- Shares gain after positive trading update
- Challenging backdrop drives growth in insolvencies
- Progress in integration of recent acquisitions
Shares in business advisory group Begbies Traynor (BEG:AIM), moved 3.4% higher following the release of an encouraging trading update covering the three months to the end of July.
Management reiterated its confidence in meeting market expectations of adjusted profit before tax of between £19.7 million and £20.6 million for the full year.
BENEFCIARY OF RISING INSOLVENCIES
Inflation, rising energy bills and interest rates are driving growth in the insolvency market.
The most recent statistics from the UK Government Insolvency Service reveal that total company insolvencies increased 56% year-on-year in the four months to the end of August.
This upward trend in new insolvency appointments has continued with an increase in the number of larger, mid-market insolvency and restructuring cases.
Key new appointments include the ongoing administrations of Avonside Group, the largest roofing contractor in the UK, and Silverbond Enterprises Limited, the former operator of the Park Lane Casino in London.
ACQUISTIONS INTEGRATING WELL
The group has made two bolt-on acquisitions in recent months, buying chartered surveyors Burdworth Hardcastle in June and Mantra Captial, the London based property finance brokerage, a month later.
The Burdworth Hardcastle deal is consistent with Begbies’ strategy to expand its property division underpinned by the Eddisons brand.
Burdworth Hardcastle was established in 2007, operates via three regional offices across Eastern England and has eighteen employees providing valuation, commercial property agency and building consultancy services.
Mantra Capital has expertise across commercial and residential real estate lending, property investment and development finance, finance for trading businesses and commercial insurance brokerage.
The Mantra deal extends Begbies’ finance brokerage capabilities nationally, an area of the business management considers critical.
Today’s update emphasised that the integration of both acquisitions is progressing in line with management expectations.
EXPERT VIEW
Commenting on today’s trading update, Canaccord Genuity analyst Portia Patel said: ‘We continue to believe the current macro outlook should provide very favourable trading conditions for Begbies’ counter cyclical activities, which comprise 70% of total revenues’.
Striking a similarly optimistic chord, Shore Capital analyst Vivek Raja said: ‘As mooted in the full year results statement on 19 July, activity levels in midmarket administration are picking up which could drive an acceleration in growth and operating margin progression within the core insolvency practice’.
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