Rising insolvencies driving progress for Begbies Traynor
Increased rates of insolvency have helped Begbies Traynor, the Manchester-based business recovery, financial advisory and property services consultancy, deliver revenue and profit increases in the year to April 30, 2023.
Turnover rose by 11% to £121.8m, while pre-tax profits of £6m were up on the £4m mark the previous year.
The board has recommended a nine per cent increase in the total dividend of 3.8p per share.
The group also reported substantial free cash flow generation of £14.1m, ending year with net cash of £3m (2022: £4.7m), having made £10.6m of acquisition and deferred consideration payments and paid dividends of £5.4m.
Begbies said current trading is just as strong, with a good order book of insolvency revenue, up 19% in the year. It said it is confident of a further year of growth in line with market expectations, which are revenues of between £127.5m-£131.4m and an adjusted pre-tax profit of £21.9m-£22.7m for the year to April 30, 2024.
Executive chairman, Ric Traynor, said: “We have reported another successful year of continued growth, with reported results ahead of original market expectations and increased our dividend by 9%.
“We have a proven growth strategy which, over the five year period between 2019 and 2023, has doubled revenue and tripled adjusted profit before tax, from a combination of organic growth and acquisitions. This growth has been delivered across insolvency and our full range of advisory and transactional services.
“We have started our new financial year confident in our outlook. The increased scale of the group with complementary professional services and an enhanced client base provides a strong platform for us to continue delivering growth. With 80% of income generated from counter-cyclical and defensive activities, we are well positioned in the current challenging economic environment.”
He added: “Our strong balance sheet and cash generation underpin our capacity to deliver organic growth initiatives and progress our pipeline of acquisitions, thereby continuing our track record of growth.”
Russ Mould, investment director for Manchester-based investment platform, AJ Bell, said: “If you want evidence of how the cost-of-living crisis, persistent inflation and higher interest rates are affecting consumers and businesses, look at two companies reporting today on the UK stock market.
“Pawnbroker H&T has been doing incredibly well over the past year or so as more people pledge assets as collateral for loans. Individuals who turn to pawnbrokers typically cannot get credit from banks and so they must seek alternative ways to borrow money if times are hard. H&T says demand for pledge lending is at record levels and continues to gather momentum. If the economy does fall into recession, one might expect H&T to do even better.
“Professional services consultancy, Begbies Traynor, tends to thrive when economic conditions are gloomy. It has seen increased work for insolvencies, which reflects how businesses can crumble under the pressure of higher rates. Many companies have reached a tipping point where they cannot generate enough cash to service borrowings and so they have no choice but to fold.
“While it is easy to conclude these companies are profiting from the misery of others, both would argue they are doing an important service.”
