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Begbies Traynor Group PLC   -  BEG   

Final results for the year ended 30 April 2019

Released 07:00 09-Jul-2019

RNS Number : 8579E
Begbies Traynor Group PLC
09 July 2019
 

 

 

 

9 July 2019

Begbies Traynor Group plc

 

Final results

for the year ended 30 April 2019

 

Begbies Traynor Group plc (the 'company' or the 'group'), the business recovery, financial advisory and property services consultancy, today announces its final results for the year ended 30 April 2019.

 

Financial highlights

 

 

2019

2018

 

£m

£m

Revenue

60.1

52.4

Adjusted profit before tax*

7.1

5.6

Profit before tax

3.5

2.3

Adjusted basic EPS** (p)

4.9

4.0

Basic EPS (p)

2.2

1.3

Proposed total dividend (p)

2.6

2.4

Net debt

6.0

7.5

 

* Profit before tax of £3.5m (2018: £2.3m) plus amortisation of intangible assets arising on acquisitions of £2.4m (2018: £1.9m) and transaction costs of £1.2m (2018: £1.4m)

 

** See reconciliation in note 4

 

Operational highlights

 

·      Strong financial performance in line with upgraded expectations*, with revenue growth of 15% (9% organic) and an improved operating profit** margin of 12.6% (2018: 11.6%)

·      All areas of the group performed well:

business recovery - growth from organic investment, acquisitions and an increase in insolvency numbers nationally;

advisory - benefit of prior year acquisition of Springboard Corporate Finance; and

property - continued to develop through focussed investment and acquisition

·      Strong cash generation enabled reduction in net debt and leverage

·      Proposed 8% increase in total dividend for the year, the second consecutive year of dividend growth

 

* Expectations upgraded in the full year trading update on 7 May 2019

** Operating profit before amortisation and transaction costs

 

Outlook

 

·      Well placed to continue our track record of growth

·      Entered the new financial year with positive momentum

·      Update on trading at annual general meeting in September 2019

 

Commenting on the results, Ric Traynor, Executive Chairman of Begbies Traynor Group, said:

 

"We have reported another year of strong financial performance, ahead of our original expectations, in which we have grown the business organically, completed four acquisitions and increased the dividend whilst reducing net debt. All areas of the group performed well, reflecting the benefits of recent organic investment, an increase in market activity and the good performance of recent acquisitions.

 

"Looking ahead, we are better positioned than ever with multiple sources of potential growth supported by a strong financial platform. There is currently uncertainty in the UK economy as a result of the Brexit process, but with a combination of our counter-cyclical activities together with our breadth of services, we are well placed to continue our track record of growth in the new financial year and beyond."

 

A meeting for analysts will be held today at 8.45am for 9.00am at the offices of MHP Communications, 6 Agar Street, London WC2N 4HN.  Please contact Peter Lambie on 020 3128 8570 or via Begbies@mhpc.com if you would like to attend.

 

 

Enquiries please contact:

               

Begbies Traynor Group plc                                                                                             0161 837 1700

Ric Traynor - Executive Chairman

Nick Taylor - Group Finance Director

 

Canaccord Genuity Limited                                                                                             020 7523 8350

(Nominated Advisor and Joint Broker)

David Tyrrell / Emma Gabriel

 

Shore Capital                                                                                                                     020 7408 4090

(Joint Broker)

Mark Percy / Anita Ghanekar

 

MHP Communications                                                                                                      020 3128 8572

Reg Hoare / Katie Hunt / Pete Lambie

 

 

Information on Begbies Traynor Group can be accessed via the group's website at
www.begbies-traynorgroup.com

 

 

CHAIRMAN'S STATEMENT

 

INTRODUCTION

 

I am pleased to report another year of strong financial performance, in line with upgraded expectations*, in which we have grown the business organically, completed four acquisitions and increased the dividend whilst reducing net debt.

 

All areas of the group have performed well: business recovery, reflecting the benefits of recent organic investment and an increase in insolvency numbers nationally; advisory services, reflecting the prior year acquisition of Springboard Corporate Finance; and property services, which we have continued to develop through focussed investment and by acquisition.

 

The benefit of our strategy to increase the scale and quality of the group's businesses through both investment in organic growth and targeted acquisitions is reflected in our financial performance. We have delivered consecutive years of earnings growth since 2015, with compound growth in adjusted earnings per share of 14% over the last four years, enabling us to raise the dividend for the last two years.

