Slides
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Half year results presentation Presented by: Ric Traynor – Executive Chairman Nick Taylor – Group Finance Director December 2024
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The information contained in this document (the “Presentation”) has been prepared by, and is the sole responsibility of, Begbies Traynor Group plc (the “Company”) and is for information purposes only. This Presentation has not been approved by an authorised person in accordance with Section 21 of the Financial Services and Markets Act 2000, as amended (“FSMA”). The Presentation does not constitute, and the Company is not making, an offer of transferable securities to the public within the meaning of sections 85b and 102b of FSMA. The Presentation is simply a summary of the Company’s activities together with the unaudited results for the six months ended 31 October 2024. Existing and prospective investors should rely on other published information together with any other analyst presentations (which can be found on the investor page of the Company’s website) and on their own examination of the legal, taxation, financial and other consequences of an investment in the Company, including the merits of investing and the risks involved. Existing and prospective investors should not treat the contents of this Presentation as advice relating to legal, taxation and investment matters and are advised to consult their own professional advisers concerning any acquisition of shares in the Company. With the exception of references to current market forecasts and consensus which has been compiled by management from analysts’ forecasts, all statements of opinion and/or belief contained in this Presentation and all views expressed represent the directors’ own current assessment and interpretation of information available to them as at the date of this Presentation. In addition, this Presentation contains certain “forward-looking statements”, including but not limited to, the statements regarding the Company’s overall objective and strategic plans. Forward-looking statements express, as at the date of this Presentation, the Company’s plans, estimates, projections, opinions, expectations or beliefs as to future events, results or performance. Forward-looking statements involve a number of risks and uncertainties, many of which are beyond the Company’s control, and there can be no assurance that such statements will prove to be accurate. No representation is made or assurance given that such statements or views are correct or that the objectives of the Company will be achieved. Existing and prospective investors are cautioned not to place reliance on the statements or views and no responsibility is accepted by the Company or any of its directors, officers, employees or agents in respect thereof. The Company does not undertake to update any forward-looking statement or other information that is contained within this Presentation. Neither the Company nor any of its shareholders, directors, officers, agents, employees or advisers take any responsibility for, or will accept any liability whether direct or indirect, express or implied, contractual or tortious, statutory or otherwise, in respect of the accuracy or completeness of the information contained in this Presentation or for any of the opinions contained herein or for any errors, omissions or misstatements or for any loss howsoever arising, from the use of this Presentation. This Presentation (including the analysts’ forecasts and consensus views derived from those forecasts) should not be considered a recommendation by the Company or any of its affiliates or any analyst in relation to any prospective acquisition of shares in the Company and does not form part of any offer for sale or solicitation of any offer to buy or subscribe for any securities or act as an inducement to enter into any contract or commitment in respect of the securities of the Company. No undertaking, representation, warranty or other assurance, express or implied, is made or given by or on behalf of the Company or any of its affiliates, any of its directors, officers or employees or any other person as to the accuracy, completeness or fairness of the information or opinions contained in this Presentation and no responsibility or liability is accepted for any such information or opinions or for any errors or omissions. Disclaimer 1
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A leading UK multi-disciplinary advisory firm 2 Providing advice and solutions to our clients to enhance, protect and realise the value of their businesses, assets and investments across the following areas of expertise
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Strong financial performance with high double-digit growth 3 Revenue £76.3m (+16%) (2023: £65.9m) Adjusted EBITDA £15.3m (+20%) (2023: £12.8m) Adjusted profit before tax £11.5 m (+16%) (2023: £ 9.9m) Adjusted diluted EPS 5.1p (+11%) (2023: 4.6p) Interim dividend 1.4p (+8%) (2023: 1.3p) Net debt £3.8m (2023: cash £1.1m) 3
