Revealed: Calombaris restaurant empire’s $20.7 million in losses before collapse
A report into the collapse of celeb chef George Calombaris’s 12 restaurant food empire has revealed the businesses haemorrhaged eye-watering amounts of cash as bosses tried to keep it afloat.
VIC News
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A probe into George Calombaris’ defunct restaurant empire shows the company racked up $20.7m in losses in the three years leading to its February collapse.
The report to creditors by administrators KordaMentha also says it should now be liquidated and that sole director Radek Sali did not breach any duties as the company declined.
The fall into administration of the company behind the Hellenic Republic and Jimmy Grants brands followed a horror summer in which sales fell amid a broader industry downturn and as the business was beset by reputational damage following its underpayment scandal.
“The group has not been profitable in the past three financial years or for the year to date period to January 2020.
“Cumulative losses before tax over this period total $20.7 million,” the report says.
At the end of January this year the company had total liabilities of $23.7m.
KordaMentha also says it will recommend to liquidate the company at a meeting next week.
“In our view, the winding up of all companies in the Group is the most viable option for creditors in that the Liquidators will be in a position to wind up the affairs of the group and realise the Group’s remaining assets for the benefit of creditors.”
KordaMentha also revealed their initial works to look at the company’s convoluted structure in which Sali served as both a shareholder and lender to the business.
Sali was also the sole director of Made Establishment when its 22 associated businesses and 12 restaurants went into administration on February 10.
The collapse saw about 400 workers out of a job.
“From our investigations to date, we have not found any evidence that the director has breached his duty to act with due care and diligence and to act in good faith, nor has he used his position improperly or used information improperly,” the report says.
“Our preliminary view is that it is unlikely that there are any claims against the director of the Group’s companies.”
It also appears the company did not trade while insolvent with administrators saying that “based on our preliminary investigations to date, it appears that the likely date of insolvency of the Group was 10 February 2020, being the date of our appointment.”
It also appears the company did not trade while insolvent with administrators saying that “based on our preliminary investigations to date, it appears that the likely date of insolvency of the Group was 10 February 2020, being the date of our appointment.”
The report says the collapse can be attributed to “declining revenue and profitability across the group following the group’s self-disclosure to the Fair Work Ombudsman of wages underpayments at a number of venues.
“This underpayment announcement resulted in intense media scrutiny and public backlash against the group,” the report says.
“Other factors generally including difficult trading conditions in the hospitality industry in recent years due to the expansion of the on-demand economy via services such as UberEats and Deliveroo, increasing costs, fierce competition and changes in consumer tastes to favour cheaper mid-tier dining options.”
The main secured creditor, the Commonwealth Bank, is owed a whopping $8.8m and the report says “we do expect there to be a return to the first ranking secured creditor”.
Although it says “given the ongoing sales process as well as the ongoing recovery efforts … we are unable to estimate the likely quantum and timing of a return”.
It has previously been estimated the CBA would get back $1 million.
The report says “priority creditors” — that is the staff owed leave and redundancy payments — are owed $1.3 million.
The administrator says they expect a shortfall to meet these and staff will have to rely on the Fair Entitlements Guarentee for payment of outstanding entitlements.
Although they note sale of assets could fund part of these.
The report notes the “beverage” assets — spirits and fine wines — alone are worth $220,000.
The unsecured creditors — including tradespeople — are not expected to get anything from the closure.
Sali has himself said that the combination of the underpayments, the bushfires and the coronavirus outbreak created a “black swan” for Made that sent revenue plummeting.
The report also reveals Sali loaned $8.5m of his own supranunation into the company to pay workers owed cash by the wage scandal.
“Super Radek (loaned) $8.5 million in October 2017 to fund wage underpayment liabilities and associated on-costs,” the report says.
Sali, a richlister estimated to be worth $290 million, brought into the food empire in 2017 and executives he hired discovered the underpayments that happened before his investment.
Sali would eventually loan the business $11.5 million.
The accounts in the administrators report reveal how tough the last three years were, and how the period after last year’s Fair Work Ombudsman’s report into the wage underpayment impacted the business.
In 2017 the business had sales of $46.8m and a net loss of $2.7m.
By the end of the 2019 financial year sales had dropped to $36.9m and net losses grew to $5.1m.
In the first seven months of this financial year it only made $16m in revenue and had made a net loss of $4.1m.
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