Lisa Wilkinson: I’m devastated and sorry over collapse of Wilko
That’s a long list of failures, Liam Byrne MP points out, and one that has left the taxpayer on the hook for over £40m in redundancy payments, a £50m hole in the pension scheme, and creditors getting 4p in the pound, at best, on their loans.
Q: Will you apologise to workers who are facing a Christmas without work?
Former chair Lisa Wilkinson says she is thankful to many people who supported Wilko, including the “fantastic team members” who always worked there, “amazing suppliers and advisers” and Wilko’s “fantastic customers” over the last 90 years.
Wilkinson (who was singled out for criticism over ‘weak leadership’ by the GMB this morning) tells the committee:
I am devastated that we have let each and every one of those people down, with the insolvency that Wilko has done.
Wilkinson says she can’t put into words how sad she is that Wilko “let down all our customers, all our team members, our suppliers, our advisers”.
Genuinely, I don’t know what you want me to say….
Byrne says he was looking for the word “sorry”, which we haven’t heard.
Wilkinson insists she is sorry, adding:
I am sorry that we are not there supporting all those people any more.
Key events
Q: But why did Wilko fail, when it had £108m of cash on the balance sheet in 2021? Why did other players weather the storm better?
Former CEO Mark Jackson says Wilko’s rents were £90m per year, it didn’t furlough staff, and spend £60m on new warehouses.
Then, when credit insurance was pulled, cash accelerated out of the business to suppliers at a faster rate.
Q: They’re all examples of management failure….
Jackson points out that he only joined in December 2022….
…so the committee turns to Lisa Wilkinson to explain these decisions.
Wilkinson says the board debated at great length whether to close in the pandemic, but decided to stay open and not furlough staff, to support those who were medically vulnerable and to pay landlords in full.
On the warehouse projects… Wilkinson says the decision to implement warehouse management systems, and replace outdated equipment, was taken several years earlier to improve efficiency.
Wilko CEO Mark Jackson says he pursued efforts for a rescue deal for months, and there were interested parties keen to save the business right up until the beginning of August.
Q: So what went wrong?
Jackson says that the security on Wilko’s balance sheet was falling every day, so secured lenders were prepared to lend less and less.
The UK’s economic climate meant the investment community were not “overly keen” to lend, he says.
Jackson reveals he was able to agree £15m of unsecured support, and £40m-£45m of secured lending.
But Wilko needed £75m to £90m.
Q: Why did you not act on the warning signs from auditors, that the financial viability of the business was in question? Did you read the audit report?
Lisa Wilkinson says she did read the audit report, and went through it with Wilko’s auditors.
She insists that Wilko’s financial situation declined sharply in 2022.
She says Wilko was taking action to try to reduce its rents, and denies ignoring advice from Teneo to do a Company Voluntary Arrangement to cut its rents.
[One issue with the CVA recommendation, it seems, is that Teneo thought the support of Wilko’s pension scheme would have been enough to get the CVA agreed, but actually the company needed support from more creditors too].
Mark Jackson offers support too, saying Wilko couldn’t enter a CVA when it was recommended, as it wasn’t insolvent at that stage.
Q: Shouldn’t the cost of living crisis having been a time for Wilko to shine?
Ex-chair Lisa Wilkinson denies not listening to advice (see previous post), but agrees that the loss of a third-generation business is devastating.
Wilkinson adds:
I do believe Wilko could have been saved, but it was not.
Q: Restructuring sources quoted in the Sunday Times have blamed Wilko’s “car crash” failure on niavety, incompetence, a failure to listen to people who have done these things for a long time, and stubbornless. Is that accurate?
Former CEO Mark Jackson says most of his time, since starting in December 2022, was spent looking forward.
Jackson says Wilko’s balance sheet was “pretty well-placed” in January 2021, with over £100m of cash.
Jackson says the biggest contributory factors to the cash outflow were increased competition, global supply chain issues, cost increases, and failure to cut costs.
Jackson argues that, with hindsight, it was a mistake for Wilko to keep trading through the pandemic. It would have been better to furlough staff, he argues, rather than keep shops open and running down Wilko’s cash reserves.
[It’s worth remembering, though, that rival B&M also kept open in the pandemic, and recorded strong revenues].
The committee then turns to this morning’s revelation that Wilko’s auditors (EY) appear to have delayed signing off the most recent accounts for nine months, so that a distribution centre could be sold to produce cash.
Q: What conversations took place over the sale of a major asset to improve the financial situation?
Lisa Wilkinson says she is not a “financially qualified person”, and isn’t from a financial background.
Q: But you are a family director of the company, with the fiduciary duties that go with that?
Wilkinson confirm this is true, and she will answer the question.
She says her understanding was that two things had to be true for the accounts to be signed off – first Wilko must have sufficient cash and liquitity to keep trading as a going concern, and second, a prediction of reasonable and achievable trading numbers that could be achieved in 2023.
We were put under enormous pressure under our then auditors, EY, to prove both those things – that we would have adequate cash, and that our numbers were reasonable and achievable.
Wilkinson explains that the adequatae cash came from the sale and leaseback of Worksop, and a loan secured against stock and intellectual property.
On the sales figures, Wilkinson insists Wilko tested against worst-case scenario, and then two even worst-case scenarios.
Q: The Sunday Times says you were advised by [consultancy firm] Teneo in 2022 to use a Company Voluntary Arrangement (CVA) to close some stores and cut the rent on others. How did you respond?
