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My best pick from all of AIM There are over 1,100 shares on AIM. I have taken a good look at several hundred and used screening software to measure up the whole lot.

Ric Traynor owns 29% of the company

Following years of researching AIM companies, today I own shares (via a spread bet) in just one: the Manchesterbased insolvency practitioner Begbies Traynor.

lenders have been reluctant to push companies into insolvency Begbies Traynor (Begbies) is led by its Executive Chairman and co-founder Ric Traynor. Today, Mr Traynor owns 29% of the company. The bull case is based on understanding what an insolvency practitioner does and what drives its business. Basically, a company or individual is insolvent if it is unable to pay its debts. Creditors or a court appoint an insolvency practitioner who endeavours to ensure that the situation does not deteriorate further and that creditors are treated fairly. Insolvency practitioners rarely get involved unless there are substantial assets involved.

fall in insolvency numbers has hurt Begbies Traynor To thrive, a business like Begbies Traynor needs an environment where corporate insolvencies are plentiful. 4

Surprisingly, despite the recession, this has not been the case in recent years. Experts frequently attribute this phenomena to the ‘forbearance’ of banks: lenders have been reluctant to push companies into insolvency due to concerns over bad publicity (especially pertinent when two of the largest banks were recently rescued by the taxpayer) and the value that may be realised for assets. The fall in insolvency numbers has hurt Begbies Traynor. From revenues of £62.8m in 2010, income has fallen every year since to £45.8m for 2014. I bought shares in the company in February 2013. At the time, the shares were trading in the mid-30s. For the six months ending 31st October 2012,

Begbies Traynor reported adjusted EPS for 2.5p. The dividend was held at 0.6p.

I bought shares in the company in February 2013 That put the shares on an extremely low P/E, with the prospect of a large yield. At that price, the insolvency market did not need to pick up for me to see value in the shares. However, I continue to expect an improvement in Begbies Traynor’s market could start soon. Moreover, such a recovery has some way to go and could take the shares much higher than they are today. For the year ending 30 April 2010, Begbies reported profit after tax of £5.6m. Basic EPS came in at 6.3p, total

November 2014 AIM Prospector  
November 2014 AIM Prospector  

Featuring ten AIM-quoted companies: Dillistone Group, Begbies Traynor, FW Thorpe, Gooch & Housego, Nationwide Accident Repair Services, Spr...