With UK corporate insolvencies having fallen by 10 per cent last year, Begbies Traynor (BEG) - the UK's leading independent recovery practice - was always going to struggle. However, the fall in the group's full-year headline profits paints an unduly pessimistic picture - add back one-off costs and adjusted pre-tax profit fell by more manageable 9 per cent year on year to £6.7m.
Much of those exceptional costs related to a continued drive to lower the cost base, with a reduction of £8m already achieved since 2011, and a further £2m of savings expected in the current year. Management reckons the current low interest environment has kept many companies afloat that would otherwise have gone bust and, ironically, any economic improvement that drives up interest rates could well will prompt an increase in insolvencies.
The group has also positioned itself to exploit any acquisition opportunities with a refinancing package that provides a £30m funding line, with maturity dates ranging between 2017 and 2021. There is also a £5m overdraft facility so, after a fall in net debt from £20.1m to £17.2m, that leaves headroom of around £17.9m.
Broker Canaccord Genuity expects full-year adjusted pre-tax profit of £5.8m, giving adjusted EPS of 4.5p (from £6.7m and 5.3p in 2012).
| BEGBIES TRAYNOR (BEG) | ||||
|---|---|---|---|---|
| ORD PRICE: | 30p | MARKET VALUE: | £27m | |
| TOUCH: | 30-32p | 12-MONTH HIGH: | 39p | LOW: 27p |
| DIVIDEND YIELD: | 7.3% | PE RATIO: | 19 | |
| NET ASSET VALUE: | 64p* | NET DEBT: | 30% | |
| Year to 30 Apr | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2009 | 62.1 | 7.25 | 5.40 | 2.80 |
| 2010 | 62.8 | 10.2 | 7.50 | 3.10 |
| 2011 | 60.6 | 5.75 | 4.30 | 2.20 |
| 2012 | 57.7 | 5.45 | 4.40 | 2.20 |
| 2013 | 51.1 | 2.42 | 1.60 | 2.20 |
| % change | -11 | -56 | -64 | - |
Ex-div: 9 Oct Payment: 7 Nov *Includes intangible assets of £50.4m, or 56p a share | ||||
