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The number of companies in ‘critical’ financial distress today showed a big jump as higher interest rates take their toll on the UK economy.
The Begbies Traynor Red Flag Alert report said the 26% increase on the previous quarter showed a “perfect storm impacting every corner of the economy”.
In today’s City trading updates, Sir Martin Sorrell’s S4 Capital said it expects client caution on marketing spend will likely persist during 2024.
AIM-listed software firm approached over £26 million takeover
07:58 , Daniel O’Boyle
AIM-listed SmartSpace Software has received a proposal over a £26 million offer from US-based firm Sign In Solutions.
SmartSpace, which offers software for building management, has received an approach over a 90p per share offer.
Its board said: “Discussions between the parties are advancing but there can be no certainty that an offer will be made, even if the pre-conditions are satisfied or waived.
“Further announcements will be made as and when appropriate.”
London has the most businesses on Begbies Traynor’s ‘critical’ list
07:55 , Michael Hunter
More on the news this morning of another big rise in the number of UK businesses in financial distress.
Begbies Traynor found that London has thew biggest number of firms on the brink of collapse, with over 14,000 falling into its definition of “critical distress”. The South East was second, with just under 8,000.
The Midlands and the North West were after than, with around 5,000 each.
The pattern was the same for companies in “significant distress”, on notch down from critical. London had over 154,000 companies in this category, and the South East almost 93,000.
‘Perfect storm’ leaves almost 50,000 businesses in danger says Begbies Traynor
07:43 , Michael Hunter
One of the most closely watched barometers tracking the number of UK businesses in difficultly has found a sharp rise in the number of firms currently at risk.
Begbies Traynor’s Red Flag tracker found that 47,000 firms are starting the year in critical difficulty, leaving them on the brink of collapse.
The insolvency and accountancy services firm said today that the number was up by a quarter, for the second consecutive period.
There were also almost 540,000 businesses in significant difficulty. The increase was driven by the Construction sector, where the number rose over 15%, and Real Estate & Property Services, where it rose by over 21%.
Begbies said it was a “worrying picture for UK businesses”.
Julie Palmer, Partner at Begbies Traynor, said: “After a difficult year for British businesses that was characterised by high interest rates, rampant inflation, weak consumer confidence and rising and unpredictable input costs, we are now seeing this perfect storm impacting every corner of the economy.”
She added:
“Now that the era of cheap money is firmly a thing of the past, hundreds of thousands of businesses in the UK, who loaded up on affordable debt during those halcyon days, are now coming to terms with the added burden this will have on their finances.”
Virgin Wines shows signs of recovery
07:41 , Daniel O’Boyle
Virgin Wines says it saw a “significant improvement in profitability” in the second half of 2023, after a disastrous period in which it struggled with warehouse issues and a post-pandemic slump in demand.
Revenue ticked slightly up to £34.3 million, but the bottom line looked better as underlying profits grew to £1.75 million.Virgin Wines said this was due to “stringent cost management” as operating costs declined by 14.5%.
After multiple profit warnings last year, the online wine retailer says profits for 2023-24 are in line with expectations.
CEO Jay Wright said: “We are pleased with our performance through the first half of our financial year, particularly our strong profitability despite the challenging trading environment, with EBITDA representing over 5% of revenue. Following operational challenges last year, we made significant improvements in our warehouse operations, achieving a planned reduction in fulfillment costs, while maintaining an excellent next day delivery service throughout the busy peak trading period.”
S4 Capital braces for tough year
07:39 , Simon English
SIR Martin Sorrell’s S4 Capital was cautious today, warning it was is unlikely to be an economic improvement this year,
The digital ad business thinks revenue will be down about 4%, a blow to Tory hopes of a pre-election boom.
Sir Marin, the former WPP executive sometimes dubbed the “Sage of Soho” for his reading of markets, was glum today.
He said this morning: “After four years of very strong growth, 2023 was a difficult year impacted by volatile macro conditions and, consequently, cautious spending from clients, particularly those in the technology sector and from smaller project-based assignments. Our client relationships remain strong and we have also managed costs tightly.”
“While it is early in the year, we are not expecting 2024 to show macro-economic improvement, and client caution on marketing spend will likely persist, although not at last year’s level given interest rates are likely to fall over time. Initial indications are for an improvement in performance in the Content practice, reflecting cost reductions, broadly similar performance in Data&Digital Media to last year and a more challenging outlook for Technology Services. In these unpredictable times, we are focused on positioning the Company for medium term growth, improving profitability and returning funds to shareowners.”
S4 shares open today at 41p bur are likely to come under pressure. They are down 80% in the last year.
Hang Seng weakness continues as Nikkei 225 rallies, FTSE 100 seen higher
07:16 , Graeme Evans
Japan’s latest stock market rally today contrasted sharply with declines of more than 2% for Hong Kong’s Hang Seng index and the Shanghai Composite.
The Nikkei 225 rose 1.6% ahead of tomorrow’s meeting of the Bank of Japan, with the country’s ultra-loose approach on monetary policy set to continue.
While Tokyo’s leading benchmark is near a 34-year high, the Hang Seng is at 15-month low after today’s fall of 2.8% took this year’s losses above 11%.
Mainland China stocks also struggled, with the Shanghai Composite down 2.7% after the country’s central bank left its key lending unchanged.
The FTSE 100 index is expected to open 25 points higher at 7487, although London’s performance contrasts sharply with Wall Street’s after technology stocks drove the S&P 500 index to a record close on Friday.
Recap: Friday’s top stories
06:45 , Simon Hunt
Good morning from the Standard City desk.
You have to go a long way back to find monthly retail figures as grisly as Friday’s 3.2% fall for December.
If you exclude January 2021, when we were still confined to quarters courtesy of the Covid virus, the last time sales plummeted more was in June 2008, just before the credit crunch morphed into full scale financial bedlam.
But December is a much bigger month for retail than June — for the obvious presents and tinsel related reasons — so arguably this remarkable slump in volumes is of far greater significance for the High Street. Indeed it appears to be the worst number for a December since the ONS began collecting monthly data in 1996.
The scale of the fall comes as a surprise, as several bellwether retailers, notably Next, Marks & Spencer and Sainsbury’s, appear to have enjoyed bumper Christmases. But many of the seasonal trading statements, don’t forget, cover a longer 13-week period, not just the final frenzied run-in to the Big Day.
November was strong, so for some retailers volumes in the longer “peak season” may have held up respectably. But November is all about discounting, December, full price sales — in theory. So a major shift from December to November spending — a trend that has been growing in recent years — is a disaster for margins.
Here’s a summary of our other top stories from Friday:
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