrieved 4 August 2013.
  39. ↑ Langsworthy, Billy (18 July 2013). "Amerang finds buyer in Ripmax Limited". ToyNews. Retrieved 6 August 2013.

External links

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