Begbies Regulatory News (BEG)

9 July 2014

Begbies Traynor Group plc

Final results

for the year ended 30 April 2014

Begbies Traynor Group plc (the 'company' or the 'group'), the UK's leading independent business recovery practice, today announces its final results for the year ended 30 April 2014.

Financial highlights

Highlights

· Results in line with market expectations and market-leading position maintained

· Reduced revenue and adjusted profit reflect 9% reduction in UK insolvencies in calendar year 2013

· Solid double digit margins*** of 13.3% (2013: 15.0%), with cost savings partially mitigating reduced revenue

· Statutory profit rose due to lower exceptional items than last year

· Acquired Cooper Williamson, a Manchester-based insolvency boutique with a strong internet presence

· Strong cash generation giving a £2.7m reduction in net debt to £14.5m compared to a year ago

Post year end

· Acquired Ian Franses, a London-based insolvency specialist

· Appointments include BTG Financial Consulting managing the disposal of Reading FC

* Profit before tax of £3.8m (2013: £2.4m) plus amortisation of £0.4m (2013: £0.4m) plus exceptional and net acquisition-related items of £0.8m (2013: £3.9m)

** See reconciliation in note 5

*** EBITA (earnings before interest, tax and amortisation of intangible assets arising on acquisitions) before exceptional items

Commenting on the results, Ric Traynor, Executive Chairman of Begbies Traynor Group, said:

"The group has maintained its market-leading position, having handled the largest number of corporate insolvency appointments in the UK, and delivered solid profits and margins. This is despite lower levels of corporate insolvencies in the calendar year 2013 compared to 2012.

"With the benefit of our reduced cost base, a strong financial position and committed medium and long-term bank facilities, the group remains well placed to take advantage of opportunities to develop and enhance the business, both organically and through selective acquisitions. We also retain the capacity and expertise to handle an increase in activity levels should they arise, which would result in improved profitability due to the inherent operational gearing in the business."

A meeting for analysts will be held today at 8.45am for 9.00am at the offices of MHP Communications, 60 Great Portland Street, London, W1W 7RT. Please contact Ben Griffiths on 020 3128 8106 or Giles Robinson on 020 3128 8788 if you would like to attend.

Enquiries please contact:

Begbies Traynor Group plc 0161 837 1700

Ric Traynor - Executive Chairman

Nick Taylor - Group Finance Director

Canaccord Genuity Limited 020 7523 8350

(Nominated Adviser and Joint Broker)

Bruce Garrow / Philippa Underwood

Shore Capital 020 7408 4090

(Joint Broker)

Pascal Keane

MHP Communications 020 3128 8100

Reg Hoare / Katie Hunt / Giles Robinson / Ben Griffiths

Information on Begbies Traynor Group can be accessed via the Group's website at

www.begbies-traynorgroup.com

CHAIRMAN'S STATEMENT

INTRODUCTION

The group's results for the year reflect the continuation of the challenging trends seen in the recent past. The benign financing environment in the UK resulted in a 9% reduction in the number of corporate insolvencies in the calendar year 2013 compared to 2012.

Against this backdrop, the group has maintained its market-leading position, having handled the largest number of corporate insolvency appointments in the UK, and has delivered solid profits and margins, with £4.0m of cost reductions having partially mitigated the full impact of reduced revenues.

Our continued focus on cash management has resulted in strong cash generation and a £2.7m reduction in net debt compared to a year ago, after £0.55m of initial and deferred acquisition payments.

With the benefit of a strong financial position and committed medium and long-term bank facilities, we have continued to invest in the group both organically and through acquisitions, and we also propose to maintain the dividend.

During the year, we have made good progress in developing our advisory services through the BTG Financial Consulting business. We also acquired Cooper Williamson, a Manchester-based insolvency boutique with a strong internet presence, which is now generating new insolvency cases for the wider group. Following the year end, we acquired Ian Franses Associates, a London-based insolvency specialist.

Overall, we have continued to consolidate our position as the UK's leading independent business recovery practice.

