Begbies Traynor issues profit warning

But insolvency revenue up 28%

Shares in the firm tumbled more than 12 per cent - 13p to 93p - after it admitted that temporary tax breaks for companies meant insolvencies had not risen as sharply as expected given the depth of the recession. Begbies' executive chairman, Ric Traynor, warned that profits for the year would be “slightly below” the £12 million expected in the City.

Analysts quickly downgraded their forecasts for the full-year to £11 million.
Begbies, which made £9.8 million last year, reported a 32 per cent rise in first-half profits to £4.3 million.

Fewer firms than feared have gone bust during the recession thanks to support from the Government and the Bank of England. “Time to pay” has involved more than 240,000 businesses delaying tax payments of £4.2 billion. Last year's cut in VAT and Business Secretary Lord Mandelson's car scrappage scheme have also helped firms stay afloat.
But Mr Traynor warned that insolvencies will rise dramatically once the temporary measures are reversed.

The dreadful state of the public finances - the UK borrowed a record £142.6 billion last year - means tax hikes and spending cuts are inevitable after the general election.

Mr Traynor said: “We expect the group to make considerable further progress as a result of anticipated rises in the level of insolvencies in the second half of 2010.”

Insolvency revenues increased by 28% to £29.5m.  Net borrowings were £20.4m, including £16m of bank debt and £4.4m of asset-related finance, a sharp rise on the £14.8m at the end of the previous first half. The gearing has risen to 31 per cent from 24 per cent.