3rd Jul 2006 07:01
Begbies Traynor Group PLC03 July 2006 RNS Release 3 July 2006 Begbies Traynor Group plc Preliminary results for the year ended 30 April 2006 Begbies Traynor Group plc announces its preliminary results for the year ended30 April 2006. Business and financial highlights: •Group position as the leading independent national provider of business insolvency and recovery services maintained and enhanced through three acquisitions •Range of professional services widened into corporate finance, investigations and consumer debt solutions, following three further acquisitions •Group is on track to deliver its initial three-year plan by mid 2007 •Work is underway to further develop the Group's network of overseas associates •Group turnover of £33.2 million increased by 30% from pro-forma level for the prior year •Profit before tax and amortisation of £7.3 million, a margin of 22% (2005 pro-forma 18%) •Normalised annual earnings per share up 31% to 6.7 pence (2005 pro-forma 5.1 pence) •Proposed final dividend of 1.0 pence, to give 1.5 pence in total for the year Ric Traynor, Executive Chairman, said: "The board remains primarily focused on completing its original strategy for theGroup over the coming year, through further earnings enhancing acquisitions andrecruitment. We are on, if not a little ahead of, schedule in delivering ourthree-year plan and will take time this summer to integrate acquisitions alreadymade and optimise the potential of the growth already achieved. Given currentmarket indicators, the outlook for the current financial year is positive." Enquiries, please contact: Ric Traynor Neil Boom/Tanya FenessExecutive Chairman Gresham PR Ltd.Begbies Traynor Group plc 0207 404 90000161 839 0900 Executive Chairman's Review Begbies Traynor Group plc is in the business of providing professional services,which are provided by the efforts and expertise of our key resource - people. Wenow count a total of 422 in our ranks, of which 331 are directly involved inproviding those services, an increase of 67% from 30 April 2005. I offer mythanks to all those who have contributed to the success of the Group over thepast year as well as my welcome to those that have joined us. I also extend mybest wishes to those few that have left us for pastures new. Commercial development In the 12 months since my last annual review, the Group has continued toprogress its strategy of expansion in its core field of general insolvencyservices and the addition of complementary services. In addition, we have addeda presence in the expanding market of consumer debt driven personal insolvencyservices. Our three-year plan at the time of our AIM flotation was to double our generalinsolvency activity from £20 million and to add up to 20% of other complimentaryservices in order to build total Group activity of £50 million. I am pleased to be able to report that, two years on, we are well on the way todelivering our planned expansion. Including the six acquisitions made in theyear to 30 April 2006 and the two already made in the period since then,together with organic growth from our continuing activities, our annualisedactivity base is now running at some £40 million per annum. General insolvency The general insolvency market over the 12 months continued to be static untilthe turn of the calendar year, when our in-house early warning system 'Red FlagA!ert' began to predict an upswing in business failures, which has since beendemonstrated by an increase in the overall number of insolvency appointmentsnationally, of which we have won our fair share. We continue to 'top the league'in terms of the number of corporate insolvency appointments undertaken. Recentmacro economic indicators suggest that this market increase is likely to besustained for some time to come. In the year to 30 April 2006, we acquired three independent general insolvencyfirms with a combined historical annual activity level of £5.1 million. Sinceacquisition, those businesses have enjoyed significant organic growth under theBegbies Traynor banner as they gain access to more high value assignments.Subsequently, we have made two further acquisitions, adding a further £3.6million of general insolvency turnover. The Group now has 18 full service and 10 satellite offices providing generalinsolvency services, covering most of mainland Britain. We continue to targetgeographical expansion to fill in the few remaining gaps in our nationalcoverage and the recruitment of senior personnel to augment our market share inthis, our core activity. Personal insolvency The Group provides insolvency services relating to the affairs of individualsand unincorporated businesses through its general insolvency business, includingbankruptcies and complex voluntary arrangements, which require significantongoing professional expertise. However, recent dramatic increases in personalinsolvencies has triggered strong demand for consumer debt solutions, based oncontributions