Tax division losses undermine prospects at Begbies Traynor

The company, which helps to salvage struggling companies and has

offices in Leeds, Halifax and Doncaster, expects its tax business to remain loss making for the full year ending April.

Executive chairman Ric Traynor said: "We expect (the tax division) to still be loss making as a whole for the year, but we expect to put at least half of that loss back in the second half and it's possible to do better than that if the tax planning assignments come in."

For the first half ended October 31, 2009, its tax division posted a loss of 1.1m against a profit of 200,000 a year ago on lower demand for specialist tax consultancy services.

Mr Traynor said he expected Begbies' overall performance for the second half to be broadly similar to that of the first half as its core insolvency business is likely to be flat sequentially.

The insolvency division reported a 47 per cent rise in earnings before interest, tax and appreciation at 5.7m.

The company said its overall adjusted pretax profit rose to 4.3m from 3.3m last year in the first half.

Revenue from continuing operations increased 21 per cent to 34.2m.

On Monday, the company had said it expected corporate insolvencies to rise in the second half of 2010 as temporary financial-support measures are unwound.

However, Begbies said the level of potential growth in insolvency for the 2010 financial year was not expected to offset fully the poor performance of the tax practice.

The company, which raised its interim dividend by nine per cent to 1.2 p, said it was well within its facilities and did not face any cash pressure.

Begbies also said it would continue to expand its insolvency business in the UK and overseas.

Mr Traynor added: "It is likely that during the course of 2010, we will be investing anywhere between 2m and 10m in new capacity and a lot of that will be in acquisitions."

The company's net borrowings at the end of October 2009 were 20.4m.