Begbies warns on profits as fewer companies go bust
The number of companies going bust is falling, which you would think would be good news, generally speaking.
Not for insolvency experts at Begbies Traynor. The company has just issued a profit warning, saying half year pre-tax earnings are expected to be £700,000 below last year’s level. There are also come exceptional costs of £800,000 in the six months. And the main cause of the profit fall? According to Begbies:
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.
So it is all the fault of those kindly folk at Britain’s banks - not a common stereotype, surely - and of course the government. But never fear, Begbies thinks it can’t last:
As the latter [government support] 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.
Begbies also makes the point that its own financing is in order:
The group remains comfortably within its banking facilities of £35m with…total net debt [of] £24.2m.
Still, a profit warning is a profit warning, and the market does not like those. So Begbies shares have dropped 4.75p to 63p, a 7% decline.
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