UK Business Metrics and Financial Risk Tracker

Any company with an H-Score® less than 25 falls into our Warning Area. These companies are showing similar traits to companies that have failed in the past and are at serious risk of distress themselves. Not all companies in the Warning Area will go on to fail, but a high number do (around 60%).

Zombies are companies that earn just enough money to continue operating and re-pay the interest on their debt. With rising interest rates in 2023, it is likely that many of these zombie companies will be forced into liquidation.

WUPA definition

A winding-up petition is a legal action that can be taken against a company by one of its creditors or by the government if the company owes money.

All petitions can be found in the London Gazette. Details of the document filed at the Gazette, including Gazette Entry Date, Event Description, Appointment Date, Practitioner Company, Practitioner Name and Court can all be found on our online platform.

NOIAA definition

A notice of intention to appoint administrators is when the company files a document to the court to outline that it intends to go into administration if a solution cannot be found to its immediate financial problems.

The rapid movement of incorporation(s) either prior to or following insolvency action against a company where the new company or companies are linked to the company that experienced insolvency action by one or more common directors. Although the population of companies that meet these criteria are legitimate and of no legal concern, the population also includes legitimate phoenixisms (if incorporated and operated in accordance with the law), and a subcategory of illegitimate phoenixisms where the applicable law has not been followed or where the director(s) intend or intended to commit fraud.

Legitimate Phoenixisms

The practice of carrying on the same business or trade successively through a series of companies, as allowed by law, where each becomes insolvent (cannot pay their debts) in turn. Each time this happens, the insolvent company’s business, but not its debts, is transferred to a new, similar ‘phoenix’ company. The insolvent company then ceases to trade and might enter into formal insolvency proceedings (liquidation, administration or administrative receivership) or be dissolved.

Illegitimate Phoenixisms

Any phoenix practice where the applicable law has not been followed or where the director(s) have intent to defraud. For example, intentionally transferring assets at lower than market value, exploiting phoenixisms to intentionally escape from debts.

Interest coverage ratio is calculated by dividing a company’s earnings before interest and taxes (EBIT) by its interest expense during a given period. If a company has a ratio below 1.5, this indicates that the company may not have enough capital to pay interest on its debts.

A profit warning is an official statement to the stock exchange from a publicly listed company that says that it will report full-year profits materially below management or market expectations.

On average, one-in-five companies delist within a year of their third warning, most due to insolvency. Making companies that issue 3 or more warnings especially vulnerable.

EY publish a quarterly profit warning report.