Final Results

Begbies Traynor Group PLC 03 July 2006 RNS Release 3 July 2006 Begbies Traynor Group plc Preliminary results for the year ended 30 April 2006 Begbies Traynor Group plc announces its preliminary results for the year ended 30 April 2006. Business and financial highlights: •Group position as the leading independent national provider of business insolvency and recovery services maintained and enhanced through three acquisitions •Range of professional services widened into corporate finance, investigations and consumer debt solutions, following three further acquisitions •Group is on track to deliver its initial three-year plan by mid 2007 •Work is underway to further develop the Group's network of overseas associates •Group turnover of £33.2 million increased by 30% from pro-forma level for the prior year •Profit before tax and amortisation of £7.3 million, a margin of 22% (2005 pro-forma 18%) •Normalised annual earnings per share up 31% to 6.7 pence (2005 pro-forma 5.1 pence) •Proposed final dividend of 1.0 pence, to give 1.5 pence in total for the year Ric Traynor, Executive Chairman, said: 'The board remains primarily focused on completing its original strategy for the Group over the coming year, through further earnings enhancing acquisitions and recruitment. We are on, if not a little ahead of, schedule in delivering our three-year plan and will take time this summer to integrate acquisitions already made and optimise the potential of the growth already achieved. Given current market indicators, the outlook for the current financial year is positive.' Enquiries, please contact: Ric Traynor Neil Boom/Tanya Feness Executive Chairman Gresham PR Ltd. Begbies Traynor Group plc 0207 404 9000 0161 839 0900 Executive Chairman's Review Begbies Traynor Group plc is in the business of providing professional services, which are provided by the efforts and expertise of our key resource - people. We now count a total of 422 in our ranks, of which 331 are directly involved in providing those services, an increase of 67% from 30 April 2005. I offer my thanks to all those who have contributed to the success of the Group over the past year as well as my welcome to those that have joined us. I also extend my best wishes to those few that have left us for pastures new. Commercial development In the 12 months since my last annual review, the Group has continued to progress its strategy of expansion in its core field of general insolvency services and the addition of complementary services. In addition, we have added a presence in the expanding market of consumer debt driven personal insolvency services. Our three-year plan at the time of our AIM flotation was to double our general insolvency activity from £20 million and to add up to 20% of other complimentary services in order to build total Group activity of £50 million. I am pleased to be able to report that, two years on, we are well on the way to delivering our planned expansion. Including the six acquisitions made in the year to 30 April 2006 and the two already made in the period since then, together with organic growth from our continuing activities, our annualised activity base is now running at some £40 million per annum. General insolvency The general insolvency market over the 12 months continued to be static until the turn of the calendar year, when our in-house early warning system 'Red Flag A!ert' began to predict an upswing in business failures, which has since been demonstrated by an increase in the overall number of insolvency appointments nationally, of which we have won our fair share. We continue to 'top the league' in terms of the number of corporate insolvency appointments undertaken. Recent macro economic indicators suggest that this market increase is likely to be sustained for some time to come. In the year to 30 April 2006, we acquired three independent general insolvency firms with a combined historical annual activity level of £5.1 million. Since acquisition, those businesses have enjoyed significant organic growth under the Begbies Traynor banner as they gain access to more high value assignments. Subsequently, we have made two further acquisitions, adding a further £3.6 million of general insolvency turnover. The Group now has 18 full service and 10 satellite offices providing general insolvency services, covering most of mainland Britain. We continue to target geographical expansion to fill in the few remaining gaps in our national coverage and the recruitment of senior personnel to augment our market share in this, our core activity. Personal insolvency The Group provides insolvency services relating to the affairs of individuals and unincorporated businesses through its general insolvency business, including bankruptcies and complex voluntary arrangements, which require significant ongoing professional expertise. However, recent dramatic increases in personal insolvencies has triggered strong demand for consumer debt solutions, based on contributions out of future