Begbies Traynor Share Discussion Threads

[runthejoules] 07/5/2019 08:08

Can't buy any this morning on HL!

[jonwig] 07/5/2019 07:57

I understand BEG is one of Manolete's [MANO] largest IP clients. MANO is hungry for business following its IPO and buys case files outright, with a profit share on top. This should improve BEG's cash turnaround and enable it to take on yet more business.

[aleman] 07/5/2019 07:51

Not just ahead of expectations but comfortably ahead. I would take that to mean more than 10%. Plus debt is down to £6m. There's been a few acquisitions recently and office openings yet debt it is down and acquisitions are trading in line. I would imagine this means there could be yet more acquisitions and a nice dividend increase.

[podgyted] 07/5/2019 07:43

TU update today which I wasn't expecting.

"The Group performed strongly in the final quarter of the financial year, as a result of which we now expect our revenue and profit for the financial year as a whole to be comfortably ahead of market expectations. This was driven by a number of successful fee realisations combined with continuing strong performance from both operating divisions."

Very good to hear!

[aleman] 30/4/2019 09:53

Q1 individual insolvencies for England and Wales down 8% on Q4 but up 16% on Q1/2018. (Scotland +29% on Q1/18.)



Q1 company insolvencies for England and Wales up 6% on Q4 and up 5% on Q1/2019 (Scotland +16% on Q1/18).

[essentialinvestor] 29/4/2019 10:44

Having read back all interim and FY reports to 2005, one aspect jumps
out, and that is the extraordinary acquisition spend- often partly funded
by new share issuances. I use "extraordinary" in light of the current
market cap. There is little doubt imv some of this acquisition activity has
been value destructive, with everything from an overseas JV to a people tracing business. Often BEG appears highly optimistic about these new businesses,
at least initially!.

Given the recent rapid build up on the property services division, I would hope Ric
has a very good handle on how this side of the business will perform during
a cyclical downturn.

I added a small amount of Friday, but remain fairly cautious.

[aleman] 29/4/2019 07:41

New research from Begbies Traynor, the UK's leading independent insolvency firm, reveals there are now 484,000 UK businesses in significant financial distress, with the property sector particularly affected, giving rise to concerns that the UK could suffer a broader economic slowdown.

The Red Flag Alert data for Q1 2019, which monitors the financial health of UK companies, found that 14% of all UK businesses were experiencing 'significant' financial distress at the end of March 2019, while the number of businesses in critical distress during the same period - often a precursor to formal insolvency - rose by 17% year-on-year.

[lefrene] 16/4/2019 12:44

One notices that the government is playing up "most people in work since 1975" whilst ignoring the rising claimant count, plus of course not mentioning that the population is circa 25% bigger than it was in 1975!

[essentialinvestor] 16/4/2019 12:43

Appreciate the detailed reply, many thanks.

[aleman] 16/4/2019 12:41

Yes, I presume so. the property services side is growing,though, mostly by acquisition. It makes sense to buy when the housing market us subdued. It might well continue to grow by acquisition but it will also see more work directed its way from business recovery if the economy deteriorates. Business recovery is growing again and could grow a lot. Yes, overall profits might double to a recession bottom, instead of treble, but they would be more likely to flatline after the recession than to fall back.

How the company does overall is hard to predict. How deep will any recession be? What measures will central banks take in a recession? We can't know these things. They are even hard to guess at. All we can do is see that the business is growing again, generating enough cash to grow the dividend and make acquisitions, and will probably grow faster if we go into recession. Downside might be if there is no recession and the economy picks up. I don't see that as at all likely but it might happen, I suppose. I'd hope these would just tread water and my other stuff that has been hit recently would take off.

I just see it as a good way to balance a portfolio with an income paying stock. It helps alleviate some of the discomfort from bad economic news and profit warnings in my other holdings.

[essentialinvestor] 16/4/2019 12:17

Aleman, viewing BEG as a counter cyclical play, will that be less so in
the next recession with their growing property services division? Thanks.

[aleman] 16/4/2019 11:26

UK Claimant Count continues to accelerate. +28.3k.




If the current accelerating trend continues, Claimant Count will probably hit a 23-year high in a little under a year. Insolvencies tend to follow Claimant Count (rather than ILO unemployment) so I'd hazard the guess BEG are getting a lot busier.

[aleman] 05/4/2019 07:56

That's a bigger one for a good price. I expect analysts will have to update forecasts. About 9% more pretax profit for less than 1% more shares (plus cash and contingents)? That should see forecasts for the year starting next month up to about 5.6p? Maybe up the dividend forecast to 3p?

BEG is very cash generative and growing organically and by astute acquisitions. I reckon p/e should be about 15. On 5.6p of earnings that gives a price target of 84p for me. And I actually think those earnings will likely be beaten due the effect of the slowing economy on the corporate recovery side.

[podgyted] 05/4/2019 07:43

Building up the Surveying side today - seems a good deal - immediately earnings enhancing.

[aleman] 26/3/2019 16:13

More expansion? BTG division this time.

[ronin92] 25/3/2019 10:05

@podgyted @Aleman

Thanks for your take on the ROCE.

[topvest] 24/3/2019 18:06

Yes, I look at the yield curve daily now. Not quite inverted but at 0.13, after having bounced back to 0.18. When it goes negative then it’s a pretty reliable indicator of recession with 6-12 months or so.

[aleman] 24/3/2019 17:38

US and UK yield curves have flattened quite a bit in recent days as investors have taken to buying long bonds at ever lower yields. This suggests their economies have slowed further and investors are seeking safety. It looks like rate cuts are needed soon or recession is on the cards.

[podgyted] 24/3/2019 14:52

BEG has been acquiring businesses ready for the next recession - so amortization of intangibles is rising - and deal costs are high. BEG adjust these out in their headline figures of adjusted profit but ROCE use statutory profits.

The fact is ROCE will be low in this type of business until they make hay during recessionary times - I hold as a counter-cyclical measure, along with gold.

[aleman] 20/3/2019 11:04

Off the top of my head, I would imagine posibly three reasons to investigate.

The typical cyclical downturn for insolvency work after a recession, possibly aggravated by the implementation of ultralow interest rates and QE (at a time BEG acquired a few other practices and probably maintained staff levels higher than needed for a recessionary boost that never really arrived as expected).

Acquisitions in related sectors may have required slightly higher capital levels - notable Hugh's auctions and Taylors property services.

I think there might have been marginal cost additions for regulatory changes in the last year or two to bring them more into line with the rest of Europe. Not sure on this but have seen a few ariticles about technical changes that I've not really read.

[ronin92] 19/3/2019 23:16

I'm considering whether to buy some BEG shares and have some questions.

Why has the ROCE for BEG been trending downward for over a decade? Is it normal in this line of business to have an ROCE of 3.5%?

[aleman] 19/3/2019 11:35

Claimant Count continues to accelerate. Feb +27k on the month to 1039k, and +205k up (+24.6%) on last February. Now highest since June 2014.



Historical Claimant Count trend and insolvency trends do trend similarly to some degree.