 

The group now has an enhanced breadth of service lines with multiple sources of growth potential. Whilst we retain a counter-cyclical focus, which accounts for 65% of our income, our broad range of services positions the group well to grow across the economic cycle. Our principal activities, which fund our investment programme and enable the payment of dividends, generate strong operating margins and are highly cash generative.

 

Our insolvency practice continues to develop through targeted recruitment, focussed business development and acquisitions. The practice will also benefit from any cyclical growth in insolvency numbers nationally, reflecting its market leading position.

 

Our advisory team has grown through acquisition and recruitment in recent years and we continue to seek opportunities for further growth.

 

Our property services business has delivered consecutive years of growth since our initial acquisition of Eddisons in December 2014. Our strategy has been to strengthen and broaden both services and geographical coverage, which has resulted in profit growth in the division from £1.9m at our initial investment in December 2014 to £3.8m this year. The business is now focussed on three key areas: valuations; auctions and asset sales; and property consultancy, planning and management.  In line with our strategy, we will continue to develop and invest in this business.

 

* Expectations upgraded in the full year trading update on 7 May 2019

 

RESULTS

 

Group revenue in the year increased by 15% to £60.1m (2018: £52.4m), 9% of which was organic. Adjusted* profit before tax increased by 27% to £7.1m (2018: £5.6m). Statutory profit before tax increased to £3.5m (2018: £2.3m).

 

Adjusted** basic earnings per share increased by 23% to 4.9p (2018: 4.0p).  Basic earnings per share increased to 2.2p (2018: 1.3p).

 

Net debt decreased to £6.0m (2018: £7.5m) with leverage (calculated as net debt to EBITDA***) improving to 0.7 times (2018: 1.1 times).

 

* Profit before tax £3.5m (2018: £2.3m) plus transaction costs £1.2m (2018: £1.4m) and amortisation of intangible assets arising on acquisitions £2.4m (2018: £1.9m)

 

** See reconciliation in note 4

 

*** Profit before tax £3.5m (2018: £2.3m) plus interest £0.5m (2018: £0.5m), transaction costs £1.2m (2018: £1.4m) and amortisation of intangible assets arising on acquisitions £2.4m (2018: £1.9m), software amortisation £0.2m (2018: £0.2m), depreciation £0.6m (2018: £0.5m) and share-based payments £0.1m (2018: £0.3m)

 

 

DIVIDEND

 

The board is pleased to recommend (subject to shareholder approval at the company's annual general meeting) an increased dividend for the year to 2.6p (2018: 2.4p), an increase of 8%. This comprises the interim dividend already paid of 0.8p (2018: 0.7p) and a proposed final dividend of 1.8p (2018: 1.7p).

 

This is the second consecutive year of dividend growth and reflects our confidence in sustaining our financial track record of earnings growth. The board remains committed to a long-term progressive dividend policy, which takes account of the market outlook, earnings growth and investment plans.

 

The final dividend will be paid on 7 November 2019 to shareholders on the register on 11 October 2019, with an ex-dividend date of 10 October 2019.

 

STRATEGY

 

Our strategy is to:

·      be a trusted advisor to all of our clients, delivering innovative and entrepreneurial advice and solutions;

·      increase the scale and quality of our businesses through both organic growth and acquisitions;

·      deliver sustainable profitable growth, enabling increased shareholder value; and

·      maintain our strong financial position enabling the investment in and development of the group and its people. 

 

PEOPLE

 

The success of the group is reliant on the quality of advice and service delivered to our clients by our people. I would like to thank all of our colleagues for their contribution over the course of this year.

 

OUTLOOK

 

We are better positioned than ever with multiple sources of potential growth supported by a strong financial platform. We have a good pipeline of both organic and acquisition opportunities across all of our service lines.

 

There is currently uncertainty in the UK economy as a result of the Brexit process, but with a combination of our counter-cyclical activities together with our breadth of services, we are well placed to continue our track record of growth in the new financial year and beyond.

 

We have entered the new financial year with positive momentum and we are confident of delivering current market expectations. As usual, we will provide an update on trading at the time of the company's annual general meeting in September 2019.

 

Ric Traynor

Executive chairman

9 July 2019
 

 

BUSINESS REVIEW

 

OPERATING REVIEW

 

Business recovery and financial advisory services

 

Revenue increased by 13.2% to £43.3m (2018: £38.3m), reflecting the benefit of increased market activity levels; the continuing development of our advisory services, with the prior year acquisition of Springboard Corporate Finance; and the benefit of organic growth initiatives.

 

Operating costs increased by £3.9m to £34.6m (2018: £30.7m) principally as a result of costs associated with acquired businesses, organic investment and increased people costs.

