Interpath reports loss amid 'false dawns' in restructuring market
Restructuring and consulting firm Interpath Advisory has suffered its second consecutive annual loss. Rising interest rates have pushed more firms into financial distress, but Interpath has not seen that drive an ‘avalanche’ of activity, according to its leaders.
Even as rate hikes squeeze company finances, many companies which might consider restructuring are somehow avoiding it. The number of zombie companies – those unable to meet interest obligations with operating profit for three years running – has risen by 5% in the last year, according to recent research by Kearney.
This may be impacting firms like Interpath Advisory, whose bread and butter is helping companies to restructure their finances. To that end, CEO Blair Nimmo told the Financial Times that while the number of companies in financial distress was on the rise, the restructuring market has “not turned out to be quite as hot as people thought it would be”.
Nimmo is a former KPMG partner, who has been with Interpath since it broke away from the Big Four firm in 2021. Backed by private equity group HIG Capital, the deal was one of several which showed that private equity firms saw restructuring consultancies – positioned to help firms through tough economic conditions – as a major opportunity. But in the years since, Nimmo said that growth in restructuring had been “disappointing in the context of the market”.
He added, “In the restructuring market there have been so many false dawns. We are getting progressively busier . . . but do I see some sort of avalanche [of activity]? No, I don’t.”
Indeed, Interpath has seen revenues rise in its most recent financial year. The income of its restructuring business expanded 2.6%, to £115.6 million during the year to March 2023. But with a significant jump in businesses in distress, and company insolvencies in England and Wales hitting a 13-year high in 2022 amid soaring interest rates, Interpath had expected better.
To that end, Interpath had grown its headcount from 550 since the company separated from KPMG, to about 740, in anticipation of heightened demand. This has pushed up staff costs by 25% to £89 million during its latest financial year – with its accounts noting the highest paid director received £1.02 million for the last financial year.
This meant that even though sales at Interpath’s advisory business jumped to £26.9 million, up from £2.8 million a year earlier, the firm still faced a pre-tax loss for the second year running. While revenues totalled £142.6 million during the period, losses widened from £10.2 million to £10.6 million leading to March 2023.
However, Nimmo still sees opportunities for the firm in the year ahead. Interpath expanded internationally during the last year – opening three offices in Ireland and acquiring Kalo Caribbean, which operates in the British Virgin Islands and the Cayman Islands – which also contributed to the hit its balance sheet took.
But as those presences look to offer more revenues in the current year, Nimmo told the Financial Times that Interpath was looking at opportunities to expand into continental Europe and the US. That could include further acquisitions.