Begbies Traynor's troubles were already well signposted by two earlier profits warnings, and so the 33 per cent slump in underlying pre-tax profits for the year was pretty much as expected.
The group's main business is offering insolvency services, restructuring and corporate finance to small- and medium-sized companies, but company insolvencies have not multiplied as expected in the wake of the recession, and management blamed this on a sustained period of very low interest rates and a more relaxed attitude by creditors. Insolvency numbers actually fell last year, although they have more recently shown signs of levelling off.
However, management has decided to concentrate on developing its core insolvency division as well as the global risk partners business, both of which remain profitable. So the tax advisory business and the loss-making Red Flag credit risk database operations are to be disposed of.
Despite the fall in profits, net operating cash flow actually improved by £1.1m to £6.3m, which reflected lower working capital requirements. And, while net debt rose from £20.2m to £22.5m, the group has a further £16.3m of untapped facilities in place.
Collins Stewart is forecasting current year adjusted EPS of 6p (5.8p in 2011).
| BEGBIES TRAYNOR (BEG) | ||||
|---|---|---|---|---|
| ORD PRICE: | 41p | MARKET VALUE: | £37m | |
| TOUCH: | 40-42p | 12-MONTH HIGH: | 80p | LOW: 39p |
| DIVIDEND YIELD: | 5.5% | PE RATIO: | 11 | |
| NET ASSET VALUE: | 73p* | NET DEBT: | 34% | |
| Year to 30 Apr | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2007 | 41.9 | 8.50 | 7.30 | 2.50 |
| 2008 | 48.1 | 5.68 | 4.70 | 2.50 |
| 2009 | 62.1 | 7.25 | 5.40 | 2.80 |
| 2010 | 62.8 | 10.17 | 7.50 | 3.10 |
| 2011 | 61.5 | 5.17 | 3.70 | 2.20 |
| % change | -2 | -49 | -51 | -29 |
Ex-div: 5 Oct Payment: 7 Nov *Includes intangible assets of £51m, or 57p a share | ||||
