Begbies Regulatory News (BEG)

21 May 2020

Begbies Traynor Group plc 

Year end trading update

Begbies Traynor Group plc (the 'company' or the 'group'), the business recovery, financial advisory and property services consultancy, announces an update on trading for its financial year ended 30 April 2020.

Summary

· Results broadly in line with market expectations:

o Revenue* expected to be c.£70m (2019: £60.1m)

o Adjusted PBT* expected to be c.£9.2m (2019**: £7.0m), having absorbed a £0.6m impact of the lockdown in the last six weeks of our financial year

· Net debt* of £2.8m (2019: £6.0m) significantly lower than expectations following strong operating cash flow in the final quarter, with significant headroom in bank facilities providing substantial liquidity

· Majority of group employees and service lines have successfully worked remotely from the commencement of lockdown in line with HM Government advice:

o Business recovery and advisory continued to be appointed on and progress cases, realise assets and complete transactions as usual

o The majority of property service lines have continued to operate remotely during lockdown

o Impact on services where lockdown paused activities, including commercial property valuations and business sales agency

o No intention to claim under the Government's Coronavirus Job Retention Scheme

* all numbers in this statement subject to audit

** restated to reflect adoption of IFRS 16

Trading

As reported in our third quarter trading update issued on 3 March 2020, the group had been trading well with strong growth in revenue and profit compared to the prior year.

These trading conditions for all service lines continued throughout February and early March. Since the introduction of lockdown restrictions in mid-March the majority of our teams have operated successfully from remote locations, however several of our property service lines were impacted by reduced activity levels, which resulted in a reduction in profits for the year of c.£0.6m.

Business recovery and financial advisory

We have seen a strong performance in the year with profit growth of c.30%, which reflects the continuing development of the division, increased insolvency appointments with higher average fee levels, a strong performance from our advisory team, and contributions from current and prior year acquisitions.

Insolvency appointments increased through the year prior to any economic impact from theCOVID-19 outbreak, which has significantly increased the level of distress in the UK economy. We continue to take the largest number of corporate insolvency appointments in the UK and our advisory team performed well in the year with an increase in corporate finance transaction completions.

The teams have successfully worked remotely since the commencement of the lockdown, continuing to provide advice and support to clients whilst progressing cases and realising assets, resulting in strong cash generation in the final quarter. Our recent investments in IT, particularly in document management, have greatly assisted our remote working capability.

Property advisory and transactional services

Profits for the year are expected to be broadly in line with the prior year. This reflects a strong performance across the division (as previously reported) in the period up to the commencement of lockdown in March, which has had a mixed impact across our property service lines.

The majority of property service lines have continued to operate remotely during lockdown.

Our plant and machinery and property auction teams have continued to trade through our online channels (www.eddisons.com and www.pugh-auctions.com), completing transactions and realising value for our clients together with asset realisations on our group insolvency appointments. The consultancy, commercial property agency and property management teams have also operated as normal from remote locations.

However, our commercial property valuations and business sales agency teams experienced reduced activity levels in April as a result of the lockdown.

Liquidity

The group is in a strong financial position. At the year end the group had cash balances of £7.2m together with undrawn, committed borrowing facilities* of £15.0m providing significant liquidity for the new financial year.

Net debt at 30 April 2020 was £2.8m (2019: £6.0m), represented by cash balances (as noted above) of £7.2m net of drawn borrowing facilities* of £10.0m. As a result of the reduced levels of debt together with increased profits, our leverage (calculated as net debt to EBITDA) reduced to c.0.3 times (2019: 0.7 times). All bank covenants were comfortably met during the year.

* The group's banking facilities comprise a £25m unsecured, committed revolving credit facility which expires in 2023, together with a £5m uncommitted acquisition facility

Dividends

The board remains committed to its long-term progressive dividend policy and the interim dividend for the financial year was paid on 11 May 2020 as previously announced. It is the board's current intention to recommend a final dividend and a decision will be made, as usual, at the time of the results announcement in the summer.

Outlook

The board remains positive about the group's prospects. In the current economic environment, we expect that our mix of service lines and counter-cyclical focus places the group in a strong position.

Whilst the timing of a return to normal economic conditions remains unknown, which impacts on several of our property service lines, we do anticipate progressive increases in the number of insolvencies. However, the timing and volume of these may be influenced by the current short-term Government support measures.

Overall, at this early stage of the new financial year, it is not possible to assess the potential impact of COVID-19 on our new financial year ending 30 April 2021.

We will provide a further update at the time of our final results announcement, which we anticipate will be in mid to late July.

Ric Traynor, Executive Chairman of Begbies Traynor Group plc, commented:

"The group has delivered a strong financial performance with increased revenue and profitability, despite the disruption in the last few weeks of the financial year. This is credit to our partners and staff in these challenging and uncertain times, where they have adapted rapidly to remote working.

"Looking ahead we remain well placed, given our strong financial position, the likely impact of the COVID-19 pandemic on the UK economy and the counter-cyclical focus of our business." 

Enquiries please contact:

Begbies Traynor Group plc 0161 837 1700

Ric Traynor - Executive Chairman

Nick Taylor - Group Finance Director

Canaccord Genuity Limited 020 7523 4588

(Nominated Adviser and Joint Broker)

David Tyrrell / Sunil Duggal / Angelos Vlatakis

Shore Capital 020 7408 4090

(Joint Broker)

Mark Percy / Anita Ghanekar

MHP Communications 07734 769 359

Reg Hoare / Katie Hunt / Florence Mayo begbies@mhpc.com

Notes to editors

Begbies Traynor Group plc is a leading business recovery, financial advisory and property services consultancy, providing services nationally from a comprehensive network of UK locations. The group has 740 staff and partners and the professional staff include licensed insolvency practitioners, accountants, chartered surveyors and lawyers.

The group's services include:

• Corporate and personal insolvency - we handle the largest number of corporate appointments in the UK, principally serving the mid-market and smaller companies.

• Financial advisory - forensic accounting and investigations, debt advisory, business and financial restructuring, due diligence and transactional support.

• Corporate finance - buy and sell side support on private company transactions.

• Valuations - valuation of property, businesses, machinery and business assets.

• Property consultancy, management and planning - building consultancy, commercial property management, specialist insurance and vacant property risk management, transport planning and design.

• Transactional services - sale of property, machinery and other business assets through physical and online auctions; business sales agency; commercial property agency focussed on northern and eastern England.

Further information can be accessed via the group's website atwww.begbies-traynorgroup.com/investor-relations.