Rossi Boots’ Kilburn manufacturer Adaptive Industries collapsed with nearly $3m in debt, says liquidator

Mounting losses, lack of finance and shareholder squabbles are among reasons behind the failure of a major SA bootmaker.

Rossi Boots chief executive Myron Mann, centre, with employees when the State Government gave the company a $250,000 boost.

The former Adelaide manufacturer of Rossi Boots owes nearly $3m, was potentially trading insolvent and executives gave different reasons for the company’s failure, according to a liquidators’ report

The debt could balloon by another $1.7m, with Rossi Boots flagging a potential claim for a warranty breach against its bootmaker Adaptive Industries, a preliminary report to creditors reveals.

Adaptive Industries’s Kilburn factory closed in November with the loss of 35 jobs ending a continuous 110-year tradition of manufacturing in South Australia.

In his February 18 report, liquidator David Kidman of KMPG calculated the company owes $2.8m to unsecured creditors, including about $637,000 to the ATO and $235,000 in payroll tax to Revenue SA. It may have been trading insolvent since from at least June 30, 2018, he wrote.

“The director (Paul McCarthy) attributed the failure of the company to the supply chain disruption due to the COVID-19 and advised that this became apparent not until 15 November 2020,” he wrote.

“Conversely, the company’s CEO (Myron Mann) … indicated to me that the company failed due to its ‘brand, IP and sales distribution [being] sold at too low a value, leaving the remaining company insolvent.”

The company started as Rossiter’s Pty Ltd in 1910 but was rebranded Adaptive Industries in April 2020 under a company restructure involving the sale of the Rossi Boots brand for $1.1m to a consortium majority-controlled by Melbourne-based apparel firm Propel Group.

Members of the Rossiter family became minority shareholders of the new entity.

Rossi Boots manufacturing in South Australia ended after 110 years when its bootmaker Adaptive Industries was placed in liquidation.

Under the restructure Adaptive Industries was contracted to continue making the boots, under an initial 12-month agreement, according to Mr Kidman who in his report attributed the company’s failure principally to:

AFTER-TAX losses between 2015 and 2019 of $7.4m;

LACK of co-operation, at times, between family member shareholders who in “some cases” were creditors;

THE principal financier withdrawing support in October 2019 putting the company under further stress and;

PROCEEDS from the April 2020 sale being “significantly less” than outstanding liabilities and future working capital requirements.

“Accordingly, whilst the company was impacted by COVID-19, it was clearly not the sole cause of its failure given the financial state of the company prior to COVID-19,” he said, adding it failed to keep financial statements.

He also noted the company was able to obtain funding support from another financier but that “lower-ranking preference shareholders” refused to grant the lender priority security over the company.

“It is apparent that the company’s former CEO and directors spent considerable time managing shareholder disputes … which might have been spent more effectively in directly managing the business affairs of the company,” he wrote.

The federal government will underwrite $1.55m in employee redundancy entitlements.

Rossi Boots Pty Ltd paid $120,000 for the Adaptive Industries machinery on December 8 and announced it would continue making the boots at the Kilburn factory.

The Advertiser sought comment from Rossi Boots’ chief executive Christine Elliott.

Rossiter’s was given a $250,000 State Government grant in 2017.