 

Segmental profits* increased by 14.5% to £8.7m (2018: £7.6m) with margins of 20.0% (2018: 19.8%).

 

Insolvency volumes nationally increased, with the underlying number of corporate insolvencies** in calendar year 2018 growing by 10% to 16,106 (2017: 14,630). In this improving market, we have maintained our market share, continuing to take the largest number of corporate insolvency appointments in the UK.

 

We have strengthened our team through the recruitment of work-winning senior people and continued to develop our existing teams. We also completed the acquisition of two insolvency boutiques (KRE (North East) in Newcastle and Dunion & Co in Stoke-on-Trent) with seven partners and staff joining the group and integrating with our existing teams.

 

Our advisory activities increased in the year, benefiting from the full year impact of the acquisition of Springboard Corporate Finance. The team performed well in the year, advising on 15 completed transactions for a gross value of £117m.

 

The number of people employed in the division has increased to 364 as at 30 April 2019 from 351 at the start of the financial year. 

 

* See note 2

 

**Source: The Insolvency Service quarterly statistics on the number of corporate insolvencies in England and Wales on a seasonally adjusted basis, excluding the one-off effect of 1,349 (2017: 2,686) bulk insolvencies as identified by The Insolvency Service

 

Property services

 

Revenue increased by 18.2% to £16.7m (2018: £14.2m), with strong financial performance across the division reflecting the benefit of both current and prior year acquisitions, organic growth initiatives and the completion of several property insolvencies. Operating costs increased by £1.8m to £12.9m (2018: £11.1m) due to acquired businesses and organic investment costs.

 

Segmental profits* increased to £3.8m (2018: £3.1m) with margins increasing to 22.5% (2018: 22.1%).

 

During the year we completed several long-running property insolvencies, which enhanced margin in the year. We have continued to invest in our property valuation team, through the recruitment of experienced surveyors, which has improved our geographical coverage and positions the business well for future years.

 

Our asset disposal teams performed well.  Property auction levels were broadly in line with the prior year.  We continue to complete the majority of our sales through in-room auctions but have during the year introduced an online platform. Machinery and business asset activity levels increased following our prior year acquisition of the CJM Asset Management business, which has integrated well with our existing team.

 

The building consulting team had a very successful year, increasing our instructions from the education sector which has been a key area of development. We have increased the size of our team through recruitment and it is well positioned to continue to grow.

 

The division completed two acquisitions in the year, which have increased both our expertise and geographical coverage. 

 

In January 2019, we completed the acquisition of Croft Transport Planning & Design ("Croft"), with the ten employees and management joining our Manchester office. Croft provides highways, transport and traffic planning advice on commercial, residential and mixed use schemes to a corporate client base, which includes developers, house builders and land owners. This expands the consultancy services we can offer to real estate developers and corporate clients.

 

In April 2019, we acquired Barker Storey Matthews ("BSM"), an independent firm of chartered surveyors with offices in Cambridge, Huntingdon, Peterborough and Bury St Edmunds, with 38 employees joining Eddisons.  The core services offered are commercial property agency, property management, building consultancy, professional services (including valuations) and planning services, consistent with our core service offerings. BSM was ranked the overall winner for Eastern England in the EG Deals Competition 2018 for commercial property agents. The addition of the BSM team expands our geographical coverage.

 

The number of people employed in the division has increased to 245 as at 30 April 2019 from 182 at the start of the financial year. 

 

* See note 2

 

Partners and employees

 

As at 30 April 2019, the group employed a total of 650 partners and staff (2018: 576); this comprises 486 fee earners and 164 support staff.

                                                             

FINANCE REVIEW

 

Financial summary

 

2019

2018

 

£m

£m

 

 

 

Revenue

60.1

52.4

Operating profit (before transaction costs and amortisation)

7.6

6.1

Interest costs

(0.5)

(0.5)

Adjusted profit before tax

7.1

5.6

Transaction costs

(1.2)

(1.4)

Amortisation of intangible assets arising on acquisitions

(2.4)

(1.9)

Profit before tax

3.5

2.3

Tax

(1.1)

(0.9)

Profit for the year

2.4

1.4

 

Operating result (before transaction costs and amortisation)

 

Revenue in the year increased by £7.7m to £60.1m (2018: £52.4m), an overall increase of 14.5% in the year, of which 8.6% was organic and 5.9% was acquired.

 

Operating margins increased in the year to 12.6% (2018: 11.6%), due to increased segmental margins in both divisions and the benefit of operating leverage as the business has grown. Operating profit increased by 24.7% to £7.6m (2018: £6.1m).

