MIDAS PART TIPS UPDATE: Begbies Traynor insolvency outfit is branching out

The NHS isn’t just a health service, it’s a huge property company, whose estate is said to cover ten times the City of London. There are community care centers, general practices, offices and more than 1,200 hospitals spread across the country.

Most sites are wholly owned, but some are rented from commercial companies, so the NHS acts as both a landlord and a tenant.

Manchester based Begby’s Traynor is best known as an insolvency practitioner, but in recent years the group has expanded into all kinds of advisory work.

That includes helping NHS managers manage their property business more effectively, letting space to shops, cafes and pharmacies, and making sure leases are fair.

Begbies also works with hundreds of schools, advising them on maintenance and upkeep, from reducing carbon emissions to removing asbestos from buildings.

These and other contracts mean that Begbies derives about 40 percent of its revenue from non-insolvent businesses, such as helping companies sell surplus machinery, buy real estate or expand operations.

By offering a range of services, Begbies is better able to grow in good times and bad.

For example, over the past five years, sales have doubled and profits have tripled, while dividends are steadily rising every year.

Chairman Ric Traynor is keen to repeat that feat in the next five years – and early signs are encouraging.

Revenue rose 11 per cent to £122 million in the 12 months to the end of April 2023 and profits rose 16 per cent to nearly £21 million, with brokers predicting continued strong growth.

Dividends are also on the rise, rising 6 percent to 3.8 pence last year, with 4 pence for 2024 and 4.2 pence next year.

Business is going well in the whole group. Ultra-low interest rates helped troubled businesses stay afloat, and government support during the pandemic provided further comfort.

Now the environment is much harder. The interest on bank loans is higher, costs are rising enormously and consumers are tightening their belts.

Second quarter insolvencies rose to more than 6,300 in England and Wales – 13 per cent more than in the same period last year – and Traynor believes the total will approach the 2009 peak of 26,000 next year.

Begbies is the number one liquidator in the UK and number two for administrations, which are offered to companies when there is an opportunity to salvage part or all of their business.

Traynor primarily works with small and medium-sized businesses, including some of today’s hardest hit industries: construction, retail and hospitality.

Begbies has a reputation for honesty and many companies approach the group directly when they are in trouble. Banks are also less brutal than in the past, so more companies can be bailed out.

Traynor, 63, co-founded Begbies in 1989, took the company public in 2004 and remains its largest shareholder, with 17.5 percent of the shares.

Having grown the company organically and through acquisitions, he plans to continue that formula while ensuring that investors are also rewarded with dividends.

Midas verdict: Midas recommended Begbies Traynor for 74p in 2019 and looked at the company again three years later, when shares had risen to £1.22. Today the stock is £1.32. This seems too low. Insolvencies are rising, profits are rising and ambitious growth targets have been set for the future. There’s even a chance that third-party bidders see value in this company. Existing shareholders should follow Ric Traynor’s example and stay with the company. New investors could also buy some stocks at current levels.

Traded on: GOAL ticker: BEG Contact: begbies-traynorgroup.com or 0161 837 1700