Begbies Regulatory News (BEG)

30 Jan 2008 07:01

Begbies Traynor Group PLC30 January 2008 30 January 2008 Begbies Traynor Group plc Interim Results For the six months ended 31 October 2007 Begbies Traynor Group plc, the specialist professional services organisation,today announces its interim results for the six months ended 31 October 2007. Financial Highlights: • Revenues up 1.9% to £21.9m (H1 2006: £21.5m) in spite of challenging market • Profit before tax* fell to £2.1m (H1 2006: £3.7m) reflecting a fall in the business insolvencies market and significant investment • Adjusted earnings per share fell to 1.7p (H1 2006: 3.2p) • Interim dividend maintained at 1.0p per share (H1 2006: 1.0p) * before amortisation Operational Highlights: • Acquisition of Shaw Tax announced separately today and two insolvency practices since half year end • Head office move and corporate re-branding completed • Continued investment in ongoing and new activities • Recent uplift in insolvency activity Ric Traynor, Executive Chairman, commented: "The Group is now trading in line with expectations, and has made good progressexpanding beyond its core insolvency base. "If the current increase in business insolvencies continues, we expect tosignificantly improve profitability over the medium term, justifying ourdecision not to cut back resources through the quiet period of last year. TheGroup will also reap the benefits of our continued investment in acquisitions inthis area." For further information, please contact: www.begbies-traynorgroup.com Begbies Traynor Group plc 0161 837 1700Ric Traynor, Executive ChairmanJohn Gittins, Chief Financial Officer Shore Capital & Corporate Limited 020 7408 4090Guy Peters Smithfield 020 7360 4900Reg Hoare/Katie Hunt/Will Henderson About Begbies Traynor Group: Begbies Traynor Group plc is a specialist professional services organisationproviding independent professional advice and solutions to businesses, financialinstitutions, the accountancy professions and individuals in the areas ofcorporate finance, recovery, investigation, risk management, commercial financeand specialist tax advice. It is listed on AIM (Ticker: BEG.L). Begbies Traynor Group plc Interim results for the six months ended 31 October 2007 Chairman's statement For the first time since the group listed on AIM in 2004, I have to report on aset of results that do not show an increase in Group profitability. Nonetheless,it is the Board's view that the Group remains on track to deliver its mediumterm goals. Results Group turnover for the six months increased slightly to £21.9m - acquisitions inthe period contributed £0.5m of sales and overall sales from existing operationswere broadly maintained. The fall in operating profits (EBITA) in the period,down on the prior period by £1.5m to £2.6m, is a result of what we see as atemporary setback in the market conditions for our core insolvency operationsand our investment in growth ahead of profit delivery. These investmentsincluded expansion of our existing service teams, the establishment of newservice lines, a new Manchester headquarters and continued development of ourBGN international network. Amortisation in the six months increased by £0.2m to £0.4m due to the impact ofacquisitions, and after finance costs of £0.5m, up by £0.1m on the previousperiod, profit before tax was £1.6m, compared to £3.5m in the previous period.The adjusted earnings per share were 1.7 pence (2006: 3.2 pence). The basicearnings per share amounted to 1.4 pence (2006: 3.0 pence). Cash generation was affected by the fall in profits and by working capitalabsorption, principally from the timing of payments which should largely reversein the second half year. In addition, we spent some £7.0m on acquisitions andcapital expenditure in support of our medium term strategy. As a result, Groupborrowings increased over the period by £8.5m to £14.3m. Having reviewed current trading, our continuing investment programme and cashavailability, the board has approved a maintained interim dividend of 1p pershare which will be paid on 7th April 2008 to all shareholders on the registeron 25th March 2008, with an ex dividend date of 19th March 2008. This set of Interim Results is our first under International Financial ReportingStandards ("IFRS"), the effect of which on comparative periods is set out in aseparate IFRS restatement announcement made today and is available on our website at www.begbies-traynorgroup.com. The principal adjustment to comparativesrelates to the treatment of goodwill amortisation. Divisional highlights Activity in our core insolvency business fell by 3% from the level in the priorperiod. This represents an outperformance of the market generally, when setagainst the sharp fall in the numbers of business insolvencies nationally in thefirst nine months of 2007, which were 13% down on 2006 (Source: Government'sInsolvency Service). As a result, margins in this area fell from 31.8% to 30.4%,as we retained our resource base through this quiet period. This has been one ofthe quietest periods for corporate insolvency for nearly 20 years, reflectingthe ready availability