The challenges faced by UK business in light of ongoing Brexit uncertainty have proved immense. Some sectors have shown themselves to be more resilient that others, sure. But largely speaking 2019 proved to be a nightmare for much of the economy.
This is a point that fresh KPMG data released today illustrates perfectly. The accountancy firm has studied the number of companies that filed insolvency notices in the London Gazette last year. And the figure comes out at 1,403, up from 1,341 in 2018.
Blair Nimmo, UK head of restructuring at KPMG, comments that “2019 was a year characterised by profound political and economic uncertainty, with consumer confidence remaining fragile and companies continuing to bear the brunt of rising overheads and increased cost.”
But in brighter news he thinks that things could be looking up in the near term. Following the boost of last month’s general election result Nimmo says that “it’s certainly not apparent that we are about to see an influx of insolvencies over the months ahead.”
Calm before the storm?
Large parts of the UK economy have experienced a pretty solid ‘Boris Bounce’ since the middle of December. It’s quite possible that KPMG’s glass-half-full suggestion that things will remain stable for the next few months will come to fruition, too. The next date on which a no deal Brexit can occur sits a long way off (on 31 December, to be precise).
I don’t want to be a party pooper but I’m not convinced that the current hiatus in Brexit-related tension will last. Indeed, the next stage of the process is due to start on 3 March with the commencement of trade talks between London and Brussels. And the difficulties of the task in hand could become apparent straight away. Don’t be surprised should the current wave of optimism flowing through the economy begin to run out of steam around the summer, then.
Dividends. Growth. Value!
In this climate I believe that buying shares in insolvency specialist Begbies Traynor Group (LSE: BEG) remains a good idea. Revenues climbed around £6m year on year in the first half of the current fiscal year (to April 2020), to £33.8m. It’s a result that lifted adjusted earnings per share by around a quarter from 2018 levels.
City analysts expect market conditions to remain supportive enough for earnings to keep ripping higher for the remainder of financial 2020, too. They expect the bottom line to improve 18%. And they reckon that Begbies Traynor will be able to follow this with a 17% annual profits increase next year.
Forecasts right now make Begbies Traynor a brilliant value pick. It’s a share that trades on a sub-1 price-to-earnings growth (or PEG) readout of 0.8. An they lead to predictions that dividends will keep sprinting skywards, too, resulting in a chubby 3.3% forward yield. This is a share that could well repeat the ripping share price gains of 2020, in my opinion.
