The collapse of Wilko Limited: Forecasting business adversity with the help of predictive analytics
Despite its longstanding presence, Wilko's insolvency highlights the challenges and fluctuations that can impact even well-established businesses. Learn how Dun & Bradstreet's predictive indicators had foreseen the onset of Wilko Limited’s insolvency 7 months before it occurred, yet the D&B Failure Score deteriorated substantially 8 months before it became insolvent.
Wilko Limited, a well-established presence in the retail sector, has garnered attention for its journey that unfolded over decades. Founded in 1941, Wilko has carved a remarkable path within the dynamic British retail industry, adapting to evolving market trends while navigating the challenges that often arise in such a competitive landscape.
With its longstanding history, Wilko Limited's story serves as a compelling case study that offers insights into the complexities and fluctuations that can impact even the most established businesses. Armed with comprehensive business data, Dun & Bradstreet accurately predicted the decline of Wilko Limited. Read on to learn more about how it unfolded.
What goes into calculating the D&B Failure Score?
Using up-to-date precise data to drive your credit risk assessment framework is essential for making astute business decisions, especially when companies are looking to decide which business partners may encounter difficulties in fulfilling their financial commitments amid the existing economic environment.
The D&B Failure Score helps to do just that. It predicts the likelihood that a company will obtain relief from its creditors or cease operations over the next 12-month period, based on the information in the Dun & Bradstreet Data Cloud. The D&B Failure Score is effective at recognising critical indicators that often precede financial distress or operational decline. To achieve this, the Failure Scorecard looks for early warning signals, such as declining revenue, increasing debt levels, inability to meet financial obligations, decreasing profitability, and more. In summary, to evaluate risks objectively and consistently, Dun & Bradstreet combines a large amount of business information with expert analysis and statistical techniques to determine the potential risk associated with a business.
What's the meaning behind the D&B Failure Score?
Factual information is analysed using advanced statistical modelling techniques. The D&B Failure Score is a relative measure of risk, whereby 1 represents organisations that have the highest probability of failure and 100 – the lowest. It shows how a company's risk of failure compares to other organisations within a country.
The D&B Failure Score provided vital insights during Wilko's decline:
The D&B Failure Score played a pivotal role in uncovering crucial insights throughout Wilko's decline:
In August 2022, Wilko received a Failure Score of 91 alongside a Recommended Credit Limit of £18,562,500.
By September 2022, the Failure Score decreased to 85 due to outstanding charges against the company.
November 2022 witnessed a further deterioration in the Failure Score to 74, driven by aging financial data.
At the end of the same month, the Failure Score further declined to 71, attributed to late filings and deteriorating financial information, signifying elevated financial distress.
December 2022 marked a steep decline to 20 as auditors expressed serious concern.
In January 2023, the score deteriorated to 10, attributed to director resignations and a downsized board of directors.
May 2023 saw a reduction to a score of 5, prompted by negative news about Wilko exploring a CVA (Company Voluntary Arrangement).
On August 3, 2023, the Failure Score dropped to 1 as news emerged about Wilko filing a notice of intent to appoint administrators.
In mid-August 2023, D&B received notification that an Administrator was appointed.
In summary, the D&B Failure Score provided a comprehensive timeline of Wilko's declining financial situation, accurately anticipating significant developments leading up to the company's eventual insolvency.
What other predictive indicators played a key role in determining Wilko’s decline?
Dun & Bradstreet uses several scores to predict the financial distress of businesses in addition to the D&B Failure Score such as the D&B Delinquency Score. It predicts the likelihood that an organisation will pay its bills in a severely delinquent manner over the next 12 months. It ranges from 1 to 100, and a lower score suggests a higher likelihood of severe delinquency.
The D&B Delinquency score also revealed a similar downward trajectory for Wilko Limited: in December 2022, the company's score dropped from 86 to 50, and this decline continued with a further plunge to 2 by May 2023, pointing to a very high risk of financial distress.
Here's how D&B can help businesses decide who to do business with:
D&B collects information from tens of thousands of sources globally. Our predictive risk scores use demographics, corporate linkage, principals, financial, trade experiences and public detrimental information to predict how an organisation is likely to behave in the future.
Our data and predictive indicators provide our customers with accurate and timely insight signifying that an organisation may be headed for failure. D&B's monitoring services can be used to identify key changes to an organisation, allowing our customers to take appropriate and timely action.
Utilising the insight provided by D&B’s Predictive Indicators helps customers to quickly identify the organisations that are likely to fail or pay late, helping to drive growth, mitigate risk and increase profitability.
Predictive Indicators can be adjusted by authorised experts to reflect non statistical/catastrophic events. For example, news reports from trustworthy sources that indicate a material change to risk can be investigated and changes made where appropriate. We also apply expert rules (sometimes referred to as overrides) in certain situations to ensure appropriate scores.
Keen to learn more?
Eager to protect your business from third party risk by accessing our exceptional industry-leading scores, including the Failure Score, and more? D&B Finance Analytics combines powerful insights and technology to help finance teams manage risk, increase operational efficiency, and reduce costs, and if you would like to get started with a smaller number of International or European credit reports only, you can now order them online.