Companies: BEG   

Growth Company Investor was an early supporter of insolvency business Begbies, having originally backed the shares at 55.5p. And we believe further growth is assured, with ambitious chairman Ric Traynor aiming to take turnover above £100m by 2010, insisting he can deliver operating margins ‘at 20% or better’ from such revenues.

His comments accompanied strong interims to October revealing 58% turnover growth to almost £22m, despite the traditional summer holiday lull that arises with the group billing time to clients, and despite a forecast upturn in business insolvency volumes remaining unfulfilled.

Pre-tax profits powered ahead by 52% to £4.1m, earnings advanced from 2.6p to 3.6p, and a 1p dividend was declared on the back of healthy operating cash flows. The figures also felt the effects of two insolvency acquisitions, as well as continued growth in corporate finance and investigations work.

Acquisitions, alongside organic growth, will allow Traynor to hit that 2010 sales target. These deals could be within core business areas, or might be acquisitions bringing other compatible professional services in house. ‘We’re looking to introduce revenue streams such as asset valuation services, legal work and debt collection,’ he explained.

For the year to April, analysts have pencilled in improved pre-tax profits of £8.9m (£7.3m) from revenues of £40.5m. Earnings look set to burgeon by 20% to 8p, placing the shares on a forward p/e of 20 and therefore a PEG ratio of 1, with a modest yield. Begbies isn’t cheap, but this is a well-managed, highly profitable business well worth holding, particularly in the light of a forecast pick-up in insolvency volumes this year.

Begbies Traynor Group	AIM	£131.02m	161.50p	-0.75p
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