BTG Consulting plc (BTA.F) Earnings Call Transcript & Summary

Let's get going. Just a little bit of admin for the audience first. I'm sure you've all used Zoom before, but we are keen to address questions if you can input them via the Q&A button. Should you miss part of it this presentation is being recorded, so you can watch it back later, and you can find it either on the Equity Development site or the Begbies site. And the slide deck that the managements are going to be using is also on the Begbies Traynor website already today. So today, we're going to be going over the full year results that Begbies have released, that was for the 30th of April this year. And we're delighted to be joined again by the Executive Chairman, Rick Traynor, and the Group Finance Director, Nick Taylor and I am now going to pass over to Rick to start proceedings.

Thank you Andy, and thank you everybody for joining us. We will now go through the presentation. On the first page, there is a disclaimer, which you can read at your leisure. Moving to Slide 2, which is the highlights of a decade of profitable growth. So this last year is the culmination of our diversification strategy over the last 10 years, something as we go into the presentation we will give more detail on and also outline how we think this is going to continue. But in terms of the last 12 months, overall revenue growth of 12%, half of which was organic, business recovery and advisory saw a 7% revenue growth, led by business recovery which was up 13%, a record year for Property division with 26% revenue growth, full value accretive acquisitions in the year contributing some GBP 5 million to reported revenue. The net debt lower than originally anticipated at GBP 1.4 million, which compares with our new GBP 35 million facility. And that GBP 1.4 million of net debt was after payments of over GBP 11 million during the period for acquisition payments and funding our EBT share purchases. It's the seventh consecutive year of dividend growth with a 5% increase in dividend proposed to [ 4p ] for the year. So another successful year of strong financial performance, and we're confident of further growth in the year ahead. Moving on to the next slide, a good look at our growth record over the last 10 years, which includes our diversification strategy, which has allowed for year-on-year growth despite the short-term headwinds in [ insolvency in our pit ] that we saw over that period up until post-Covid. In terms of revenue, a cumulative average growth rate of 13%, so up from some GBP 45 million to GBP 136 million. In terms of profit growth, a 6x increase for adjusted pretax profit, so that's an annual average growth rate of 22%. And dividend-wise, we've seen an average growth rate of 7%. So a progressive dividend policy, but mindful of our reinvestment of cash into the business, particularly for those acquisitions. And in terms of the share price performance over that period, we've seen the 10% average growth rates in the share price and in terms of the total shareholder returns, some 14% and that compares with, of course, the pretty anemic performance of [ amoral ] over that 10-year period, which is the grade line you can see on the graph in the bottom right-hand corner. In terms of that growth and diversification, what does that mean when it's resulted in a -- what we call a leading U.K. advisory firm, which has 2 divisions? The first business recovery in advisory has 2 pillars of services, one being business recovery, which is formal insolvency and the second covering various activities, advisory and corporate finance, including debt advisory and finance broking, corporate finance, special situations, M&A and financial advisory. Our second division, property advisory has 3 pillars of services, being valuations, asset sales and property consultancy and I will go into more detail later in the presentation. So overall, in terms of the revenues last year of GBP 136 million, some 58% of that was business recovery. So now over 42% of our business is non-insolvency activities. And we see lots of growth potential moving forward, which again, we'll cover on future slides. Passing over to Nick now for the financial review.

