The PAS Group was struggling prior to the outbreak of COVID-19, creditor documents can reveal.
While the pandemic impacted retail revenue and supply chains from China, the Group had already clocked a $4.9 million reduction in earnings for the year ended June 30, 2019.
This was driven by the declines in retail revenue from underperforming store closures, and only partly offset by new wholesale contracts secured in its Designworks business.
This decline continued to the 11 months to May 31, 2020 with earnings of $672,000 for the period.
The drop was exacerbated by a 27% fall in revenue for its wholesale and retail divisions due to the disruption caused by COVID-19, specifically due to forced store closures and supply delays.
A 3% increase in employee benefit expenses as a percentage of revenue also hit the bottom line, largely relating to the Review and Black Pepper businesses.
The fixed nature of these costs meant the impact was greater against a declining revenue base.
Despite trading below expectations, administrators did not believe the business appeared to be insolvent at the date of appointment.
While rent was deferred on the majority of leased premises for April and May, and extended trading terms were negotiated with some suppliers, these steps were characterised as liquidity preservation measures to navigate through the COVID-19 pandemic.