UK corporate insolvency market leader Begbies Traynor (BEG:AIM) says a key business unit is set for a stronger second half as activity levels pick up.
Trading performance in the six months to 31 October was helped by Begbies’ property auctions businesses but executive chairman Ric Traynor says improvements at the insolvency unit are likely to drive the second half result.
‘Having experienced a period of subdued insolvency trading in the first half, we expect a strong second half performance,’ says Traynor.
‘This expectation reflects improved activity levels and the completion of a number of contingent fee engagements that are currently being undertaken.
‘We expect profits for the year to be broadly maintained, with the benefit of a lower cost base mitigating a reduction in revenue.’
INSOLVENCIES INCREASE
Earlier this month, Shares reported UK corporate insolvencies increased year-over-year in the three months to 30 September for the first time since 2011, according to Government data.
Insolvencies usually pick up as economic activity improves and entrepreneurs start to wind up under-performing businesses to increase investment in areas more likely to participate in increased economic activity.
Despite recent signs of improvement in the market, Begbies chief Traynor said in previous interviews with Shares that the current market for restructuring and insolvency is the weakest in decades. Traynor adds he expects a more stable market in the coming months but not necessarily a pick-up in the number of insolvency appointments.
MERGERS AND ACQUISITIONS
Traynor has upped investment in complementary services like property auction houses and business surveyors and valuers through acquisitions to prop up profitability in recent years.
Results for the six months to 30 September showed revenue down 3.9% at £24.5m with pre-tax profit and earnings per share flat at £2.5m and 1.8p respectively.
Net debt increased to £12.2m versus £10.4m at 30 April 2016 and £11.9m a year earlier.
Shares in Begbies trade 2.7% lower at 47p valuing the business at £50m.
Earlier this year, Shares flagged Begbies at 42p as an interesting contrarian opportunity if earnings started to improve from a low base.
