Begbies Regulatory News (BEG)

10 March 2011

BEGBIES TRAYNOR GROUP PLC

("the Group")

Trading Update

Begbies Traynor Group plc, the specialist professional services consultancy, today issues a trading update for its third quarter ended 31 January 2011 ('the period'). 

Trading in the period indicates that the Group's performance for the second half is now expected to be broadly similar to that achieved in the first half of the current financial year, compared with a previously anticipated improvement. Although activity levels in the Group's core insolvency division have increased in line with usual seasonal trends as anticipated, the overall market for UK corporate insolvencies was flat in the quarter. This seasonal improvement will only partially mitigate lower than expected performance from the Group's tax division. Overall, this has resulted in a reduction in the Board's expectations for the year as a whole.

BTG Global Risk Partners, a provider of risk consulting and forensic investigation services, continues to perform strongly and in line with expectations.

The Group continues to invest in Red Flag Alert, a subscription-based credit risk database, which has continued to add new subscribers at an encouraging rate (with 168 multi-user subscribers currently compared to 96 as at 31 October 2010); start up costs are in line with expectations. 

The tax division is performing below management expectations in the second half, resulting from a reduced demand for tax planning services, primarily due to a tougher stance towards tax planning activities adopted by the Government and HMRC, and a continued low demand for transactional tax services due to the weak economic recovery. This has led to lower revenues and profitability than previously anticipated. We do not expect a material contribution from the tax division in the current market conditions and will review the carrying value of the goodwill at the year end.

Following the actions announced at the half year, we have taken further restructuring actions within insolvency, tax and support areas to align costs to current levels of activity. This action will result in exceptional restructuring costs for the year (stated prior to any goodwill impairment charge) of approximately £3m (£0.8m having been reported as at 31 October 2010). This comprises severance costs, onerous property leases and non-cash asset write downs. We anticipate annualised cost savings from this restructuring of approximately £2m.

Despite lower than anticipated profits and greater exceptional charges, the Board expects net debt to remain broadly in line with expectations.

A further trading update will be issued in early June 2011, following the Group's year end.

Ric Traynor, Executive Chairman of Begbies Traynor Group, said:

"The core insolvency business has now stabilised in line with national appointment trends. We have taken strong action to realign costs to enhance profitability at current levels of activity, following the disappointing trading performance in the year to date. 

However, we have maintained our market leading position in insolvency and the Group remains well-placed to take full advantage of any upturn in its markets from its current cost base."

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