FRP Advisory Group plc

("FRP" or the "Group")

Half Year Trading Update

FRP Advisory Group plc, a leading national specialist business advisory firm, announces a trading update for the half year ended 31 October 2022 ("H1 2023").

Trading performance

The Group's performance remained strong during the first half, with continued growth in revenues and profits.

The Group expects to report revenue for H1 2023 of £49.4m, up 10% on the prior year (H1 2022: £44.7m), and underlying adjusted EBITDA* of £11.6m, up 5% on the prior year (H1 2022: £11.1m), in line with the Board's expectations to date.

Restructuring

The Restructuring team continue to serve the full range of UK clients across all sectors, there is a focus on the core mid-market, with assignments ranging from personal clients, SMEs and higher-profile appointments.

FRP has seen an increase in demand for confidential advisory projects and enquiries for restructuring services compared to last year.

Growth in the higher volume liquidations market, which are typically lower value and less complex, has continued, including Creditors Voluntary Liquidation's ("CVLs") and Compulsory Liquidations. However, the formal administration appointment market still remains below pre-pandemic levels. This level is despite the long list of well documented headwinds facing UK corporates including recent interest rate rises, supply chain disruption, input cost inflation (i.e. wages, energy, supplies and materials), Brexit and the withdrawal of pandemic support measures.

Many troubled UK corporates have avoided the need to consider and implement formal restructuring processes as they took advantage of the government-backed support measures made available during the pandemic. Furthermore, key creditors like HMRC have a tax arrears backlog to address and institutional lenders continue to be supportive where possible. The Group expects that as the headwinds further impact the UK economy that the demand for the Group's restructuring services will continue to increase.

Corporate Finance

The integrated FRP Corporate Finance brand was launched in July 2022 supported with a new dedicated corporate finance website to amalgamate the previous FRP Advisory, Spectrum Corporate Finance (acquired in 2021) and JDC Corporate Finance (acquired in 2020) brands. The last six months has also seen the development of centralised support across corporate finance which encompasses research, marketing and deal origination to provide a strong and consistent platform for growth. 

Despite the well-publicised economic headwinds, M&A in the UK mid-market proved resilient in H1 2023 and FRP Corporate Finance has continued to be an active player in this market, advising on 40 deals in H1 with a combined value of £1.2 billion and raising £552 million of debt. 

Notable deals in H1 included:

-           MBO of healthcare services provider, Partnering Health Limited.

-           Sale of multi-brand distributor, BTC Activewear to New Wave Group AB in Sweden.

-           Sale of Blueback Global, a leader in global expansion services, to TopSource Worldwide.

The team has a good pipeline of existing M&A and Debt Advisory mandates and the level of new enquiries remains encouraging, although rising interest rates and the forecast recessionary period continued to impact the buyers' appetite, particularly in consumer exposed sectors, which is likely to reduce mainstream M&A activity over H2 compared to last year. Conversely, this should lead to an increase in debt refinancings and restructuring related M&A activity.

*Underlying adjusted EBITDA removes exceptional costs and non-cash costs including share based payments relating to deemed remuneration arising on acquisitions that is subject to continuing employment and the Employee Incentive Plan established on IPO and funded by partners, resulting in no dilution to existing shareholders.

Balance sheet and liquidity

The Group completed a significantly oversubscribed £39m placing in June 2022 comprising approximately £7.5m (gross) cash raised from new and existing institutional investors to further bolster the balance sheet to continue to target acquisitions and a placing by certain directors and partners for approximately £31.5m. The transaction increased the free float and market liquidity of FRP's shares.

The Group's balance sheet is strong with an unaudited net cash balance as at 31 October 2022 of £21.0m** (H1 2022: £9.2m). In addition, the Group continues to have an undrawn revolving credit facility of £10m.

**£26.6m gross cash less £5.6m of structured debt (H1 2022: £16.8m less £7.6m), repayable over approximately three years.

People and operations

FRP's 26 offices across the UK continue to work well together, drawing on specialists from different service lines as necessary, in order to deliver the best possible service and outcome.

We continued to selectively grow our headcount, increasing the number of total Colleagues by 6% over H1 as a result of demand-led lateral hiring, and by 11% year-on-year including Colleagues that came with the BridgeShield Asset Management Ltd acquisition (April 2022).

The Group continues to make progress in improving operational efficiency and enhancing internal controls. Salesforce, a CRM system, and an upgraded time recorded system has been rolled out across the firm, along with the implementation of a new risk management framework and the Group now aligns with ISO 31000.  During the second half of this financial year, a new HR system with various modules and a Document Management System (DMS) will be rolled out.

Outlook

Trading since 1 May 2022 has been in line with the Board's expectations. The medium-term outlook for our key markets remains positive and the Board is confident of making further progress in the current Financial year.

Geoff Rowley, Chief Executive Officer of FRP Advisory Group plc, said:

"FRP has made good progress in the first half, continuing to grow our team, revenues and profits. Our strategy remains to deliver sustainable profitable growth by ensuring our five service pillars work together to provide solutions that achieve the best possible outcomes.

Our Restructuring team is well positioned to service the expected increase in demand stemming from the many challenges faced by UK businesses, although uncertainties persist over how long the available liquidity and government backed loans can sustain troubled businesses or how proactive key creditors like HMRC and institutional lenders will be on addressing over-due debts.

Our Corporate Finance team has a strong pipeline and they are seeing an increase in demand for debt advisory colleagues to support on transactions."

Notice of results

The Group expects to report its unaudited results for the half year ended 31 October 2022 on 13 December 2022.

The information contained within this announcement is deemed by the Group to constitute inside information under the Market Abuse Regulations No. 596/2014.

Enquiries:

FRP Advisory Group plc  

Geoff Rowley, CEO

Jeremy French, COO

Gavin Jones, CFO

Enquiries via MHP

Cenkos Securities plc (Nominated Adviser and Sole Broker)

Katy Birkin/Max Gould (Corporate Finance)

Alex Pollen (Sales)

Tel: +44 (0) 207 397 8900

MHP Communications (Financial Public Relations)

Oliver Hughes

Charlie Barker

Pete Lambie

Tel: +44 (0) 3128 8540 / +44 (0) 20 3128 8570

[email protected] 

Notes to Editors

FRP is a professional services firm established in 2010 which offers a range of advisory services to companies, lenders, investors and other stakeholders, as well as individuals. These services include:

§ Restructuring advisory: corporate financial advisory, formal insolvency appointments, informal restructuring advisory, personal insolvency and general advice to all stakeholders.

§ Corporate finance: mergers & acquisitions (M&A), strategic advisory and valuations, financial due diligence, capital raising, special situations M&A and partial exits.

§ Debt advisory: raising and refinancing debt, debt amendments and extensions, restructuring debt, asset based lending and corporate and leveraged debt advisory.

§ Forensic services: forensic investigations, compliance and risk advisory, dispute services and forensic technology.

§ Pensions advisory: pension scheme transaction advisory, pension scheme restructuring advisory, covenant advisory and corporate governance