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Begbies Traynor in profit despite difficult market

Last updated: 10:50 12 Jul 2016 BST, First published: 10:04 12 Jul 2016 BST

Chartered surveyors surveying a chart
The recent acquisition of Eddisons has strengthened its property arm.

The UK’s largest professional services consultancy Begbies Traynor Group PLC (LON:BEG) reported profits of £4.5mln despite a challenging market in which insolvency volumes drop to their lowest level since 2004.

For the year to April 2016, the insolvency arm reported pre-tax profits of £600,000 for the year, compared to a loss of £700,000 in 2015.

Adjusted pre-tax profits were up by a quarter to £4.5mln, while revenues topped £50mln.

In December, the group said that pre-tax profits had nosedived in the half year due to challenging market conditions.

But the group said recent acquisitions - including chartered surveyors Eddisons – have since strengthened its property services division, now representing around 25% of the group’s activities.

“Although we remain cautious about activity levels in our counter-cyclical activities in both business recovery and property services in the near term, the recent acquisition of the Pugh auction business, together with the Taylors valuation business, gives the opportunity for growth in earnings in the new financial year,” said executive chairman Ric Traynor.

The results are broadly in line with estimates in respect of adjusted earnings and dividends, said Shore Capital.

The difficult market resulted in downward pressure on the group's revenue, but that was more than offset by the benefits of one-off consultancy fees, cost cutting and recent acquisition activity such that the group was still able to grow its earnings, said the broker.

Cash flow was much stronger than analysts had expected, resulting in a notable reduction to the year-end net debt position. 

The broker indicated minor adjustments to its forecasts to reflect the cautious management guidance.

“It is possible these could prove to be too conservative if corporate insolvency market activity improves on the back of a potential post-referendum UK slowdown,” said the analyst.

“Begbies remains well positioned to benefit with over eighty percent of group revenue emanating from this source.”  

Shares fell 12% to 47.8p.

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