MIDAS SHARE TIPS: Profit from Begbies Traynor, the firm that booms while others are going bust
Ric Traynor was an ambitious young man of 29 when he founded Traynor & Co, a Manchester-based accountancy firm specialising in insolvency and restructuring cases.
The year was 1989 and Traynor reckoned that dealing with companies in trouble was far more interesting than plain vanilla auditing work.
Three decades later, that interest is undimmed. Traynor is executive chairman of Begbies Traynor, the UK’s leading insolvency firm, which last year alone handled more than 1,500 cases, double that of its nearest competitor.
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Traded on AIM, Begbies Traynor shares are 74p and should increase in value this year and beyond.
The company has matured considerably in recent times, Traynor is determined to expand the business and the economic environment is conducive to growth.
In 2009, the financial crisis provoked a surge in insolvencies, with more than 26,000 companies going out of business during a single year.
Exceptionally low interest rates and a more benign economic climate saw that number tumble to around 14,000, an historic low in the insolvency world.
Now, the numbers are picking up again. Around 16,000 UK firms are expected to hit the buffers this year, rising still further in 2020. The figures make bleak reading for Britain’s businesses but they are likely to boost results at Begbies Traynor.
Begbies works primarily with small and mid-sized businesses. The firm is usually appointed by creditors, such as banks, when a firm cannot pay its bills or debts.
Begbies’ job is to find out what has gone wrong, make sure directors have not stashed money away and assess whether there is any cash left in the business, often selling assets and chasing debts along the way.
The task can be painful but it needs to be done. Many companies can even find it reassuring to have an independent specialist take over their affairs.
Traynor has expanded into other areas as well, to reduce the firm’s reliance on insolvency work. Today, the group has two new divisions, working alongside the original Begbies Traynor business – BTG Advisory and Eddisons.
BTG provides guidance and support to companies –when they face problems and when they want to grow.
Eddisons is a chartered surveying firm, which offers straightforward surveying services but also specialises in selling properties and equipment when companies need to raise money.
The decision to broaden into other areas is yielding results. In the year to April, revenues rose almost 15 per cent to £60million, helped by a £17million contribution from the property division, and profits were 26 per cent ahead at £7.1million.
This year, brokers expect turnover of more than £66million and profits of almost £9million. Dividends are rising too, with 2.6p paid out in the year to last April and 2.8p pencilled in for the current year.
Looking ahead, growth is on the agenda. The group bought an Exeter-based insolvency specialist last week and more acquisitions are likely.
MIDAS VERDICT: After 30 years at the helm, Traynor is as committed to Begbies Traynor as ever. He is determined to take revenues to £100million over the next three years and increase profits substantially along the way, through organic growth and acquisition.
Tough economic and political conditions are likely to help him achieve his ambitions. At 74p, Begbies shares are a buy.