Begbies slumps to loss following clear-out

INSOLVENCY firm Begbies Traynor slumped to a £5.7m loss in the year to April 30 as sales dropped by 5% to £57.7m.

The Manchester-based company declared a pre-tax profit of £5.5m from continuing operations, but exceptional losses of £7.1m relating to its discontinued operations dragged down overall levels of profitability.

During the year, the company sold off its tax consultancy business, the bulk of its offshore accounting operations and the Red Flag credit information business. The latter was sold to the group’s executive chairman and founder Ric Traynor in a deal which saw him agree to inject £1m to support the business. Begbies Traynor also has the potential to earn back £1.5m from the deal depending on Red Flag’s future success.

Mr Traynor said the firm had delivered “a resilient financial performance” after taking action to reduce its cost base.

“Having re-focussed the business, we are now operating in a more stable environment with the benefit of a strengthened financial position and a core business which has retained its market leadership.

“Whilst our markets remain challenging and we do not anticipate a substantial improvement in the near term, we remain committed to maximising the performance of and growing our cash-generative and profitable business, both organically and through acquisitions.”

Staff numbers at the company declined by 6% to 563 people, with the bulk of the downsizing taking place in its core insolvency arm.

Some 432 of these are direct fee earners and 84 are partners. The company has also trimmed its main board, with Geoff Hill retiring following disposal of its tax business and corporate development director Graham McInnes moving into a non-executive role. The slimmed-down board now features just three executive directors and two non-execs.

The company, which has a progressive dividend policy, maintained its total dividend payment for the year of 2.2p.

It finished the year with net assets of £58.5m, down from £65.9m a year earlier.

David Gorman of Manchester-based Milkstone stockbrokers said: “Begbies Traynor had quite a tough year, in that it had to respond to difficult market conditions by reshaping the business and reducing costs.

“Given the circumstances, the figures aren’t too bad and are in line with our forecasts.”