BEGBIES TRAYNOR is looking to sell its tax and Red Flag credit risk database divisions.
The listed firm said the decision was made after a strategic review of the business.
Profits before tax for the year ending 30 April 2011 were £5.2m, down from £10.2m a year earlier.
Ric Traynor, executive chairman of Begbies Traynor, said: “The past 12 months have been a very challenging period for the group, with national insolvency numbers in the UK decreasing over the year.
“This reduced our levels of profitability which, together with the under-performance of the tax division and continuing investment in the ‘Red Flag Alert’ business, resulted in a disappointing performance for the year.”
The firm said that the tax and Red Flag divisions had growth potential though required the kind of continued investment better suited to a specialist market.
Tax and Red Flag divisions at Begbies Traynor currently employ 12 partners and 27 support staff.
The firm said it had a reduced demand for tax planning services due to a tougher stance towards tax planning activities adopted by the government and HMRC.
The subscription-based Red Flag database increased revenue to £200,000 [WHEN?] compared to nothing achieved for 2010.
Traynor said the firm’s core insolvency division continued to be strong in the UK SME insolvencies market and that it had good relationships with all of the major banks – a key source of work.
However, insolvency revenues decreased to £54.8m from £59.2m last year, with profits in the department also falling to £13m from £17.4m.
Traynor said: “The level of corporate insolvencies, having fallen during calendar year 2010, has stabilised in the first two quarters of 2011.
“We have adjusted our cost base while retaining our capacity to take advantage of any upturn in the insolvency market. Overall, with our continuing activities now focused on the profitable, cash-generative and strong core businesses, we look forward to returning the group to profitable growth,” said Traynor.
The firm spent £2m on restructuring costs in the last year.
Net debt increased to £22.5m from £20.2m, which the firm attributed to £4.4m of acquisition and deferred payments.
However, the group’s global risk partners’ business developed well through the year, with organic growth in revenue and profit.
HMRC breaches client confidentiality; and partner profits fall at EY. These stories and more discussed in Friday Afternoon Live
Does Darwin's theory apply to taxation? Colin ponders...
Two new audit partners have been appointed at the firm BDO in its audit practice following continued growth and investment
The UK tax gap fell in 2014-15 to its lowest-ever level of 6.5%, revealed official statistics published today