Good morning! I'm back home again after a few days in London for various company meetings, so am looking forward to having a few more leisurely days, not charging around on the tube or Boris Bikes! Yesterday I had a very pleasant lunch at Buchanan Communications with Zytronic (LON:ZYT) who delivered their results presentation. So I'll do a write-up on that meeting here on Stockopedia when time permits, probably later today.

It's quiet for results today. The only Listed insolvency practitioner Begbies Traynor (LON:BEG) has issued interim results to 31 Oct 2013. They're not very good - turnover down 14.6% to £22.3m for the six months, and adjusted profit before tax is down 34% to £2.1m. This equates to adjusted diluted EPS down 28% to 1.8p, or 1.7p is you ignore adjustments. However, this is not a surprise, as broker consensus was expecting a decline in profitability this year, since slow insolvency market conditions has been a known factor for several years now. So broker forecast for this year is a reduction to 4.3p.

These interim results look to be in line with expectations at 1.8p, since H2 is traditionally stronger than H1, therefore the company seems on track to meet the full year forecast of 4.3p. Note how the business has been shrinking in recent years:

As you can see, turnover & profits have been declining for four years now. However, also note how the PER has been low for several years, and the dividend yield has been getting stronger, and now stands at a very attractive 5.8% forecast for this year (assuming the 2.2p p.a. total payout is maintained).

The interim dividend has been maintained, at 0.6p, which is encouraging. So Begbies has managed down its costs to reflect quiet corporate insolvency market conditions, and is still generating enough profit in tough market conditions to pay a generous dividend. I quite like that.

At some point in the future, there should be an increase in corporate insolvencies, probably when interest rates rise, and the Banks balance sheets are strong enough to make full provisions against zombie company debts - i.e. companies which can service the interest on their debt at ultra-low interest rates, but which have little prospect of being able to cope with…

Unlock the rest of this article with a 14 day trial

or Unlock with your email

Already have an account?
Login here