The Essential Ingredient Group of Companies - Case Update

Robert Ditrich, Rebecca Gill and Craig Crosbie of PwC, the voluntary administrators of The Essential Ingredient Group of Companies, are recommending that the companies be wound up so that a liquidator can pursue potential unfair preference claims and investigate a number of related party transactions that have been identified.

The family owned and operated gourmet food and cookware supplier had been operating for nearly four decades when it entered voluntary administration on 26 September. The company started out as a mail order business and eventually grew into a retail, wholesale and e-commerce operation with an Australian-wide customer base. Approximately 67 people are employed by the group.

In FY19, the directors started seeking advice for the sale of the business. More recently, attempts to restore profitability have been thwarted by increased trading costs and a general downturn in customer demand. Reduced cashflow has also made it increasingly difficult to maintain adequate stock holdings as some suppliers have placed the companies on stop supply, or COD terms. The directors had hoped that the group's business would improve after the COVID pandemic, but this was not the case. With sales declining and operating expenses increasing, the directors decided to appoint administrators.

The administrators continued to trade the business while they explored options for a sale or restructuring of the group, but no DOCA proposal was ultimately received. They have conducted preliminary investigations into the group’s financial position and concluded that signs of financial distress have been apparent from at least June 2023, and that the companies may have been insolvent from January 2024 and possibly earlier.

The administrators’ preliminary investigations have also identified a number of payments which may be recoverable as preference payments, including over $150,000 in payments made to the ATO. Various transactions including drawings, partners loans, dividends, related party loans, and intercompany loans which appear reasonable also require further investigation to determine whether they may constitute unreasonable director related transactions.

The second meeting of creditors is scheduled for today.

The administrators’ report to creditors can be found here.