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Strong activity levels and positive momentum across the business 4 • Insolvencies remain at elevated levels • Commercial property transactions in line with prior year • Lending to UK real estate SMEs increased by 4% Supportive markets for growth Double digit organic growth from both divisions Continuing growth and development of our team • Increased insolvency activity • Strong growth in financial advisory • Property auction volumes increased • Building consultancy continued expansion • 7% growth in fee earners over last 12 months • Senior hires to grow advisory • Good progress on learning and development support • Continue to deliver process improvement initiatives
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Financial review
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High double-digit revenue and profit growth 6 £m 2024 2023 Growth Business recovery and advisory 52.8 47.0 12% Property advisory 23.5 18.9 24% Revenue 76.3 65.9 16% Business recovery and advisory 13.6 11.6 17% Property advisory 3.9 3.5 11% Segmental result 17.5 15.1 16% Group services (4.9) (4.4) 11% Operating profit 12.6 10.7 18% Margin Business recovery and advisory 25.8% 24.7% Property advisory 16.6% 18.5% Group 16.5% 16.2% Finance costs (1.1) (0.8) Adjusted PBT 11.5 9.9 16% Tax (3.0) (2.6) Profit after tax 8.5 7.3 16% EPS Basic 5.4p 4.6p 17% Diluted 5.1p 4.6p 11% Business recovery and advisory • Insolvency revenue increased by 7% (organic) to £41.4m (2023: £38.8m) • Driven by higher value cases • Pipeline increased to £76.4m (30 April 2024: £71.9m, 31 October 2023: £70.3m) • Advisory revenue increased by 39% (organic) to £11.4m (2023: £8.2m) • Restructuring, debt advisory, broking, and special situations M&A • Margin improvement driven by growth Property advisory • Revenue growth of 24% (organic: 8%, acquired: 16%) • Increased auction volumes from organic growth and prior year acquisition of SDL • Building consultancy continued organic development • Valuations growth from prior year acquisition • Margins reflect normalised activity levels (prior year enhanced consultancy fees) together with organic investment • Group services 6.4% (2023: 6.7%) of revenue • Finance costs increased due to higher debt following buybacks and IFRS16 • Adjusted tax rate (26%) in line with prior year • EPS growth • Basic reflects earnings growth • Diluted reflects share options and earn outs
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Reconciliation of adjusted EBITDA to statutory profit £m 2024 2023 Adjusted EBITDA 15.3 12.8 Share based payment charge (0.5) (0.2) Depreciation (2.2) (1.9) Finance costs (1.1) (0.8) Adjusted profit before tax 11.5 9.9 Acquisition consideration (4.9) (4.5) Amortisation of acquired intangibles (1.9) (3.0) Negative goodwill (gain on acquisition) - 0.7 Transaction costs - (0.1) Non-underlying items (6.8) (6.9) Statutory profit before tax 4.7 3.0 Acquisition consideration • Charged to profit rather than capitalised if contingent on selling shareholders remaining with the group • Designed to preserve value of goodwill and customer relationships acquired • Payments agreed in sale and purchase agreements Amortisation of acquired intangibles (non-cash) • Intangible assets recognised through acquisition accounting (typically brands, customer relationships, order books and websites) Negative goodwill (non-cash) • Consideration not being capitalised results in exceptional gain Transaction costs • Legal and professional fees 7
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Strong financial position with significant headroom Cashflow – typical H1 seasonality • Working capital absorption increased to £5.7m (2023: £4.6m) from: • Organic revenue growth - £4.6m • Annual profile of payments (bonuses and prepaid annual costs) - £1.0m • Lock up of 4.3 months (30 April 2024: 4.2 months) - £0.1m • Lease payments increased to £1.4m (2023: £0.7m) • Free cash flow increased by 8% • Current period acquisition payments relate to earn outs • Further £4.7m earn outs expected in H2 • Thereafter remaining earn outs of c£10.5m (satisfied by December 2027) Net debt and facilities • £3.8m at October 2024 (April 2024: £1.4m, October 2023: net cash £1.1m) • Significant levels of headroom in bank facilities of £35m • £25m unsecured, committed RCF and a £10m accordion • Committed until February 2027 with two one-year extension options 8 £m 2024 2023 Adjusted EBITDA 15.3 12.8 Working capital (5.7) (4.6) Cash from operating activities 9.6 8.2 Tax (1.9) (1.8) Other (interest, capex, lease payments) (3.4) (2.4) Free cashflow 4.3 4.0 Acquisition payments (net of cash acquired) (4.1) (4.0) Purchase of own shares (0.8) - Net proceeds from share issues 0.2 - Dividends (2.0) (1.9) Net cash outflow (2.4) (1.9)
