Begbies Traynor to spend £3m in restructuring

LISTED FIRM Begbies Traynor is to spend £3m in restructuring costs, according to its latest trading update.

The firm said its insolvency business did not earn enough to mitigate lower than expected returns in its tax division, so will need to restructure.

Begbies Traynor said although its insolvency arm has seen its caseload increase with seasonal trends, corporate insolvencies remain flat in the current quarter.

A statement from the update said: “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.”

The business is taking restructuring actions with tax, insolvency, and support areas. It estimates restructuring costs of about £3m, with £800,000 already reported on 31 October 2010.

Begbies Traynor hopes to make savings of £2m from the restructuring.

However, the group’s risk and forensic divisions continue to remain strong and in line with expectations.

Also the board expects net debt to remain in line with expectations despite lower than expected profits and greater charges.

A further trading update will be issued in early June.

Ric Traynor, chairman Begbies Traynor, 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.”

The company’s share price has fallen 8.5p to 50p.

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