The Kleenm aid Group (Adm inistrators Appointed)

192 Pages·2009·3.14 MB·English

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Contents
1 Executive Summary 3
2 Independence Statement 6
3 Purpose of Administrators' Report 7
4 Basis of this Report 7
5 Statutory Information 7
6 Summary of Administration to Date 26
7 Administrators’ Trading Performance and Receipts & Payments 28
8 Report as to Affairs 28
9 Administrators' Investigations 29
10 Liquidation Scenarios 41
11 Estimated Return from a Winding Up 41
12 Voluntary Administrators' Recommendations 46
13 Voluntary Administrators' Fees 47
14 Second Meetings of Creditors 48
Appendix A – Dates of Appointment for the Kleenmaid Group of Companies 49
Appendix B - Declaration of Independence, Relevant Relationships & Indemnities 50
Appendix C - Statutory Information 51
Appendix D - Related Entities 55
Appendix E - Statement of Remuneration 56
Appendix F - Summary of Customer & Intercompany Transactions 134
Appendix G - Financial Statements by Entity 136
Appendix H - Composition of Committee of Creditors 151
Appendix I - Administrators’ Receipts and Payments 153
Appendix J - Estimated Statements of Position 154
Appendix K - Notice of Second Meetings of Creditors 180
Appendix L - Creditor Information Sheet 187

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Liability limited by a scheme approved under Professional Standards Legislation
Definitions
Administrators John Greig, Richard Hughes and David Lombe
ASIC Australian Securities & Investments Commission
Appliances business The appliance sales business of EDIS
Bizco Bizco Retail Pty Ltd (Administrators Appointed)
Committee Committee of Creditors
Corporate Group Kleenmaid Corporate
LAC
LAS
EDIS
KCS
Bizco
Kleenmaid Property
Kleenmaid Appliances
Deloitte Deloitte Touche Tohmatsu
DOCA Deed of Company Arrangement
EBIT Earnings Before Interest and Tax
EDIS EDIS Service Logistics Pty Ltd (Administrators Appointed)
FY Financial Year
GE GE Commercial Corporation (Australia) Pty Ltd
GEERS General Employee Entitlements and Redundancy Scheme
IP Intellectual Property
k Thousands
KCS Kleenmaid Customer Solutions Pty Ltd (Administrators Appointed)
Kleenmaid Appliances Kleenmaid Appliances Pty Ltd (Administrators Appointed)
Kleenmaid Corporate Kleenmaid Corporate Pty Ltd (Administrators Appointed)
Kleenmaid Retail Kleenmaid Retail Pty Ltd (Administrators Appointed)
Kleenmaid Group / the Group All Kleenmaid companies across both the Corporate Group and the Orchard
Group
Kleenmaid Holdings Kleenmaid Holdings Pty Ltd (Administrators Appointed)
KM Intellectual Reserve KM Intellectual Reserve Pty Ltd (Administrators Appointed)
Kleenmaid Order House Kleenmaid Pty Ltd (Administrators Appointed)
Kleenmaid Property Kleenmaid Property Pty Ltd (Administrators Appointed)
LAC Lifestyle Appliance Corporation Pty Ltd (Administrators Appointed)
LAS Lifestyle Appliance Sales Pty Ltd (Administrators Appointed)
M Millions
Management Management of the Kleenmaid Group
Manlyvale Manlyvale Pty Ltd (Administrators Appointed)
KM Rewards My Kleenmaid Rewards Pty Ltd
Orchard KM Orchard KM Pty Ltd (Administrators Appointed)
Orchard Group Kleenmaid Holdings
KM Intellectual Reserve
Kleenmaid Retail
Order House
Orchard KM
Manlyvale
p.a. Per Annum
PILN Payment in Lieu of Notice
RATA Report as to Affairs
Spares business The spare parts sales business of EDIS Service Logistics Pty Ltd.
The Act Corporations Act 2001
The Court Federal Court of Australia or any of the State Supreme Courts
The Regulations Corporations Regulations 2001
Westpac Westpac Banking Corporation Limited
Report for Kleenmaid Group Page 2
14 May 2009
1 Executive Summary
On 9 April 2009 and 15 April 2009 we, John Greig, Richard Hughes and David Lombe, were appointed Joint
and Several Administrators of several companies in the Kleenmaid Group by the directors, Andrew Young,
Bradley Young and Gary Armstrong pursuant to Section 436A of the Corporations Act 2001 (“The Act”).
The Kleenmaid Group consists of 2 groups of companies, the Orchard Group and the Kleenmaid Corporate
Group (“Corporate Group”). The companies in each group to which we were appointed are:
Kleenmaid Corporate Group Orchard Group
• Kleenmaid Corporate Pty Ltd • Kleenmaid Holdings Pty Ltd
• Lifestyle Appliances Corporation Pty Ltd • KM Intellectual Reserve Pty Ltd
• Lifestyle Appliances Sales Pty Ltd • Orchard KM Pty Ltd
• Kleenmaid Property Pty Ltd • Kleenmaid Retail Pty Ltd
• EDIS Service Logistics Pty Ltd • Manlyvale Pty Ltd
• Kleenmaid Customer Solutions Pty Ltd • Kleenmaid Pty Ltd
• Bizco Retail Pty Ltd
• Kleenmaid Appliances Pty Ltd