Starting with the highlights, top level view, so growth across both divisions is another year of double-digit growth for the group. Revenue growth of 12%, half organic and half acquired, bringing our revenue to GBP 136.7 million, operating profits up 10% to GBP 23.9 million. Margins were down slightly to 17.5%. We'll look at the movements in a bit more detail further on [indiscernible]. But we saw increases in margin across business recovery and property, and that was pulled back by a subdued M&A market. And our central costs have increased in pound terms, broadly in line with the uplift in revenue as we continue to invest in some of those core teams that support the wider business. Adjusted pretax profits were up by 6%, reflected increased finance costs in the period. Finance costs were up by about [ 3-fourths ] of a million, half of that was from increased costs reflecting the interest rates on our main banking facilities, the increase in base rate which was effective for the whole of the financial year we're reporting. The remainder of the other half was from IFRS-16 lease charges. There's some number of new leases taken out over the course of the last 18 months. The tax rate of 26% increased reflecting the increase in headline U.K. corporation tax rate, which was effective for us for the whole of the financial year. And that increase in corporation tax brought our EPS in at 9.9p from 10.1p in the prior year. To make it comparable, so on a constant tax rate, we were seeing an EPS at 10.6p or an increase of 5%. The increase in dividend, which we mentioned to 4p gives us cover, which is significantly added at 2x, which is our target level. Moving on to the next slide, a reconciliation of our adjusted results to our statutory position. Just to highlight all of the acquisitions we have here are results from acquisition accounting. Any of you who follow our [indiscernible] [ acute listed peers ] such as the listed lawyers and FRP will see similar adjusting items and that all results from the fact that we have requirements in acquisition for vendors to stay with the business for a period and as a result of that, under IFRS, we have to charge that element of consideration to profit rather than capitalizing it. That's clearly a key commercial term in terms of preserving the value of the goodwill and the other relationships that we've bought and all that gets laid out in the sale and purchase agreements. As a result of not capitalizing the consideration, we get exceptional gains on a number of our transactions, which we also included in this adjusted item. Transaction costs are legal and professional fees during the deal and the amortization of the intangibles, which get recognized as relatively short-lived assets having bought the business. All things being equal, all of these charges gradually reduce over the course of the next 3 years. Moving on to the next slide, you can see on the slide prior, on slide 8, we have a [ bowl ] of mix of services that comes out from this slide where we have a number of movements, which I'll just talk through. In terms of insolvency, we saw increased activity across all of our case sizes that boosted our revenue and profit and margin in the period, and you can see the profit uplift of some GBP 3.5 million year-on-year. Within property advisory, we saw organic growth, which is the first of the 2 bars and acquisitions, both contributing around GBP 1 million. Going the other way, we had a particularly strong comparative period within advisory. So we knew we take a bit of a step back year-on-year, but we've also faced some pretty big headwinds in terms of the M&A market over the course of the last 12 months, which has given us a further step back in profit terms. But in terms of margin, we're still making about an 18% blended margin across our range of financial advisory services. And as I said on the previous slide, our shared and central costs have increased broadly in line with the growth of the group and that gave us an operating profit growth of just over GBP 2 million, which was 10% up year-on-year. Next 2 slides just give a little bit more color on the movements by segment. The first one up within business recovery and advisory, where we had a further successful year. Within the insolvency elements of the segment, revenue was up by 13% to GBP 17.5 million, and we also saw our order bookings increased by 8%. So that's the value of the work where we've been appointed but not yet seen [indiscernible] in the revenue to profit. That puts us in a good position as we start the new year so we've got more look at the start half of this year than we had 12 months previously. But then advisory for the reasons I mentioned on the previous slide, that there's a much quieter M&A market. So there were less of the contingent fees from corporate finance coming through as a result, saw a slight drop in revenue of just over GBP 2 million in the year, but expect that to come back as a corporate finance market returns. Our year-end head count increased to 732 from 694, 12 months previously and that provides lots of capacity as we go into the new year for fee earning work. I'm looking at that other operating division of property advisory where it was a record year. Revenue growth principally driven by the acquisitions, [indiscernible] 6% in total, and margins were up to 18.9%. Rick will talk a bit more on some of the things that we've been doing in terms of growing these 3 key areas of service. Consultancy is our largest area, it's 40% of revenue, and the revenue growth there was largely organic. Then asset sales, which is 35% of the business, significant revenue growth, principally driven by the acquisitions both in the auction and in the general [ practice ]. Within valuations, which is 25% of the business, we saw revenue of 10%, which is principally acquired and a significant growth in the head count over the course of the 12 months, now we have 442 people working in this division, up from 338 last year. To give you a feel of some of the activities we've been doing operationally across the group, continue to invest in people, processes, sustainability and marketing within people. We have been developing our talents and learning opportunities. And we've also enhanced our benefits package over the course of the year, which gives more flexibility and a broader range of benefits to all of our employees. And processes, we're looking to use technology to improve what we do, make it more efficient. That involves adopting third-party software solutions, looking to get more automation into the work that we do and we use that in-house IT skills to deliver successful implementations of those projects. On the sustainability front, we've made good progress again, [indiscernible] well-being. So we now provide remote GP access to all our colleagues, mental health support, and we made progress in terms of a number of our environmental initiatives. Within digital marketing, we successfully increased our income from internet-led direct marketing. That started off in the insolvency business, where we now generate about 12% of our insolvency revenue from [indiscernible] work via internet marketing and then now using those same techniques to drive growth in property advisory, and all of those things enable efficiencies across the group, sustainable growth overall. We are in a strong financial position. We have new enhanced bank facilities, which we entered into in February of this year. They comprise a GBP 25 million revolving credit facility and a GBP 10 million [ accordion ]. The costs are broadly in line with the previous facility, and it's a 3-year term through till 2027, and we have 2 further 1-year extension options, which should look to a maturity in February 2029. And the table on this slide shows the summary lines from the cash flow, which follow pretty broadly the trends we saw in profits. Adjusted EBITDA increasing, some working capital absorption on the organic growth given the growth in cash from operating activities, increased tax and interest payments, bringing free cash flow in at GBP 12.4 million from GBP 14.1 million last year. We paid dividends, acquisition payments, which covers both in-year acquisitions and earnouts, the GBP 2.4 million for purchase of our own shares at a net of the GBP 2.9 million funding of the EBT, the GBP 0.5 million proceeds are the [indiscernible] maturity in the year. We closed the year with a net debt of GBP 1.4 million, a significant headroom within those new facilities. And finally from me guidance as we look forward to financial year '25, where we're confident of our outlook, which is in line with the current market expectations for a further year of growth. Within Business Recovery, we're well placed to continue that track record that the market and general conditions are positive with our teams, we're well placed to provide [indiscernible] support for the business community. Within advisory and Corporate Finance, we've got an encouraging pipeline of M&A instructions with anticipated recovery in M&A generally later in the financial year. That's likely to be second-half weighted, obviously, continuing positive activity levels in Debt Advisory are in [indiscernible]. Both in property advisory, we're well placed to build on our recent strong track records, good prospects for both acquisitions and organic development across all 3 of those core disciplines. The strong cash generation, the new and then large debt facility, we've got flexibility to continue to execute that growth strategy and we'll give our next update at the time of our AGM in mid-September. So all in all, it's another strong set of results, highlighting our consistent performance through the cycle. And I'll now hand back to Rick to talk through the divisional review.