 

Adjusted profit before tax increased by £1.5m to £7.1m (2018: £5.6m), an increase of 26.7% in the year as a result of the increased operating profits with interest costs in line with the prior year.

 

IFRS 15 'Revenue from Contracts with Customers' and IFRS 9 'Financial Instruments' have been implemented with effect from 1 May 2018. The adoption of these standards had a minimal impact on reported revenue, profit and earnings per share in the current year. We have applied these standards using the retrospective application method, giving an opening adjustment to retained earnings rather than a restatement of prior periods.  This is detailed further in note 1.

 

Tax

 

The overall tax charge for the year was £1.1m (2018: £0.9m), giving an effective rate of 31% (2018: 38%). This comprised a charge on adjusted profit before tax of £1.6m (2018: £1.3m), partially offset by a tax credit resulting from transaction costs and amortisation of £0.5m (2018: £0.4m). The tax rate on adjusted profits was 22%, in line with the prior year. 

 

Earnings per share

 

Adjusted basic earnings per share* increased by 22.5% to 4.9p (2018: 4.0p). Basic earnings per share increased to 2.2p (2018: 1.3p).

 

* See reconciliation in note 4

 

Acquisitions

 

During the year the group completed four acquisitions:

 

·      Croft Transport Planning & Design on 31 January 2019 for initial consideration of £1.5m (£1.125m in cash and the issue of 640,150 new ordinary shares) with a maximum additional cash payment of £2.5m subject to financial performance in the five year period following the acquisition.

·      KRE (North East) on 13 February 2019 for initial consideration of £0.45m (in cash) with a maximum additional cash payment of £0.15m subject to financial performance in the one year period following the acquisition.

·      Dunion & Co on 1 March 2019 for initial consideration of £0.1m (in cash) with a maximum additional cash payment of £0.1m subject to financial performance in the two year period following the acquisition.

·      Barker Storey Matthews on 5 April 2019 for initial consideration of £1.6m (£1.067m in cash and the issue of 844,290 new ordinary shares) with a maximum additional cash payment of £1.4m subject to financial performance in the three year period following the acquisition.

 

The net cash outflow from acquisitions in the year was £1.2m, comprising the cash consideration of £2.7m net of cash acquired of £1.5m.

 

The acquired businesses have performed in line with expectations in the post-acquisition period and the integration with our existing businesses is progressing well.

 

A proportion of the consideration payable for these acquisitions requires post-acquisition service obligations to be performed by the selling shareholders. These amounts are accounted for as deemed remuneration and charged to the consolidated statement of comprehensive income over the period of the service obligation. The value of net assets acquired exceeds the accounting value of consideration and consequently a gain of £2.9m has been recognised within transaction costs in the year.

 

Financing

 

Net debt at the year end reduced to £6.0m (2018: £7.5m). This reflected cash generated from operations in the year of £7.3m (2018: £7.5m) partially offset by investment in acquisitions (net of cash acquired), deferred consideration payments and capital expenditure of £3.2m (2018: £2.4m) and dividends paid of £2.6m (2018: £2.4m).

 

During the year, we agreed an extension to our banking facilities with HSBC, which now provides the group with a committed facility until 2023.  These facilities are unsecured, mature on 31 August 2023 and comprise a £25m committed revolving credit facility and a £5m uncommitted acquisition facility.

 

During the year, all bank covenants were comfortably met and the group remains in a strong financial position. As a result of the reduced levels of debt together with increased profits, our leverage (calculated as net debt to EBITDA*) improved to 0.7 times (2018: 1.1 times).

 

* Profit before tax £3.5m (2018: £2.3m) plus interest £0.5m (2018: £0.5m), transaction costs £1.2m (2018: £1.4m) and amortisation of intangible assets arising on acquisitions £2.4m (2018: £1.9m), software amortisation £0.2m (2018: £0.2m), depreciation £0.6m (2018: £0.5m) and share-based payments £0.1m (2018: £0.3m)

 

Net assets

 

At 30 April 2019 net assets were £59.7m (2018: £59.1m). The movement in net assets reflects an increase of £2.9m, from post-tax adjusted earnings of £5.5m net of dividends of £2.6m; £2.2m from the issue of new shares, principally in relation to acquisitions; offset by a reduction of £1.4m from the adoption of IFRS 15 and IFRS 9 at 1 May 2018 (see note 1) and the post-tax impact of acquisition-related transaction and amortisation costs of £3.1m.

