Acquisitions underpin outlook in recovering markets

Strong FY21 results were in line with our most recently upgraded forecasts (May 2021) and reinforce our conviction that BEG is set to deliver material earnings growth over the next few years.

Recovery in corporate insolvency volumes will drive organic growth, as government support is gradually withdrawn. Volumes are currently artificially suppressed i.e., near thirty-year lows, well below a ‘normal’ cycle for the UK economy. Simple restoration of the latter would deliver a significant increase y-o-y, which should benefit BEG as the UK’s leading independent provider.

BEG appears to have very effectively shrugged off much of the impact of the pandemic and demonstrated an ability to outperform its underlying markets. Revenue from new insolvency appointments was in line y‑o‑y despite a 34% overall market decline. In the context of subdued corporate insolvency volumes, the results are especially impressive.

The FY21 results complete a five-year period during which BEG has delivered annualised (CAGR) growth in revenues and adjusted EPS of 14% and 20% respectively (50:50 organic/acquisition) and paid down all debt despite completing 13 value enhancing acquisitions. We have held our FY22e forecast and 165p/share fair value estimate.

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