Begbies lifts profits as revenues dip

INSOLVENCY specialist Begbies Traynor hailed solid half year results after a busy period which saw it refocus on its core business by selling its tax business.

The AIM-listed Manchester-based group increased ebitda from £4.4m to £4.6m and pre-tax profits from £3.1m to £3.4m despite flat revenues in its continuing business in the six months to the end of October. Turnover was £29.4m compared with £29.8m a year ago.

The group said revenues in its core insolvency division had seen a small increase, which had been offset by a fall in revenues in its risk business.

Chairman Ric Traynor said the results were achieved against a “background of a continuing uncertain economic environment”, and the business was seeing the benefits of restructuring over the last, which improved operating margins.

In the insolvency and restructuring division, where Begbies Traynor is the country’s leading independent business rescue organisation, revenues were  £26.8m, up from £26.5m last year.

This, combined with a reduced cost base following the restructuring in the previous financial year, resulted in an increase in segmental profit of £0.4m to £7.2m  Operating margins were 26.9% (2010: 25.6%).
 
Mr Traynor said the insolvency market has stabilised this year 2011, after falling in 2009 and 2010.

“However, despite the apparent stalling of economic recovery, base rates of 0.5% continue to provide a very benign financing environment for otherwise weak companies,” he added.

He said costs were being kept under close review, and that during the year staff employed in the insolvency division had been reduced from 502 at the start of the year to 488, which resulted in exceptional restructuring costs of £400,000.
 
Revenues in Begbies’ Global risk partners business, which provides of specialist, integrated risk consulting and forensic investigation services, fell to £2.6m from £3.4m and profits more than halved from £700,000 to £200,000.
 
He said activity levels in 2010 befitted from several large and profitable engagements, which were completed at the start of this financial year and have not been replaced to date. On a more positive note he said the division has a “number of sales”, which would potentially benefit future periods.
 
In the loss-making tax business – sold last month to Smith and Williamson Holdings for an initial consideration of £2.9m, revenues were £2.3m compared with £4m a year ago.

Mr Traynor said the sale of Red Flag – the firm’s data and research arm – is progressing. This division generated revenue of £300,000 in the period, up from £100,000 last year.

Looking ahead he said: “There are no indicators of an increase in activity levels in the short-term and we remain conservative in our outlook.

“However, with the level of financial distress in the UK we believe that the insolvency and restructuring division is well placed to take advantage of any opportunities as they arise.
 
“Overall, having completed the disposal of the tax division and making good progress with the remaining disposal plans, the board is now focused on maximising the performance of the core businesses.”