RESULTS

Group revenue in the year ended 30 April 2014 was £45.8m (2013: £51.1m). Adjusted profit before tax* was £5.0m (2013: £6.7m). Exceptional items and acquisition-related costs were £0.8m (2013: £3.9m). The exceptional costs in the current year relate to costs associated with the planned relocation of the group's London offices (2013: restructuring costs of £3.8m and costs relating to the debt refinancing of £0.1m). Profit before tax was £3.8m (2013: £2.4m). Statutory profit for the year was £3.0m (2013: £1.4m).

Earnings per share**, adjusted for the net of tax impact of amortisation of intangible assets arising on acquisition, exceptional and acquisition-related costs were 4.3p (2013: 5.3p). Basic and fully diluted EPS were 3.3p (2013: 1.6p).

Following strong cash generation in the year, net debt reduced by £2.7m to £14.5m at 30 April 2014 (2013: £17.2m), after £0.55m of initial and deferred acquisition payments. Gearing reduced to 24% (2013: 30%) and the group has significant headroom in its committed banking facilities. Interest cover*** was 5.5 times (2013: 7.8 times). Net assets per share were 65p (2013: 64p).

* Profit before tax of £3.8m (2013: £2.4m) plus amortisation of intangible assets arising on acquisitions of £0.4m (2013: £0.4m) plus exceptional items and acquisition-related costs of £0.8m (2013: £3.9m)

** See reconciliation in note 5

*** Before exceptional costs and amortisation of intangible assets arising on acquisitions

DIVIDEND

The board remains committed to a long-term progressive dividend policy, which reflects the potential for earnings growth. In the near term, dividend decisions reflect short-term fluctuations in profit, as a result of market conditions, and the requirement for continuing investment.

Having considered the results for the year, the outlook for the new financial year and the ongoing requirements of the business, the board has recommended the total dividend be maintained at 2.2p (2013: 2.2p), comprising the interim dividend already paid of 0.6p (2013: 0.6p) and a final dividend of 1.6p (2013: 1.6p).

The final dividend will be paid on 7 November 2014 to shareholders on the register on 10 October 2014, with an ex-dividend date of 9 October 2014.

PEOPLE

We are reliant on the expertise, professionalism and commitment of our people and I thank all of them for their contribution during another challenging year in our industry.

OUTLOOK

As the UK insolvency business with the largest market share by volume, any change in national insolvency numbers, which remain difficult to predict in the current climate, has a direct impact on our operational volumes and earnings. Whilst we do not anticipate any immediate change in activity levels, the expectation of an increase in interest rates over the forthcoming months has escalated recently. A sustained rise in rates would result in a less benign financing environment, with the possibility of an increasing number of insolvencies and restructuring assignments.

With the benefit of our reduced cost base, a strong financial position and committed medium and long-term bank facilities, the group remains well-placed to take advantage of opportunities to develop and enhance the business, both organically and through selective acquisitions. We also retain the capacity and expertise to handle an increase in activity levels should they arise, which would result in improved profitability due to the inherent operational gearing in the business.

In common with last year, we expect the first half, which includes the quieter summer months, to be a relatively slow trading period, with the bias of activity towards the second half. For our core insolvency and restructuring business, we expect the current year to be one of consolidation, as we integrate acquisitions and retain the capacity to handle increased volumes.

An update on current trading will be provided at the time of the company's annual general meeting in September 2014.

Ric Traynor

Executive chairman

9 July 2014

STRATEGIC REPORT

Begbies Traynor Group is the UK's leading independent business recovery practice, handling the largest number of corporate appointments, principally serving the mid-market and smaller companies. We provide a range of specialist professional services primarily to businesses, their professional advisors and the major banks covering insolvency, restructuring and risk management activities.

INSOLVENCY MARKET

The number of corporate insolvencies (Source: The Insolvency Service) for calendar year 2013 was 18,856 (2012: 20,749), a decrease of 9%. The number of appointments in the first quarter of 2014 stabilised to 4,751 (2013: 4,616). The sustained low level of interest rates at 0.5% (since May 2009) continues to provide a very benign financing environment for UK companies.