An additional company exists in the Orchard Group, My Kleenmaid Rewards Pty Ltd, which is not in
administration.

Each group has different shareholdings and operates different aspects of the Kleenmaid business. The
Orchard Group was the original proprietor of the Appliances and Spare businesses. Following a restructure
in December 2007, certain aspects of the Orchard Group’s trading operations transferred to the Corporate
Group.
Our review and analysis has been performed on a consolidated basis for both the Corporate and Orchard
Groups.
We have conducted a preliminary investigation into the affairs of the Kleenmaid Group pursuant to Section
438A of the Act. We have found that there are a substantial number of transactions that could be recovered
should a liquidator be appointed. A summary is set out below in Section 1.1 below, with fuller detail set out
in Section 9 of our report.
In addition to investigating the affairs of the Kleenmaid Group, Section 438A of the Act requires the
Administrators to form an opinion about the future of the Kleenmaid Group and give reasons for our opinion
in relation to each of the following matters:
a) whether it would be in the interests of the Kleenmaid Group companies creditors to execute
Deeds of Company Arrangement (“DOCA”);
b) whether it would be in the creditors’ interests for the administrations of the companies in the
Kleenmaid Group to end and control to be returned to the directors; or
c) whether it would be in creditors’ interests for each of the companies in the Kleenmaid Group to
be wound up.

Report for Kleenmaid Group Page 3
14 May 2009
1.1 Investigation
Section 438A (a) of the Act provides that as soon as possible after an administration begins the
Administrators must investigate the company’s business, property, affairs and financial circumstances.
This investigation is to determine whether a liquidator could recover funds from insolvent transactions
entered into prior to the appointment of the Administrators.
1.1.1 Date of Insolvency
From our preliminary investigations, we believe that the Kleenmaid Group may have become insolvent in
June 2007, if not earlier. We base this finding on the following:
• the Kleenmaid Group has experienced cash flow difficulties since June 2007 and probably earlier
• there was a significant excess of liabilities over assets (i.e. a balance sheet deficiency) across the
Kleenmaid Group from at least June 2007, if not earlier. As set out in the table below, the deficiency
grew significantly over this period:
Kleenmaid Group 30 Jun 07 30 Jun 08 31 Mar 09
Net Asset Position
$’000s
Current assets 21,301 413 (14,433)
Current liabilities (36,469) (44,594) (48,238)
Net current liabilities (15,168) (44,181) (62,671)
Non-current assets 18,002 205,836 37,715
Non-current liabilities (22,663) (211,035) (57,113)
Total net assets/(liabilities) (19,829) (49,380) (82,069)
• net cash flow was negative in every month since June 2007
• a number of demands for payment both informal and formal and payment arrangements were made
over the period since June 2007, and possibly earlier
• the current ratio of the Kleenmaid Group, which is a prima facie indicator of the ability of a company
to extinguish its short terms debts, was less than 1 at June 2007 and since. A ratio of less than 1 is
indicative of illiquidity suggesting that there may be difficulty meeting debts as and when they fall
due.
1.1.2 Insolvent Transactions
We have also identified a number of insolvent transactions from our preliminary investigation that may
represent possible recoveries for the benefit of creditors if the companies are wound up. These are:
Type & Act Reference $000’s For further
discussion
refer
Unfair preferences – Section 588FA 2,400 Section 9.4
Uncommercial transactions – Section 588FE 179 Section 9.6
Discharging a debt of a related entity – Section 588FH 1,788 Section 9.7
Damages for breaches of directors duties – Section 184 Unknown Section 9.8
Report for Kleenmaid Group Page 4
14 May 2009
Unreasonable director-related transactions – Section 588FDA 386 Section 9.9
Insolvent trading by directors – Section 588G 82,069 Section 9.2
These investigations include consideration of whether the directors may be personally liable under the Act if
the directors failed to prevent the Kleenmaid Group from incurring a debt when, at the time of incurring that
debt, the Kleenmaid Group was insolvent, or became insolvent by incurring that debt.
In the calculation of dividends we have only taken the unfair preferences into account, as we are unsure of
the commercial recoverability of the other insolvent transactions.
1.2 Proposed Deed of Company Arrangement
We have not received any DOCA proposals at the date of this report. The directors have advised however,
that they are in the process of preparing a DOCA proposal and will be providing it to us before the second
meetings of creditors. Should a proposal be received prior to the meetings, we will endeavour to inform
creditors of the details of the proposal as soon as possible.
The directors have asked for the second meetings to be adjourned to allow them time to finalise their DOCA
proposal. It is a matter for creditors at the second meetings as to whether they wish to adjourn the meeting to
a later date. We will provide our opinion in relation to an adjournment once we have had the opportunity to
analyse the DOCA proposal.
1.3 Recommendations
As no DOCA proposal has been received the only options remaining for creditors are either to return the
companies in the Kleenmaid Group to control of the directors or to place the companies in the Kleenmaid
Group in liquidation.
As the Kleenmaid Group is insolvent we do not recommend that the companies be returned to the control of
the directors.
We therefore recommend that creditors vote for all the companies in the Kleenmaid Group to be
wound up.
We reserve our right to change our recommendation to creditors should there be any change in the current
position or should a DOCA proposal be received subsequent to the date of this report, that we consider would
change our recommendation.
Should we receive any new information relevant to creditors between issuing this report and the date of the
creditors meeting, a summary will be made available on our website at
www.deloitte.com.au/services/corporatereorganisation/businessesunderadministration.
1.4 Dividends - Liquidation
Our dividend estimates for creditors are set out in Section 11.3 of this report.