Thank you, Nick. If we move to the next slide, having a look at our business recovery and our advisory performance during the year, a successful year overall. Business Recovery, continuing that revenue growth across all case sizes, so a GBP 9 million increase in activity over the course of that year. Larger, more complex appointments represent over 50% of our revenues as you can see from the graph on the right, that's split it into below 10,000, 10,000, 50,000 and over 50,000. In terms of the under 50,000, that is coming from our regional network and digital marketing services and the more complex assignments tend to come from our major offices. We've retained our market leading position by volume, ranked first nationally overall and second in terms of administration which tends to be larger appointments. In terms of notable cases during the year, administration of the Worcester Rugby Union Club under receivership of Britishvolt EV battery site, which is the biggest site in the Northeast, those jobs came in, in the prior year, but it's an indication of one of the larger jobs that provide significant work over a number of years, typically 3 years and more. So that's provided meaningful work for us during that period. In terms of new administrations won in the year we're reporting which will provide income into this year and next year, Readie Construction, Breathe EV, Fortress Capital and Thought Fashion, all fall into that camp. And that ongoing momentum with new administration since the year-end is continuing with Cascade and Island Poke, both being large jobs in the hospitality sector. And overall, construction, retail and hospitality being big providers of work for us during the period. In terms of advisory, we're well placed to deliver further growth after a mixed year. As Nick has said, we've seen headwinds with the M&A business, not surprisingly with increased interest rates and various other challenges but we hope to see that reverse this year. Our other activities have either done well or have been resilient during that period, including our recently bought finance brokerage business, which has had a very critical year in difficult market circumstances. Again, high interest rates have affected demand in that area, but they've performed well, nonetheless. Moving on to the next slide, just to look at the insolvency market generally and moving forward to elevated levels of insolvency, which we expect to be maintained. They're not at recessionary levels in terms of comparison of the insolvency rate now when we go back to the last recession. Administrations, which again, as I said, are typically the larger [indiscernible] remain significantly below the previous peak of the last recession and indeed are still just below 2019 levels. And the insolvency rate, so that's the number of companies that go into a formal process as a proportion of the overall population of companies in the economy, is running to about 0.5% as opposed to what we saw in the recession of more than 1%. So not really in the eye of a recessionary storm at the moment, this is more a normalizing of the insolvency market after those very low interest rates. In terms of our other research, which indicates levels of stress, our red flag research shows increasing levels of distress with companies over 0.5 million with some significant stress, 10% of those in a critical position and we'd expect half of those to be insolvencies over the next 12 months, so that would be something like 25,000 insolvencies. And Allianz Trade, the trade credit insurer is forecasting an increase in the insolvencies of 10% in this current year and elevated levels next year. In terms of our capacity to do this work, we've increased the number of insolvency practitioners we've got from 93 to 98, and we have a total professional team of 625 compared with 597 a year ago. So we're well placed to cope with this work if we see an upturn or indeed with market share. So overall, we expect the level of insolvencies just under – the level of insolvencies to be elevated this year, next year, and when we move into a different part of the cycle, we still expect to see insolvencies at over 20,000 because we think that is a more normalized level in the current interest rate environment. Looking at our Property Advisory business, this is the 10-year track record, which mirrors the slide you've seen before in terms of performance. So we bought Eddisons at the end of 2014 with turnover of just over GBP 12 million, and we've seen that increase to well over GBP 40 million over that period of time with progressive increases in profitability along the way. In terms of the business that we bought, which was the regional commercial charter surveyors practice, it's grown from its Yorkshire base as a property consultancy to a well-regarded mid-tier national firm and has retained its operations under the Eddisons brand. We've demonstrated resilience through the cycle, reporting strong growth and improved profitability despite the subdued market in some of the service lines in property. We have completed 16 acquisitions in 10 years with a total investment of GBP 34 million, including the initial investment in Eddisons. And the team has increased over this period from 135 to 442, reflecting the expanded range of services and coverage. Moving to the next slide, please, having a look at the year that's just gone, and that's increase in turnover by 26%, our 3 pillars of services: valuation, asset sales and property, looking first at asset sales, further investment to boost the team. Our Auctions business now is a national practice with a pro-forma revenue of something like GBP 10 million covering proxy plant and machinery sales. We acquired SDL auctions in December of last year, which was a Midland-based property auction business following the acquisition of a similar business in