Begbies Regulatory News (BEG)

15 Nov 2005 11:37

Begbies Traynor Group PLC15 November 2005 RNS Release 15th November 2005 Begbies Traynor Group plc Pre-Close Trading Update and Acquisition of W3 Debt Solutions The Board of Begbies Traynor Group plc ("BTG" or "the Group") (AIM: BEG), theUK's largest independent firm of business rescue and restructuring specialists,is pleased to provide an update on current trading in advance of interim resultsfor the six months to 31 October 2005, which will be released on 16 January2006. BTG has made good progress and remains on track to deliver growth in line withcurrent market expectations and the Group's plan to double its share of theaccessible corporate recovery market to 10% by the end of 2007. Despite therecent apparent upswing in the volumes of personal insolvencies, the corporatemarket remains stable at the levels consistently seen over the recent past.Therefore, delivery of planned growth continues to be mainly driven byacquisitions. The integration of the Group's largest acquisition to date, that of insolvencyspecialists Taylor, Gotham and Fry (TGF) in August, is proceeding well withpleasing progress made in merging this business with our existing South Easternregional operation. Acquiring TGF marked an important strategic developmentfor the Group, adding an extra level of presence in the South East. This is aregion of key economic importance and one we see offering significant organicgrowth opportunities for all of BTG's insolvency and corporate recoveryservices. Also progressing to plan is the integration of MCF, the Leeds-based corporatefinance operation acquired in May 2005, that specialises in advice andtransactions in the mid-corporate market. We have begun the process of expandingthis activity into the other major cities in which the Group operates. A longer-term Group strategic goal is to offer an increasing number of servicesclosely related to insolvency and corporate turnaround. FDB International, thecommercial investigation and security agency acquired by BTG in June, has yet todevelop its potential from membership of the Group. It is receiving additionalsenior management input to ensure greater value is produced from the Group'sinvestment over time. Acquisition of W3 Debt Solutions LLP BTG is now entering the rapidly-expanding volume personal insolvency marketthrough the acquisition of W3 Debt Solutions LLP. W3 Debt Solutions begantrading in September 2003, and today employs around 15 full-time staff from itsoffice in Chorley, Lancashire. W3 Debt Solutions reported turnover of £1.1m inthe year to 31st May 2005, producing profits before tax of £350,000. W3 Debt Solutions specialises in providing advice and practical support toindividuals in debt. Assisting people in debt is one of the fastest-growingsectors of the overall insolvency market, which according to the latest DTIfigures has grown 46% from Q3 2004 to Q3 2005. This strong rate of growth hasbeen partly fuelled by changes introduced under the Enterprise Act that make itsimpler for individuals and companies to invoke formal insolvency procedures.Growth has also resulted from the easy availability of cheap credit which hasled to rising numbers of individuals borrowing beyond their means. In response to the emergent demand, the Board of BTG resolved to enter thevolume personal insolvency market as an ancilliary service stream, operatingunder a different brand that is distinguished from BTG's existing corporateinsolvency and turnaround services. The terms of the transaction are as follows: BTG has acquired Insolvency Advice Limited, (which was owned and controlled byRic Traynor and Andrew Dick, Executive Directors of BTG) which owned 51% of W3Debt Solutions for £1.36m satisfied by the issue of 1,133,333 new ordinaryshares in BTG to Ric Traynor and Andrew Dick. In addition, an earn-outconsideration is payable (also in shares in BTG to be issued at the time ofmeasurement) based on 6.75 times the increase in taxed earnings of W3 DebtSolutions in the year to 31 October 2006. Immediately after being acquired by BTG, Insolvency Advice Limited acquired afurther 25% interest in W3 Debt Solutions from Greg Mullarkey (its chiefexecutive), leaving him with a minority interest of 24% of the goodwill value ofthe business. Greg receives an initial consideration comprising 276,732 sharesin BTG and a cash payment of £334,000. Greg is also entitled to a deferredconsideration of £333,000 in cash, subject to abatement at £10 for every £1 thatthe taxed profits of W3 Debt Solutions for the year ending 31 October 2006 fallshort of £235,000. Greg has also been granted a put option, whereby his remaining 24% minorityinterest can be sold to BTG. The consideration will be based on profits for theyear ended 31st October 2008. If Greg exercises this put option he will receivea consideration which equates to 24% of seven times post tax profits for thatyear, subject to a cap of £5m. As disclosed above, pre-tax profits for the year ended 31st May 2005, based onunaudited accounts were £350,000, before partnership drawings. This equates to£230,000 after allowing for the basic remuneration for Greg as an ongoing memberof the LLP. The business currently has some 900 Individual VoluntaryArrangements under