BTG Consulting plc (BTG) Earnings Call Transcript & Summary

All right. Welcome, everybody. We're just going to let all of you log in, and we should be underway in 30 seconds, if you just hold on. Thank you. All right. Let's get cracking. Just a few points of admin first. The presentation is being recorded, so you can watch it all again. We will go through as many of your questions as we can after the team have given their presentation and the slide deck that they will be talking to should also be up on the BTG IR page on its website in a few days' time. So we're very pleased to welcome back the CEO of BTG, Mark Fry; CFO, Nick Taylor; and the Executive Chairman, Ric Traynor, who I will now pass over to start the presentation.

Thank you, Andy, and welcome, everybody. This is the BTG Consulting plc final results for the year ended first of April 2026. As Andy said, I'm Ric Traynor Executive Chairman. I'm joined by our new Chief Executive Officer, Mark Fry; Nick Taylor, our Chief Financial Officer, who has been with us for some time and assure you recognize from previous presentations. If we turn to Slide 3. We're very pleased with a good year of progress and delivery against our strategy to build a multiservice line professional services business, resilient across the economic cycle. Strong financial performance ahead of market expectations in the year with revenue of nearly GBP 170 million, EBITDA of GBP 33.3 million and a 7% increase in the dividend of 4.6p. This year's performance builds on a decade and more sustained profitable growth, heading towards that GBP 200 million turnover target that we have flagged in recent years. The business model provides resilience through the cycle, a diversified mix of countercyclical transactional and asset-related services across restructuring advisory and real estate. It's been a busy year for us. We've enhanced the leadership team with Mark stepping up to CEO plus other changes and also completed the rebrand to BTG [ Consultancy ]. Mark will talk about both of those further in the presentation. And we retain a strong financial position with nominal net debt at the year-end and our $35 million facility available to working capital and acquisition purposes. Moving to the next slide. Approving structurally delivering sustainable growth, strong track record of organic growth, completed -- sorry, complemented by our well-established process of value-enhancing acquisitions, a lot of those acquisitions self-funded through cash flow of the business, typically 1 to 5 million turnover businesses, which we've been buying between 2 and 4 a year pretty consistently, execution underpinned by strong governance and a disciplined approach to risk. We're focused on delivering sustainable growth in earnings and shareholder value and there are good organic and acquisitive opportunities anticipated to continue growing. We move to the next slide. Consistent growth delivered through an economic cycle, if you look at the last 10 years' progress, all the graphs going in the right direction, I'm pleased to say. So in terms of revenue, that 15% average growth rate has tripled our turnover from about GBP 50 million to GBP 170 million it is today. Growth rate in profit has delivered a 5x increase from GBP 5 million to GBP 25 million. And our progressive dividend policy at 80%. So conservative given that we are retaining cash to invest in the business as well. That's still in GBP 48 million worth of dividends over that 10-year period. And in terms of net cash, debt reduction over the period to that negligible position we have today, and that's after the GBP 48 million dividend payout, nearly GBP 6 million of share buybacks and GBP 25 million initial acquisition payments over that period. So good cash flow, which has enabled us to return some funds to shareholders and continue to invest in the business. So a consistent long-term growth record prudent risk management and opportunities to continue moving forward. I'll hand over to Nick now.