Sheffield the prior year called Mark Jenkinson. That now gives us a business operating across the whole of the north of England into the Midlands and access to the South. We now market over 250 lots per month, we have a planned national marketing campaign which will drive growth and profitability and we're working on back-office integration to ensure we maximize efficiencies of putting these businesses together. In May of last year, we acquired Banks Long, a boutique, Charter Surveyors practice with a strong commercial property agency team as well as providing other services. It strengthens the presence across East England and South Yorkshire and overall capital value of over GBP 300 million of assets sold during the period, which is some 50% ahead of last year. We're now ranked #5 in terms of agencies for property sales and lettings by volume, by the Estates Gazette, which is the industry's trade magazine. Moving on to property consultancy, the growth continues with plans for further developments, continuing growth in key clients of the education sector. We've recruited a head of sustainability and decarbonization so that broadens the services we can offer, both in terms of this particular sector and to a wider client base. And we've seen synergies of cross-selling benefits from growth of the wider business as we put more services into our offering, the ability to sell those across our many clients. And in terms of valuation, our third pillar, we've seen geographic expansion. Andrew Forbes was acquired in November '23, that's the Southwest-based specialist valuation practice. That's enabled us to have extra coverage across the country, so while we're on all the bank's panels for valuations we get work from them in the areas that we operate. So we're now moving to Southwest, so we can win additional work from those existing panels. And in terms of rate, we've seen a rate increase with Andrew Forbes because we're now competing on a national level rather than a local level. It's also our intention to build out other service lines on to that valuation practice in that part of the world. We have ongoing recruitment plans to increase the size of the team to increase that national footprint to win maximum amounts to work from those national panels. So there's significant opportunities to consolidate in what is fragmented market. Moving on to our strategy for growth, which many of you will have seen before, and it's a continuation of the same, so focusing on our organic growth with retention and development of our existing partners and employees. The recruitment of new talents over the senior level of our technical expertise and hopefully also, in many cases, have a following which brings new work to us. But also at the other end of the pyramid, people joining us to start their professional lives and trading either as accountants, insolvency practitioners or charter surveyors. We've seen enhanced cross-selling of our service lines and expertise to our wider client base. So for many years, we've had the advantage of insolvency in Eddisons working together. We now have, for example, the finance broking business on board which can work both with our restructuring teams and also with the purchases of assets from our [ states ] and from Eddison's clients. Our ambition is to maintain this growth track record with a medium-term revenue target of GBP 200 billion. Moving on to the next slide. Looking at our acquisitions over the period since 2020 and its impact on growth, we've grown from GBP 71 million turnover business to GBP 136 million of that period, of which GBP 41 million came from acquisitions and GBP 24 million organic growth. And if you look at the chart on the right-hand side, you can see the major impact in the '21 year, which included the 2 significant insolvency acquisitions we did in the Southeast, CVR, the DRP, which moved the needle significantly on both the insolvency side and on the business overall. Since then, it's been more of the routine acquisitions, of which there are many and we expect to continue this year and beyond, typically, boutique practices in one of our service lines with turnover between GBP 1 billion and GBP 3 billion will be the norm. So we've got a well-placed and well-established process for identification, valuation, acquisition and integration of target businesses. We've made 13 of these since 2020, as you can see from the graph on the right-hand side, across all of our service lines, and we have the cash generation, strong balance sheet and facility headroom to underpin capacity for further acquisitions. The pipeline of acquisitions is pretty good across all of our various service lines. We would expect to see some activity this year and into subsequent years. Moving on to the summary, we are confident of our strong platform for future growth. We've successfully executed our growth and diversification strategies in 2014, which has driven material growth over the period, cumulative average growth rate of 13% in revenue and 22% in adjusted pretax profit, while we anticipate continuing growth moving forward. The results for the year build on a strong track record with growth across both divisions, delivering [indiscernible] consecutive year of dividend growth. We've started the new year with encouraging activity levels in all service lines and positive momentum. Market conditions for the group services remain positive, both in insolvency, advisory and in property services. And with our strong cash generation and enlarged debt facility, it gives us the flexibility to execute our growth strategy. And again, our ambition is to maintain this track record of growth for the medium-term revenue targets of GBP 200 million. Thank you very much. If there are any questions now in the investment case there will leave on the screen. If there are any questions, then please fire away.

