As we progress through these summer months with disheartening economic stats and figures released every day, one thing is clear: we have entered into a deep recession. Some believe it could be the worst recession for decades. Surely that’s bad news for everyone, right? Not necessarily. I back top UK AIM share Begbies Traynor (LSE:BEG) to beat the recession during these tumultuous times. Begbies Traynor has a counter-cyclical nature in terms of performing well and appreciating during economic downturn.
The economy
Let’s start by looking at the state of the economy. The International Monetary Fund estimates that the global economy will shrink by 3% this year. This would make it the worst recession since the Great Depression of the 1930s. Already between March and May, the UK saw over a 19% fall in GDP. Unemployment is high and expected to increase as furlough support gradually diminishes. How long will this recession last? Well the last recession, onset by the global financial crisis of 2008, lasted five quarters in the UK.
So, what does this mean for UK companies? For some companies it means slow business, struggling operations, weak cash flow, and financial difficulty. The recession, coupled with lockdown and fears of a second wave of Covid-19, spells trouble for many UK businesses. This is where top UK AIM share Begbies Traynor steps in.
Rescue and recovery
Begbies Traynor is the UK’s leading corporate rescue and recovery practice. Founded in 1989, it has grown into a top company providing business recovery, financial advisory, and property services consultancy. A key part of its business is being an insolvency specialist. The unfortunate hardships and demise of some companies means more business for Begbies Traynor. Demand for its services has already increased this year, and I expect demand will increase even more over the next year. This is why I view Begbies Traynor as a top UK AIM share and one to beat the recession while the market and economy struggle.
What do the numbers say? Final results for its financial year ended 30th April 2020 are announced on Tuesday 21st July. Revenue is expected to be about £70 million, up from £60.1 million in 2019. Adjusted profit before tax is expected to have grown by around 30%. An interesting stat is its insolvency business had increased in the year prior to any impact from the Covid-19 outbreak. Furthermore, it maintained its interim dividend in May and has invested in IT to assist its remote working capability. All promising signs. I expect the share price to perform nicely upon news of the results.
The future
As the true economic impact of lockdown is realised towards the end of the year, companies will have a clearer view of where they stand in the fight for survival. On top of this, as forms of government support slow and cease, further repercussions will be felt. I expect some impacts to only materialise as late as early 2021. Begbies Traynor will have a clearer view of demand as time progresses, but I believe it will all be positive news for its business in the short and long term. That’s why I view Begbies Traynor as a top UK AIM share to beat the recession.