Okay. Thank you, Ric. Starting on Slide 7 with the financial highlights for the year. Revenue growth, 10%. As Ric mentioned, GBP 168.5 million of revenue in the 12 months. I mean in that 10% growth, we had 8% organic growth, which is pleasing. That builds on the 10% organic growth, which we reported last year. Adjusted EBITDA up by 5% to GBP 33.3 million with margins of 19.8%, a 6% growth in EPS, dividend up by 7% and our net debt at GBP 1 million at the end of April. That comes after acquisition payments of just over GBP 8 million, share buybacks of GBP 1.2 billion and dividends of GBP 6.9 million. Moving on to operating performance. Looking at the detail by segment. First, in pound terms, then we'll look at margins within restructuring and advisory. All the growth here is organic, 9% top line, 5% profit growth. Within that segment, restructuring, which is the largest element, had a good year, strong activity levels building on our progress in recent years. And the growth has come across all case sizes, but notably from larger and more complex cases and that improvement in case quality drives higher recovery rates. So an increase in hour and now we can charge per hour on the margin improvements. Within advisory, which is an area we've been developing, we've seen an increase in activity in deal advisory, and that's both mainstream corporate finance and special situations M&A, which Mark will talk about some of the investment that we've made there. The headwinds that we've experienced have been on some of the transaction work, which we support, notably on property-related transactions, which has given us a fewer number of the large, high-value property financing assignments in the year which hasn't [indiscernible] on earnings and margins. Within real estate, it's been another year of double-digit growth at 11% top line, 6% from acquisitions, 5% organic. So well-balanced growth from that division. The organic growth has come across valuations, projects and development work within agency and auctions. We saw the same challenges in terms of headwinds from the markets, but we had good robust activity levels, largely supported by our auction practice. And there was a solid year for plant machinery and insurance, they're very closely aligned with our restructuring teams and our property management business. Looking at margins. Margins overall, 16.1%, down from 16.9% the year before. So a few moving parts within that. Within the year, we've seen increased restructuring margins driven by the strong activity levels. We're seeing stable real estate margins at 16.8%, and group costs have been well controlled growing at a lower rate than the headline revenue rate. And that's having absorbed across all the business, GBP 1.5 million of additional NI costs. The areas where we've had pull back on margin has been the challenging advisory markets against a strong comparative in financial year '25 and the margin line where we've been investing in capabilities, so recruiting senior people where there's a lag in sense that they generate in revenue and margin. So the year-on-year movement reflects that lower level of transactional activity in the investment costs and progression back upwards towards the 17% where we have been in recent years, will be supported by improved levels of transactions and the return coming through on that investment. On a statutory basis, our non-underlying items, which are all acquisition IFRS 3 related. Those charges are down in the year to GBP 10.9 million. They're set to go down further as the various deals we did in recent years, drop off. So the contrast between the adjusted pretax growth of 6% and statutory profit growth of 23%. Then to cash flow on Slide 11. We continue to deliver good levels of cash generation. Looking over the last 5 years with an operating cash conversion of 90%, that's cash from operations divided by the EBITDA. There will be year-on-year movements as working capital fluctuates up and down. You can see that clearly, [ as seen ] financial year, it's '26 and '25, where cash conversion in '26 was 83%. And contrasted with very high conversion in financial year '25 at 97%. The 2 principal drivers of that consumption in the year we're reporting here in the mix, high level of formal insolvency work, which has a higher lockup in advisory work and also the timing of cash receipts, which totaled about GBP 3 million onto [indiscernible] engagements which did not cash in financial year '26. One's already come through in the new financial year, and we expect the other one to come through in the first half. And the combination of both of those pushed our overall group lock up to 4.5 months in the year. The other factor that's brought our free cash flow down year-on-year is a normalized level of tax payments. So the GBP 6.7 million in financial year '26 is a realistic number moving forward. That's 26% of our pretax profits financial year '25, the benefits carried forward from prior years. In terms of capital allocation, our acquisition payments, which was GBP 3.7 million on the 2 acquisitions we did this year. GBP 4.4 million of earn-outs, we've done GBP 1.2 million of buybacks and GBP 6.9 million of dividends, and that's largely been funded through free cash flow. We're in a robust financial position. Our net debt at the end of April was GBP 1 million, and that gives us significant headroom in the [ 35 million ] facilities. In terms of capital allocation and shareholder returns. Our priorities for deploying capital, as you've seen this year, investing in people and our platform capability. And Mark's got a lot of examples of the initiatives that we've done over the course of the last 12 months, together with selective value-enhancing acquisitions, which we've been doing over many years. And in terms of returns to shareholders, we seem to deliver that return through growing our earnings. We've had annual growth of 14% over the last 10 years. Our progressive dividend policy, which has been 8% per annum of dividend growth and buybacks, which we've used to balance dilution from share issues for either acquisitions or for management and staff share options. And over the last 3 years, we've bought back GBP 5.7 million of shares. So our disciplined capital allocation supported by our earnings growth, strong cash generation and our balance sheet strength. So overall, we've had a good financial year. We've made really good progress and I'll now hand over to Mark to talk through some of our operational highlights.

