Begbies Traynor Group (LON:BEG), the UK’s leading professional services consultancy specialising in business recovery, financial advisory, and property services, continues to strengthen its position in the market. With a proven track record of growth and a strategic expansion into property advisory, the company remains well-positioned to capitalise on the current economic climate.
Strong Performance in Line with Expectations
In its latest trading update, Begbies confirmed that both divisions are performing in line with the Board’s expectations, with a strong pipeline of work and sustained high levels of activity. This positive momentum reaffirms the company’s ability to navigate economic cycles effectively. For FY25E, Equity Development forecasts revenue growth of 11% to £152m, with Business Recovery and Advisory contributing £105m (+9%) and Property Advisory delivering £47m (+17%). These figures reflect both organic growth and the success of value-accretive acquisitions.
Economic Pressures Drive Increased Demand
The macroeconomic backdrop remains supportive for Begbies’ core business. As companies grapple with rising employment costs and taxes from the Autumn Budget, financial distress is increasing. The company’s 4Q24 Red Flag Alert revealed a 50% increase in businesses in “critical” distress and a 21% rise in “significant” financial distress. With corporate insolvencies still at elevated levels of 1,850 per month, Begbies’ Business Recovery and Advisory division is expected to benefit from sustained demand well into 2025.
A Diversified and Profitable Growth Story
Beyond insolvency services, Begbies has strategically diversified into property consultancy, a resilient sector that has seen consistent expansion. Over the past decade, the company has built a national mid-tier property consultancy under the Eddisons brand, tripling revenues in this division to £40m in FY24. The business has maintained strong operating profit margins of 16%-23%, even while integrating multiple acquisitions.
Begbies’ long-term ambition is to grow revenues to £200m, driven by organic expansion and further acquisitions. Analyst Caroline Gulliver of Equity Development highlights that “management’s ambition is to grow mid-term revenues to £200m from its existing service offer through organic growth and acquisitions, with further possible growth from acquisitions of complementary professional services businesses.”
Undervalued with Strong Upside Potential
Despite its strong financial performance and cash-generative nature, Begbies’ current market valuation does not fully reflect its potential. The stock trades at approximately a 35% discount to its long-run average valuation multiples and also lags behind sector peers. With a projected 3% dividend yield and a significant rerating potential to 14x PER, Equity Development sees considerable upside in the stock, setting a fair value of 145p per share (compared to the last close at 94.2p).
Final Thoughts
Begbies Traynor is a resilient, growing, and well-diversified professional services firm with a strong track record of performance. The combination of high demand for business recovery services, a growing property advisory division, and an attractive valuation makes this a compelling investment opportunity. As corporate distress levels remain elevated and the company continues its disciplined acquisition strategy, Begbies is set to maintain its upward trajectory in the years ahead.