of easy credit up until the autumn of 2007. Our activity in corporate finance grew as a result of the inclusion of ouroperation in Newcastle, which was acquired in the second half of the previousyear. We also expanded this operation organically, engaging five new partnersaround the country since the end of the prior period, who have been buildingtheir portfolio of assignments. However, as the majority of corporate financeincome is contingent and therefore not recognised until deals complete, theirefforts have not yet been reflected in increased turnover. We also invested in a number of new business streams in the period: commercialfinance broking, valuations advice and business improvement consulting, all ofwhich have incurred early stage costs, which have been written off. Results fromour IVA consumer debt operation were flat when compared to the previous period. Finally, we made our entry into tax consulting services in the period, byacquisition. I am pleased to report that this area has performed profitably andfully in line with expectations. Acquisitions since the period end In the last quarter of 2007, we made two further acquisitions of insolvencyfirms, as previously announced, which are in the process of being integratedinto our North East region. Both of these operations are performing toexpectations. We maintain a pipeline of potential further insolvencyacquisitions. As announced separately today, we have, this month, completed the acquisition ofShaw Tax, a long established and profitable specialist tax consultancy operatingfrom offices in Birmingham and London. Current trading Since the end of the period under review, we have begun to see an upswing ininsolvency activity, with new case values in November, December and Januaryaround the country showing marked increases. There is now a consensus in themarketplace that 2008 will see a sustained increase in the level of businessfailures. This is further supported by the Group's own Red Flag Alertstatistics, which monitor adverse actions and other corporate distress signals.The latest survey, issued this week, showed significant increases in adverseactions, such as county court judgements and winding up petitions, in the finalquarter of 2007. Corporate finance activity in the second half remains contingent on dealcompletions. However, given the likely economic environment, we have begun toshift the focus of our corporate finance teams towards business and debtadvisory activities. We believe that, in this way, activity in this area can besustained and that the benefits from our recent resource growth will flowthrough. We continue to monitor our investment in new advisory and consultingareas to ensure that they mature rapidly to deliver profit contribution. Our penetration of the tax consulting market, which focuses on providingoutsourced specialist tax advice via fellow professionals, continues to build onthe acquired base through recruitment and by further acquisition. We now have anactivity base in this area of professional services of some £5m per annum,including the acquisition referred to above, which we expect to deliver ourrequired level of profit contribution in the coming year and which we will seekto further expand. Summary and outlook The Group is trading in line with expectations, and has made good progressexpanding beyond its core insolvency base. If the current increase in businessinsolvencies continues, we expect to significantly improve profitability overthe medium term, justifying our decision not to cut back resources through thequiet period of last year. The Group will also reap the benefits of ourcontinued investment in acquisitions in this area. Ric TraynorExecutive Chairman30 January 2008 Begbies Traynor Group plcProfit & loss accountSix months ended 31 October 2007 Unaudited Unaudited Unaudited Six months Six months Year ended ended ended 31 October 31 October 30 April 2007 2006 2007 £'000 £'000 £'000 Revenue 21,930 21,514 44,483Direct costs (11,584) (10,191) (20,053)Administrative expenses (7,745) (7,233) (15,153) ---------------------------------------------------Other operating income - 9 9 Earnings beforeinterest, taxand amortisation 2,601 4,099 9,286 Amortisation (429) (219) (520)Finance costs (527) (397) (957) ---------------------------------------------------Profit before tax 1,645 3,483 7,809Tax expense (570) (1,239) (2,769) ---------------------------------------------------Profit for the period 1,075 2,244 5,040 ===================================================Attributable to:Equity holders of the parent 1,171 2,244 5,040Minority interest (96) - - --------------------------------------------------- 1,075 2,244 5,040 =================================================== Earnings per share (in pence)From continuing operations Basic 1.4 3.0 6.7 ===================================================Adjusted 1.7 3.2 7.0 =================================================== Begbies Traynor Group plcConsolidated balance sheetAs at 31 October 2007 Unaudited Unaudited Unaudited As at As at As at 31 October 31 October 30 April 2007 2006 2007 £'000 £'000 £'000Non-current