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Guidance – confident of further year of growth in line with expectations Market conditions remain supportive for group’s service lines • Reflected in good activity levels and positive momentum across the business Business recovery: anticipate continuing growth supported by market conditions • Capacity and breadth of expertise to provide advice and support required by clients Advisory: continuing investment in team • Healthy pipeline of engagements • Well-placed to continue positive H1 progress Property advisory: ongoing positive momentum • Well-placed to maintain financial performance from H1 Confident of building on strong track record of growth in current year and beyond Q3 update in February 2025 * current range of analysts’ forecasts (as compiled by the company) for adjusted PBT of £23.0m-£24.3m 9
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Operating review
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Insolvencies remain at elevated levels Activity levels expected to be sustained by current headwinds: • Continuing demand pressures • Rise in costs pre and post budget • Prospect of higher for longer interest rates Administrations remain significantly below previous peak (2008) and below pre-pandemic levels Liquidation rate at c.0.5% is less than half previous recessionary peak of >1.0% Competitor landscape Big Four, Ex Big Four & American Boutiques National Accountancy Firms & Specialists Local Boutiques Source: UK Insolvency Service Administration appointments Corporate insolvencies 11
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0 10 20 30 40 50 60 2016 2017 2018 2019 2020 2021 2022 2023 2024 Supportive market transaction levels for property advisory 12 1. HMRC UK monthly property transactions commentary updated 31 October 2024 (TTM) 2. Number of lots sold at auction (residential and commercial) per Essential Information Group (TTM) 3. Bank of England Bankstats tables showing loan amounts to UK small and medium-sized enterprises of which buying, selling and renting of own or leased real estate (ZKP5) 0 30 60 90 120 150 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 0 5 10 15 20 25 30 35 2016 2017 2018 2019 2020 2021 2022 2023 2024 Commercial property transactions Properties sold through auction (residential and commercial) Real estate bank lending Value (£bn) Number (‘000) Number of transaction (‘000) Commercial property transaction levels in line with prior year • Remains c.6% below pre-pandemic levels Property auction volumes continue to grow • Maintains post pandemic momentum Bank lending to real estate SMEs increased by 4% over last 12 months Competitor landscape Large international firms National firms & specialists Local boutiques
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Now one of the largest national property auctioneers (residential and commercial online auctions) • Area of recent investment through acquisition: • Mark Jenkinson (Sheffield) - March 2023 • SDL Auctions (Midlands) - December 2023 • Good progress in integration – target completion later in financial year • Growth in auction lots across the combined business Building consultancy continuing to develop • Increased activity levels across a broad client base • education sector and commercial clients • Recruited to enhance our expertise and coverage Strong growth in business advisory services • Good mix of cyclical and pro-cyclical exposure • Debt advisory, restructuring, finance broking, special situations M&A • “Restructuring Roundup” podcasts released Increased insolvency activity in higher value cases • Notable cases in hospitality, construction, haulage and financial services Double digit growth from both divisions 13
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Notable cases across the business Summary: When we were engaged, the client was about to lose its franchise licenses due to cash flow and operational issues. Several restaurants had already closed, with more closures imminent. We negotiated with lenders and franchisors to halt enforcement and secure funding, successfully reopening recently closed restaurants. We stabilised cash flow and launched an accelerated M&A (AMA) process, which took over four months due to poor management systems and complex stakeholder interests. The process was supported by our property advisory team from an asset appraisal perspective. Outcome: Following the AMA process, we successfully secured the sale and continuity of 46 out of 51 Taco Bell outlets and over 40 of the 53 KFC outlets to two separate purchasers. Background: BTG Advisory was approached to explore strategic options for the Caskade Group which had been experiencing challenges for some time. The client operated a number of franchised KFC and Taco Bell outlets from over 100 UK locations. Caskade (KFC and Taco Bell franchise) Pre-pack administration sale of restaurant chain Island Poké to hospitality incubator White Rabbit Projects safeguarding the jobs of over 100 employees. Sale of rail supplies manufacturer Crowle Wharf Engineers (CWE) with annual sales of £5m and 50 employees to William Cook Rail. Refinance of a multi-site hotel group based in Central London of £4.9m. Ollie Quinn was sold out of administration to OQ Eyewear, retaining all stores and safeguarding the jobs of 80 employees. Sale of 179,000 sq ft unit in Peterborough, following substantial refit, with completion due in January Pre-pack administration sale of FCA-regulated independent financial advisor with over 1,000 clients and substantial AUM. Other typical cases across our service lines 14