income, rather than asset realisations, through Individual Voluntary Arrangements (or, in Scotland, the equivalent process known as Protected Trust Deeds). Our Glasgow office has developed a specialism in the provision of Trust Deed services and increased its activity over the last year to become the second placed provider in the field. In England, the Group entered the consumer debt insolvency market through the acquisition of a specialist provider of consumer debt solutions in November 2005, which has since more than doubled its volume of new appointments. We see the provision of consumer debt insolvency solutions as significantly supplementing our core insolvency services. By maintaining our ability to offer the full range of personal insolvency services through specialist operations in England and Scotland as well as our general office network, we are well placed to provide appropriate advice and services in all circumstances and to sustain activity through changes in market sentiment, legislation and regulatory focus. Corporate Finance The Group expanded its activity range into the provision of corporate finance services in May 2005, through the acquisition of an independent firm based in Leeds. Since that time, we have opened a corporate finance department in Manchester and plan to roll out this service to all the major business centres in which the Group operates. As well as providing advice on capital transactions, our corporate finance services extend to assisting businesses to fund their working capital requirements, whether for growth or stability. Working in close liaison with experienced insolvency practitioners within the Group, our corporate finance teams also advise troubled businesses where a formal insolvency may not deliver the optimum result for creditors, employees and proprietors. The process of integration of these services into the Group's operations has progressed at a pleasing rate, without any short-term disruption to turnover or profits from the corporate finance business we acquired. Investigative services We have continued to expand our activities in forensic accounting investigations over the past year, with teams now operating in London and Manchester. As well as providing litigation support and conducting investigative analysis where fraud is suspected, the forensic teams are increasingly involved in investigations into the past transactions of businesses where the Group is administering formal insolvency proceedings. A year ago, we expanded our range of investigative services by the acquisition of a business providing non-financial investigative and tracing services. Our activities in that field have recently been augmented by the addition of a Northern-based team of investigators. In isolation and without the benefit of a recognisable brand, such businesses do not tend to deliver profitability beyond proprietorial remuneration. However, we have the ability to cross-sell these investigative services through our intrinsic demand from insolvency administration and our network of professional contacts. This, as well as margin enhancement through the benefit of the Begbies Traynor brand, can deliver intrinsic shareholder value over time. These benefits will accrue after modest investment in the costs of acquisition and support through the process of integration and development. Financial Development and Results I am very happy to report that the profit before taxation of the Group for the year to 30 April 2006 is £7.3 million, a margin of 22% on Group turnover of £33.2 million, before amortisation of directly acquired goodwill, which we continue to aggressively apply. This translates into adjusted earnings per share of 6.7 pence; a 31% increase on the pro-forma comparable figure for the full year to 30 April 2005. The financial statements for the year to 30 April 2006, fully adopt the revisions to accounting standards on income recognition and dividend accrual. In consequence, the comparative figures for the 7 months to 30 April 2005 have been restated, the effect of which has been to increase profits before tax by £316,000 in 2005/06 and £235,000 for the prior 7 month period. The overall effect of the change in accounting for work done but not invoiced has been to increase its carrying value by £2 million, resulting in additional historical tax charges of £500,000 which have been provided for and are payable over 3 years. Our continued programme of expansion has resulted in the investment of £22 million since 30 April 2005 on business acquisitions, of which £9 million remains outstanding either as deferred or conditional future consideration. In the financial year to 30 April 2006, the Group's total expenditure on acquisitions was £15 million, of which £3 million was met through the actual or prospective issue of shares, £6 million remains to be paid, leaving £6 million paid in cash, in addition to £5 million paid in respect of earlier acquisitions and the loans arising from the Group formation on flotation. Six million pounds