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  • Writer's pictureMark Watson-Mitchell

Going Bust Is A Growth Business

The latest Trading Update from Begbies Traynor (LON:BEG) shows that helping companies that are faring badly can be good news.

As Corporate UK suffers, with distress levels increasing, that background really is good business for this particular company.

The £205m capitalised group is a leading UK business recovery, financial advisory and property services consultancy. 

It handles the largest number of corporate appointments in the UK, and principally serves the mid-market and smaller company sectors.  

The company’s other services include corporate finance, valuation and sale of properties, businesses and other assets, and property consultancy, planning and management.

Executive Chairman Ric Traynor stated that:

“We have had a good half year with encouraging activity levels across the group, resulting in double-digit growth in both revenue and profitability. 

At the same time, we have continued to invest for future growth, having completed three acquisitions in the financial year to date in line with our strategy to enhance our service offering and regional coverage.

We remain confident of delivering market expectations for the full year, extending our strong financial track record of growth. 

With 80% of income generated from counter-cyclical and defensive activities, and a strong balance sheet, we remain well-positioned to continue investing in and growing the business.”

Analysts Portia Patel and Justin Bates at Canaccord Genuity Capital Markets rate the group’s shares as a Buy, looking for 183p as their Price Objective.

For the current year to end April they estimate £131.0m (£121.8m) of sales, with adjusted pre-tax profits of £21.9m (£20.7m), giving earnings of 10.1p (10.1p) and paying out a 3.9p (3.8p) dividend per share.

For the year 2024/25 they see £139.1m revenues, £23.1m profits, 10.7p earnings and a 4.0p dividend.

Jamie Murray and Vivek Raja at Shore Capital Markets are estimating £132.1m revenues, £22.5m profits, 10.4p earnings and paying a 4.0p dividend.

For next year they foresee £140.1m in sales and £24.4m profits, with earnings of 11.2p and covering a 4.2p dividend per share.

At Equity Development their analysts Roger Leboff and Andy Edmond have put out a 175p a share ‘fair value’ looking for £129.0m revenues, £22.0m profits, 10.3p earnings and a dividend of 4.0p per share.

We shall see just how well the group has progressed into its second half-year when it reports its Interim Results on Monday 11th December.

This time last year the group’s shares were up to 150.69p, they have since been down to 105.50p, before closing last night at 123p.

From this level I would look to them to rise back up to and over the 140p barrier.

(Profile 24.11.19 @ 85p set a Target Price of 110p*)

(Profile 21.04.20 @ 93p set a Target Price of 110p*)

Loungers (LON:LGRS) – The Expansion Continues Apace

This operator of all day café/bar/restaurants across the UK trades under the Lounge, Cosy Club and Brightside brands

There are some 203 Lounges nationwide, they offer a neighbourhood café/bar combining elements of coffee shop culture, the British pub and dining, and are principally located in secondary suburban high streets and small-town centres.  

The sites are characterised by informal, unique interiors with an emphasis on a warm, comfortable atmosphere, often described as a ‘home from home’.

When announcing a 24-week Trading Update in mid-October CEO Nick Collins stated that:

“I am delighted with our strong trading performance across both the mature estate and our new openings. 

Our consistent sales growth reflects the continued evolution of our offer and the resilience of the UK consumer and high street.  

We have now opened 34 sites in the past 12 months, creating around 1,000 jobs in the process, and 72 sites since the last Covid lockdown.  

With a great pipeline of further openings in front of us I have never felt more optimistic about our prospects.”

Loungers has reiterated its firm belief that there is scope for at least 600 Lounges across the UK.

Analysts Anna Barnfather and Nishant Dahad at Liberum Capital rate the group’s shares as a Buy, looking for a 400p Price Objective.

Their estimates for the current year to end April 2024 suggest £332m (£284m) takings and pre-tax profits of £12.0m (£9.4m), with earnings of 8.1p (8.1p) per share.

For the coming year they have pencilled in £382m sales, £13.8m profits and 9.4p earnings.