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Our team – continuing to drive organic growth 7% growth in fee earners over last 12 months • Advisory senior hires (appointed four partners and one director) with further appointments planned for H2 • Building consultancy and valuations hires in the period Good progress on learning and development support • Leadership development programme for over 200 senior leaders • Live-learns commenced delivering remote training on core skills • CPD accreditation for in-house developed courses Fourth SAYE scheme launched for qualifying colleagues Process improvement initiatives continuing to progress • Identifying and embedding improved ways of working, whilst optimising use of technology • Ongoing focus to mitigate headwind of increased employment costs 15
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Strategy for growth
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17 Making good progress on medium-term revenue target of £200m
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Well placed to build on ten years of growth in property advisory Growth continues to be focused on core areas of valuations, asset sales and consultancy Division created through Eddisons acquisition in December 2014 • 14 further bolt on acquisitions to grow the division • 8 specialist and 6 general practices • Investment cost £27m – acquiring revenue of £27m • Acquisition size: revenue £0.5m to £5m Continuing to execute growth strategy • M&A opportunities in line with strategy to date • Organic growth through: • Recruitment of new talent • Investment in technology and processes 18
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19 Since 2014 have tripled the size of the business with a six-fold increase in PBT 45.4 50.1 49.8 52.6 60.0 70.5 83.8 110.0 121.8 136.7 0 20 40 60 80 100 120 140 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24 Revenue (£m) Business recovery Advisory & corporate finance Property advisory Revenue growth and diversification 10 yr Revenue CAGR: +13% 3.6 4.5 4.9 5.6 7.0 9.2 11.5 17.8 20.7 22.0 0 5 10 15 20 25 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24 PBT (£m) Adj PBT 10 yr PBT CAGR: +22% Profit growth 2.2 2.2 2.2 2.4 2.6 2.8 3.0 3.5 3.8 4.0 0 1 1 2 2 3 3 4 4 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24 Dividend per share (p) Dividend growth Shareholder return 10 yr Dividend CAGR: +7% 0.0 50.0 100.0 150.0 200.0 May-14 May-15 May-16 May-17 May-18 May-19 May-20 May-21 May-22 May-23 GBpence Share price Total shareholder return AIM All Share
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Summary and outlook
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Strong first half performance and confident of delivering expectations for the full year 21 Continued to execute strategy to grow the business in the period Proven strategy for growth across the cycle • Making good progress towards medium-term revenue target of £200m pa • Driven by combination of organic growth and acquisitions Market conditions remain supportive for our service lines • Strong activity levels and positive momentum across the business Confident of continuing to build on strong track record of growth in current year and beyond
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Investment case 22
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Appendix
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H2 analyst metrics 24 • Profit expectations for the full year unchanged • H2 guidance • Revenue phasing: typical H2 weighting of revenue in business recovery and advisory • Margins broadly in line with H1 • Adjusted tax rate 26% (FY26: 26%) • Share based payment charge £0.7m • Weighted average shares for EPS calculation: diluted (165.4m FY25) • Share contingent consideration in H2 to be satisfied by treasury shares • Transaction/amortisation costs: • Acquisition consideration (P&L charge) £3.4m (Full year: £8.3m) • Amortisation £1.6m (Full year: £3.5m) • H2 cash flow • Working capital – broadly neutral • Tax payments of £3.6m • Share buy back of £0.8m • Lease payments of £1.4m • Final dividend of £4.3m paid in November 2024 • Acquisition payments of £0.4m paid December 2024 • Earn out payments of £4.7m in H2 • Anticipated payments of £10.5m between FY26 and FY28 • £5.3m FY26, £4.8m FY27, £0.4m FY28
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25 Acquisition accounting and payments £m H125 H225 FY26 FY27 FY28 FY29+ TOTAL P&L items Amortisation 1.9 1.6 2.8 1.4 0.8 0.7 7.3 Acquisition consideration 4.9 3.4 8.0 3.9 1.3 16.6 Contingent consideration outflows Cash payments 4.1 4.7 5.3 4.8 0.4 15.2 Share issues - 1.6 1.1 0.5 - 3.2 Total consideration 4.1 6.3 6.4 4.7 0.4 18.4 Net balance sheet accrual (1.8)
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Begbies Traynor Group plc; registered in England No: 5120043, registered office: 340 Deansgate, Manchester, M3 4LY, a member of the Begbies Traynor Group; Specialist Professional Services. Offices across the UK. www.begbies-traynorgroup.com