Begbies issues profits warning

Begbies issues profits warning

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Begbies Traynor warned over profits after a decline in the number of companies hitting the wall

Insolvency specialist Begbies Traynor has warned over profits after a decline in the number of companies hitting the wall.

The professional services consultancy said adjusted pre-tax profits for the six months to October 31 were expected to be 16% lower than a year earlier, down £700,000 to £3.6 million.

The Manchester-based company was hit by a 9% reduction in insolvency revenues as the economic recovery saw fewer firms go bust, while Begbies also took £800,000 in restructuring costs.

Government statistics recently showed the number of UK insolvencies in the third quarter of 2010 were 18% lower than the same period the previous year.

Begbies Traynor, which claims to be the UK’s biggest administrator by cases handled, said the number of companies falling into administration remained lower than expected in the fourth quarter of the year because of temporary Government support initiatives and the lenience of creditors.

However, it expects more insolvencies in 2011 as the Government’s Budget cuts start to bite.

It added the reduction in revenues from administration work had been offset by a better performance in its non-insolvency operations, which would help keep revenues broadly the same as last year.

Shares in Begbies Traynor, which is due to report its results for the six months to 31 October on December 16, slumped 7% following Monday’s profits alert.

Begbies benefited from the recession in recent years as the number of companies falling into administration soared. Its adjusted pre-tax profits increased 40% to £9.8 million in the year to April 2009, as the number of companies it dealt with as administrator increased by 38% to 1,800.

The number of insolvencies in the UK has fallen since the start of 2009, although Begbies has been growing its share of the market. The company reported revenues from continuing operations up 11% to £69.1 million and adjusted pre-tax profits up 6% to £10.4 million in the year to April 2010.

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