of that expenditure was met from an issue of new shares in July 2005 and the balance was funded from the senior debt facilities available to the Group and operating cash flow. The board is conscious of the need to continue to generate and conserve cash to fund the ongoing growth capital needs of the Group, whilst delivering sustained income returns to shareholders. Accordingly, an interim dividend of 0.5 pence per share was paid during the year and the directors intend to recommend a final dividend for the year ended 30 April 2006 of 1.0 pence per share at the forthcoming annual general meeting of the Company in September. In accordance with current accounting policies, this has not been accrued in the financial statements. The Future The board remains primarily focused on completing its original strategy for the Group over the coming year, through further earnings enhancing acquisitions and recruitment. We are on, if not a little ahead, of schedule in delivering our three-year plan and will take time this summer to integrate acquisitions already made and optimise the potential of the growth already achieved. Given favourable market indicators, the outlook for the current financial year is positive. However, the executive has already started to think beyond the initial goal and is formulating longer term plans. One key area is overseas development. Since the start of the calendar year, we have deployed senior personnel resource in the active development of our international network of associate firms, with very positive results. The next likely step will be to cement those links by making modest strategic investments in overseas business partners. We are also turning our attention to seeking out ways to broaden our service offering into compatible professional markets in the United Kingdom, where we believe we can add value by capitalising on cross selling and networking opportunities. Ric Traynor Executive Chairman 3 July 2006 Begbies Traynor Group plc Consolidated Profit & Loss Account Year ended 30 April 2006 7 months to 30 April 2005 Continuous Acquired Total Restated £'000s £'000s £'000s £'000s Turnover 25,083 8,159 33,242 16,010 Direct costs (11,831) (3,363) (15,194) (7,281) Administrative expenses (7,934) (2,372) (10,306) (5,259) Other operating income 48 - 48 110 -------- --------- ---------- ----------- Earnings before interest, tax and amortisation 5,366 2,424 7,790 3,580 -------- --------- ---------- ----------- Amortisation of goodwill (1,369) (1,187) (2,556) (1,162) ======== ========= ========== =========== Operating profit from continuing operations 3,997 1,237 5,234 2,418 ======== ========= Interest payable and similar charges (476) (254) ---------- ----------- Profit on ordinary activities before taxation 4,758 2,164 Tax on profits on ordinary activities (1,737) (864) ---------- ----------- Profits on ordinary activities after taxation 3,021 1,300 Dividends paid (732) - ---------- ----------- Retained earnings 2,289 1,300 ========== =========== Basic earnings per share (pence) - see note 2 4.2p 2.0p Adjusted earnings per share (pence) - see note 2 6.7p 3.3p No gains or losses were recognised in the year, other than those included in the profit and loss account. As permitted under s230 of CA 1985, no separate profit and loss account is presented for the Company. The profit after tax of the company for the year was £1,237,000 (2005; 7 months - £345,000). Fully diluted earnings per share are not materially different from basic earnings per share. Begbies Traynor Group plc Balance Sheets At 30 April 2006 Group at 30 April Company at 30 April 2006 2005 2006 2005 restated restated £'000s £'000s £'000s £'000s Fixed Assets Intangible assets 37,616 26,982 1,612 1,590 Investments in subsidiary - - 23,579 18,667 undertakings Tangible assets 3,731 2,526 - - ------- -------- -------- -------- 41,347 29,508 25,191 20,257 ------- -------- -------- -------- ------- Current Assets Debtors 19,972 13,371 11,960 5,287 Cash at bank and in hand 598 131 - - ------- -------- -------- -------- 20,570 13,502 11,960 5,287 Creditors falling due within one year (10,614) (10,804) (298) - ------- -------- -------- -------- -------- Net Current Assets 9,956 2,698 11,662 5,287 -------- -------- Total assets less current liabilities 51,303 32,206 36,853 25,544 Creditors falling due after more than one year (12,938) (5,707) (1,227) - ------- -------- -------- -------- 38,365 26,499 35,626 25,544 ======= ======== ======== ======== Capital and Reserves Called up share capital 3,744 3,271 3,744 3,271 Other reserves 31,032 21,928 31,032 21,928 Profit and loss account 3,589 1,300 850 345 ------- -------- -------- -------- 38,365 26,499 35,626 25,544 ======= ======== ======== ======== Begbies Traynor Group plc Consolidated Cash Flow Statements Year to 30 April 2006 7 months to 30 April 2005 restated Statement of Adjustments from Operating Profit to Net Cash Flow from Operating Activities £'000s £'000s Total operating profit 5,234 2,418 Depreciation of tangible 811 553 