The latest set of results from insolvency specialist, and recent buy tip, Begbies Traynor (BEG) confirms what we had already suspected. The insolvency market is at a low in the cycle and, until Begbies' recent acquisition of property consultancy Eddisons pays back, profitability will suffer.
A 14 per cent reduction in the number of UK corporate insolvencies over the last financial year left revenues reasonably flat for the Aim-listed group. Couple that with £2.9m in one-off acquisition and restructuring costs - the group also bought two smaller insolvency practices during the period - and the move into the red is better understood. But management are confident profitability will recover by the end of the current financial year. "The one-off items won’t re-occur, and we’ll have had 12 months of revenue from Eddisons by then," says group finance director Nick Taylor.
Begbies bought Eddisons in December for £8.5m, and managed to earn £4.5m from property-related work over the remaining five months of the financial year.
Analysts at Canaccord Genuity expect adjusted pre-tax profits of £6.7m for the year to April 2016, giving EPS of 4.9p. That compares with adjusted pre-tax profits of £3.6m and EPS of 2.9p in 2015.
| BEGBIES TRAYNOR (BEG) | ||||
|---|---|---|---|---|
| ORD PRICE: | 41p | MARKET VALUE: | £43m | |
| TOUCH: | 40-42p | 12-MONTH HIGH: | 55p | LOW: 41p |
| DIVIDEND YIELD: | 5.4% | PE RATIO: | NA | |
| NET ASSET VALUE: | 58p* | NET DEBT: | 21% | |
| Year to 30 April | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2011 | 60.6 | 5.75 | 4.3 | 2.2 |
| 2012 | 57.7 | 5.45 | 4.4 | 2.2 |
| 2013 | 51.1 | 2.42 | 1.6 | 2.2 |
| 2014 | 44.1 | 4.25 | 3.7 | 2.2 |
| 2015 | 45.4 | -0.72 | -0.6 | 2.2 |
| % change | +3 | -117 | -116 | - |
Ex-div:08 Oct Payment:06 Nov *Includes intangible assets of £57.8m or 55p a share | ||||