out of future income, rather than asset realisations, throughIndividual Voluntary Arrangements (or, in Scotland, the equivalent process knownas Protected Trust Deeds). Our Glasgow office has developed a specialism in the provision of Trust Deedservices and increased its activity over the last year to become the secondplaced provider in the field. In England, the Group entered the consumer debtinsolvency market through the acquisition of a specialist provider of consumerdebt solutions in November 2005, which has since more than doubled its volume ofnew appointments. We see the provision of consumer debt insolvency solutions as significantlysupplementing our core insolvency services. By maintaining our ability to offerthe full range of personal insolvency services through specialist operations inEngland and Scotland as well as our general office network, we are well placedto provide appropriate advice and services in all circumstances and to sustainactivity through changes in market sentiment, legislation and regulatory focus. Corporate Finance The Group expanded its activity range into the provision of corporate financeservices in May 2005, through the acquisition of an independent firm based inLeeds. Since that time, we have opened a corporate finance department inManchester and plan to roll out this service to all the major business centresin which the Group operates. As well as providing advice on capital transactions, our corporate financeservices extend to assisting businesses to fund their working capitalrequirements, whether for growth or stability. Working in close liaison withexperienced insolvency practitioners within the Group, our corporate financeteams also advise troubled businesses where a formal insolvency may not deliverthe optimum result for creditors, employees and proprietors. The process of integration of these services into the Group's operations hasprogressed at a pleasing rate, without any short-term disruption to turnover orprofits from the corporate finance business we acquired. Investigative services We have continued to expand our activities in forensic accounting investigationsover the past year, with teams now operating in London and Manchester. As wellas providing litigation support and conducting investigative analysis wherefraud is suspected, the forensic teams are increasingly involved ininvestigations into the past transactions of businesses where the Group isadministering formal insolvency proceedings. A year ago, we expanded our range of investigative services by the acquisitionof a business providing non-financial investigative and tracing services. Ouractivities in that field have recently been augmented by the addition of aNorthern-based team of investigators. In isolation and without the benefit of a recognisable brand, such businesses donot tend to deliver profitability beyond proprietorial remuneration. However, wehave the ability to cross-sell these investigative services through ourintrinsic demand from insolvency administration and our network of professionalcontacts. This, as well as margin enhancement through the benefit of the BegbiesTraynor brand, can deliver intrinsic shareholder value over time. These benefitswill accrue after modest investment in the costs of acquisition and supportthrough the process of integration and development. Financial Development and Results I am very happy to report that the profit before taxation of the Group for theyear to 30 April 2006 is £7.3 million, a margin of 22% on Group turnover of£33.2 million, before amortisation of directly acquired goodwill, which wecontinue to aggressively apply. This translates into adjusted earnings per shareof 6.7 pence; a 31% increase on the pro-forma comparable figure for the fullyear to 30 April 2005. The financial statements for the year to 30 April 2006, fully adopt therevisions to accounting standards on income recognition and dividend accrual. Inconsequence, the comparative figures for the 7 months to 30 April 2005 have beenrestated, the effect of which has been to increase profits before tax by£316,000 in 2005/06 and £235,000 for the prior 7 month period. The overalleffect of the change in accounting for work done but not invoiced has been toincrease its carrying value by £2 million, resulting in additional historicaltax charges of £500,000 which have been provided for and are payable over 3years. Our continued programme of expansion has resulted in the investment of £22million since 30 April 2005 on business acquisitions, of which £9 millionremains outstanding either as deferred or conditional future consideration. Inthe financial year to 30 April 2006, the Group's total expenditure onacquisitions was £15 million, of which £3 million was met through the actual orprospective issue of shares, £6 million remains to be paid, leaving £6 millionpaid in cash, in addition to £5 million paid in respect of earlier acquisitionsand the loans arising from the Group formation