All right. Thank you, gentlemen. Very, very clear, and we do already have a number of questions. So moving straight on. Indeed, as you've just been saying, Rick, you've made a good start to the current year across the board, but which parts of the business would you expect to be the stand-out performers in full year '25?

Well, Andy, I think that to a large extent we will see a similar sort of growth across all of our service lines, subject to acquisitions, of course, which can move the needle. So in terms of organic growth, we'd expect that in insolvency, we expect that in advisory as Nick has mentioned, we're hopeful that M&A work comes back in the second half of the period and we expect to see continued organic growth in property. In terms of acquisitions, which can move the needle, it's more likely to be on the property side. It's a bigger market overall, very fragmented down the bottom end, and there are more businesses of a material size in there as one of the smaller boutiques. Whereas if we look at insolvency, it tends to be the 1 million to 2 million boutiques which are available, which we can roll out as when we get the opportunity in [indiscernible] to do so, but individually, they don't move the needle. So I would say that if the acquisition pipeline delivers as we would wish, we would probably see more activity overall in property, but it would be based on achieving those acquisitions.

Okay. And looking a little bit further ahead, we have a question about what do you think the group might look like when you reach the GBP 200 million medium-term revenue target in terms of the split between your main core activities?

Well, it depends to a certain extent on what opportunities do appear, of course, but if we were to be in a position in 3 years plus where we'd achieve that GBP 200 million turnover level, and approximately GBP 80 million of that was insolvency and insolvency-related, GBP 40 million was advisory, and the other GBP 80 million was property, we would see that as being achievable and it would be -- we will be happy with.

Yes. Sounds like a sensible target. A number of questions around insolvency. Which do you consider more important, growing your insolvency market share or growing its margins? I would suspect the answer might be both.