In previous economic cycles, the number of corporate appointments has peaked after recessions when the economy enters a recovery phase. This is due to a combination of financially stressed companies being unable to finance working capital requirements; higher interest rates giving an increased cost of finance for financially stressed businesses; and banks being willing to crystallise losses on distressed loans, supported by additional appetite from purchasers for distressed assets.

Although the economy has now entered a cycle of growth, this has not yet impacted on the level of corporate insolvency appointments.

STRATEGY

We aim to enhance our market-leading position, ensuring the business is well-placed to benefit from the opportunities presented by the long-term growth in the UK insolvency market, together with developing complementary service offerings such as financial, valuation and debt consulting.

OPERATING REVIEW

Insolvency and restructuring

Begbies Traynor is the UK's leading independent business recovery practice, providing a partner-led service to stakeholders in troubled businesses.

Segmental profits* in the year decreased to £10.6m (2013: £12.3m) as a result of a reduction in revenue to £42.9m (2013: £47.5m). Operating margins were 24.7% (2013: 25.9%). The reduced level of market activity led to lower insolvency appointments for the group, which combined with pressure on fee rates,caused the reduced revenue levels in the year.

We remain focussed on our cost base as a result of the ongoing challenging trading environment. Following the restructuring completed in the previous financial year, together with the ongoing focus on cost levels, the divisional cost base decreased to £32.3m in the year (2013: £35.2m), which has partially mitigated the impact of the reduction in revenue.

The number of people employed in the division has decreased to 379 as at 30 April 2014 from 415 at the start of the financial year.

We remain the market leader in UK mid-market insolvency and we believe that the combination of our full national coverage, strong relationships with all major UK banks and excellent referral networks from other professional services organisations leaves the business well-placed to take full advantage of this market.

We will continue to develop our core division through a combination of senior recruitment, selective acquisitions and staff development, with the intention of progressively increasing our market share. Further development over the medium term will come from winning higher value, more complex instructions from existing clients and prospects, by demonstrating our capabilities and credentials.

* See note 2

Global risk partners

Global risk partners is a specialist risk consulting and forensic investigation consultancy.

Revenues in this segment decreased to £2.8m (2013: £3.6m), resulting in a loss* of £0.2m (2013: loss of £0.2m). Having generated a loss of £0.2m in the first six months of the financial year the division delivered a break-even performance in the final six months of the year.

The number of people employed in global risk partners decreased to 23 on 30 April 2014 from 30 at the start of the financial year.

* See note 2

Partners and employees

As at 30 April 2014, the group employed a total of 449 people (2013: 501), a decrease of 10% compared with a year ago, which includes 348 direct fee earners, of whom 68 are partners, and 101 support staff.

We continue to invest in training and developing our people, five of our fee earners passed the Joint Insolvency Examination Board exams in November 2013. We are pleased to have recruited two new partners into the business and promoted one fee earner to partner.

Developments in the year

We have continued to develop our advisory services through BTG Financial Consulting, which was launched in the last financial year. In addition to completing several complex restructuring assignments this year, we have also been appointed to advise on some significant debt advisory matters with debt levels in the £50m - £300m range. Subsequent to the year-end we were appointed to manage the disposal of Reading FC, which follows from our other recent successes in this niche field, including Southampton, Port Vale and Hull City.

We are well advanced with further plans to continue developing our offering in the London market. Our existing team, who focus on executing higher value restructuring and consulting mandates as well as larger insolvency cases, will relocate to offices in Canary Wharf during summer 2014.

Subsequent to the year end, in June 2014 we completed the acquisition of Ian Franses Associates, a London-based insolvency specialist. This business, which is located in Paddington, will focus on executing higher volume liquidations and personal insolvencies in the London market. The acquisition will enable the group to provide complementary services from two London locations, providing a strong platform for growth in the largest market in the UK.