 

Going concern

 

The directors have reviewed the financial resources available to the group and have concluded that the group will be able to operate within the level of its borrowing facilities and have a reasonable expectation that the group has adequate resources to continue in operational existence for the foreseeable future.  This conclusion is based, amongst other matters, on the group's existing borrowing facilities and a review of financial forecasts for a period exceeding 12 months from the date of this announcement. Accordingly, the financial information in this announcement is prepared on the going concern basis.

           

Ric Traynor                                                                          Nick Taylor

Executive chairman                                                          Group finance director

9 July 2019                                                                           9 July 2019

 

Consolidated statement of comprehensive income

 

 

2019

2018

 

Note

£'000

£'000

 

 

 

 

Revenue

2

60,058

52,441

Direct costs

 

(34,276)

(30,141)

Gross profit

 

25,782

22,300

Other operating income

 

393

400

Administrative expenses

 

(22,163)

(19,922)

Operating profit (before amortisation and transaction costs)

2

7,553

6,059

Transaction costs

3

(1,180)

(1,364)

Amortisation of intangible assets arising on acquisitions

 

(2,361)

(1,917)

Operating profit

 

4,012

2,778

Finance costs

 

(486)

(482)

Profit before tax

 

3,526

2,296

Tax

 

(1,092)

(872)

Profit and total comprehensive income for the year

 

2,434

1,424

Earnings per share

 

 

 

Basic

4

2.2 pence

1.3 pence

Diluted

4

2.1 pence

1.3 pence

 

The profit, comprehensive income and earnings per share is attributable to equity holders of the parent.

 

Consolidated statement of changes in equity

 

 

 

Share

 

Share

 

Merger

Capital redemption

 

Retained

 

Total

 

capital

premium

reserve

reserve

earnings

equity

 

£'000

£'000

£'000

£'000

£'000

£'000

At 1 May 2017

5,640

22,335

18,507

-

11,618

58,100

Profit for the year

 

 

 

1,424

1,424

Dividends

-

-

-

(2,356)

(2,356)

Credit to equity for equity-settled share-based payments

-

-

-

295

295

Own shares acquired in the year

(304)

 

 

(226)

(226)

Shares issued as consideration for acquisitions

101

-

1,374

-

1,475

Shares issued as deferred consideration

33

-

367

-

400

SIP shares issued

3

34

-

-

37

Other share options

35

420

-

 

(455)

-

At 30 April 2018

5,508

22,789

20,248

304

10,300

59,149

Adjustment for changes in accounting policy

-

-

-

-

(1,448)

(1,448)

Balance at 30 April 2018 after adjustments

 

 

 

 

8,852

57,701

Profit for the year

-

-

-

2,434

2,434

Dividends

-

-

-

(2,649)

(2,649)

Credit to equity for equity-settled share-based payments

-

-

-

99

99

Shares issued as consideration for acquisitions

74

-

834

-

908

Shares issued as deferred consideration

93

-

1,107

-

1,200

SIP shares issued

1

7

-

-

8

Other share options

43

394

-

 

(437)

-

At 30 April 2019

5,719

23,190

22,189

304

8,299

59,701

 

 

Consolidated balance sheet

 

 

2019

2018

 

Note

£'000

£'000

Non-current assets

 

 

 

Intangible assets

 

59,392

59,061

Property, plant and equipment

 

1,766

1,512

Trade and other receivables

6

3,220

1,759

 

 

64,378

62,332

Current assets

 

 

 

Trade and other receivables

6

32,653

30,829

Cash and cash equivalents

 

4,009

3,518

 

 

36,662

34,347

Total assets

 

101,040

96,679

Current liabilities

 

 

 

Trade and other payables

7

(22,664)

(17,268)

Current tax liabilities

 

(1,976)

(1,548)

Provisions

 

(588)

(783)

 

 

(25,228)

(19,599)

Net current assets

 

11,434

14,748

Non-current liabilities

 

 

 

Trade and other payables

7

-

(1,093)

Borrowings

 

(10,000)

(11,000)

Provisions

 

(763)

(414)

Deferred tax

 

(5,348)

(5,424)

 

 

(16,111)

(17,931)

Total liabilities

 

(41,339)

(37,530)

Net assets

 

59,701

59,149

Equity

 

 

 

Share capital

 

5,719

5,508

Share premium

 

23,190

22,789

Merger reserve

 

22,189

20,248

Capital redemption reserve

 

304

304

Retained earnings

 

8,299

10,300

Equity attributable to owners of the company

 

59,701

59,149

 

 

Consolidated cash flow statement

 

 

2019

2018

 

 

£'000

£'000

Cash flows from operating activities

 

 

 

Cash generated by operations

 

