Pensworth Dairy closes its doors within days of Freshways becoming the largest shareholder in Kent Dairy - This is an updated version of story posted on this page last week following further discussions with all three parties involved
Posted on: 24/01/23
Pensworth Dairy who operate across the South East, East Anglia, South West, Wales and the Midlands and buys a proportion of its milk from 10 local farmers has closed its doors. Last week Pensworth informed their farmer suppliers that they will no longer collect their milk and to immediately seek a new milk purchaser. With the help of Pensworth it is believed 9 of the farmers have found new homes for their milk with Cotteswold and one with Freshways
Freshways have confirmed they purchased the Kent business on Friday 13th January in a deal which was negotiated quickly. In less than two business days of Kent selling a majority share of the business to Freshways and disputing the invoices Pensworth’s business was at risk of closing its doors.
As at 13th January sale date £10 million plus was due to Pensworth from Kent and was part of a credit agreement on the basis each Monday a payment from Kent to Pensworth was made. By Tuesday last the 17th January Pensworth received no weekly payment from Kent and were notified by Freshways/Nijjar Dairies that they were disputing the full £10 million due from Kent to Pensworth and not just the invoices relating to the missed/withheld weekly payment.
This is the first time such a total invoice dispute has been triggered and Ian has been informed it didn’t simply come in the form of a request for more information but was allegedly accompanied by a mediation clause. The first alarm bell for Pensworth was when the agreed Monday payment did not arrive from Kent Dairy Company into Pensworth’s bank account by Tuesday 17th January as agreed – Freshways have confirmed that this weekly amount was not processed last week or this week.
Pensworth started in 1975 and back in May 2021 sold their food service distribution units at Cheshunt, Kent, Southampton, East Anglia and subsequently also Bristol and Wales to David Terry of Kent Dairy Company, a former Director of Pensworth and board member. Pensworth helped to facilitate this purchase and set up a long term supply agreement to sell all of its milk and products to the locations that it sold.
For the past 20 months Kent Dairy Company have taken around 70% of the milk and products that Pensworth purchases and is their key customer.
Pensworth’s total annual turnover in dairy is circa £60 million and as of today in excess of £10 million is still owed to them by Kent Dairy Company who trade in the region of £850k each week with Pensworth
Note in addition Pensworth separately owe Freshways circa £1.1 million and made a regular payment on Friday 13th as they have each Friday. On Friday 13th Pensworth paid an agreed £160,000 to Freshways.
During the previous 20 months, Kent Dairy Company have paid Pensworth weekly and by and large in full. Following the dispute of the whole £10 million owed to Pensworth along with no weekly payment (circa £800,000 plus) it was impossible for Pensworth to continue trading.
The only hope remaining is the directors of Freshways and Kent Dairy Company will pay in full what is due very soon and do what is right both morally and legally (That’s assuming the funds are available). Having said that its not clear that payment in full of all outstanding invoices owed by Kent will settle all creditors. Freshways are very clear that if they hadn’t stepped in a bought the Kent Business it would have folded with the loss of 188 jobs which they believe they might save as a result of their intervention. Understandably Pensworth have a different view of the situation and its background as to where they find themselves today and that’s basically the crux of the two sides of the story.
Th e Freshways move regrettably paralysed Pensworth overnight, including leaving 9 farmers with no December milk payment. Note the one who has transferred to Freshways has been promised he will be paid in full. In addition, a heap of other suppliers, processors and families have been dragged in some of whom have already mentally written off their losses.
The hope is that all affected will get paid in full soon. The lawyers will no doubt be licking their lips once gain.
On Ian’s desk today is a non-dairy contract he is examining, and the wording appears to be far more normal and fair than th e interpretation of the Pensworth/ Kent contract
“the Company shall pay the balance of all invoices not in dispute by the due date for payment of the invoice”.
In that contract in order to dispute an invoice, there are clear parameters for instance the purchaser cannot dispute all invoices on block as it appears has happened in this instance
If the original intention of Bali Nijjar/Freshways and the Director of Kent Dairy Company was to oust Pensworth they achieved that with expert precision and speed by simply refusing to pay and moving to dispute all that is due to Pensworth. Consequently, Freshways now supply Kent with its requirements which up until last Wednesday were supplied by Pensworth.
Those involved on the Pensworth side understandably feel aggrieved at how quickly Freshways have moved from becoming new owners to supplying their own milk and milk products. There are allegedly several other reputable processors that supplied Pensworth with their milk and cream who are now outstanding substantial amounts of money, as well as companies that Pensworth purchased spot raw milk from and other Food Service and Dairy suppliers who have been caught up in this. Is this “Normal business in the world of Dairy? “
No doubt in the coming months & weeks more will be written about this demise of Pensworth including critical dates and times actions were taken.
The number 1 outstanding question in relation to Pensworth and the businesses it owes money to is when will Freshways/Kent start to pay off the debt and when will it be fully paid? If that is achieved the killer question must be who will be left owed what and will the 9 farmers be paid for all milk delivered? The jury is out on that one but they are way down the line behind any professional fees plus the preferential creditors.