Begbies Regulatory News (BEG)

5 Dec 2008 07:00

Friday, 5 December 2008

BEGBIES TRAYNOR GROUP PLC("the Group")

 Trading Update

 Notice of Interim Results

Begbies Traynor Group plc, the specialist professional services organisation, today issues a trading update for the six months ended 31 October 2008. The Group will issue its interim results for the period on Wednesday, 21 January 2009. 

Insolvency

Activity levels and margins in the Group`s core insolvency and corporate recovery operations have continued to increase in the first half, being  substantially ahead of the same period last year and well ahead of the second half performance for the year ended 30 April 2008. As a result, this division has accounted for approximately 80% of the Group`s overall revenues in the first half. In addition, the Group has continued to invest in its resource base during the period through a combination of recruitment and previously announced acquisitions. 

Tax & Other

Profits from the Group's tax consulting and other divisions have also increased over the comparable period in the previous year. Profitability in the tax division in particular is expected to be more second half weighted, reflecting the seasonality of this business in the run up to the tax year end and the investments made in senior recruitment which are expected to deliver returns in future periods.

Corporate Finance

During the unprecedented financial and credit market conditions in the Autumn the corporate finance market as a whole ground to a virtual halt. Our corporate finance division was not immune to this sudden, rapid and unexpected change in outlook. As a result, divisional profitability deteriorated markedly in the final weeks of the half year period, with operating losses being incurred in the first half as a whole in the order of £1.0m, significantly worse than our earlier expectations. 

Some restructuring of the cost base has been undertaken, resulting in headcount reductions with the aim of significantly reducing losses and giving rise to exceptional costs of £0.3m in the period. The Board will continue to monitor this division closely to ensure it delivers an improved performance in the second half and profitability in future years when corporate finance activity picks up.

Continuing operations

Results from continuing operations on a pre-exceptional basis for the first half are significantly ahead of the same period last year, largely due to the strong trading of the Group's insolvency division. Overall pre-exceptional operating margins from continuing operations for the first half are expected to be broadly in line with those of the same period last year, with higher margins in the insolvency division being offset by operating losses from the Group`s corporate finance activities.

Disposal

The Group has completed the planned disposals of its CRM consulting and consumer debt management businesses for an immaterial amount and as a result, there are expected to be non recurring post tax losses from discontinued activities in the first half amounting to £0.7m.

Financing

The Group is in a strong financial position, particularly given the recently completed placing of new shares which raised £12.5m net of costs. These funds are providing additional working capital to further support our strategy and the organic growth in insolvency activity.

As at 31 October 2008, the Group's net debt, excluding asset finance, stood at £11.9m, comfortably within the banking facilities that were renewed and increased in April 2008. The facilities include a £20.0m, three year, revolving credit facility ('RCF'), a £5.0m overdraft and unsecured loans of £1.6m. Interest on the RCF is charged at 1.4% over LIBOR and on the overdraft is 1.5% over bank base rate.

Conclusion

The Board expects that, due to the strong performance of its insolvency division, the Group's pre-exceptional continuing activities will perform  in line with expectations for the year as whole. A further update will be provided at the time of the interim results.

Ric Traynor, Executive Chairman of Begbies Traynor Group said:

"We have had a strong first half in our core business of insolvency and corporate recovery and our positive expectations for the year as a whole are unchanged. The combination of the share placing in September and our renewed and increased banking facilities mean that we have adequate resources for the Group to capitalise further upon an anticipated sustained period of improved new work flow in our insolvency practice."

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Information on Begbies Traynor can be accessed via the Group's website at www.begbies-traynorgroup.com