ACCOUNTANCY firm Begbies Traynor, which has a large operation in Birmingham, is to sell off its tax business and the Red Flag market intelligence arm after seeing group pre-tax profits nearly halve to £5.2m.
The company described the year to April 30 as “very challenging” due to lower than expected insolvency numbers and losses in the tax and Red Flag businesses.
Following a strategic review, it said it would focus on its “core skills” relating to insolvency, restructuring and corporate finance.
During the year Begbies, which has is headquartered in Manchester, saw pre-tax profits fall from £10.2m to £5.2m. Revenues slipped 2% to £61.5m.
Lower rates of business failure contributed to a 7% fall in insolvency revenues to £54.8m. Profits slumped by 25% to £13m.
Tax revenues increased by 11% to £7m but the division incurred a loss of around £100,000 and exceptional costs of £3.4m associated with a restructuring of the cost base.
Begbies said profitability was constrained by lower demand for tax planning services. Red Flag, which was launched in 2009, had 250 companies subscribing to a service that offers assessment and monitoring of the financial performance of customers, suppliers and competitors. It made a loss of £700,000 on revenue of £200,000 during the year.
Executive chairman Ric Traynor said: “The level of corporate insolvencies, having fallen during calendar year 2010, has stabilised in the first two quarters of 2011. “We have adjusted our cost base whilst retaining our capacity to take advantage of any upturn in the insolvency market.
“Overall, with our continuing activities now focused on the profitable, cash-generative and strong core businesses, we look forward to returning the group to profitable growth.”
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