assetsGoodwill 43,794 41,326 41,911Other intangible assets 1,198 657 521Property, plant andequipment 6,722 4,283 4,277 --------------------------------------------------- 51,714 46,266 46,709 ---------------------------------------------------Current assetsTrade and other receivables 25,616 21,746 24,718Cash and cash equivalents 29 547 527 --------------------------------------------------- 25,645 22,293 25,245 ---------------------------------------------------Total assets 77,359 68,559 71,954 ===================================================Current liabilitiesTrade and other payables (8,073) (11,546) (11,337)Current tax liabilities (598) (1,761) (1,485)Financial liabilities (12,883) (725) (667) --------------------------------------------------- (21,554) (14,032) (13,489) ---------------------------------------------------Net current assets 4,091 8,261 11,756 ---------------------------------------------------Non-current liabilitiesTrade and other payables (2,933) (3,628) (2,316)Financial liabilities (1,367) (10,335) (5,131)Deferred tax liabilities (1,646) (556) (1,000)Corporation tax - - (193) --------------------------------------------------- (5,946) (14,519) (8,640) ---------------------------------------------------Total liabilities (27,500) (28,551) (22,129) ---------------------------------------------------Net assets 49,859 40,008 49,825 ===================================================EquityShare capital 4,046 3,779 4,044Share premium account 21,747 14,185 21,696Other reserves 17,584 17,584 17,584Retained earnings 6,458 4,460 6,501 ---------------------------------------------------Equity attributable to:Equity holders of theparent 49,835 40,008 49,825Minority interest 24 - - ---------------------------------------------------Total equity 49,859 40,008 49,825 =================================================== Begbies Traynor Group plcConsolidated cash flow statementSix months ended 31 October 2007 Unaudited Unaudited Unaudited Six months ended Six months ended Year ended 31 October 31 October 30 April 2007 2006 2007 £'000 £'000 £'000 Earnings before interest, tax and amortisation 2,601 4,099 9,286Depreciation 668 533 1,142Loss on asset sale 8 8 27Increase in receivables (841) (337) (3,570)(Decrease) increase inpayables (1,776) 931 1,169 ------------------------------------------------Cash generated by operations 660 5,234 8,054 Income taxes paid (1,082) (669) (1,981) Interest paid (398) (355) (700) ------------------------------------------------Net cash (used in) generatedfrom operating activities (820) 4,210 5,373 ------------------------------------------------Investing activities Proceeds on disposal ofproperty, plant and equipment 369 197 301Purchases of property, plantand equipment (3,446) (1,233) (1,942)Acquisition of subsidiaries (3,891) (4,338) (6,672) ------------------------------------------------Net cash used in investingactivities (6,968) (5,374) (8,313) ------------------------------------------------ Financing activitiesHP finance received 1,628 601 1,055Dividends paid (1,214) (749) (1,505)Repayments of HP financeobligations (490) (390) (939)Proceeds on issue of shares 52 11 7,787New bank finance raised (repaid) 7,314 1,640 (3,529) ------------------------------------------------Net cash generated fromfinancing activities 7,290 1,113 2,869 ------------------------------------------------Net decrease in cash and cashequivalents (498) (51) (71) Cash and cash equivalents atbeginning of period 527 598 598 ------------------------------------------------Cash and cash equivalents atend of period 29 547 527 ================================================ Note of preparation 1. These interim financial statements for the period ended 31 October 2007, which are neither audited nor reviewed, have been prepared for the first time consistent with IFRS and do not comprise full accounts within the meaning of s 240 of the Companies Act 1985. Results for the comparative periods have been restated under IFRS. The changes in accounting policies resulting from the IFRS restatement, together with the financial impacts of these changes and the full IFRS accounting policies of the Group are set out in the document entitled 'IFRS Restatement Report', which can be found on the Group's website, www.begbies-traynorgroup.com. 2. This unaudited interim report does not comprise the Group's statutory accounts. The financial information in respect of the year ended 30 April 2007 is extracted from the statutory accounts under UK GAAP for this period and amended by adjustments arising from the implementation of IFRS. The statutory accounts for this period have been filed with the Registrar of Companies. The auditor's report on these accounts was unqualified and did not contain a statement under section 237 (2) or (3) of the Companies Act 1985. 3. Basic earnings per share are arrived at by dividing profit for the period by the average number of shares in issue during the period. Adjusted earnings per share add back to earnings the after tax cost of goodwill amortisation. This information is provided by RNS The company news service from the London Stock Exchange