REG - Frenkel Topping Grp - Interim Results
30/09/2024 07:00
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RNS Number : 1245G Frenkel Topping Group PLC 30 September 2024
The information contained within this announcement was deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018 as amended. With the publication of this announcement via a Regulatory Information Service, this inside information is now considered to be in the public domain.
30(th) September 2024
Frenkel Topping Group plc
("Frenkel Topping", "the Company, or "the Group")
Interim Results for the six months ended 30 June 2024
Frenkel Topping (AIM: FEN), a specialist financial and professional services
firm operating within the personal injury and clinical negligence marketplace
(PI and CN), is pleased to announce its interim results for the six months
ended 30 June 2024.
Financial Highlights
H1 2024* H1 2023* % change FY2023
(£m) (£m) Full year (£m)
Revenue 17.9 16.0 12% 32.8
Recurring revenue 6.5 5.9 10% 12.0
Non-recurring revenue 11.4 10.1 13% 20.8
Gross profit 6.9 6.6 5% 13.9
Adjusted EBITDA** 3.6 3.5 3% 8.0
Adjusted EPS (basic) 1.8 pence 1.7 pence 6% 4.3 pence
Cash & cash equivalents 4.1 4.9 (16%) 2.4
Funds Under Management ("FUM") 1,455 1,261 15% 1,335
Assets on a discretionary mandate 935 761 23% 820
*Unaudited
**EBITDA before share based compensation, acquisition strategy, integration,
reorganisation and exceptional costs
Operational Highlights
· Acquisition of Northwest Law Services Limited ("NWL") to bolster our
offering within the legal costs sector, performing to expectation
· Cardinal Management Limited ("Cardinal") agreed a new partnership
with the NHS Major Trauma Centre ("MTC") at Sheffield Children's Hospital,
taking the total number of sites at which Cardinal provides services to eleven
· Client retention within our IFA business remains strong at 99%
· Healthy FUM growth in the period of £120m by end of H1 with a strong
pipeline for the remainder of the year - prior year growth of £148m for the
full year 2023
· Ascencia Investment Management Limited ("Ascencia") won the ARC 3D
award for Commitment to Transparency
· Ascencia also received Highly Commended status from Defaqto in their
Defensive MPS (Platform) category in relation to two investment solutions
· Key focus on consumer duty with completion of fair value assessment
and confidence that there are no material issues arising out of the consumer
duty review
· Welfare Benefits team identified £1.3m of unclaimed benefits,
demonstrating both our commitment to supporting our clients and enhancing our
service offering to law firms
Continued delivery of strategy & outlook
· The Company continues to execute its strategy and is evaluating
opportunities both delivered organically and inorganically
· Clear focus on integration across the Group and a simplification of
branding to give a more cohesive image (in progress)
· Trading in line with revised management expectations for the year and
well poised to continue to make progress in growing the business over the
medium term. The FUM pipeline going into H2 is encouraging and overall the
opportunity remains to consolidate its position as the leader in financial and
professional services in the PI and CN space and that the vast majority of
businesses acquired have integrated well and are performing to management's
expectations.
For further information:
Frenkel Topping Group plc www.frenkeltoppinggroup.co.uk (http://www.frenkeltoppinggroup.co.uk)
Richard Fraser, Chief Executive Officer Tel: 0161 886 8000
Cavendish Capital Markets Limited (Nominated Advisor & Broker) Tel: 020 7220 0500
Carl Holmes/Abigail Kelly (Corporate Finance)
Tim Redfern (ECM)
The Frenkel Topping Group of companies specialises in providing financial
advice and asset protection services to clients at times of financial
vulnerability, with particular expertise in the field of personal injury (PI)
and clinical negligence (CN).
For more than 30 years the Group has worked with legal professionals and
injured clients themselves to provide pre-settlement, at-settlement and
post-settlement services to help achieve the best long-term outcomes for
clients after injury. It boasts a client retention rate of 99%.
Frenkel Topping Group is focused on consolidating the fragmented PI and CN
space in order to provide the most comprehensive suite of services to clients
and deliver a best-in-class service offering from immediately after injury or
illness and for the rest of their lives.
The group's services include the Major Trauma Signposting Partnership service
inside NHS Major Trauma Centres, expert witness, costs, tax and forensic
accountancy, independent financial advice, investment management, and care and
case management.
The Group's discretionary fund manager, Ascencia, manages financial
portfolios for clients in unique circumstances, often who have received a
financial settlement after litigation. In recent years Ascencia has
diversified its portfolios to include a Sharia-law-compliant portfolio and a
number of ESG portfolios in response to increased interest in socially
responsible investing (SRI).
Frenkel Topping has earned a reputation for commercial astuteness underpinned
by a strong moral obligation to its clients, employees and wider society, with
a continued focus on its Environmental, Social and Governance (ESG) impact.
For more information visit: www.frenkeltoppinggroup.co.uk
(https://protect-eu.mimecast.com/s/WNCMCR1EKSxDwoTNKWD-?domain=frenkeltoppinggroup.co.uk)
Richard Fraser, CEO of Frenkel Topping Group, statement:
The Board presents results for the first half of 2024 showing modest growth in
comparison to the prior year. There is much to be content with, in particular
the performance of the Group to drive FUM growth, the completion of the
consumer duty review and the acquisition of Northwest Law Services Limited,
which has been performing in line with expectations since completion in April
2024 and is well set for future growth.
