Begbies hit as deal flow dries up

BEGBIES Traynor’s corporate finance division has run up a £1m loss following the collapse of the deals market.

In a trading statement covering the six months to October 31 the national accountancy firm, which is headquartered in Manchester, said activity had, “ground to a virtual halt”.

The operating loss is worse than expected and the firm has been cutting overheads leading to an exceptional charge of £300,000. Jobs have gone but it did not say how many.

But the downturn has increased the firm’s insolvency work which has been its traditional focus. Activity increased during the period and the division was busier than in the preceding six months. As a result insolvency accounted for 80% of the group’s first-half revenue.

Executive chairman Ric Traynor said the firm had enough cash to capitalise on this growth after raising £12.5m in September with a share issue and renewing its bank facilities.

These include a £20m three-year revolving credit facility which charges interest of 1.4% over the inter-bank rate and unsecured loans of £1.6m. There is also a £5m overdraft with interest at 1.5% above the base rate. The group’s net debts stand at £11.9m.

Mr Traynor, said: “We have had a strong first half in our core business of insolvency and corporate recovery and our positive expectations for the year as a whole are unchanged.

“The combination of the share placing in September and our renewed and increased banking facilities mean that we have adequate resources for the group to capitalise further upon an anticipated sustained period of improved new work flow in our insolvency practice.”

During the period Begbies sold its CRM consulting business and its consumer debt management arm. It said non-recurring post tax losses from discontinued activities were £700,000.

The firm, which employs more than 500 staff, made a pre-tax proft of £5.6m, up 6.6%, in the year to April. Sales were up 6.7% at £48.1m.

Among the insolvencies the company is handling is Red City Developments, the business behind the new sports stadium in Salford.