The £238m capitalised group should be announcing its Interim Results on Tuesday 28th November.

In the middle of last month, when the shares were 186p, I noted that: “I can see them edging back above the 200p level very soon, possibly before the end of next month and the publishing of its Interim Results.”

Last night they closed at 231p, up 19p on the day, demonstrating that they were beginning to rekindle investor interest.

Hold firm.

(Profile 03.09.19 @ 205p set a Target Price of 275p*)

Kinovo (LON:KINO) – A Buy Ahead Of Interims?

This £30m valued group provides gas heating, electrical, and general building services to housing associations and local authorities, public buildings, industrial and commercial, and to the education and private sectors in the UK. 

It recently had a bid approach from its largest shareholder, which has come to nought.

Earlier this month the first half Trading Update reported CEO David Bullen stating that:

“The first half was another important period of progress and growth for Kinovo, underpinned by the clear benefits associated with our strategic repositioning, the ongoing effects of legislative drivers and our selective investments.

We have also made significant progress regarding DCB. We remain on target to complete seven of the nine projects this financial year and I look forward to updating our shareholders with further detail in the interim results.

Looking ahead, I am confident that our strategic investments will generate further value for the Group, creating opportunities to continue our momentum, including additional contract wins and renewals across our divisions. 

At this stage of the Group’s financial year, the Board is confident of achieving full year results in line with its expectations.”

Analyst James Wood at Canaccord Genuity Capital Markets is keen on the shares, giving them a Buy tag, with an aim of 62p in due course.

He estimates that the current year to end March 2024 will see sales lift up to £72.0m (£62.7m), taking adjusted pre-tax profits up to £5.8m (£4.9m) and raising earnings to 6.9p (6.7p) per share.

For the coming year he goes for £76.6m in revenues, £6.3m profits and 7.5p earnings.

Ahead of the Update on 18th October I noted that:

“The shares closed last night at only 57p, which in my view clearly shows that they are heading a great deal higher than my Target Price, possibly to 70p plus.”

Well, that has not yet come to pass, in fact, the shares have eased back to just 48p, not too good a performance, but I remain ever hopeful.

Perhaps anticipation and delivery of the Interim Results due on Tuesday 28th November will help to renew dealing in these undervalued shares.

(Profile 29.08.23 @ 49p set a Target Price of 62p*)

Transense Technologies (LON:TRT) – Looking For A Good AGM Update

With the tech sector beginning to get into gear again, I believe that it is appropriate to take another look at this £16m capitalised company.

It provides specialist sensor systems and products to various sectors, such as aerospace, electric motors and drive, and motorsport and high-performance vehicles, as well as industrial machinery, including off-highway vehicles, heavy industrial engines, and robotics.

Its products provide real time measurement of torque, temperature, and pressure, which is used to improve power, performance, and efficiency through condition monitoring and asset/predictive maintenance; for monitoring and testing the tyre and vehicle performance of heavy-duty off-road vehicles.

The group’s directors consider that there are positive market drivers across all key target market sectors which provide ample opportunity to expand, despite current uncertain economic conditions, and accordingly Transense is investing in technology, equipment and human resources in order to build strategic and sustainable long term shareholder value.

At Allenby Capital their analyst Ian Jermin believes that current profit forecasts and corporate cash can support a share price of 150p.

He is looking for the current year to end June to record £4.80m (£3.53m) sales, adjusted pre-tax profits of £1.69m (£1.08m) and earnings of 11.4p (10.2p) per share, while lifting net year-end cash to £2.04m (£0.98m).

For 2025 his estimates are for £5.60m revenues, £2.06m profits and 13.6p earnings.

I am looking forward to the AGM Trading Update due to be issued on Wednesday 29th November – it should help to lift the shares back over the end September price High of 120p, they closed last night at just 100.50p.

(Profile 17.09.21 @ 102p set a Target Price of 127.5p)

(Asterisks * denote that Target Prices have been achieved since Profile publication)


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