fixed assets Amortisation of goodwill 2,556 1,162 (Profit)/loss on sale of (5) 40 fixed assets ---------- ---------- Earnings before interest, tax, depreciation and amortisation (EBITDA) 8,596 4,173 (Increase) in debtors (3,383) (1,534) Decrease in creditors 517 275 ---------- ---------- Net cash flow from operating activities 5,730 2,914 Returns on Investment and Servicing of Financing Net finance charges paid (476) (244) Dividends paid (732) - Corporation tax paid (1,192) (241) Capital Expenditure and Financial Investment Capital expenditure (1,112) (837) payments Proceeds of asset 325 287 disposals Acquisitions (7,634) (2,424) ---------- ---------- Cash Flow Before Financing (5,091) (545) Financing Net proceeds of share 6,224 5,032 issues for cash Loans repaid (4,000) - Asset finance capital (549) (240) payments ---------- ---------- Movement in Net Cash (3,416) (4,247) ========== ========== Begbies Traynor Group plc Reconciliation to Movement in Net Debt Year to 30 April 2006 7 month period to 30 April 2005 restated £'000s £'000s Movement in net cash (3,416) (4,247) Asset finance capital 549 240 repaid ------------ ------------ Change in net funds resulting (2,867) 4,487 from cash flows Cash included in 201 - acquisitions Asset finance capital (924) (326) raised ------------ ------------ ------------ Movement in net funds (3,590) 4,161 Opening net debt (5,023) (9,184) ------------ ------------ ------------ Closing net debt (8,613) (5,023) ============ ============ Begbies Traynor Group plc Analysis of Changes in Net Debt Cash at bank and in hand Asset finance Amounts drawn on bank facility Total £'000s £'000s £'000s £'000s As at 1 May 131 (801) (4,353) (5,023) 2005 Cash flow movements 266 549 (3,682) (2,867) Non cash movements 201 (924) - (723) ---------- ----------- ---------- -------- Net debt at 30 598 (1,176) (8,035) (8,613) April 2006 ========== =========== ========== ======== Begbies Traynor Group plc Notes to preliminary announcement Note 1. Basis of Accounting and preparation BTG acquired the trading entities in the Group as at 1 October 2004. Businesses acquired after 1 October 2004 are consolidated from the date of their acquisition, using the acquisition method of accounting. The financial statements have been prepared under the historical cost convention and in accordance with applicable accounting standards. As permitted by the Companies Act 1985, no profit and loss account is published in respect of BTG itself. Profit shares accruing to partners in subsidiary entities are shown in the consolidated profit and loss account as direct or indirect operating costs as appropriate. As a result of changes to accounting standards relating to the recognition of income and dividend accruals, the comparable results for the seven month period to 30 April 2005 have been restated. The effects of the changes are as follows: 1.Proposed dividends are no longer accrued in the financial statements; 2.All work done but not invoiced is included in turnover and debtors in the financial statements at its anticipated net realisable value, except for contingent work, where revenue is dependant in an event not in the control of the Group, which has not occurred by the date of finalisation of the evaluation. In consequence, the Group no longer categorises any work done but not invoiced as work in progress. Note 2. Earnings per share Basic earnings per share are calculated by dividing the Group profits after taxation of £3,021,000 by the weighted average number of shares in issue in the year ended 30 April 2006 of 71,852,093. The restated earnings per share for the 7 month period to 30 April 2005 are calculated by dividing the restated profits after tax for that period of £1,300,000 by the number of shares in issue throughout that period of 65,424,580. The dilution effect of the estimated future obligation to issue shares to a value of £439,000 relating to the acquisition of IAL is negligible, as was the effect of the obligation, at 30 April 2005, to issue 666,672 shares in consideration of the future acquisition of shares in Begbies Traynor limited, which has been met. Adjusted earnings per share reflect earnings after tax after adding back the net of tax cost of goodwill amortisation. Restated adjusted pro-forma earnings per share for the year ended 30 April 2005 were 5.1 pence. Note 3. Statutory Accounts The financial information set out above does not constitute the Group's statutory information for the year ended 30 April 2006, but is derived from those accounts. Statutory accounts for the year will be delivered to the Registrar of Companies following the Company's annual general meeting. The auditors have confirmed to the board that their report on those accounts (assuming they correspond with this statement) will be unqualified and will not contain statements under the Companies Act 1985 sections 237 (2) or (3). This information is provided by RNS The company news service from the London Stock Exchange

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