Switch secures 200 jobs at bakery firm Milligans

Jan 13 2010 by Peter McCusker, The Journal

QUICK work by the directors of bakery and coffee shop firm Milligans has secured its future - and that of its 200 workers - after it faced a £300,000 bill following the pre-Christmas collapse of a rival.

The firm faced a possible hit from the failure last month of North East Bakery which went into administration.

The Newcastle firm's 13 shops and bakery closed and 120 staff lost their jobs.

Its stores had been previously owned by Milligans and landlords have been chasing it for rent payments.

Now Milligans has transferred its business, which includes 13 coffee shops, three bakeries and a butchers, to a new holding company.

Managing director Stephen Milligan said: “Following the unfortunate sudden administration of North East Bakery, sites that were originally leased from us, have now reverted back to us as fixed overheads.

“Due to this climate, the financial implication on our business meant that we had to act quickly to minimise any damage, which I am delighted we have been able to do.

“We have had to restructure our business to protect ourselves and the jobs of our 200 staff.

“We have had to transfer the assets of the business to a new vehicle to protect us from liabilities which are not of our making. We have been fielding calls from a number of landlords asking for rent payments.

“With some properties still on long-term leases we reckoned the liabilities could have been in region of £300,000 a year.

“No claims have so far been made, but if any are made then they will be made on the previous company vehicle and this will be put into administration.”

In 2006 Milligans sold 16 of its bakery shops and its manufacturing plant in Newcastle to North East Bakery to concentrate on developing its coffee shop business.

The deal meant that many of the existing landlord/tenant agreements remained under the overall auspices of Milligans with it in effect sub-letting many of the stores to North East Bakery.

North East Bakery, which was established by young entrepreneur Greg Phillips, was placed into the hands of administrators PricewaterhouseCoopers two days before Christmas.

The administrators said at the time that the performance of the company, whose stores traded under the Nichols brand, had been affected by poor trading and an expensive rebranding programme.

A spokesman for PwC said yesterday that it was involved in talks with interested parties about possibly taking over some of the stores.

Mr Milligan said the shift from bakeries towards coffee shops is paying dividends with more coffee shops, which trade under the Cafe M brand, set to open this year.