On 1 October 2013, we completed the acquisition of Cooper Williamson, a Manchester-based corporate insolvency boutique. Cooper Williamson had successfully developed its own business rescue website (www.realbusinessrescue.co.uk), which was a significant driver of new cases. The acquired business has now been fully integrated into our existing operations and the website is generating new insolvency cases for the group nationally.

FINANCE REVIEW

EBITA (pre-exceptional items)

Trading performance was affected by the challenging trading conditions in the year. Operating costs reduced by £4.0m to £39.8m (2013: £43.8m) as a result of the restructuring exercise completed in 2013 and the ongoing management of the group's cost base. EBITA (pre-exceptional items) reduced to £6.1m (2013: £7.7m) with margins of 13.3% (2013: 15.0%).

Finance costs

Finance costs increased to £1.1m (2013: £1.0m) as a result of the increased costs of the new facilities entered into in April 2013.

Amortisation

Amortisation costs of £0.4m (2013: £0.4m) relate to the amortisation of intangible assets arising on acquisitions.

Exceptional items

Exceptional items in the year were £0.8m relating to costs associated with the planned relocation of the group's London offices.

Exceptional items of £3.9m in 2013 comprised restructuring costs of £3.8m and costs relating to the debt refinancing of £0.1m.

Tax

The tax charge for the year was £0.8m (2013: £1.0m), giving an effective rate of 20% (2013: 41%). The reduced effective rate reflects a tax credit in the current year, resulting from a reduction in deferred tax liabilities due to the enacted reduction in the corporation tax rate to 20% by 2015.

Earnings per share ('EPS')

EPS*, adjusted for the net of tax impact of the amortisation of intangible assets arising on acquisitions, exceptional and net acquisition-related items, were 4.3p (2013: 5.3p).

Basic and diluted EPS were 3.3p (2013: 1.6p).

* See reconciliation in note 5

Acquisition

On 1 October 2013, the group completed the acquisition of the trade and assets of Cooper Williamson Ltd, the Manchester-based corporate insolvency specialist. The acquisition was for an initial consideration of £0.9m, satisfied in cash of £0.45m and through the issue of 1,141,842 new ordinary shares.

Under the terms of the acquisition, there is contingent consideration payable of up to £1.6m: £1.1m subject to financial performance hurdles over the three years from completion, which may be satisfied in cash or by issuing new ordinary shares at the group's discretion. The group has also agreed to further consideration of up to £0.5m, subject to financial performance in the following two years.

In accordance with IFRS 3 (revised), a liability of £0.6m has been recognised in respect of contingent consideration (giving expected total consideration of £1.5m) and acquisition costs of £0.1m have been charged to the statement of comprehensive income as an exceptional item.

Cash flows

Cash generated by operations (before interest and tax payments) in the year was £7.4m (2013: £7.8m). This cash flow is stated after £1.4m (2013: £1.7m) of restructuring payments and £0.2m (2013: £1.4m) of payments relating to discontinued operations, which were provided for in prior periods.

Tax payments in the year were £1.0m (2013: £0.4m). Interest payments were £0.9m (2013: £1.5m including £0.4m of arrangement fees in respect of new bank facilities in the year).

Cash outflows from investing activities were £0.9m (2013: £1.0m). Capital expenditure was £0.4m (2013: £0.4m) and deferred payments relating to prior year acquisitions were £0.1m (2013: £0.6m). Acquisition payments were £0.45m (2013: £nil).

Financing cash outflows were £2.0m (2013: £4.1m). During the year there was a repayment of asset finance obligations of £0.1m (2013: £0.2m) and a repayment on the group's principal bank facilities of £nil (2013: £2.0m). Dividend payments were £2.0m (2013: £2.0m). Proceeds from share issues were £0.1m (2013: £0.1m).

Financing

Net borrowings reduced by £2.7m to £14.5m at 30 April 2014 (2013: £17.2m), with a reduction in gearing to 24% (2013: 30%) and significant headroom within the committed banking facilities of £30m. During the year, all bank covenants were comfortably met and the group remains in a strong financial position. On 30 April 2014, the board cancelled the £5m overdraft facility due to the reduced levels of debt and significant headroom within the committed facilities.

