British companies will continue to face “elevated” insolvency levels as higher interest rates and funding requirements put pressure on company balance sheets, according to Begbies Traynor.
The Aim-listed restructuring firm expects high levels of corporate distress to continue next year after the number of insolvencies rose by 12 per cent to 25,391 in the year to April 30.
Begbies Traynor’s revenues were up by 12 per cent from £121.8 million to £136.7 million for the year ended April 30, with adjusted earnings before interest, tax, depreciation and amortisation up by 7 per cent from£26.6 million to £28.5 million. Profit before tax declined by 3.3 per cent to £5.8 million.
Ric Traynor, executive chairman of Begbies Traynor, said: “Insolvency activity across the UK remains at elevated levels, with sustained higher interest rates continuing to impact on corporate stress levels.”
He said the higher levels of insolvencies would continue next year when businesses face “working capital and other funding challenges” due to a recovery in economic growth.
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The Body Shop, Cazoo, Ted Baker and Matchesfashion have all fallen into insolvency this year as businesses struggle in the higher-rate environment. The Bank of England has increased the base rate to a 16-year high of 5.25 per cent to tame inflation and while rates are forecast to fall this year, companies will still face higher borrowing costs.
Begbies Traynor’s revenue from its business recovery work rose by 13 per cent from £70.6 million to £79.5 million, with revenues from its advisory activities falling by 2.2 per cent from £19.1 million to £16.9 million. The group’s shares were down by 2.4 per cent or 2.4p to 97p.
The group has worked on a number of large insolvency cases throughout its financial year, including administrations of Worcester Rugby Club and Paperchase, as well as the receivership of Britishvolt’s electric battery site in Northumberland.
The firm has also been appointed to handle the administrations of Fortress Capital and Thought Fashion.
Analysts at Shore Capital said Begbies Traynor’s shares were trading at a discount to others in its sector but that this was “unwarranted” given its “leading position” in a growing market.
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They added: “The monthly insolvency statistics provided by the UK government show that company insolvencies remain at decade-long highs, which should provide a positive tailwind for Begbies. The company has significant scope to continue increasing its scale and breadth of services through further M&A and organic investment.”
Shares in Begbies closed down 1p, or 1 per cent, at 98½p.
