Client losses knock over Sumo Visual

Multiple major client losses have forced Sumo Visual Group, one of Australia’s biggest retail signage printers, into administration, only six months after making a big kit investment.

The $30m-a-year company with operations in Melbourne and Sydney entered voluntary administration on Tuesday under PPB Advisory, which will try to sell the business.

Administrator Craig Crosbie says all 80 staff were terminated late yesterday after it 'quickly became apparent that Sumo Group had insufficient funds to pay employees'.

“Our priority is to assist employees through this period, and to seek expressions of interest to purchase the assets of Sumo Group," he says.

“We will inform the Department of Employment that a Fair Entitlements Guarantee (FEG) claim is being prepared and we will do everything in our power to secure FEG funding, process employee claims as quickly as possible and to identify potential employment opportunities for affected employees.”

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Sources close to the company say a big retail client recently jumped ship to a competitor while another switched out the vast majority of its work, and resulting cashflow issues led to the printer’s predicament.

Sumo boasted some of the biggest retail contracts in Australia with clients including Target, Dan Murphy’s, Masters, McDonald’s, and Red Rooster. Retail was 70 per cent of its business.

The sources say Sumo was struggling to find enough work for the HP Scitex FB10000 flatbed printer it installed only in March.

This is despite the company claiming at the time that it had been so swamped with demand that it had to turn away jobs because its machines could not accommodate the volume of work without a major upgrade.

Other sources close to the company say Sumo's woes began much earlier than the recent client losses, starting 18 months ago when the major shareholder, private equity firm Harbert Management Corporation, replaced founder Matt Huber with interim chief executive Robert Read after Huber had a heart attack.

The sources say the new executives underpriced jobs and spent too much – including $800,000 on new software earlier this year. Sumo is said to owe creditors more than $5m plus tax liabilities and employee entitlements.

Sumo has seen major staff turnover this year with Read stepping down in March and replaced as chief executive by Ken Swan, and numerous sales staff leaving in the past few months who sources say saw the writing on the wall.

Other senior figures who have recently fled the sinking ship include sales director Gary Fawcett who left for Fusion Entertainment earlier this month, and several account managers.

This is in addition to head of design and innovation Robert Grosso who left about seven months ago and eventually joined Carlton and United Breweries earlier this month.

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The sources say trading is continuing for the time being but nothing has come in or out of the facility as suppliers will need to strike deals with the administrator.

Sumo’s website is down as of today and no one is answering phones at its Port Melbourne factory, which is just down the road from On Demand, which went into liquidation the same day.

Creditors are due to get a letter from the administrators tomorrow advising them of the situation, with the first creditors meeting scheduled for Monday.

The administrator says it is mindful of the impact of its appointment and will make every effort to preserve value in the business and assist employees whilst it investigates Sumo's affairs, and will report the findings to creditors.

In addition to its size, Sumo won a Global Point of Purchase Advertising International (POPAI) Award earlier this year and gold at the Australia and New Zealand POPAI Marketing at Retail Awards a year ago.

More to follow on this developing story.

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