management and is adding over 45 new cases per month. The value of net tangible assets acquired with the business is estimated at£400,000, which is represented by partners capital accounts. Insolvency AdviceLimited will replace the proportion of Greg Mullarkey's capital account that isto be repaid to him following the transaction of approximately £100,000. Going forward, the Directors anticipate that the growth of W3 Debt Solutionswill be enhanced by internal referrals from the existing Group network ofoffices and contacts. The acquisition of W3 Debt Solutions is anticipated tohave a modest positive impact on earnings in the current year and the benefitsare expected to be more significant in 2006/07. The Directors, other than Ric Traynor and Andrew Dick, consider, havingconsulted with BTG's advisers Shore Capital & Corporate, that the terms of thetransaction are fair and reasonable insofar as BTG shareholders are concerned. New share issues Mark Fry and Jamie Taylor, two partners who joined BTG following the TGFacquisition in August, have each subscribed, in cash, for 275,417 new BTGordinary shares at 120p per share. These shares were issued by the Group underits existing authority. In addition, Mark and Jamie have each acquired 141,250shares from other senior members of the BTG Group. BTG has also bought-in the 25% minority interest in its South West business fromIan Walker, who remains with the Group, for £150,000 in cash plus the issue of41,782 shares in BTG. Following the issue of these additional new ordinary shares and the addition ofthe shares being issued in consideration of W3 Debt Solutions, the Group willhave a total of 74,212,056 ordinary shares in issue. The new ordinary sharesare expected to trade on AIM on 18th November 2005. Ric Traynor and Andrew Dick's shareholdings in the Group (including familyinterests), following the acquisition and other share issues are 30,916,960shares (41.7%) and 12,266,781 shares (16.5%) respectively. Their combinedpercentage holding in BTG of 58.2% remains unaltered as a result of the abovetransactions overall. Ric Traynor, Executive Chairman of Begbies Traynor Group, comments: "I am pleased with the Group performance in the first half of the year, withrevenues and profits growing according to our business plan. We areparticularly pleased to have successfully completed five acquisitions in 2005,and we continue to pursue other opportunities to bring profitable firms into theGroup. Mark Fry and Jamie Taylor have reconfirmed their commitment to the Group, afterjoining us in August, by investing £1m in BTG equity, both through subscriptionfor new shares and facilitating modest planned disposals by a number of partnerswhose initial holdings are now out of their lock-in period. We have watched closely the personal insolvency market, and waited for theappropriate moment to progress the acquisition of W3 Debt Solutions. To beprofitable servicing the volume personal insolvency market requires a differentset of skills and processes compared to those required for larger scalecorporate work. We are delighted that we can now address this fast-growingmarket under the W3 Debt Solutions brand as part of the BTG group and areextremely pleased to welcome Greg and his team." Enquiries, please contact: Ric Traynor Neil Boom/Rosemary AcfieldExecutive Chairman Gresham PR Ltd.Begbies Traynor Group plc 020 7404 90000161 839 0900 Mike SawbridgeShore Capital & Corporate Limited0151 600 3722 Notes to Editors About Begbies Traynor Group plc The Group specialises in business insolvency management and is becomingincreasingly active in the area of personal insolvency. It also offers servicesin corporate rescue and forensic investigation and has entered the field ofcorporate finance through the acquisition of MCF Corporate Finance. In addition,the Group recently acquired FDB International, an established commercialinvestigation and security agency. The Group has grown to its current network of 30 nationwide offices ranging fromScotland to the South West of England, with over 300 operatives. The Companycontinues to pursue its strategy of organic development, coupled with theacquisition of specialist knowledge of both individuals and firms, to furtherincrease its market share in its core services. The Directors believe that the Group is the UK's largest independent insolvency,corporate rescue and recovery specialist with clients ranging from majorinstitutions to individuals with business difficulties. The Office Network The Group operates with 60 licensed insolvency appointment takers, some 220 feeearning staff and 65 in support and administration. The Group operates from 30locations of which five are regional offices, a further twelve are full officesand thirteen are satellites. Business Activities The core business of the Group is the formal administration of insolvenciesincluding receiverships, liquidations, administrations, company voluntaryarrangements and business-related personal insolvencies. The Group has extendedits activities into a range of consultancy services including corporate rescue,credit management, forensic and investigation services and corporate finance. This information is provided by RNS The company news service from the London Stock Exchange