Thank you, Nick, and good afternoon, everybody. Ric started by mentioning a couple of key events that we've had during the year. One of those being the rebrand to BTG which has now taken out different business divisions under a single integrated group operating under a unified BTG identity. I'm pleased to report that we've had really good feedback on the rebrand, both internally and externally. We've also refreshed our leadership team. Part of that is my moving role to becoming CEO, but also and equally importantly, we have appointed 3 managing partner leads for each of our main pillars being restructuring, advisory and real estate. In restructuring, we continuing to strengthen our market leadership position, and that is supported by some notable restructuring case wins, which I will comment on a little further on. In advisory, we are continuing to develop our range of transactional and advisory services across the cycle. And in the last 12 months, we have really developed our special sets M&A practice, which is really useful in the restructuring space. It gets us into situations earlier around the advisory piece, if there's an opportunity for sale, and it also enhances the brand in the market in terms of the places that we're able to promote those business sales. Real estate continues to be fast growing across our services but worthy of particular note is our position in the auction market, where we are now #3 in the U.K. in terms of majority by volume and transaction value. Next slide. Going into the service side, just a little bit more detail. As I mentioned, the refreshment of the leadership team, this has had a considerable impact in the business. Coupled alongside the rebrand, we have seen a substantial improvement in activity for cross-service collaboration between the different business units and a real focus on driving strategic initiatives working alongside each other. So an example of this is in the [indiscernible] property at receivership space which is a part of the market where we're not hit as hard as we thought we should do historically. And yet we should be very well placed to do so with both the property expertise we have in-house and the insolvency practitioner services we have in-house. So both sides of the business have now got together, and they are taking a joint initiative to market, which should be a really strong offering to the lender community. And there are a number of other initiatives from across service perspective that we've now got underway. We have been active in investing in capability and in recruiting senior hires. In London, for example, we've taken 2 senior fee winners from a major competitor. And I'm very pleased to say that they both hit the ground running, generating revenue from the start. And we do have ongoing conversations with other potential practitioners to join us in London from our immediate competitor landscape. BTG is also now attracting inbound talent, which is a positive development where our position is changing in the market, and we've been seen for the larger cases, more complex work that we're doing, then that is making us an attractive proposition for people to come and join. So inbound inquiries are certainly increasing. Our digital marketing activity continues, and that's supported by an increase in the level of instructions. In 2025, it represented 12% of revenue. And this year, that's increased to 15%, which represents 35% year-on-year growth. We have strengthened our position in the market across both administrations and liquidations. As you can see, our from chart on the right, we actually achieved over 190 Nashville appointments following the MFS collapse, which I'm sure probably all of you will have heard about due to the high profile of that collapse and the significant media attention that it received. I would mention that the split is around 170 administrations and around 20 liquidations on that number and there may be some more to follow. On the administration side, we are appointed on a number of those jointly with FRP. We also continue to focus on sector expertise. For example, in [ spot ], where we are certainly a market leader in the amount of restructuring we do in that space. As you'll be aware, we've always had a big presence in relation to football clubs. But interestingly, that also extends into rugby and more recently into horse racing as well being appointed over the operating business at [indiscernible] city race course. We continue with our sector focus on health care, and that's another area where we've got some cross service line collaboration and strategic initiatives for growth going on across the business and in financial services. We recently achieved our first appointment under the special administration scheme, which is for financial institutions specifically and that not -- you just can't take that appointment as a solvency practitioner without specific approval under the legislation. To coincide alongside that, we have achieved panel status on the financial conduct authorities panel for that type of work. In advisory, we've -- sorry, on the previous slide, still sorry. In advisory, I mentioned our progress in [ Special 6 M&A ]. We've also invested in people in advisory. We've taken 2 partners from [ Kroll ] and other major competitor, one in London and one in Birmingham. That special since M&A team are also very much focused on sectors, and they have developed an excellent reputation across hospitality and leisure. For example, health care and in retail, and we've expanded our forensic team to 4 partners also over the last 18 months. In real estate, we're also investing in senior recruitment. We have taken a an auction director from [ Knight Frank ] into the London team, and we have 2 senior valuation suppliers in the Birmingham team and 1 public sector valuation specialist who has come into the London team, bringing some new expertise with him. There's also been a refreshment of the leadership team within the real estate division, and that is to create more clarity around ownership and responsibility and the delivery of some of the strategic growth initiatives that I mentioned. Real estate benefit significantly from its position on various panels. And that's not just the lender market that's also from the public sector arena. They're on the panels, for example, for the [ GCA ], a government procurement agency, [ Homes England ] and the [ ESP ], which is a government procure agency for schools. As a