9,178

9,065

Income taxes paid

 

(1,362)

(980)

Interest paid

 

(489)

(558)

Net cash from operating activities

 

7,327

7,527

Investing activities

 

 

 

Purchase of intangible fixed assets

 

(216)

(77)

Purchase of property, plant and equipment

 

(784)

(394)

Deferred consideration payments

 

(1,030)

(1,132)

Acquisition of businesses (net of cash acquired)

 

(1,167)

(803)

Net cash used in investing activities

 

(3,197)

(2,406)

Financing activities

 

 

 

Dividends paid

 

(2,649)

(2,356)

Proceeds on issue of SIP scheme shares

 

10

38

Repayment of loans

 

(1,000)

(6,000)

Net cash used in financing activities

 

(3,639)

(8,318)

Net increase (decrease) in cash and cash equivalents

 

491

(3,197)

Cash and cash equivalents at beginning of year

 

3,518

6,715

Cash and cash equivalents at end of year

 

4,009

3,518

1.     Basis of preparation and accounting policies

The results for the year ended 30 April 2019 have been prepared on the basis of accounting policies consistent with those set out in the annual report to shareholders of Begbies Traynor Group plc for the year ended 30 April 2018, apart from those affected by the implementation of IFRS 15 'Revenue from Contracts with Customers' and IFRS 9 'Financial Instruments' as noted below. These impact the accounting policies for revenue and trade receivables.

 

The group's financial statements for the year ended 30 April 2019 have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted for use in the EU.  Whilst the financial information included in this announcement has been prepared in accordance with IFRS, this announcement itself does not contain sufficient information to comply with IFRS.

 

This financial information does not include all of the information and disclosures required for full annual financial statements and does not comprise statutory accounts within the meaning of section 435 of the Companies Act 2006.

 

The comparative figures for the year ended 30 April 2018 do not comprise the group's statutory accounts for that financial year.  Those accounts have been reported upon by the group's auditors and delivered to the Registrar of Companies.  The report of the auditors was unqualified, did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and did not contain statements under section 498 (2) or (3) of the Companies Act 2006.

 

Statutory accounts for Begbies Traynor Group plc for 2019 will be delivered to the Registrar of Companies following the company's annual general meeting.  The auditors have reported on these accounts; their report is unqualified and does not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and did not contain statements under either section 498 (2) or (3) of the Companies Act 2006.  The 2018 annual report will be available on the group's website: www.begbies-traynorgroup.com.

 

Going concern

 

In carrying out their duties in respect of going concern, the directors have completed a review of the group's current financial position and cash flow forecasts for a period exceeding 12 months from the date of this announcement. This review included sensitivity analysis to determine the potential impact on the group of reasonably possible downside scenarios. Under all modelled scenarios, the group's banking facilities were sufficient and all associated covenant measures were forecast to be met.

 

After making enquiries, the directors have a reasonable expectation that the company and the group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, this financial information is prepared on the going concern basis.

 

Adjusted performance measures

 

Management believes that adjusted performance measures provide meaningful information to the users of the accounts on the performance of the business and are the performance measures used by the board. Accordingly, adjusted measures of operating profit, profit before tax and earnings per share exclude, where applicable, transaction costs, amortisation of intangible assets arising on acquisitions and related tax effects on these items. These terms are not defined terms under IFRS and may therefore not be comparable with similarly titled profit measures reported by other companies. They are not intended to be a substitute for, or superior to, GAAP measures.

 

The items excluded from adjusted results are those which arise due to acquisitions and are charged to the consolidated statement of comprehensive income in accordance with IFRS 3. They are not influenced by the day-to-day operations of the group.

 

Adoption of new accounting standards

 

The following standards became effective in the financial year commencing 1 May 2018 and have been applied using the retrospective application method; giving an opening adjustment to retained earnings rather than a restatement of prior periods.  The comparative information is not restated, and is therefore presented in line with the accounting standard applicable in the comparative year.

 

IFRS 15 'Revenue from Contracts with Customers'

 

IFRS 15 introduces a new model for revenue recognition, which is based upon the transfer of control rather than the transfer of risks and rewards under IAS 18 'Revenue'. On the majority of the group's engagement types the point at which revenue is recognised has not changed, as the point of transfer of control under IFRS 15 (which determines revenue recognition) is the same as the point of transfer of risks and rewards (which determines revenue recognition under IAS 18). 