The group's principal unsecured, committed facilities of £30m provide the group with medium and long-term financing with maturity dates from 2017 to 2021.

Net assets

At 30 April 2014 net assets were £59.4m (2013: £57.7m), equivalent to net assets per share of 65p (2013: 64p).

Non-current assets increased to £53.6m (2013: £52.6m) due to intangible assets recognised on the acquisition of Cooper Williamson in the year.

Trade and other receivables decreased to £36.3m (2013: £40.2m), principally due to a reduction in working capital.

Net borrowings reduced to £14.5m (2013: £17.2m).

Trade and other payables, which reduced to £8.2m (2013: £9.4m), includes trade creditors and accruals of £5.9m (2013: £7.1m), tax and social security creditors of £1.7m (2013: £2.0m) and deferred consideration liabilities of £0.6m (2013: £0.3m) of which £0.3m is payable within one year.

Provisions for property costs, restructuring costs and post-disposal obligations total £2.1m (2013: £3.0m) of which £1.5m is payable within one year.

Current tax liabilities were £0.7m (2013: £0.5m). Deferred tax liabilities were £5.0m (2013: £5.1m).

Going concern

The directors have reviewed the financial resources available to the group and have concluded that the group will be able to operate within the level of its borrowing facilities and have a reasonable expectation that the group has adequate resources to continue in operational existence for the foreseeable future. This conclusion is based, amongst other matters, on the group's existing borrowing facilities and a review of financial forecasts for a period exceeding twelve months from the date of this announcement. Accordingly, the financial information in this announcement is prepared on the going concern basis.

Ric Traynor Nick Taylor

Executive chairman Group finance director

9 July 2014 9 July 2014

The profit and comprehensive income for both years is attributable to equity holders of the parent.

All results arose from continuing operations.

Consolidated statement of changes in equity

 The merger reserve arose on the formation of the group in 2004.

1. Basis of preparation and accounting policies

The results for the year ended 30 April 2014 have been prepared on the basis of accounting policies consistent with those set out in the annual report to shareholders of Begbies Traynor Group plc for the year ended 30 April 2013.

The group's financial statements for the year ended 30 April 2014 have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted for use in the EU. Whilst the financial information included in this announcement has been prepared in accordance with IFRS, this announcement itself does not contain sufficient information to comply with IFRS.

This financial information does not include all of the information and disclosures required for full annual financial statements and does not comprise statutory accounts within the meaning of section 435 of the Companies Act 2006.

The comparative figures for the year ended 30 April 2013 do not comprise the group's statutory accounts for that financial year. Those accounts have been reported upon by the group's auditors and delivered to the Registrar of Companies. The report of the auditors was unqualified, did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and did not contain statements under section 498 (2) or (3) of the Companies Act 2006.

Statutory accounts for Begbies Traynor Group plc for 2014 will be delivered to the Registrar of Companies following the company's annual general meeting. The auditors have reported on these accounts; their report is unqualified and does not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and did not contain statements under either section 498 (2) or (3) of the Companies Act 2006. The 2014 annual report will be available on the group's website: www.begbies-traynorgroup.com.

Going concern

In carrying out their duties in respect of going concern, the directors have completed a review of the group's current financial position and cash flow forecasts for a period exceeding twelve months from the date of this announcement. This review included sensitivity analysis to determine the potential impact on the group of reasonably possible downside scenarios. Under all modelled scenarios, the group's banking facilities were sufficient and all associated covenant measures were forecast to be met.

After making enquiries, the directors have a reasonable expectation that the company and the group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, this financial information is prepared on the going concern basis.

2. Segmental analysis by class of business

3. Finance costs

4. Exceptional and net acquisition-related items

5. Earnings per share

The calculation of the basic and diluted earnings per share is based on the following data:

The following additional earnings per share figures are presented as the directors believe they provide a better understanding of the trading position of the group:

6. Dividends

7. Reconciliation to the cash flow statement