consequence of that, by our [ senior ] advisory instructions, increasing in frequency and also delivering a higher average fee. So I will mention a case in the case study slide, which they did for a London [indiscernible] of [indiscernible], which delivered a fee in the order of GBP 300,000. But finally, the auctions. We continue to invest in IT. You see a leverage in the [ MS Dynamics ] platform. And as I mentioned, that is now the third largest auctioneer in the U.K. So we're very pleased with the performance there. I'd like to now touch on Slide 17 on some -- a few -- just a few examples, the cases that we've worked on during the past 12 months. I drew reference to market financial solutions earlier. This business is a significant provider of mortgages and the collapse happened fairly rapidly. There are clearly some elements of fraud, which will require some detailed and complex investigation. It's been a highly competitive case in the restructuring market. We've literally -- most of the profession competing to get parts of it. I'm exceptionally pleased with our team who are extremely tenacious and have managed to secure the number of appointments that they have achieved. And we are dealing with a lot of the companies that control the asset base. And principally, that's 100-plus Central London properties that are valued anywhere between GBP 0.5 million and GBP 35 million. So a key aspect of this case and some of the others I mentioned today is here, we're using not only our restructuring service line, but also advisory and real estate. Sheffield Wednesday, a case that we have spoken about at half year and has been. Obviously had lots of media profile and attention. So I'm sure many of you will be aware that this was a case that we were dealing with. We ran our process with a particular buyer for some time, which unfortunately fell out after some months. So we then need to go back to market and find another buyer which we were successful in doing somebody from the U.S.A. So we're delighted with that because the outcome has been to secure a certain return to creditors. Obviously, it preserves Sheffield Wednesday continue as a football club, which is excellent for the community and the fan base. And it's a great reputational outcome for us, continues our success in football clubs and obviously, as a rewarding case from a fee perspective. The next one to mention is Ambient Support Limited. This is an M&A process that was followed by an administration. And we delivered the sale of 80 care homes, a transaction, which preserved over 800 jobs and preserve continuity of care for over 700 restaurants -- residents, apologies residents. Now one thing I would mention about all of those 3 cases is that they will all deliver fees into seven figures, some of them well into seven figures for us. So they are great examples of where we are increasing the size and complexity of the cases that we deal with. The [ London Borough ] submit case is a capsule project for real estate. They were pointed to deliver the decarbonization strategy and design, supported the funding bid, lender feasibility study, energy audits and option appraisals, and they ultimately manage that project to deliver a material carbon reduction and lower energy costs. And that's the case where I mentioned for property advisory, that will generate has generated a fee of around 300,000. So a good selection of cases there. Slide. Team, acquisitions and development of scaling. We completed the acquisition of Kirkby Diamond and Network Auctions in the year, both of which have strengthened our real estate platform. Kirkby Diamond was actually the -- it was the largest acquisition since we completed Eddisons back in 2014. Network Auctions is about [indiscernible] the lead auctions business. Both of these acquisitions have integrated well into the group may have contributed to performance during the year by extending our geographical reach, broadening service capability and enhanced market position. If you look at the little map on the right-hand side, you can see the acquired offices in orange there and our existing offices in blue. A good function of that map for me is it shows in the amount of gray, how much potential there is to extend the geographical coverage of the real estate business. We've had 2 small restructuring acquisitions during the year. One was the [ specialist solvent ] website liquidations website, MBL online. And we acquired Lameys Accountants in the Southwest, that's a restructuring acquisition, and that will expand our reach into [indiscernible] and Cornwall. Framework for continued growth. I think we've mentioned throughout that our focus on growth is both organic and by acquisition. And I mentioned that we are targeting the recruitment of talent. Just a few additional little stats to provide around people because we are a people business and they are key to our success. We've had 100 promotions across the business during the year. We have 114 people who are currently receiving support for professional examinations. We had 7 people past the joint insolvency terminations pulled this year, and that means that they are now qualified to act as insolvency practitioners. And we had 5 people past their rigs exams and they're now qualified as chartered surveyors. We also as a business support the apprenticeship scheme in the U.K., and this year, we recruited 31 apprentices under that scheme. And I mentioned on staff retention rates. Beneath our senior leadership team, we have an 87% staff retention rate, which we are very proud of. I don't have the exact stat for the senior leadership team, but we're well aware that it's considerably higher than 87%. So -- and we -- as a sudden note, we remain on track to deliver our GBP 200 million revenue target as outlined and planned. Next slide, 20. Final comment on the current trade and outlook. We have started to do financial year. Well, we've got very good momentum across the group. As I've mentioned, and that's supported by strong current activity levels and our pipeline visibility. The macroeconomic uncertainty continues to drive demand for countercyclical services albeit in a transactional market that does take some impact from that. We are expecting an improvement in margin, but this will be subject to a normalization of those transactional markets and also delivering the returns on recent investments. All in all, we anticipate a further year of growth in line with our expectations. Thank you.