on flotation. Six million poundsof that expenditure was met from an issue of new shares in July 2005 and thebalance was funded from the senior debt facilities available to the Group andoperating cash flow. The board is conscious of the need to continue to generate and conserve cash tofund the ongoing growth capital needs of the Group, whilst delivering sustainedincome returns to shareholders. Accordingly, an interim dividend of 0.5 penceper share was paid during the year and the directors intend to recommend a finaldividend for the year ended 30 April 2006 of 1.0 pence per share at theforthcoming annual general meeting of the Company in September. In accordancewith current accounting policies, this has not been accrued in the financialstatements. The Future The board remains primarily focused on completing its original strategy for theGroup over the coming year, through further earnings enhancing acquisitions andrecruitment. We are on, if not a little ahead, of schedule in delivering ourthree-year plan and will take time this summer to integrate acquisitions alreadymade and optimise the potential of the growth already achieved. Given favourablemarket indicators, the outlook for the current financial year is positive. However, the executive has already started to think beyond the initial goal andis formulating longer term plans. One key area is overseas development. Sincethe start of the calendar year, we have deployed senior personnel resource inthe active development of our international network of associate firms, withvery positive results. The next likely step will be to cement those links bymaking modest strategic investments in overseas business partners. We are alsoturning our attention to seeking out ways to broaden our service offering intocompatible professional markets in the United Kingdom, where we believe we canadd value by capitalising on cross selling and networking opportunities. Ric TraynorExecutive Chairman3 July 2006 Begbies Traynor Group plc Consolidated Profit & Loss Account Year ended 30 April 2006 7 months to 30 April 2005 Continuous Acquired Total Restated £'000s £'000s £'000s £'000s Turnover 25,083 8,159 33,242 16,010 Direct costs (11,831) (3,363) (15,194) (7,281)Administrative expenses (7,934) (2,372) (10,306) (5,259)Other operating income 48 - 48 110 -------- --------- ---------- -----------Earnings beforeinterest, tax andamortisation 5,366 2,424 7,790 3,580 -------- --------- ---------- -----------Amortisation ofgoodwill (1,369) (1,187) (2,556) (1,162) ======== ========= ========== =========== Operating profit fromcontinuing operations 3,997 1,237 5,234 2,418 ======== =========Interest payable andsimilar charges (476) (254) ---------- -----------Profit on ordinaryactivities beforetaxation 4,758 2,164 Tax on profits onordinary activities (1,737) (864) ---------- ----------- Profits on ordinaryactivities aftertaxation 3,021 1,300 Dividends paid (732) - ---------- -----------Retained earnings 2,289 1,300 ========== ===========Basic earnings pershare (pence) - seenote 2 4.2p 2.0pAdjusted earnings pershare (pence) - seenote 2 6.7p 3.3p No gains or losses were recognised in the year, other than those included in theprofit and loss account. As permitted under s230 of CA 1985, no separate profit and loss account ispresented for the Company. The profit after tax of the company for the year was £1,237,000 (2005; 7 months- £345,000). Fully diluted earnings per share are not materially different from basicearnings per share. Begbies Traynor Group plc Balance Sheets At 30 April 2006 Group at 30 April Company at 30 April 2006 2005 2006 2005 restated restated £'000s £'000s £'000s £'000sFixed Assets Intangible assets 37,616 26,982 1,612 1,590 Investments in subsidiary - - 23,579 18,667 undertakings Tangible assets 3,731 2,526 - - ------- -------- -------- -------- 41,347 29,508 25,191 20,257 ------- -------- -------- -------- -------Current Assets Debtors 19,972 13,371 11,960 5,287 Cash at bank and in hand 598 131 - - ------- -------- -------- -------- 20,570 13,502 11,960 5,287Creditorsfalling duewithin oneyear (10,614) (10,804) (298) - ------- -------- -------- -------- -------- Net CurrentAssets 9,956 2,698 11,662 5,287 -------- -------- Total assetsless currentliabilities 51,303 32,206 36,853 25,544Creditorsfalling dueafter morethan one year (12,938) (5,707) (1,227) - ------- -------- -------- -------- 38,365 26,499 35,626 25,544 ======= ======== ======== ========Capital and Reserves Called up share capital 3,744 3,271 3,744 3,271 Other reserves 31,032 21,928 31,032 21,928 Profit and loss account 3,589 1,300 850 345 ------- -------- -------- -------- 38,365 26,499 35,626 25,544 ======= ======== ======== ======== Begbies Traynor Group plc Consolidated Cash Flow Statements Year to 30 April 2006 7 months to 30 April 2005 restatedStatement of Adjustmentsfrom Operating Profit to NetCash Flow from OperatingActivities £'000s £'000s Total operating profit 5,234 2,418 Depreciation