Well, indeed Andy, it is both, but of course, the margins would be very important. If we could achieve higher margins with the same level of turnover, then that would be probably our preference. But both is what we are attempting to do. So we think, over time, increasing our market share is achievable over time, increasing margins because of the efficiency of the larger business as possible as well.

Yes. And you had a helpful slide on the perspective on the number of administrations at the moment. I have a question, what makes you so confident that the insolvency market has not already peaked in terms of volumes, given that the U.K. is starting to see better growth data, and there are, of course, hopes of interest rate cuts in the near future?

Well, we think in terms of number increases, it may well be no increase or a modest increase over the course of this year. It's more a matter of how sustainable is that level moving forward? What we're arguing is that we're in a very different position to 2008 to 2010, where obviously, we undoubtedly were in recession. Then we saw very low interest rates, which impacted the insolvency market and numbers for a prolonged period of time, in fact probably for 10 years up to post-Covid. What we are saying is that the market norm moving forward is going to be in the 20,000s. So we expect to see some moderation in numbers probably after 2025, but we're not going to see numbers falling back to 15,000, 16,000 that we saw sort of '14, '15, '16. It's a different market now, normalized interest rates, the population of businesses around that means that insolvency rates of 0.5% is going to produce 20-odd thousand businesses per annum as a base level over the course of the next cycle.

And continuing that theme, we have a viewer of saying, I tend to think of FRP being focused on the larger administration roles, whereas Begbies is doing a lot more cases, but in the smaller size of insolvency. Is that a fair description?

Yes, it is. To the extent that FRP do more administrations than we do and we do more liquidations than they do. But we are second in administrations, so we do a lot and we've been increasing our market share over the last 5 years in that particular area. So overall, the difference between the 2 of us is not as significant as it sounds to say that their administrators that [ we liquidated ], it's a much closer comparison than that.

Yes, indeed, someone else is asking, perhaps there are merits of specializing in smaller cases than some of the other big names in the insolvency market?

Yes. Well, one of the plusses is that, that tends to be the part of the market which continues throughout the cycle because businesses start -- when the economy is moving, businesses start-ups which are in the core ideas or badly managed or undercapitalized and typically last 1 or 2 years. So that volume end of things is more sustainable across the cycle than the big jobs which tend to be feast and famine so you can have periods where there are very few of those around. And then one part of the cycle, obviously, they will be pronounced in terms of number.

Yes. That makes sense. Right. I hope, Nick, you are still there, some questions for you, perhaps. What percentage of the contingent order book is typically converted into revenue? And how much of that would you expect in the current year?

It's difficult to quote a specific percentage for it. What tends to happen on an insolvency case is that there's a number of assets which we recognize. But that number for month, the base of our non-contingencies, and then there will be some kind of actions where we think the recovery is less certain and it gets put into non-contingent and over the life of the case, noncontingent moves into contingent and then ultimately will be built. So we would expect the majority -- comfortable majority of that contingent work to convert. The larger lump sums, which may be the result of a piece of legal action or some fraud work, they're easier to track. We'd probably get a couple of million pounds a year from large one-off type contingent income, but the rest is spread across our on normal caseloads and recurs pretty evenly year-on-year.

Okay. And in terms of visibility, there was no order book presented for property. Is this typically because it is a less visible area than business recovery?

Yes, a typical insolvency job to master [indiscernible] 3 years, so what we will see for insolvency revenue is about half of the revenue in the year comes from [indiscernible] within that year, and the other half comes out of that order book that we start the year with. Yes, the difference in property, they tend to be shorter lived transactional appointments or shorter pieces of advice, valuation will be instructed and then within a month that valuation report will have been issued to the clients or certainly gone to an auction so it's not really a comparable business to have that as a KPI.

And in terms of property advisory, we have a comment that your results show a pleasantly surprising lack of cyclicality despite what seems to be a challenging property environment at the moment. Does that make you even more confident of better performance when some market tailwinds start to appear?

Yes, I think so. The benefit that we've got within Property Advisory is that it's a resilient mix of services. So a large area of the work that we do with advice that clients need throughout the cycle, and we've been able to grow that in the face of a market which has had less transaction-like activity. But clearly, if we do enter a more positive property environment where there are more transactions, more properties being bought and sold than the teams that provide the agency advice and it will drive valuations and it's likely to drive refits and other advisory but would expect that to be supportive of growth in excess of the sort of mid- to high single digits that we've reported over the course of the last few years on an organic basis.