Thank you, Mark. Let me just move now to Slide 22 and finish on that. So to summarize, overall, we're well positioned to continue building on our long-term track record of growth supported by our established business model, strong market positions and disciplined approach to investment. Hopefully, there are some questions, which we will be delighted to answer.

Thanks very much, gentlemen. Very clear and very good progression too. Lots of questions, so let's dive [indiscernible]. Maybe one for you first, Mark. Your ability to attract senior hires in recent years is very encouraging. Has the strength of the BTG Group offering being more important to that recruitment than the weakness of the firms that people are actually leaving to join you?

Yes, it certainly has. I mean we've got people to join, which obviously in itself creates a degree of momentum and interest when the market sees certain key people changing firms. There have been some interesting developments in our market where other firms have had some, I shall refer to it as turmoil, perhaps. And that creates then a desire for them to move people to move and for us to be able to target. So -- and in general, as I said in the presentation, the general fact that we've been able to improve the level of type of cases that we've been winning and the complexity of the work that we're doing then starts to make us look like an attractive proposition for people. Part of that will also relate to perhaps people with other organizations where they got to that glass [ ceiling ] point and they can't see an opportunity to proceed further. But we seem to be offering that in the market. So again, it makes us attractive.

Yes, certainly makes sense. Looking at insolvency, also, I think, probably for you, Mark, you said that number of administrations were up by 12% but national and insolvencies was a slightly lower number. Was that entirely down to MFS? Or is there a trend in one growing higher than the other? And following on from that, if there is a trend to more administrations, is that good or bad for BTG?

