According to the latest set of insolvency statistics published by www.InsolvencyJournal.ie, total corporate insolvencies for the first 8 months of 2013 stands at 920. This fall represents a 21% drop when compared to last years’ total of 1,170. Total Company failures for the month of August this year stand at 108 compared to 126 in August last year, a drop of 14%.
Regionally, Leinster accounted for 60% of the 108 overall monthly total, with Dublin making up for 52% of all Leinster business failures. Munster followed with 31% of the overall total. Ulster and Connaught were the provinces least affected.
Some good news for the construction sector, which has seen a 17% year on year drop in corporate insolvencies from 282 construction business failures recorded for the first 8 months of 2012 compared to 234 recorded so far this year. There were a total of 35 construction related business failures in August this year, up 14% compared to August 2012. However, According to research from Ulster Bank, The construction sector saw tentative signs of recovery in July with new orders up for the first time in 19 months and house building edging back into positive territory. The Ulster Bank Construction Purchasing Managers’ Index® (PMI®) – a seasonally adjusted index designed to track changes in total construction activity – remained below the 50.0 no-change mark in July, but rose sharply to 47.5 from 43.4 in the previous month. This signalled a marked easing in the rate of decline in activity, with the latest fall the slowest since December 2011.
Commenting on his outlook for the construction industry over the coming months and into the last quarter, David Van Dessel partner with kavanaghfennell (the firm who compile the data) said, “Although the construction sector has enjoyed a 17% decrease in insolvency activity in 2013, (when compared to 2012), the overall corporate insolvency market enjoyed an even greater decrease in activity of 21%, which demonstrates that the construction sector is still suffering more than other sectors. However, there are some positive indicators for the sector such as the favourable move in the Ulster Bank Construction Purchasing Mangers’ index and increased profitability recently announced by Grafton Group Plc, who increased their operating profit by 17% to over €36m.To date companies at the core of the construction sector have been struggling to address the difficult question of secured debt and the courts have allowed little leeway with regard to secured debt write off through Examinership, which has left those companies at the core of the construction sector with little or no wriggle room. Suppliers into the core of the construction sector have suffered terribly with bad debt write off but those remaining in business today appear to be beginning to rebuild their balance sheet strength. Considering the decrease in construction sector insolvencies, the increase in the Construction PMI and a more active property market in general, perhaps there is some room for a small amount of optimism.”
There was also some good news for the manufacturing sector which experienced a significant drop from 16 insolvencies recorded in August 2012 to 5 business failures in August 2013. In addition Data published by the Central Statistics Office, showed production in the industrial sector had grown by 1.2 per cent in July compared to June – meaning a year-on-year increase of 6.4 per cent. On a seasonally adjusted basis, production in manufacturing industries was 4.4 per cent higher than in the previous quarter, the CSO said. The adjusted figure for industrial turnover between May and July was up by 3.7 per cent on the previous quarter, and by 6.3 per cent on the same period of 2011. Commenting on the manufacturing sector, David Van Dessel commented, “manufacturing companies, unlike property development companies, are perfectly placed to avail of Ireland’s corporate recovery legislation through Examinership. There are positive signs for the manufacturing sector, but companies that are struggling with large creditor balances might consider balance sheet restructuring through Examinership, which is aimed at protecting the underlying business, while the balance sheet is restructured, enabling the business to be put back on an even keel.”
Retail corporate insolvencies so far this year stand at 133, a 10% drop compared to the 149 recorded during the same period last year. Despite this positive year on year comparison, the overall KBC Ireland/ESRI Consumer Sentiment Index decreased to 68.2 in July, from 70.6 in June. Commenting on the figures, David Van Dessel, noted, “the pullback seen in Irish consumer sentiment in July isn’t surprising after the sharp improvement reported in June specifically related to improved weather conditions. More importantly, it suggests confidence is still fragile and very vulnerable to unexpected bad news”.
A survey published this week of key Dublin retailers has found that many are facing an increase in their annual rates bill next year of between 30 and 80 per cent, according to Retail Ireland, the IBEC group that represents the retail sector. Stephen Lynam, Director of Retail Ireland said, “The news that the cost of commercial rates for many retailers in the city is set to soar is unacceptable. Retail sales have fallen by 25% in recent years, and tens of thousands of jobs have been lost as a result. Retailers have had to keep prices low to attract price-sensitive customers, despite the fact that rents remain too high and the cost of doing business has increased”. According to a Retail Ireland survey of eight leading city centre retailers, increases of between 30 and 80 per cent are being proposed. Commenting on the anticipated increase in Rates, David Van Dessel said, “where businesses, including retail businesses, are faced with escalating costs which threaten the going concern status of the Company, Directors should consider Examinership. In short, where it can be demonstrated that a Company has a reasonable prospect of survival the court may grant the company protection from its creditors for a period of up to 70 days, during which time an Examiner will attempt to restructure the balance sheet by negotiating with the creditors.”
The motor industry has seen steady improvement with a 50% reduction in level of business failures from May to August this year. More than 11,500 new cars were sold in July following the Introduction of the new 132 Plate. Alan Nolan, Director General of SIMI said, the offers and incentives from both distributors and dealers encouraged consumers to buy this July. New car sales had dropped-off in June in anticipation of the new plate but the total for the three months May, June and July now exceeds the same three months last year by nearly 4%, after the first four months of the year had shown a drop of 13.2%.
SIMI motor stats:
1. 11,640 new cars sold in July this year, up 7,216 (163%) on last year (4,424)
2. 864 more cars sold in July than combination of June and July last year
3. 7,216 more than July last year
4. July 2013 is the best July since the beginning of the recession in 2008
However, business failures continue within the sector with the recent voluntary liquidation of Newgate Motors in Navan, Co. Meath. The car dealership specialising in Mercedes Benz and Land Rover passenger and commercial vehicles was established in 1990.
Receiverships are down 15% year on year, with 225 recorded from January to August this year compared to 266 during same period in 2012. Court Liquidations are down marginally by 2% from a total of 43 recorded from January to August 2012 compared to 42 from January to August 2013. Creditor Voluntary Liquidations (CVL’s) dropped by 24% with a total of 843 from January to August 2012 to 639 from January to August 2013. Examinerships dropped by 22% with 18 recorded from January to August 2012 and 14 noted so far this year.
David Van Dessel, commented “It is extremely disappointing to see the continued low level of Examinership take up, with only 1 in 100 insolvent companies pursuing this process, I am very keen to see the new Examinership legislation come into force as soon as possible, which we hope will see more troubled companies viewing this process as a viable option, thus reducing the number of liquidations”. – See more at: http://insolvencyjournal.ie/news/21-year-on-year-drop-in-corporate-insolvencies#sthash.43wymwTm.dpuf