One in three UK Debt Collection Agencies (DCAs) is making a loss as economic conditions continue to take their toll, according to a new study.
The new Plimsoll Analysis – Debt Collection Agencies, which analysed some 405 DCAs, found that 145 of those companies had made a loss, many for the first time in their history. Whether such losses were down to a one-off bad year or whether there were more fundamental issues was not clear, according to the report author David Pattison: “Many can rightly claim to be victims of difficult trading conditions,” he says. “A quick refocus on profitability would ensure this is an isolated occurrence.”
However, overall conditions are no excuse for a band of serial loss makers in the market: “Some 75 companies are making a loss for the second or even third year running and are simply selling at prices their business cannot sustain,” he continues. “They have put off making the painful decision that more prudent companies made a while ago. No one wants to trim costs, lay off staff, cancel dividend payments and the like but carrying on regardless is now unviable. They can no longer bury their heads in the sand.”
David congratulates management teams that have made often difficult and unpopular decisions: “They have cut their cloth according to the market conditions and are more stable for it,” he says. “Those failing to do so are running out of time and cash. Without a big increase in demand they cannot support their pricing strategy much longer. Watch out for a number of failures among the companies we have identified”.