Begbies Traynor swings into profit by pinpointing property to overcome lacklustre insolvency market
Begbies Traynor revealed a reverse in fortunes today, swinging into a profit in its most recent financial year.
The figures
The business recovery and property services consultants reported a profit before tax from continuing operations of £558,000 for the year to April, up from a loss of £723,000 the year before.
Meanwhile, the company brought in revenues of £50.1m, up from £45.4m in the prior year.
Begbies Traynor's balance sheet position also improved, with net debt going from £12.8m last year to £10.4m at the end of this April.
The market, however, did not react well to the news. Shares are trading down 10.7 per cent at 48.25p at time of writing.
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Why it's important
As a general rule, businesses have been booming lately, which has created problems for Begbies Traynor's insolvency efforts. With national insolvency appointments down nine per cent in the year to March, it's hardly surprising that revenues from the company's insolvency and restructuring activities have dropped from £40.9m to £37.7m.
However, being wary that this portion of its business is highly dependent on the economic cycle, Begbies has diversified and branched its activities in property services. This set of results represents the first full year since the company acquired chartered surveyors firm Eddisons.
Begbies also purchased Taylors, a valuation business, during the course of this financial year, and acquired Pugh & Co, a commercial property auctioneers, shortly after the financial year ended.
What Begbies Traynor said
Ric Traynor, executive chairman of Begbies Traynor Group, told City PM that the renewed focus on property services meant the business was "better hedged" against movements in the economic cycle and made sure the company could keep on churning regardless of factors outside of their control.
Traynor pointed out that "things got even quieter" in the run-up to the referendum "as decisions weren't being made". He added that the situation seemed to be similar in the immediate aftermath of the vote, particularly because of all the current "shenanigans" with politics.
Putting a positive spin on the current climate, Traynor added: "There's bound to be more uncertainty. There's bound to be investment put on hold. There's bound to be more conservatism with lenders about whether they lend to commercial organisations or not….it's bound to have an impact on those marginal businesses which are just surviving, of which there are many. It's bound to push a significant number of them just over the edge."
In short
An excellent case study on how companies can shield their business from economic movements outside of their control