28% decrease in corporate insolvencies in H1 2019 compared to the same period in 2018
310 corporate insolvencies in total in H1 2019
The latest insolvency statistics published by Deloitte indicate that the total number of corporate insolvencies in H1 2019 was 310. This is a significant decrease of 125 (29%) on H1 2018, when 435 corporate insolvencies were recorded.
The analysis also shows that the age of companies becoming insolvent has remained consistent for H1 2019 - 78% (241) of insolvent companies in the first half of this year were incorporated more than five years ago.
22% (69) of all insolvencies recorded in the first six months of 2019 relate to companies less than five years old, 25% (76) are in the 5-10 years bracket, 22% (69) are in the 10-20 years bracket, 17% (53) are in the 20-30 years bracket, 7% (21) are in the 30-40 years bracket and 7% (22) are over 40 years old.
Types of insolvencies
The continued prevalence of creditors’ voluntary liquidations (CVLs) as a means of addressing corporate insolvency was apparent in the first half of 2019. CVL insolvencies accounted for 206 or 66% of the total number of corporate insolvencies in the first half of 2019. This is a marginal decrease of 2% on H1 2018 figures when CVL insolvencies represented 68% of overall insolvencies.
The number of court liquidation appointments (CL) and wind up petitions have decreased marginally from 43 incidences in H1 2018 to 34 for the same period in 2019.
The most significant shift on a year-to-year basis has been recorded in the number of corporate receivership appointments, where the number of incidences recorded has decreased substantially from 83 recorded in H1 2018 to 54 in H1 2019. On a quarterly basis, receiverships have increased slightly in Q2 2019, when 33 cases were recorded, compared to Q1 2019 when 21 receivers were appointed over a company or corporate assets.
Lastly, there has been a slight increase in examinership appointments in H1 2019 compared to the same period in 2018. In the first six months of 2019 16 companies entered the examinership process, while in H1 2018 only 12 cases were recorded.
Commenting on the figures, David van Dessel, Partner, Financial Advisory, Deloitte said:
It is encouraging that there is an increase, albeit a small one, in examinerships over the first half of this year. Analysis of prior periods has shown that the majority of companies who attempt an examinership return successfully to trading and emerge with stronger balance sheets.
Overall, we are of the view that the decrease in corporate receivership activity observed in the first half of 2019 is likely to level out in the latter half of 2019 and into 2020 with an increase anticipated as recent acquirers of non-performing loan books (NPLs) commence enforcing their security in relation to the corporate loans acquired. We anticipate the number of corporate receivership appointments as an overall proportion of corporate insolvencies will increase as a result of this also.
Geographically, the incidence of corporate insolvencies has remained broadly consistent over the course of the last year. The highest number of corporate insolvencies recorded in H1 2019 relate to Leinster (200), followed by Munster (68), Connaught (32) and Ulster (10). This pattern is generally consistent with previously recorded figures.
Findings show that the breakdown of insolvencies by industry is in line with previous years.
The services industry once again recorded the highest level of insolvencies with 122 (40%) in H1 2019. Compared to the same period in 2018 the services industry has recorded an increase of 27%. Within this industry, companies operating in the financial sector have been the most prone to insolvency during the period. Out of 122 corporate insolvencies recorded, 28 related to companies operating in the financial services sector. This is consistent with the overall statistics recorded in 2018. Real estate and property services is the second most common services sector affected by insolvency during H1 2019 with 16 insolvencies noted. Other notable service sectors affected by insolvency in H1 2019 include the personal services (13), publishing and advertising (9) and home repair (6) sectors.
The construction industry once again followed the services industry as having the second highest level of corporate insolvencies in H1 2019, with a total of 57 (18% of insolvencies recorded in H1 2019). This statistic does however reflect a notable decrease on the same period in 2018 when insolvencies of construction companies totalled 85 and accounted for 19% of corporate insolvencies in that period.
The hospitality and retail sectors both represented 13% respectively of all insolvencies recorded in H1 2019 with 41 insolvencies recorded in respect of each. Insolvency levels in the retail sector are decreasing on both a year-to-year and quarter-to-quarter basis. 64 companies went through an insolvency process in H1 2018, compared to 41 in the same period in 2019. In addition, the number of insolvencies in the retail sector decreased from 25 in Q1 2019 to 16 in Q2 2019. These figures point to an overall improvement in these sectors.
Lastly, a total of 49 insolvencies were recorded in the manufacturing, IT, motor, transport and wholesale sectors. The most significant difference in comparison to the first half of 2018 was recorded in the manufacturing sector, where the number of insolvencies decreased from 33 in 2018 to 18 in 2019.
Mr Van Dessel concluded:
Looking towards the second half of the year, we expect that the overall number of insolvencies will continue to remain steady. That said, should a no-deal Brexit scenario materialise in October 2019, it could have a material impact on insolvency levels; however, any effect is more likely to be reflected in the 2020 statistics.
Directors of struggling companies should be reminded of the importance of seeking the appropriate advice in a timely manner. There are a number of restructuring options available, both formal and informal and it is important that the appropriate turnaround strategies are implemented early. In circumstances where corporate rescue is not possible and a wind-up strategy is necessary, the risks and costs for the company and all stakeholders are minimised if advice has been sought and received at an early stage in the process.
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