Teneo Financial Advisory details administration of Black Sheep brewery

The taxpayer looks also to be millions out of pocket, with debts to HMRC and the company having Covid-related loans from the government.

A report by administrators Teneo Financial Advisory says both HMRC and unsecured creditors are unlikely to be repaid.

The report follows the sale of the Masham-based brewery to Breal Capital for £5m on May 23.

The deal was a part of a pre-packaged sale and the appointment of administrators, which the company said was “essentially to give protection to the companies and prevent any person taking action against it”.

In the latest reporting year, Black Sheep reported losses of £1.6m compared to losses of £285,000 the year before. The losses were forecast to continue into 2024.

This stemmed from sales failing to recover from pre-pandemic levels of £19.4m in 2019, being £14.7m in the latest year.

The brewery, said the report, suffered higher costs, including for energy, staff and raw materials amid challenges from the current economic environment.

This meant it “continued to experience cash flow difficulties.”

An equity raising process, began in November, attracting no buyers. Six offers to buy the company were made, however, with Breal the successful bidder.

The administrators report some £4.1m of government loans were still outstanding at the time of the sale.

HMRC is also owed £1.2m from the brewery side of the business and £135,000 from the retail. The report said the £1.2m is unlikely to be repaid in full and the £135,000 not at all.

Unsecured creditors are owed £1.4m altogether, which won’t be returned. Some 376 organisations are listed as being owed money. This includes a company called Dewscope who provided a £500,000 loan earlier this year.

However, some money has been repaid, including Close, which has had £2.6m returned and a £1.5m asset finance arrangement with Lombard won’t be adversely affected by the administration.

Black Sheep CEO Charlene Lyons says the arrangement has spared Masham “what could have been a local employment catastrophe.”

She explained: “The Black Sheep Brewery Plc and BSB Retail Limited entered Administration as a result of trading difficulties encountered by the company, subsequent to the Covid pandemic and the more recent energy price rises, leading to recessionary consumer markets.

“The assets of the company were purchased out of administration by a NEWCO, namely Black Sheep Brewing Company Ltd. This company is owned by the Breal Group and will continue to trade as Black Sheep.

“The Breal Group acquired the assets, out of administration, to secure the business for the long-term, and this has saved the jobs, and futures of the people that worked there. Black Sheep is a significant employer within the town of Masham, this deal has prevented, what could have been a local employment catastrophe.

“We do recognise that this is a difficult time for all shareholders and stakeholders alike, while the industry continues to face challenging times. In the last 12 months, 45 breweries entered insolvency in the UK, a three-fold increase on the previous year, as the cost-of-living crisis has squeezed household disposable income.

“This has had an extreme and adverse effect on all brewers’ sales, at a time when their own costs and inflation are high. Black Sheep has not been immune to these factors, leading it to the administration process. It is highly likely that many more will follow in the coming months.”

She added: “I would like to thank you for your ongoing support and patience, and I would like to assure you that the beers you all love will continue to be brewed from Black Sheep’s home in Masham, albeit under new ownership.”