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Insolvency Predictions: How did we do?

Jan 18, 2024 Niamh Hunter Updated On: January 25, 2024
Insolvency Predictions: How did we do?

Of all the UK sectors in 2023, the construction industry experienced the majority of insolvencies and bad debt. However, regardless of sector, the impact of bad debt is one of the most detrimental things a business can undergo. So much so, that bad debt makes a business three times more likely to go insolvent themselves.

Red Flag Alert are industry leaders in business data, protecting companies by tracking and detecting key indicators of potential insolvency before news reaches others. Using this data, we highlighted three high-turnover construction companies which were in financial distress and at risk of insolvency, in October 2023.

But, were our predictions for construction company insolvencies in 2023 accurate?

2023 Predictions Recap

In October 2023, Red Flag Alert pinpointed three high-turnover construction companies that were showing tell-tale signs of distress. Analysing comprehensive data across financials, growth scores, and events painted a clearer picture of the future…

Tingdene Homes Limited

The prominent manufacturer of residential park homes and holiday lodges in the UK faced a tumultuous 2023 marked by challenges, notably the submission of a winding-up order by a creditor. The company navigated through a difficult period, adapting to the evolving business landscape.

XYZ Rail Limited

Primarily servicing the rail sector, XYZ encountered ongoing difficulties since 2022. The company found itself in a precarious position, ultimately becoming the subject of a winding-up order. The challenges underscored the broader issues impacting the rail industry during this period.

Catfoss Group Manufacturing Limited

Specialising in the construction of hospitals and ancillary buildings for the NHS, Catfoss experienced a challenging year. Over the past 12 months, the company witnessed a decline in both liquidity and revenue on a year-on-year basis. Furthermore, a winding-up petition added to the financial pressures faced by Catfoss Group Manufacturing Limited, highlighting the complexities within the healthcare construction sector.

These developments across Tingdene Homes Ltd, XYZ Rail Ltd, and Catfoss Group Manufacturing Ltd reflect the broader economic and industry-specific challenges that shaped the business landscape in 2024. But, how did they fare?

Red Flag Alert’s 2024 Insolvency Prediction Results

Tingdene Homes Limited - Insolvent

Once Red Flag Alert’s official prediction was detailed on October 12th 2023, Tingdene Homes Ltd began to suffer from substantial financial concerns. From the time our prediction was published to their insolvency, Tingdene was hit with 11 new CCJs from creditors.

Within a matter of weeks, the manufacturer dropped down to two red flags, indicating significant legal notices and an extreme potential for risk, and they are now in the weakest 20% of companies in the UK.

As the situation worsened, the company had three separate winding-up petitions, leading to a three-red flag status being assigned to Tingdene on the 8th of December 2023.

On the 9th of January 2024, the company went insolvent, almost one month before the three red flag warnings.

Read the full company report here

XYZ Rail Limited - Insolvent

Prior to Red Flag Alert’s prediction, XYZ Rail Ltd had been experiencing a turbulent stage of business. Being tracked as a one red flag company from the 24th of June 2022, the company accessed creditor services and satisfied their mortgage, before a reclassification to Bronze on the 14th of May 2023.

Bronze would indicate that the company has passed RFA scorecards, and is deemed healthy, with a low chance of failure. However, they should still be subject to closer monitoring, as they are less financially stable compared to Gold and Silver companies.

However, less than three months later, a winding up petition was submitted and XYZ Rail’s status worsened to two red flags. As a new mortgage was taken out on the 11th of August, the company dropped to three flags on the 12th of September, with insolvency taking place a month later.

Read the full company report here

Catfoss Group Manufacturing Limited - Improved

Overall, Catfoss Group Manufacturing Ltd has experienced its fair share of turbulence, with a history littered with challenges. On the 2nd of November, the construction company was assigned one red flag, highlighting a moderate risk and suggesting a downward slide into insolvency. This was followed by a winding-up petition on November 20th, 2022, and a two red flag status, emphasising the risk and downward trend.

Liquidity ratio and revenue both dropped by 10% on March 22, 2023, resulting in three red flags by September 21, 2023. Subsequently, there were further drops in revenue and liquidity by 10%

However, there was a positive turn as asset value increased by 15%, resulting in a Silver classification on January 6, 2024.

In October 2023, Red Flag Alert predicted Catfoss Group’s incoming insolvency. Using key analysis, our experts understood that their history indicated extreme potential risk and close monitoring was necessary to mitigate its impact.

Fortunately, businesses were able to protect themselves during this time, with Red Flag Alert monitoring.

Meanwhile, Catfoss Group also managed to use this time to make improvements, improving their standing and regaining financial stability. This earned them a silver classification and an asset value increase of 15% on the 6th of January 2024.

But as the situation got much worse before it improved, Red Flag Alert customers were the first to know. This gave them the opportunity to dodge the ripple effect of instability and track when Catfoss Group were in a stronger position and enjoying a positive upward trend.

Read the full company report here

Try Red Flag Alert

Red Flag Alert’s data visualisation tools demystify key business indicators to optimise tracking and monitoring for potential risk, handing businesses the control they need to secure growth and avoid insolvencies.

It’s through these industry-leading tools that our experts are able to identify the companies with the highest likelihood of financial instability. By harnessing the data behind insolvency, Red Flag Alert shines a light on the businesses that pose the most risk.

Businesses across the UK are all facing their own challenges, but as the construction industry attempts to tackle insolvency, it’s becoming increasingly clear it is being disproportionally affected.

Whilst there is no one clear route to reducing these insolvencies and their impact, robust credit risk procedures are a powerful placeholder. By closely monitoring business data for any suppliers, debtors, or partners, businesses can begin to map out the most likely future.

Monitoring for financial health, early signs of instability, key events, and changes, as well as using the data to find reliable and financially stable businesses.

Red Flag Alert has the most up-to-date, comprehensive business data, using innovative technology to create a streamlined monitoring process that does the hard work for you. Start protecting yourself today and secure your free seven-day trial of the Red Flag Alert platform.

Published by Niamh Hunter January 18, 2024
Niamh Hunter