Zombies return

See here

R3, the insolvency practice body has claimed that there are 146000 zombie companies in the UK. Thats 8% of the total

In effect, their criteria is a business that is teetering on the edge of insolvency, unable to pay more than the interest on its debts

Now that could be a slightly harsh benchmark and it would be wrong to assume that each and every one of these businesses will fail. But the risk is clear

And the risk extends right across the business community. If say half of these businesses do fail, then arguably that would equate to total average bad debts of 4% of turnover across all markets. Thats a big hole….

Never has credit checking been more vital than today

Travelodge woes

http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/leisure/9481165/Travelodge-agrees-financial-restructuring.html

The downturn now seems to have filtered down to budget hotels or has it? You would have thought that the chain would have been beneficiaries of the tightening of belts but apparently not

But is this simply a case of classic over-expansion? It is a classic credit risk and it may well simply have been that they thought they were likely to benefit a little more than was realistic?

A worrying article on Invoice financing

http://www.telegraph.co.uk/finance/yourbusiness/9482017/Invoice-finance-firms-profit-from-company-failures.html

Worth a read and to summarise the issue of invoice financiers twitching over lucrative “termination fees” is rightly highlighted

It is an issue and one that does the industry no favours. One example is quoted and whilst the unamed accountants summary towards the end of the piece is probably accurate, its doesnt take much bad news to tarnish a sector

I am a little surprised that brokers are cited. Maybe im naive, but in my brokering, the very last outcome i want to see is the administration of the client

Simply put, the commission would stop at this point and whilst there may well be “arrangements” to circumvent this ( i don’t know and wouldn’t want to know) the very fact that a relationship has been built with the client must surely leave a little guilt?

i always visit my prospects and and really enjoy being part of the ambitions of the business. i like to keep in touch and nothing gives me more pleasure than an arrangement that builds success. That might sound all a bit happy clappy, but building those relationships is simply the best part of the job. So far it has proved to be very sucessful

And theres a selfish element too. A happy client refers…

The invoice financing industry is very mixed and the objective is to sort the wheat from the chaff. It does take hard work to keep tabs on which provider acts in which way, but i have a good idea i promise you

No client of mine has had a bad experience yet and i certainly do not expect them to do so

 

High risk construction

An interesting piece here on the plague of the “zombie companies”

The criteria for such businesses is defined as follows

According to R3, “zombie businesses” have four key characteristics: • Just being able to pay the interest on debts, but not reduce the debt itself; • In the event of a rise in interest rates, the business will be unable to pay its debt • Struggling to pay debts when they fall due; • Having to negotiate payment terms with suppliers.

But is this fair? Many an expanded thriving business will be experiencing al the above, most especially in the early years of trading. Growing pains are familiar but do they indicate long term failure? Not at all.

As ever the wider picture has to be considered. 

However there is one area that is highlighted as being vulnerable and probably rightly so

However, the construction sector has the largest proportion of businesses that are only able to pay the interest on their debts – 16%, which equates to 37,000 businesses.

Manning added: “Devastation on the high street is well recorded. Since the start of 2011, over 21,000 jobs have been lost from the failures of major high street names, but we are yet to see the volume of construction failures that we would expect.

“With many capital expenditure projects coming to an end, cuts in public sector budgets and work from the Olympics having recently dried up, we can expect to see some of these businesses fail. Construction may well be the next big casualty from this recession.”

One to watch

 

 

 

More bad news from HMV

Latest results make for grim reading and its difficult to see where the group can go from here

http://www.insolvencynews.com/article/14252/corporate/hmv-announces-16.2m-loss-and-4.4m-loan-deferral</p>

Sales are down 12% year on year and whilst they are backing sales of technology products to breach the gap, these comprise of just 10% of turnover. Its not going to happen is it?

Maybe CD and dvd sales will level out but as an occasional visitor the flagship Oxford Street store, it is very apparent that the number of shoppers there is a lot less than it was a few years back

This is one of those occasions whereby a possible business failure is simply a matter of being exposed to market changes out of your hands. Compared with many retailers, i always felt that HMV stores were nicely presented and they marketed astutely, but that simply hasn’t been enough

 

Bradley Wiggins

Quite something to cycle down to Bushy Park on Weds to see a UK gold medal won by surely our premier sportsman. The crowds were immense and the atmosphere incredible

And what a boom cycling has proved to be in London (at least). Thousands of cyclists descended to see a bit of history

One troubled high street retailer will be very happy too