UPDATE: Begbies Traynor Says Insolvency Slowing In Short-term

8th Jul 2010 11:21

(Adds analyst and executive comment, share price) By Rachael Gormley Of DOW JONES NEWSWIRES LONDON (Dow Jones)--U.K. insolvency specialist Begbies Traynor Group PLC (BEG.LN) said Thursday it expects recent acquisitions and its now-profitable tax unit to mitigate a slowdown in demand for its insolvency practice in the short term, after reporting a 20% rise in fiscal-year pretax profit. Executive Chairman Ric Traynor said government support measures to help businesses, as well as a reluctance to chase debt, were slowing the number of insolvencies in the U.K. "HM Revenue & Customs isn't chasing companies in default as much, and this is usually the major instigator of insolvencies," Traynor said, adding that banks were also taking a lenient view with many customers. "We're expecting a modest first half," Traynor said. "We don't think the insolvency numbers will come through in the first half but more in the second half," he added. Begbies' Red Flag Alert survey, which monitors the warning signs of companies in distress, reported Thursday that more than 127,000 U.K. companies owing GBP69.5 billion in liabilities were at risk of default in the second quarter of 2010. Traynor said activity levels for the first two months of fiscal 2011 are slightly ahead of last year and in line with management expectations, boosted by its acquisition of a Manchester-based insolvency practice, Tomlinsons, a new office in the Caymen Islands and the return of its tax practice to profitability in the second half, following a restructuring. And further acquisitions are still on the cards. "We expect to have a period of going back to acquisitions of a small size, but a reasonable volume of them," Traynor said, adding that the firm was looking overseas as well as in the U.K. For the year ended April 30, Manchester-based Begbies posted pretax profit of GBP8.7 million compared with GBP7.2 million in the same period a year earlier. Revenue rose to GBP69.1 million from GBP62.1 million and the firm proposed a final dividend of 1.9 pence a share--a 12% increase on year. This takes the total for the year to 3.1 pence--an 11% increase on year. Begbies said it had principal bank debt of GBP15.9 million at the year end and is comfortably within its GBP35 million banking facilities--adding that this was enough for its expansion plans. Following the results Shore Capital kept its fiscal 2011 forecasts unchanged with adjusted pretax profit of GBP10.9 million, saying Begbies' valuation is undemanding for a company with attractive medium-term growth prospects. Analysts at Astaire meanwhile said that while Begbies has two complementary businesses, the concern for the coming year is the level of demand in the insolvency business. At 1001 GMT, shares were up 2 pence, or 3.4%, at 61.25 pence, while the wider FTSE All-Share index was up 1.1%. -By Rachael Gormley, Dow Jones Newswires; 44-20-7842-9308; [email protected] (END) Dow Jones Newswires July 08, 2010 06:21 ET (10:21 GMT)