Another sensible bolt-on deal

Begbies Traynor has announced the acquisition of Budworth Hardcastle Ltd, a provider of services in valuation, commercial property agency and building consultancy. As per our latest analysis, the maximum consideration payable is £2.4m, subject to financial performance, and this will be paid out in cash and an issue of 206,937 shares to the vendors. Begbies’ robust balance sheet means that there is still ‘significant headroom available’ for investment and further deals.

The Group has grown substantially in recent years by combining organic expansion with value-accretive acquisitions, and Budworth Hardcastle will fit neatly (geographically and in its range of services) alongside Eddisons’ existing footprint in the East of England.

It is increasingly clear that BEG should see a much higher workload in business recovery after the Government’s support for companies that suffered in the pandemic and lockdowns was withdrawn. Furthermore, data on the health of the UK economy has deteriorated noticeably since our previous note:
• GDP declined by 0.3% in April, adding to the 0.1% drop in March, with services, production and construction all shrinking in April.
• Consumer confidence dropped to a record low on minus 41 on the index, reflecting surging prices, a squeeze on incomes and disruption from strikes.

BEG has said it will release full year results on 19 July, and we have previously stated that we shall review our FY23 forecasts and valuation thoughts at that time. Until the we retain our long-held 165p / share fair value estimate, supported by further potential for organic growth from a well-managed and diversified financial advisory and property services group.