Building service breadth, market share and margins
Firstly, they demonstrate once again that BEG can find ways to push up revenues and margins without any material assistance from higher numbers of insolvency appointments. The latter remains the major metric for the business, and total UK insolvency volumes are back to pre-pandemic levels. But a pick-up in larger, more complex (and higher value) administrations has yet to appear.The second takeaway is reiteration that acquisitions are core to the growth strategy. Management has demonstrated its ability to identify, secure and successfully integrate substantial additions. With respect to the FY22 result, 24% out of 31% revenue growth was acquisition related and operating profit margins grew from 14.8% to 16.9%.
According to the statement, FY23 has also begun positively. The group is confident that it will record further growth as it builds on a solidly performing base. Approx. 70% of the business remains geared towards insolvency work, a contracyclical input, so BEG is positioned to capitalise on the UK’s current economic struggles.
On the back of the group’s increased scale and service breadth we have increased our fair value estimate to 175p / share. That’s equivalent to 18.2x FY23e PER and reflects a deliberately conservative view, confined to organic growth.
NB WEBINAR - on Wed 27th July at 11.30am BEG Management will present to investors and take Q&A. To attend please visit ED website - Events
Begbies Traynor Group is a business recovery, financial advisory and property services consultancy. Co. provides these services through two operating segments: business recovery and financial advisory services, which provides transactional support, valuations and advisory services through its subsidiary, BTG Financial Consulting LLP; and property services, which delivering advisory, such as commercial property valuations, property receiverships, property management and accounting, and as well as transactional services that include property auctioneers, machinery and business asset auctioneers to owners and occupiers of commercial property, investors and financial institution.
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