Wednesday, December 12, 2012

Tue 12 Dec - BEG, SRG, STAF

A shorter report today, as I have to dash to the Begbies Traynor (BEG) results presentation at the offices of MHP Communications, just behind Oxford Circus, so am bracing myself for the rush hour tube journey.

Begbies interim results are fairly subdued, as I was expecting given the very low PER. Turnover is down about 10% to £26.1m, and adj profit is down from £4.1m to £3.2m for the 6 months. However, the outlook statement is OK, saying,
"We anticipate an improvement in activity in the second half of the financial year during the traditionally busier winter months. Given this, we currently anticipate that the group's performance for the year as a whole will be broadly in line with last year."

So we're probably looking at expections being trimmed from about 6p to about 5.5p for the full year, which means the shares remain good value in my opinion at 32p, off a penny so far today. PER is about 6, and the divi has been maintained at 0.6p, so no reason to expect any change in the full year divi of 2.2p, giving a very pleasing yield of almost 7%.

Net debt has fallen a bit to £18.3m, which sounds a lot, but it's fine. The nature of insolvency practitioners is that they run a very long debtor book, since fees are accumulated until authorised by the creditors meeting after asset disposals have been made. So they are paid in one lump, often a long time after the work was started. BEG has a £44m debtor book, so more than double its net debt, which I'm relaxed about. So are the banks, as the bank debt is unsecured, a very unusual situation. Remember that insolvency practitioners effectively work for the banks, so debt here is not an issue. I hold shares in BEG.

As planned, Security Research (SRG) announces a 1 in 5 Tender offer at 225p, a big premium to the current price which was 125p last night, and is 10%  this morning to 136p. I hold.

Another share in my portfolio, which has been doing well of late, is Staffline (STAF). They announce another bolt-on acquisition this morning, financed from existing facilities.

Right, gotta dash. I shall report back on Begbies this afternoon hopefully.

Regards, Paul.


  1. Hi Paul,

    Probably a stupid question but on he accounts it has intangibles at 50m, what would these be?

    Regards Dean

    1. Hi Dean,
      I'm pretty sure the intangibles are acquired goodwill - i.e. the premium paid for acquisitions above net assets.
      My view is that all intangibles should be written off, and all amortisation charges reversed out of the P&L.
      From memory, BEG has around £7m in NTAV.