Update on BMX giant, The Source

The Source BMX brand continues to trade after a difficult period in the market.

Companies House records that The Source – and the Source (Hastings) Holdings Limited – appointed an administrator on 11 September 2023.

However, Wheels of Steel Holdings Limited and Source BMX Limited purchased 100% of Source BMX, which continues to trade, as detailed in the SIP 16 Memorandum.

The 73 employees were transferred to Source BMX Limited. Consumers may not notice any difference.

BACKGROUND

The SIP 16 Memorandum details how the insolvency came about, noting the supply chain difficulties around Covid-19 impacting financial performance – revenue dropped from £14.5 million in the year to 31 March 2021 to £12.1 million in year to end 31 March 2022. When stock flow resumed in vast quantities and with transport costs ballooning, stock levels rocketed from £3 million (FY 21 stock levels) to £8.6 million (FY22). Operating profit dropped from £0.7 million in FY21 to a loss of £0.8 million in FY 2022.

As the market slackened further, losses built into 2023, resulting in a £2.7 million operating loss in the year to 31 March 2023, which in turn presented liquidity challenges.

HSBC UK were owed £4.9 million, meanwhile investor BGF was owed £4.6 million. Stock was valued at £1.8 million (BMX bikes, accessories and parts).

Five months later, in August, a buyer was being sought and over 175 parties were approached (broken down as 33 ‘trade parties’ and 142 financial investors), says the Memorandum. The business was also marketed online on some channels, but no solvent offers were received. There were, however, two offers to acquire the business and assets on a pre-pack basis. Legal advice followed the decision to appoint administrators on 29 August 2023 (recorded on Companies House on 11 September).

Wheels of Steel bought it through a pre-pack sale of £550,000, which effectively brought the Source back to its original founders, brothers Rich and Marc Moore.

Corroborated reports indicate that cycling suppliers to the Source did not lose out through the move and have been paid in full.

The above story only applies to the Source’s UK business – the European and US companies have been unaffected.

In short, The Source was facing the common and extreme challenges that the cycle industry (and many others) have been enduring. Those challenges have closed some significant players in the sector in the UK, not least distributors Moore Large, 2pure and Fli Distribution. Likewise, big name retailers like ProBikeKit and Planet X were bought amid struggling trading, while we’ve also seen bike brands step in to support retailers. An unexpected boom during lockdown, supply chain disruption, followed by overstocks in the market, uncertainty, inflation and reduced consumer spending power have been (we hope) unprecedented challenges.

Editor’s note: Since publishing and retracting a story on The Source (Hastings) last week, we’ve used additional material and information, largely from official publicly available documents, but also from confidential sources, to produce this updated version.