We estimate that there will be no dividend to unsecured creditors of any company in the Kleenmaid
Group, except for Kleenmaid Pty Limited. Unsecured creditors of this company may receive between
1 and 2 cents in the dollar.

Employee creditors estimated dividends in c/$ are set out below:

Report for Kleenmaid Group Page 5
14 May 2009
Company High Low
EDIS 56 Nil
Orchard KM 100 24
KCS 10 Nil
Kleenmaid Retail Nil Nil

At this stage, we do not believe secured creditors will receive a dividend from the companies.
1.5 Second Meeting of Creditors
Pursuant to Section 439A (3) of the Act the second meetings of creditors will be held on
25 May 2009 at the Mercure Hotel, 85-87 North Quay, Brisbane at 10am. (See Form 529 enclosed in
Appendix K).
Creditors who are unable to attend the meetings in person may dial into the meeting via teleconference
(teleconference Number: [phone]) or view the Second Meeting via web-cast (URL:
http://www.brr.com.au/event/57541/second-creditors-meeting?popup=true)

Creditors may attend and vote in person, by proxy or by attorney. The appointment of a proxy must be made
in accordance with Form 532 (copy enclosed in Appendix K). A specific proxy can be lodged directing the
proxy to approve or reject of each resolution. Proxy forms or facsimiles thereof must be lodged with the
Administrators prior to the commencement of the meetings. Where a facsimile copy of a proxy is sent, the
original must be lodged with us within 72 hours after receipt of the facsimile. An attorney of the creditor
must show the instrument by which he or she is appointed to the Chairman of the meetings, prior to the
commencement of the meetings.
A creditor is required to lodge a Proof of Debt (copy enclosed in Appendix K) to be entitled to vote at the
second meetings of creditors and must do so prior to the commencement of the meetings.
If a creditor wishes to rely upon the Proof of Debt that they lodged with us at the first meetings of creditors,
held on Thursday 23 April 2009, they must make reference to that Proof of Debt when submitting a proxy, or
when attending the second meetings of creditors. Creditors should be aware that a new proxy is required
for these meetings, even if you have already lodged Proofs of Debt for the first meetings. Please refer
to Appendix K for guidance on completing the forms and meeting registration details.
At these meetings creditors will be asked to resolve:
• whether it would be in the creditors' interests for the administrations to end;
• whether it would be in the creditors’ interests for each of the companies in the Kleenmaid Group to
execute DOCAs, should proposals be received before the second meeting of creditors;
• whether it would be in the creditors' interests for the companies to be wound up.
2 Independence Statement
We undertook a proper assessment of the risks to our independence prior to accepting the appointment as
Administrators of the Kleenmaid Group. This assessment identified no real or potential risks to our
independence. We are not aware of any reasons that would prevent us from continuing with these
appointments.
There are no other prior professional or personal relationships that should be disclosed other than those
contained in the Declaration of Independence, Relevant Relationships and Indemnities attached as Appendix
B.
Report for Kleenmaid Group Page 6
14 May 2009
We have not been indemnified in relation to these administrations, other than any indemnities that we are
entitled to under statute.
3 Purpose of Administrators' Report
Section 435A of the Act states that the objective of a Voluntary Administration is to allow for the business,
property and affairs of an insolvent (or likely to become insolvent) company to be administered in a way that
either:
• maximises the chances of the company continuing in existence; or
• if it is not possible for the company to continue trading, results in a better return for creditors than
would result from an immediate winding up.
We have conducted an investigation into the affairs of the Kleenmaid Group pursuant to Section 438A of the
Act. The results of our investigations to date are set out in this report.