In terms of the market position, there have certainly been a couple of large groups that have gone into administration, we've -- lots of companies that would have therefore impacted on those stats because obviously, the administration market isn't that large. So I would think that there's -- those [indiscernible] very big impact. Is there -- there will be a move to -- there's a move to more administration from our perspective, the more we change our market position and we pick up larger and more complex cases because they will tend to be an administration rather than a liquidation because there are more options that flow from them. But from our perspective, we still expect a very continually buoyant CVL market that we will remain very focused on in terms of a work winning perspective. And continuing to build as much as we can on market share in that space.

Very good. Nick, how many benefits are you seeing from AI reducing administrative costs already? And the other side of the coin, will AI be useful in creating commercial opportunities in the years going forward?

Look, it's early days on AI. We've rolled out copilot nationally for people to use, but we're starting to see benefits as people can become more efficient just through using copilot on their desktop. The -- in terms of teams having a real change in output, it's been pretty focused at the moment on our digital marketing team, sort of developed AI. They've moved a level up from just routine copilots in the [indiscernible] agents, routine part of that work in terms of analyzing work, analyzing leads, promoting leads, promoting our websites, channels. So they've definitely seen an increase in their outputs, and they're confident they're delivering probably 50% more than they would have done for the same resource. So that has been good. But in terms of overall benefits across the business, across the fear in the community. I think it's early days of [indiscernible].

Yes. Question here, which service line to you 3 gentlemen think has the greatest long-term growth potential? And what would you most like investors to better understand about the BTG business that is perhaps being currently overlooked?

Well, in terms of growth potential, the property business has significant growth potential because it's a much bigger sector than restructuring. It's also very fragmented. So there are acquisition opportunities as well as opportunities to recruit directly into the business. So we definitely will see that growing over time. In terms of the restructuring business, growing our market share, a lot of that will be organic, we think and come from what Mark has already explained in terms of moving up to win more work in that mid-tier space, bigger, better assignments, but also doubling down on the volume. The volume business is important for us, and we don't see it as an either or in terms of that or the bigger cases, it's both. So we do see growth potential there. Obviously, it's a cyclical industry. So we will see ups and downs. But where we sit here today, we think that that's going to be a busy market for us for the foreseeable future. In terms of other activities, our advisory business is relatively small compared to the others, around about GBP 20 million turnover, and there's lots of opportunity to grow that into other financial and professional areas immediately adjacent to what we're currently doing. But we remain open-minded about additional professional services should the opportunity arises and it'd be something that we think we can buy at the right price or bring in on the right basis, we can grow it, and it makes a decent margin. So I think that the main thing, the message we are trying to get across and have for some time is that we have got a very successful restructuring practice, but we are a broader-based business now. We are dedicated to growing our business at any point in the economic cycle. So where we are, whether it's in the depths of a recession, whether the economy is booming, we've got a business which year-on-year will be able to grow.

Yes. And all record certainly suggests that. A couple of questions on winning business. Someone asking whether you could give an overview of your deal origination mix. And in the context of restructuring our advisory, how important are accounting firms, digital platforms or direct corporate outreach as a means of winning transactions?

Yes, I mean the answer actually is all of those, and they're all really equally important to us. I mean the accountancy profession provides, particularly in our regional markets, a very large percentage of the CVL insolvency liquidation market. The financial institutions, private equity, law firms provide good [ reproduct ]. The ABL market, credit funds, debt funds, I could go on, I think provide good referrals to us in the larger either early advisory stages of the company in distress in addition to formal insolvency, which would be the administration market predominantly, but it may also be in the restructuring plan space where we've been quite busy. So all of those areas are [ now ] -- and that a challenge for us is constantly making sure that we're reaching out to that market and promoting our services and capability so that we're in the frame of those referrals.

Thank you, Mark. And a related question, we have one in that larger complex and better margin deals are understandably a focus for the group. How have you been making progress in winning them? Is that more down to some of the senior hires that you've mentioned? Or is it weaker competition or just a greater recognition of the BTG track record?