of tangible 811 553 fixed assets Amortisation of goodwill 2,556 1,162 (Profit)/loss on sale of (5) 40 fixed assets ---------- ----------Earnings beforeinterest, tax,depreciation andamortisation (EBITDA) 8,596 4,173 (Increase) in debtors (3,383) (1,534) Decrease in creditors 517 275 ---------- ----------Net cash flow fromoperating activities 5,730 2,914 Returns on Investment andServicing of Financing Net finance charges paid (476) (244) Dividends paid (732) - Corporation tax paid (1,192) (241) Capital Expenditure andFinancial Investment Capital expenditure (1,112) (837) payments Proceeds of asset 325 287 disposals Acquisitions (7,634) (2,424) ---------- ---------- Cash Flow BeforeFinancing (5,091) (545)Financing Net proceeds of share 6,224 5,032 issues for cash Loans repaid (4,000) - Asset finance capital (549) (240) payments ---------- ----------Movement in Net Cash (3,416) (4,247) ========== ========== Begbies Traynor Group plc Reconciliation to Movement in Net Debt Year to 30 April 2006 7 month period to 30 April 2005 restated £'000s £'000sMovement innet cash (3,416) (4,247) Asset finance capital 549 240 repaid ------------ ------------ Change in net funds resulting (2,867) 4,487 from cash flows Cash included in 201 - acquisitions Asset finance capital (924) (326) raised ------------ ------------ ------------ Movement in net funds (3,590) 4,161 Opening net debt (5,023) (9,184) ------------ ------------ ------------ Closing net debt (8,613) (5,023) ============ ============ Begbies Traynor Group plc Analysis of Changes in Net Debt Cash at bank and in hand Asset finance Amounts drawn on bank facility Total £'000s £'000s £'000s £'000s As at 1May 131 (801) (4,353) (5,023)2005 Cash flowmovements 266 549 (3,682) (2,867) Non cashmovements 201 (924) - (723) ---------- ----------- ---------- -------- Net debtat 30 598 (1,176) (8,035) (8,613)April2006 ========== =========== ========== ======== Begbies Traynor Group plc Notes to preliminary announcement Note 1. Basis of Accounting and preparation BTG acquired the trading entities in the Group as at 1 October 2004. Businessesacquired after 1 October 2004 are consolidated from the date of theiracquisition, using the acquisition method of accounting. The financial statements have been prepared under the historical cost conventionand in accordance with applicable accounting standards. As permitted by theCompanies Act 1985, no profit and loss account is published in respect of BTGitself. Profit shares accruing to partners in subsidiary entities are shown in theconsolidated profit and loss account as direct or indirect operating costs asappropriate. As a result of changes to accounting standards relating to the recognition ofincome and dividend accruals, the comparable results for the seven month periodto 30 April 2005 have been restated. The effects of the changes are as follows: 1.Proposed dividends are no longer accrued in the financialstatements; 2.All work done but not invoiced is included in turnover anddebtors in the financial statements at its anticipated net realisable value,except for contingent work, where revenue is dependant in an event not in thecontrol of the Group, which has not occurred by the date of finalisation of theevaluation. In consequence, the Group no longer categorises any work done but not invoicedas work in progress. Note 2. Earnings per share Basic earnings per share are calculated by dividing the Group profits aftertaxation of £3,021,000 by the weighted average number of shares in issue in theyear ended 30 April 2006 of 71,852,093. The restated earnings per share for the7 month period to 30 April 2005 are calculated by dividing the restated profitsafter tax for that period of £1,300,000 by the number of shares in issuethroughout that period of 65,424,580. The dilution effect of the estimatedfuture obligation to issue shares to a value of £439,000 relating to theacquisition of IAL is negligible, as was the effect of the obligation, at 30April 2005, to issue 666,672 shares in consideration of the future acquisitionof shares in Begbies Traynor limited, which has been met. Adjusted earnings pershare reflect earnings after tax after adding back the net of tax cost ofgoodwill amortisation. Restated adjusted pro-forma earnings per share for theyear ended 30 April 2005 were 5.1 pence. Note 3. Statutory Accounts The financial information set out above does not constitute the Group'sstatutory information for the year ended 30 April 2006, but is derived fromthose accounts. Statutory accounts for the year will be delivered to theRegistrar of Companies following the Company's annual general meeting. Theauditors have confirmed to the board that their report on those accounts(assuming they correspond with this statement) will be unqualified and will notcontain statements under the Companies Act 1985 sections 237 (2) or (3). This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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