In addition to investigating the affairs of the companies, Section 438A of the Act requires the Administrators
to form an opinion about the future of the companies in the Kleenmaid Group and give reasons for our
opinions in relation to each of the following matters:
a) whether it would be in the interests of the company's creditors of each of the companies in the
Kleenmaid Group to execute a Deed of Company Arrangement (“DOCA”);
b) whether it would be in the creditors’ interests for the administrations to end and control to be
returned to the directors; or
c) whether it would be in creditors’ interests for each of the companies in the Kleenmaid Group to
be wound up.
4 Basis of this Report
This report has been prepared primarily from information received from the directors and the books and
records of the Kleenmaid Group. We have investigated the affairs of the Kleenmaid Group, however there
may be certain matters of which we are not aware, or of which we have not been advised. We have not
performed an audit of the Kleenmaid Group.
In order to complete this report, and in conducting our investigations, we have utilised information from:
• the Australian Securities and Investments Commission (“ASIC”);
• Kleenmaid Group’s books and records;
• discussions with the companies’ creditors;
• discussions with the directors; and
• discussions with Management and staff.
Whilst we have no reason to doubt any information contained in this report, we reserve the right to alter our
conclusions should the underlying data prove to be inaccurate or materially change from the date of this
report.
5 Statutory Information
A summary of the statutory information for the Kleenmaid Group, including directors’ and officers’ details
and registered charges for each company in the Kleenmaid Group is in Appendix C.
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14 May 2009
5.1 Shareholders
The Kleenmaid Group consists of two separate groups known as the Kleenmaid Corporate Group
(“Corporate Group”) and the Orchard Group. The companies included in each group, their primary function
and ultimate shareholders are:
5.1.1 Corporate Group
Gary Bradley
Armstrong Young
50% Ord 50% Ord
Laini Shelley
Kleenmaid
Oldfield Young
EB Pty Ltd
100% Ord 13030%% Ord 100% Ord
Tocoolum 33% Kleenmaid Corporate Pty 33% Toparkcity
Pty Ltd Ltd Pty Ltd
100% 100% 100% 100%
Lifestyle Appliances Lifestyle Appliances Kleenmaid Property Pty EDIS Service Logistics • Operates appliances
Corporation Pty Ltd Sales Pty Ltd Ltd Pty Ltd and spares business
• Franchisor • Franchise marketing • Property Manager
Key 100% 100% 100%
Kleenmaid Corporate Group Kleenmaid Customer Kleenmaid
companies in administration Solutions Pty Ltd Appliances Pty Ltd Bizco Retail Pty Ltd
Corporate shareholders external to Group • After sales • Collects customer • Sales Support (NSW)
(not in Administration) service monies
Individual shareholders
A summary of the directors and officers is attached in Appendix C.
The ultimate holding company of the Corporate Group is Kleenmaid Corporate. Ultimate shareholders of the
Corporate Group are individuals associated with directors Bradley Young and Gary Armstrong.
The Corporate Group consists of a holding company and seven trading companies whose principal activities
are:
• sale of Kleenmaid goods to retail and commercial customers;
• marketing of Kleenmaid franchises;
• sale and management of franchises;
• management of Kleenmaid stores in New South Wales;
• supply of spare parts to entities under the Kleenmaid banner and to non-Kleenmaid related
entities;
• repairs to Kleenmaid products both in and out of warranty; and
• leasing and subleasing property to franchisees.
The Corporate Group has 15 franchises in the following locations:
NSW QLD WA SA VIC
• Chatswood • Gold Coast* • Cannington • Marion • Mitcham*
• Warners Bay* • Jindalee* • Osborne • Stepney
• Tuggerah • Maroochydore Park
• Wollongong • Fortitude Valley • Myaree*
• Toowoomba
* Owned by entities associated with Bradley Young.
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