Begbies benefits from uncertainty

That metric excludes £2.4m of amortised intangible assets and £1.2m of costs associated with four bolt-on deals, which in turn explains the lofty price/earnings multiple in the table below. Add back interest, share-based payments and other amortisation and depreciation charges, and Begbies’ enterprise value trades on just 11 times trailing adjusted cash profits. 

Investors can nonetheless expect more deals – and more one-off costs – in the coming year. Potential sellers are more amenable to deals now the insolvency market is heating up, said executive chairman Ric Traynor, who also expects larger resolutions, after a “slightly disappointing” period for cases, where the fee on an individual can pass £1m.

Mr Traynor also thinks he can push back on some of the fees passed on to occasional partner Manolete Partners (MANO), after the litigation funder effectively disclosed its margins through its IPO. The Begbies founder, citing conversations with “deep-pocketed funds” hoping to replicate Manolete’s model, also reckons insolvency financing competition is imminent.

Consensus forecasts are for earnings per share of 5.5p in the 12 months to April 2020.