The recent results from Begbies Traynor plc, the listed insolvency specialist firm, shows that the market for helping companies that find themselves in difficulty is not growing as fast as expected. This is mainly due to the fact that many businesses are currently still being supported by their banks and HMRC despite carrying huge debts, plus interest rates are very low said executive chairman Ric Traynor.
After exceptional write downs, the company reported a loss of £5.7m. The insolvency department has seen 40 insolvency staff made redundant as costs are cut. The firm has sold off the Red Flag Alert service, its offshore companies and is seeking to concentrate on its core insolvency activities.
Some argue that the shares at 8% yield are cheap and historically the market for insolvency work expands as the recovery gets underway. This seems illogical but banks are more willing to call in loans when the economy is growing as there is a market to sell distressed assets into. In addition companies are more likely to start overtrading causing cashflow difficulties.
Pre exceptionals the company made an operating profit of over £5m on declining sales of £58m.