Begbies benefits from business misery as economic conditions bite

Manchester-based insolvency experts, Begbies Traynor, is confident of delivering strong annual results, it said in a trading update for the six months ended October 31, 2023.

The professional services consultancy released the update this morning which outlines a confident forecast as the group benefits from the current difficult economic conditions for many businesses, mirroring a similar update last Friday (November 17) by restructuring and advisory firm, FRP, which said it expects to report a surge of new business instructions as more challenging trading sweeps through the UK economy.

Begbies said today that revenue and adjusted operating profit is expected to increase by around 13%, with a good mix of organic and acquired growth. Adjusted pre-tax profits are expected to increase by approximately 10%, having absorbed increased finance costs.

The group is in a positive cash position with net cash of £1.1m at October 31, 2023, despite several acquisitions, resulting from strong free cash flow in the six months. At the same point last year the group had net debt of £2.4m.

Begbies said it is confident of delivering market expectations for the full year to April 30, 2024, extending its strong financial track record of growth. Market consensus for the full year is for an adjusted pre-tax profit of £21.9m-£22.5m.

The update said the group’s insolvency teams remain busy with increased year on year activity levels. It has added capacity through recruitment for further growth.

As anticipated, the financial advisory arm experienced reduced M&A activity in the period, which was mitigated by advice provided on refinancing and restructuring solutions.

In property advisory and transactional services, the valuations team – predominantly providing services to lenders – is benefiting from the breadth of expertise and advice provided, projects and development activity through building consultancy teams continues to expand with increased activity levels across its broad client base, and there a higher level of auction volumes – sales of property, plant and machinery – partially mitigated weaker transactional markets in agency and business sales.

Since the start of the financial year the group has completed three acquisitions, adding Banks Long & Co, a general chartered surveyors practice, based in Lincoln, a Cardiff-based insolvency team from Jones Giles & Clay, which joined the group’s existing Cardiff office, and Andrew Forbes, a property valuation practice based in Bristol.

All three of these earnings accretive acquisitions align well with the group’s current service offerings while strengthening its existing regional presence. Integration is proceeding well with trading performance in line with expectations.

Executive chairman, Ric Traynor, said: “We have had a good half year with encouraging activity levels across the group, resulting in double digit growth in both revenue and profitability. At the same time, we have continued to invest for future growth, having completed three acquisitions in the financial year to date in line with our strategy to enhance our service offering and regional coverage.

“We remain confident of delivering market expectations for the full year, extending our strong financial track record of growth. With 80% of income generated from counter-cyclical and defensive activities, and a strong balance sheet, we remain well positioned to continue investing in and growing the business.”

Last Friday, FRP, which has teams in Manchester, Preston, Nottingham, Leicester, Birmingham, Leeds and Bristol amongst its network of 25 regional offices, said it expects to report revenue for the first half of 2024 of £58.7m, up 19% on the prior year (H1 2023: £49.4m), and underlying adjusted EBITDA of £15.5m, up 34% on the prior year (H1 2023: £11.6m).

Translated to the full year, FRP said it expects to make pre-tax profits of £28.8m on turnover of £112.2m.