Rachel Elnaugh’s Red Letter Days went into administration amid crippling debts. Couldn’t get much worse, could it?
She had carefully built the £17m-turnover experiences company before busily forging a career as a business guru on the BBC’s Dragons’ Den – only to lose it all. To then see the ailing business saved by two of her fellow panelists on the programme in a blaze of headlines rubbed salt into an already gaping wound. It’s about as humiliating a scenario as you could imagine.
Peter Jones, the entrepreneur behind £200m-plus wireless communications business Phones International Group, and Theo Paphitis, the man who revitalised La Senza, Ryman and Millwall FC, stepped in to pluck Elnaugh’s 16-year-old ‘baby’ from the clutches of administrators Kroll in early August.
Jones, particularly, may have looked to outsiders as though he had a mean streak. He had sat side by side with Elnaugh for the filming of two series’ of BBC Two’s cult success. Paphitis on the other hand had yet to be publicly unveiled as the replacement for YO! Sushi founder Simon Woodroffe.
For Jones, there was no discernible ‘fit’ with his other business activities and his position in the limelight could only be enhanced by this sexy business story for the nationals. Furthermore, taking on the debts would barely dent his estimated personal wealth. How could he lose?
But he refutes absolutely that he moved out of any desire to boost his profile further, arguing that he and Paphitis have far from courted the press. “This is not a publicity stunt,” he says, anticipating how some might perceive it. “The reality of life is we’ve got to go in and do a turnaround. When we’ve achieved that, we’ll talk about it. Over the last eight weeks we’ve been completely wrapped up in the business.” He admits he’s spoken to Elnaugh, who he described as a business acquaintance more than a friend, once or twice since but says they’re not in dialogue as she has no further part to play.
Good start
To date, he’s bouyant about what the pair have achieved, already referring to it as an “astounding turnaround”. “I’m very pleased with what we’ve got,” he enthuses. “We’ve done a lot already. I’m not saying it’s a miracle, but it’s not far from it if you compare where the business was to where it is now.”
Orders are being processed every day. Agreements with suppliers have, to a great extent, been salvaged. And customers too will be pleased to learn that the initial commitment to redeem vouchers bought via Visa and Mastercard, where the card issuer picks up the liability anyway, has been extended.
Debenhams, Harrods and Selfridges, where the company has concession outlets, are all back on board. This represents more than 80% of the company’s retail business. And more announcements appear imminent. “We’re working closely with House of Fraser to see whether that can be sorted out. So we’ve got a lot of very happy people as a result,” he says.
Customer satisfaction has come at a price though and Jones and Paphitis are digging deeper than they had expected to. Jones admits he was surprised at the number of vouchers that have not been redeemed, and Kroll puts total debts at more than £14m – much of which is effectively written off because the money had been paid up-front and used within the business by Elnaugh. What seems incredible is that she told Growing Business in 2003 that the company had been profitable for a decade at that time. Proof that an apparently successful company’s demise can be rapid.