 

However, on two of the group's engagement types, the adoption of IFRS 15 has resulted in a change in revenue recognition as either:

·      IFRS 15 requires the group to have enforceable rights to payment to meet recognition criteria for revenue having satisfied a performance obligation.  On a number of contracts the group may not have enforceable rights to payment at the early stage of the contract and revenue will not be recognised until these rights are in place; or

·      IFRS 15 requires certain contracts to be combined, where they are entered into at or near the same time, with the same customer and negotiated with a single commercial objective or a single performance obligation.

 

 

1.     Basis of preparation and accounting policies (continued)

IFRS 9 'Financial Instruments'

 

The introduction of IFRS 9 impacts the group's accounting policy for trade receivables through the recognition of an expected loss provision for future impairment of receivables. 

 

Opening adjustment to retained earnings

 

The adoption of these standards at 1 May 2018 reduced trade and other receivables by £1.8m and increased deferred tax assets by £0.4m, giving a reduction in net assets of £1.4m.

 

The tables below show the impact of adopting these new accounting policies in the year.

 

Consolidated statement of comprehensive income

 

 

 

As reported
30 April 2019

 

 

 

 

IFRS 15 adjustment

 

 

 

 

IFRS 9 adjustment

Balances without adoption of new standards
30 April 2019

 

 

 

Year ended 30 April 2018

 

£'000

£'000

£'000

£'000

£'000

Revenue

60,058

15

-

60,073

52,441

Direct costs

(34,276)

-

-

(34,276)

(30,141)

Gross profit

25,782

15

-

25,797

22,300

Other operating income

393

-

-

393

400

Administrative expenses

(22,163)

 

31

(22,132)

(19,922)

Operating profit before amortisation and transaction costs

7,553

15

31

7,599

6,059

Transaction costs

(1,180)

-

-

(1,180)

(1,364)

Amortisation

(2,361)

-

-

(2,361)

(1,917)

Operating profit

4,012

15

31

4,058

2,778

Finance costs

(486)

-

-

(486)

(482)

Profit before tax

3,526

15

31

3,572

2,296

Tax

(1,092)

(3)

(6)

(1,101)

(872)

Profit and total comprehensive income for the period

2,434

12

25

2,471

1,424

Earnings per share

 

 

 

 

 

Basic

2.2p

 

 

2.2p

1.3p

Diluted

2.1p

 

 

2.1p

1.3p

 

Consolidated balance sheet

 

 

 

As reported
30 April 2019

 

 

 

 

IFRS 15 adjustment

 

 

 

 

IFRS 9 adjustment

Balances without adoption of new standards
30 April 2019

 

 

 

 

30 April 2018

 

£'000

£'000

£'000

£'000

£'000

Non-current assets

64,378

-

-

64,378

62,332

Current assets

 

 

 

 

 

Trade and other receivables

32,653

1,261

391

34,305

30,829

Cash and cash equivalents

4,009

-

-

4,009

3,518

 

36,662

1,261

391

38,314

34,347

Total assets

101,040

1,261

391

102,692

96,679

Current liabilities

 

 

 

 

 

Trade and other payables

(22,664)

182

-

(22,482)

(17,268)

Current tax liabilities

(1,976)

(3)

(6)

(1,985)

(1,548)

Provisions

(588)

-

-

(588)

(783)

 

(25,228)

179

(6)

(25,055)

(19,599)

Net current assets

11,434

1,440

385

13,259

14,748

Non-current liabilities

 

 

 

 

 

Trade and other payables

 -

-

-

-

(1,093)

Borrowings

(10,000)

-

-

(10,000)

(11,000)

Provisions

(763)

-

-

(763)

(414)

Deferred tax

(5,348)

(271)

(67)

(5,686)

(5,424)

 

(16,111)

(271)

(67)

(16,449)

(17,931)

Total liabilities

(41,339)

(92)

(73)

(41,504)

(37,530)

Net assets

59,701

1,169

318

61,188

59,149

 

2.     Segmental analysis

The group's operating segments are established on the basis of the components of the group that are evaluated regularly by the chief operating decision maker. The group is managed as two operating segments: business recovery and financial advisory services, and property services.

