Begbies gains from insolvencies boom

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Begbies Traynor has been one of the few genuine beneficiaries of the deepest recession in a generation, but brokers said the strongest growth was yet to come as the number of corporate failures remained far from the expected peak.

Shares rallied yesterday after Britain’s biggest insolvency firm by number of appointments said first half results would be “significantly ahead” of the same period last year.

Borders UK is one of the high street names to fall into administration recently but analysts say banks have thus far resisted pulling the plug on other vulnerable retailers ahead of the lucrative Christmas period.

Moreover, thousands of businesses have avoided immediate financial difficulties as a result of the government’s tax holiday scheme, and business failures are likely to rise sharply next year once the support is withdrawn.

Mark Fleetwood, analyst at Brewin Dolphin, upgraded his recommendation on the stock from “hold” to “add”. “It hasn’t been the absolute bumper ride that it could have been,” he said.

Begbies’ core insolvency and recovery division, which accounts for about 85 per cent of revenue, has thrived amid economic hardship: the company said it expected almost 30,000 formal corporate insolvency procedures in England and Wales this year, up nearly 35 per cent on 2008.

But the shares remain about half their 2008 peak, partly as a result of concerns over its non-insolvency businesses.

Shore Capital, the company’s brokers, expect full year pre-tax profit to rise from £7.2m to £10.4m on revenue of £70.1m (£62.1m).

The shares rose 5p or 5.3 per cent to 100p.

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