As the UK flirts with a third dip into recession, business should be booming for insolvency specialist
To survive in this surreal environment Begbies has been adapting by restructuring the business. The costs of which wiped £1m off profits. Still, the business does look in better shape. Net debt has been cut by a third to £18.3m in the past 12 months and net cash flow from operations reversed from an outflow of £700,000 in the first half last year to a £2.3m inflow, which easily covers the £500,000 first half dividend. Begbies is getting leaner as well: insolvency staff have been cut from 466 to 449, which helped protect margins. In fact, operating margins rose 30 basis points to 25 per cent compared with the second half of the prior year.
Broker Cannacord Genuity forecasts full-year adjusted pre-tax profits of £7.4m and EPS of 5.7p (from £7.3m and 6p in 2012).
|BEGBIES TRAYNOR (BEG)|
|ORD PRICE:||32p||MARKET VALUE:||£28.8m|
|TOUCH:||31-33p||12-MONTH HIGH:||41p||LOW: 25p|
|DIVIDEND YIELD:||6.9%||PE RATIO:||9|
|NET ASSET VALUE:||64p*||NET DEBT:||32%|
|Half-year to 31 Oct||Turnover (£m)||Pre-tax profit (£m)||Earnings per share (p)||Dividend per share (p)|
Ex-div: 10 Apr
Payment: 9 May
*Includes intangible assets of £51m, or 56p a share
Begbies shares are lowly rated on a forward PE ratio of six and are well supported by a near 7 per cent yield. But the outlook for the insolvency market shows no signs of improving near term, so they remain a hold.
Last IC view: Hold, 30p, 5 July 2012