 

Business recovery and financial advisory services

Property services

Consolidated

 

2019

2019

2019

 

£'000

£'000

£'000

Revenue

 

 

 

Total revenue from rendering of professional services

43,313

16,903

60,216

Inter-segment revenue

-

(158)

(158)

Revenue from external customers

43,313

16,745

60,058

Segmental result

8,658

3,765

12,423

Shared and central costs

 

 

(4,870)

Operating profit before amortisation and transaction costs

 

 

7,553

 

 

Business recovery and financial advisory services

Property services

Consolidated

 

2018

2018

2018

 

£'000

£'000

£'000

Revenue

 

 

 

Total revenue from rendering of professional services

38,273

14,288

52,561

Inter-segment revenue

-

(120)

(120)

Revenue from external customers

38,273

14,168

52,441

Segmental result

7,563

3,132

10,695

Shared and central costs

 

 

(4,636)

Operating profit before amortisation and transaction costs

 

 

6,059

 

3.     Transaction costs

 

2019

£'000

2018

£'000

Deemed remuneration

2,806

1,678

Acquisition costs

154

117

Gain on acquisition

(2,909)

(1,189)

Charge arising under Begbies Traynor (London) LLP put and call option

1,129

758

 

1,180

1,364

 

4.     Earnings per share

The calculation of basic and diluted earnings per share is based on the following data:

 

2019

£'000

2018

£'000

Earnings

 

 

Profit for the year attributable to equity holders

2,434

1,424

 

 

2019

number

2018

number

Number of shares

 

 

Weighted average number of ordinary shares for the purposes of basic earnings per share

112,547,759

108,998,901

Effect of:

 

 

Share options

404,262

1,264,656

Contingent shares as consideration for capital transactions

3,476,190

3,196,612

Weighted average number of ordinary shares for the purposes of diluted earnings per share

116,428,211

113,460,169

 

 

 

4.     Earnings per share (continued)

 

2019

pence

2018

pence

Basic and diluted earnings per share

 

 

Basic earnings per share

2.2

1.3

Diluted earnings per share

2.1

1.3

 

The calculation of adjusted basic and diluted earnings per share is based on the following data:

 

2019

£'000

2018

£'000

Earnings

 

 

Profit for the year attributable to equity holders

2,434

1,424

Amortisation of intangible assets arising on acquisitions

2,361

1,917

Transaction costs

1,180

1,364

Tax effect of above items

(449)

(364)

Adjusted earnings

5,526

4,341

 

 

2019

pence

2018

pence

Adjusted basic earnings per share

4.9

4.0

Adjusted diluted earnings per share

4.7

3.8

 

5.     Dividends

 

2019

£'000

2018

£'000

Amounts recognised as distributions to equity holders in the year

 

 

Interim dividend for the year ended 30 April 2018 of 0.7p (2017: 0.6p) per share

771

640

Final dividend for the year ended 30 April 2018 of 1.7p (2017: 1.6p) per share

1,878

1,716

 

2,649

2,356

Amounts proposed as distributions to equity holders

 

 

Interim dividend for the year ended 30 April 2019 of 0.8p (2018: 0.7p) per share

914

771

Final dividend for the year ended 30 April 2019 of 1.8p (2018: 1.7p) per share

2,058

1,872

 

2,972

2,643

 

The proposed final dividend is subject to approval by shareholders at the annual general meeting in September 2019. The interim dividend for 2019 was not paid until 9 May 2019 and, accordingly, has not been included as a liability in these financial statements nor as a distribution to equity shareholders.

 

6.     Trade and other receivables

 

2019

£'000

2018

£'000

Non-current

 

 

Deemed remuneration

3,220

1,759

Current

 

 

Trade receivables

7,823

6,740

Less: impairment provision

(1,338)

(1,082)

Trade receivables - net

6,485

5,658

Unbilled income

21,310

21,719

Other debtors and prepayments

2,379

2,153

Deemed remuneration

2,479

1,299

 

32,653

30,829

 

7.     Trade and other payables

 

2019

£'000

2018

£'000

Current

 

 

Trade payables

953

1,414

Accruals

7,125

6,902

Other taxes and social security

3,308

2,319

Deferred income

3,338

1,807

Other creditors

4,830

4,249

Deemed remuneration liabilities

3,110

577

 

22,664

17,268

Non-current

 

 

Deemed remuneration liabilities

-

1,093

 

8.     Reconciliation to the cash flow statement

 

2019

£'000

2018

£'000

Profit  for the year

2,434

1,424

Adjustments for:

 

 

Tax

1,092

872

Finance costs

486

482

Amortisation of intangible assets

2,558

2,099

Depreciation of property, plant and equipment

563

488

Deemed remuneration

2,806

1, 678

Charge relating to the put and call option over Begbies Traynor (London) LLP

1,129

758

Gain on acquisition

(2,909)

(1,189)

Share-based payment expense

99

295

Operating cash flows before movements in working capital

8,258

6,907

Increase in receivables

(827)

(458)

Increase in payables

1,643

2,742

Increase (decrease) in provisions

104

(126)

Cash generated by operations

9,178

9,065

 


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Final results for the year ended 30 April 2019 - RNS