Begbies Traynor

Surely no one is enjoying the current downturn more than insolvency specialist Begbies Traynor, which has beaten forecasts for last year and foresees at least two more years of these superlative conditions.

Businesses don’t get much more counter-cyclical than the group’s core insolvency administration arm, which handled recent high-profile cases such as Silverjet and Carlyle Capital, and contributes over three-quarters of revenues. After a slow previous year and a quiet first half, depressed by the market’s free and easy credit conditions, Begbies was rewarded for maintaining its expansionary plans as insolvencies began to mushroom last autumn.

However, held back somewhat by the first half performance, pre-tax profits from continuing operations slipped from £8.5 to £5.7m in the year to April on sales up 14.8% to £48.1m. Executive chairman Ric Traynor says he intends to ‘sell or wind down’ its consumer debt arm as ‘the market was over-hyped and it’s now not an exciting business’.

But the future surely looks more exhilarating for the company, with the credit crunch resulting in ‘four times as many’ companies experiencing ‘critical problems’ than last year. Ric Traynor observes that having already taken ‘our fair share’ in the sharp increase in the number of businesses going into insolvency, ‘we see that trend continuing this year, next year and into 2010’.

All in all, it looks good news for the company, which looks a pretty non-toxic investment in these astringent times and is likely to soon enjoy upgrades on the current consensus forecasts of 8p earnings for the current year. Backed here in 2005 at 55.5p, the shares have risen above £2 and wavered to a recent low of 88p last December. They are worth buying.

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