Begbies warns of slowdown

07/06/2010 Ben Jaglom

AIM-traded insolvency specialist Begbies Traynor has warned of a slowdown in the second half of its year to April.

In a trading update ahead of full year results (set for release in July), Begbies said that overall, ‘work flow’ from its core business insolvency activities, representing more than 80 per cent of sales, grew significantly last year. However, Begbies noted that second half activity levels ‘were relatively flat’ compared with the first half, on account of a lesser number of UK corporate insolvencies.

Ric Traynor, the group's founder and executive chairman, highlighted recent government statistics showing a 5 per cent fall in insolvencies for the first quarter of 2010 compared with the previous quarter, noting that this decline was the ‘fifth successive fall in national insolvency volumes, reflecting the effects of government support measures and monetary policy’.

Such reduced volumes, cautioned Traynor, are likely to persist in the short-term, though the Begbies board insists corporate insolvency numbers will rise as the economic cycle develops, ‘consistent with historical patterns for insolvencies to lag the cycle.’

Furthermore, Begbies results are still expected to better last year's, when Begbies achieved 40 per cent growth in profits to £9.8 million on sales up 30 per cent to more than £62 million, although the financials will show a £800,000 one-off hit relating to Begbies' recent refinancing and the restructuring of its non-insolvency operations.

Following the trading update, Begbies shares shed 3.25p, more than 5 per cent, to 59.5p, down from their 115p 52-week high and valuing the business at £53.2 million.