Okay. You mentioned that the increase in U.K. corporation tax rates hurt your bottom line and your EPS this year. What are your expectations for an adjusted effective tax rate in the current financial year, caveating, of course, that we do have a new government next?

As long as there's no change in policy from the new chancellor we would expect our adjusted rate to remain at the 26% that we saw over financial year '24.

Great. Now you've referred to the diversification and the broad balance between cyclical and acyclical activities. We have a question, what proportion of revenues and profits are now specifically coming from insolvency work?

Specifically, insolvency is 58% in the year.

Right. Self-help and efficiency. Is your investment in IT, automation and process expected to significantly improve profit margins? Or is it in fact just mitigating other headwinds in terms of rising costs due to inflation?

It's probably a bit of both, to be honest, it's making sure that as the business grows, you've got the right way of doing things and the -- we've got the right software in place to make it supportable and something that we can grow. But at the margin, we would expect if we've got better quality processes, better quality systems, then we can look to improve efficiency. How much of that flows through and how much is used to mitigate some other inflationary pressures we'll see over the course of the next couple of years, but I wouldn't expect any increase in overall margin will be relatively modest for them, it's clearly an important thing for us to be doing going forward.

Two or three questions about deals and M&A. Firstly, is there any change in how the board goes about setting capital allocation and its priorities when it comes to assessing internal investments versus external acquisitions?

I think that is a -- is no, there is no change moving forward. I think we're happy with the balance that we've had over the last 10 years and we think that will be the same model moving forward, certainly for the next few years. We expect organic growth, we're looking for acquisitions, we've achieved about 50-50 over a prolonged period of time, achieving that, moving forward, we'd be very pleased with. Obviously, from a year-to-year basis, it can vary depending on the number of acquisitions in that particular year, but overall, that mix of organic growth and acquired growth is something that we can see moving forward certainly for the next 5 years. Nick, do you want to add anything to that?

Nothing else, that's fine.

Okay. And during the talk, Rick, you mentioned that bolt-on acquisitions were most likely to be expanding the depth of existing service lines within the group. So we have a question and might there be scope to add on a new business line in professional services if the right deal came along?

Well, the answer is yes. While there's plenty of scope for growth of our existing service lines and what we're looking at for the moment, everything would fall into those camps. We are open-minded about adding additional service lines to our portfolio. If it was something completely new, ideally, we would like to start with a significant acquisition. So we're buying something of scale already operating in that particular service line, which had quality management to clearly have a deep knowledge of their own particular area and have the ability and desire to grow that business. So we remain open-minded but at the moment, in the short term, we're focused on the activities we are currently doing.

Okay, very clear. And then perhaps the last question, you talked about a good pipeline of bolt-on targets, spread across the group. How is the climate for finding the right deals at the right price at the moment in your judgment?

It doesn't seem to have changed over a number of years. The opportunities are there, the price hasn't changed either. We have our set pricing criteria and formula, and we haven't needed to adjust those. In terms of the pipeline, there are many opportunities we will look at which the timing isn't right [Audio Gap] sometimes, they come back a number of years later. Sometimes they are -- the timing is right and we can do them very quickly. So it's price and it's hearts and minds of vendors being the appropriate time in their progression that they want to actually, I guess, lose that independent and sell their business to a larger business either because that's the right time for them to do a capital transaction or because they want to have a backdrop where they're working in a bigger business and see the benefits that brings in terms of support and access to bigger marketplaces.

Great. Very clear. Well, I think we've covered most of the questions so far. So thank you to our audience for a wide variety of inquiries. I should remind our viewers that not only will this webinar will be recorded and distributed; the slide deck is on the Begbies' website. And today, Equity Development has published a research note which retains a fair value [ seen of their ] shares materially above the current share price. If the audience can fill out a brief feedback form that will come through shortly, that will be much appreciated by ourselves and the management. And last, but by no means least, thank you very much, Rick and Nick, for very clear presentation, good results, and we wish you all the best in continuing this long track record of growth.

Thank you very much, Andy, and thank you, everybody, for joining us.