Wilkinson says this was indeed reported to her. There were verbal discussions with Teneo, but she believes Wilko were told its financial position wasn’t bad enough to justify a CVA (which is a deal between a company and its creditors).
By September 2022, she says there was “a long report” which discussed a CVA as a contingency measure if trading continued to deteriorate.
Q: But wasn’t Teneo’s advice to do the CVA right away?
Wilkinson says no, it was presented as a contingency option.
Her understanding was that Wilko would get a better business rates position if it held the CVA in April, so staff started to work on the plan in the first quarter of this year.
We listened to the advice, and we followed it, she insists.
Lisa Wilkinson is then asked what mistake she personally made as Wilko’s chair, that led to its collapse.
Wilkinson says she asks herself all the time what she would do differently if she had the chance.
And there are three things….
She says she should have been more proactive in 2022. At the start of that year, Wilko had positive cash, decent trading sales, no debt – but in each four-week period, cash was eroded.
Second, she wishes she’d brought Mark Jackson in as CEO earlier [he was appointed in December 2022]
Thirdly, Wilkinson wishes she’d taken the advice of PwC earlier.
Lisa Wilkinson: I’m devastated and sorry over collapse of Wilko
That’s a long list of failures, Liam Byrne MP points out, and one that has left the taxpayer on the hook for over £40m in redundancy payments, a £50m hole in the pension scheme, and creditors getting 4p in the pound, at best, on their loans.
Q: Will you apologise to workers who are facing a Christmas without work?
Former chair Lisa Wilkinson says she is thankful to many people who supported Wilko, including the “fantastic team members” who always worked there, “amazing suppliers and advisers” and Wilko’s “fantastic customers” over the last 90 years.
Wilkinson (who was singled out for criticism over ‘weak leadership’ by the GMB this morning) tells the committee:
I am devastated that we have let each and every one of those people down, with the insolvency that Wilko has done.
Wilkinson says she can’t put into words how sad she is that Wilko “let down all our customers, all our team members, our suppliers, our advisers”.
Genuinely, I don’t know what you want me to say….
Byrne says he was looking for the word “sorry”, which we haven’t heard.
Wilkinson insists she is sorry, adding:
I am sorry that we are not there supporting all those people any more.
NEW 🚨
Wilko former family owner Lisa Wilkinson reveals to MPs that the previously debt free, furlough avoiding family business was in the middle of negotiating a secured loan from
Macquarie Bank when the 2022 mini budget hit “hiking interest massively” making loan “infeasible”. pic.twitter.com/s1b4izY2Dh— Faisal Islam (@faisalislam) November 28, 2023
Mini-budget chaos scuppered Wilko loan deal, MPs hear
Lisa Wilkinson then explains that Liz Truss’s mini budget scuppered Wilko’s attempt to move from a revolving credit facility to a secured lending facility in 2022.
She reveals Wilko was negotiating a deal with Macquarie Bank, but the interest payments on that loan were hiked massively in the mini-budget turmoil, she says.
Turning to other cause of Wilko’s collapse, she says financially, revenues were falling faster than costs could be cut.
Wilko also lost the confidence of key allies, including its bank, Lloyds, and its credit insurers, who both pulled away in 2022.
And it didn’t get enough support from enough suppliers (although some were very supportive).
Customers have gradually reduced their spending at Wilko, Wilkinson points out – for reasons such as the failure to scale up the business, the cost of living crisis, product availability problems due to driver shortages.
Wilkinson says Wilko’s customer proposition, against the budget retailers, was ‘unclear”.
She also points to the pressure on profit margins, spiralling costs, expensive high street rents, and Wilko’s weak processes and infrastructure.
Lisa Wilkinson denies her greed bankrupted Wilko
Committee chair Liam Byrne starts by asks Lisa Wilkinson why the retailer she chaired collapsed this year.
Q: Did your greed bankrupt Wilko?
“I don’t believe so, no”, replies Wilkinson softly.
Q: Why did Wilko collapse?
Wilkinson explains that , in essense, Wilko ran out of cash.
There were many contributory factors that led to that, she says, including the decline of the high streets, high rents, business rates, and Covid-19.
Wilkinson explains that Wilko stayed open during the pandemic, didn’t furlough staff, paid landlords in full during Covid, and only look advantage of business rates relief and the deferral to paying VAT (which has been paid off).
“There’s some debate about whether we should have done that, but we did”, Wilkinson adds.
Next up, the Business and Trade committee will hear from:
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Mark Jackson, former CEO of Wilko
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Victoria Venning, Partner, EY
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Andrew Walton, UK Head of Audit, EY
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Lisa Wilkinson, former Chair of Wilko
Q: What kind of Christmas are Wilko’s former staff facing?
Nadine Houghton, national officer at GMB, says Wilko staff would normally be looking forward to working with their colleagues this Christmas period.
Some staff have moved to B&M and Poundland, but many speak of a “loss of family”.
And Houghton criticises ex-chair Lisa Wilkinson for never apologising, or visiting a Wilko store or distribution centre to explain to staff what went wrong.
Houghton says she can’t understand that, if you’ve been part of a family business for such a long time….
Q: Was there a scenario under which Wilko could have survived?
Patrick O’Brien, global retail research director at GlobalData, says yes – if Wilko had started taking different decisions many years ago, including changing their store portfolio.
But, he says, many retailers are stuck in long leases, so often hope for the best.
O’Brien adds that there was “definitely an opportunity” for Wilko, given people are trading down in the cost of living crisis.
