Half-year profits to be hit at Begbies Traynor
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INSOLVENCY specialist Begbies Traynor has warned that first-half profits will be £700,000 lower than last year, as margins were squeezed and it was hit by higher financing charges.
The Manchester-based company, which operates a national insolvency practice as well as other financial services and has offices across Yorkshire, said it had seen less insolvencies than it had expected, as a result of a softer stance being taken by the banks and other authorities.
Revenues in the six months to the end of October will be “broadly in line with the prior year”, but insolvency revenues are around 9% lower.
The company said in a trading update: “As a result of the constrained activity levels, profitability in the period has been impacted by reduced margins in insolvency, partially offset by improved performance within the group’s non-insolvency businesses.
“As a consequence of this, together with an increase in finance costs resulting from the group’s new banking facilities, we expect adjusted pre-tax profits in the first half year to be around £700,000 below last year’s results of £4.3m.”
Begbies Traynor said it had undertaken some restructuring of its own during the period, which incurred exceptional costs of approximately £800,000.
The AIM-lised company said it remained “comfortably” within its banking facilities of £35m – net debt was £24.1m at the end of October.
It said it expects the insolvency market to pick up in the second half of the year.
“The numbers of UK insolvencies remain lower than expected and the group believes this fall continues to be due to the combination of lenient creditor attitudes and temporary government support initiatives.
“As the latter begins to unwind and public sector cuts start to impact, we expect some incremental flow in new insolvency engagements through the remainder of the financial year.
“This would result in an improved performance in the second half, reflecting a greater second half weighting to our results as previously indicated in our trading update in September.”
The company will report its half-year figures on December 16.