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Insolvency specialist Begbies Traynor has, unsurprisingly, reported strong growth in its business insolvency work where results for the year to April are expected to be 'very substantially' ahead of last year. Looking ahead, Begbies' Red Flag alerting system, which measures the number of businesses in trouble, suggests that it will be busy for some time to come.
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But, elsewhere in Begbies' business, the recession is proving to be something of a drag. Its corporate finance division has been scaled back significantly due to awful market conditions, but losses will be less than those reported in the first half. The tax consulting division is also performing below management expectations and the tough business environment is likely to result in a subdued second-half performance.
The drag these smaller divisions is having on the booming insolvency business means that results for the full year 'are expected to reach the lower end of current market expectations'.
What we said: Buy
When: 3 Apr 2008
Price: 115.5p
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Management's forecast is a slight disappointment, as is the recent share price performance. Begbies' shares are now below where we recommended them, but the longer-term picture remains rosy. Buy at 108p.
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