However, 2024 has this far not come without challenges, particularly within
Partners in Costs Limited ("PIC") where we have not yet been able to achieve
the growth that management expected this year. The medium-term prospects for
PIC remain positive and the Board is confident that this is a short-term issue
which it has taken swift action to address with a number of changes to
processes and personnel implemented. As previously announced, PIC acted as a
drag on the Group's overall performance in H1, mainly due to recruitment and
technology implementation impacting its ability to handle increased
workloads. Pleasingly, demand for PIC's services is clear and with a
considerable effort having gone in to address the short-term headwinds, the
Board is seeing PIC start to regain momentum.
We are particularly encouraged by the growth in FUM during the period of
£120m, a testament to the success of our Group-wide strategy in recent years
beginning to come to fruition and the hard work of our sales team. By
comparison, in the previous full financial year FUM grew by £148m and the
Company is tracking well ahead of this. Their work is aided by the
award-winning products offered by Ascencia, who have also continued to
outperform benchmarks. As an example of this, our Income and Growth 4 fund
achieved returns of 4.92% on the three years to 30th June 2024 compared to ARC
Sterling Balanced Asset's return of 3.29%.
The Board was delighted that Ascencia Investment Management's Safety First 2
& 3 portfolios have been Highly Commended in the Defaqto Defensive
Comparator Sector. Based on 5 years discrete risk-adjusted performance
measures, the Defaqto MPS Comparator awards recognises the most consistent MPS
solutions within the Defensive comparator sector. Additionally, Ascencia has
been awarded with the ARC 3D Research Award this year. This annual award has
three founding principles: Data, Due Diligence and Demonstration.
However, the performance is slightly tempered due to continued market
conditions and a large proportion of the new FUM mandates being channeled into
our Money Market Solution (MMS) at lower fee rates. MMS was launched in June
2023 and stands at £113.5m at 30(th) June 2024. We remain poised to
redeploy these mandates into our other, higher earning, investment solutions
as market conditions change.
We are extremely pleased that Cardinal has increased its geographical reach
and goes live at Sheffield Children's Hospital's Major Trauma Centre in
November this year. In addition to this, Cardinal also launched Re.Source
v2.0, a directory made available to NHS staff at MTCs allowing medical
professionals easy access to make referrals to patients for care needs after
discharge from the MTC. Our work within Cardinal allows us to better support
the interests of patients, claimants and the work of their professional
representatives.
Somek & Associates continues to go from strength to strength, having
increased our number of Medico-Legal expert witnesses by 17%, enabling us to
handle an increased number of instructions in an area of high demand. This
remains a key focus area and opportunity for future growth.
Bidwell Henderson continues to expand the Graduate training programme with two
intakes to date in H1 and a further intake due to start in the Autumn. We
continue to develop this programme and are looking at ways we can expand its
reach within our wider Costs businesses in order to produce a pipeline of
future Costs experts.
Demand also remains strong within Care and Case Management and we continue to
increase our headcount and geographical reach within this sector in order to
expand and fulfil the further untapped potential. Having evaluated a number of
potential acquisition opportunities in this space the Board has resolved to
focus on growing this business division organically.
Consumer Duty
A key focus for 2024 has been the continued implementation of robust
governance to further embed Consumer Duty principles, with continuous
monitoring and progress tracking. We have delivered bespoke training sessions
with all of our staff with extremely positive outcomes and action for change.
Our Consumer Duty Champions and teams meet regularly to assess, review,
discuss and challenge our FCA regulated companies.
Fair value assessment and associated amendments to charging structures related
to Consumer Duty have been largely completed and the Board is confident that
there are no material regulatory implications that have not been sufficiently
addressed.
As previously announced the amended charging structures will have a modest
impact on revenues, with limited impact this financial year.
Key initiatives for H1:
· Assessment of Value complete for Frenkel Topping Limited ("FTL")
· Assessment of Value complete for Ascencia Investment Management
Limited
· Consumer Duty Reports completed
· Introduction of 'Explainer' videos for Lay clients to support
Consumer Understanding
· Implementation of Consumer Duty Directories to provide structure and
governance
· Sign up to the Consumer Duty Alliance and Financial Vulnerability
Task Force
· Implementation of Voice of the Customer within FTL
At Frenkel Topping we are committed to always doing the right thing by our
consumers, clients, and our people, Consumer Duty goes hand in hand with our
established ethos and values. This is a continuous journey for us with ideas
and initiatives for improving our consumer journey and experiences already in
the pipeline.
Key Appointments
We have made a number of key appointments in recent months. Gillian
Carlisle-Collett has joined as Head of Operations within our Care and Case
Management division. Gillian is a dual qualified lawyer and change specialist
with a wealth of experience in project leadership, team and leadership
development and business transformation. Her career history boasts top law
firms such as Napthens LLP, Fletchers Solicitors, Keoghs LLP and DWF LLP.
Lee Jones has been appointed as the new Head of Tax and Accounting within
Forth Associates Limited. Lee brings over 20 years of experience as an ACCA
qualified accountant having previously held the position of Senior Partner at
Sedulo.
Jessica Thurston has been appointed as Managing Director of Somek following
the retirement of founding director Alison Somek. Jess has 30 years of
experience as an Occupational Therapist and Care Expert, having worked with
Somek since 2002, most recently as Head of Medico-Legal Operations, overseeing
the growth of the company to date.
Elias Omar has been appointed as Jess's replacement in the role of Head of
Medico-Legal Operations. Elias is a qualified solicitor with 15 years of
experience working in the legal sector across all aspects of civil litigation,
with a primary focus on PI and CN, most recently at Thompsons Solicitors and
OH Parsons LLP.
Outlook
We are trading in line with revised management's expectations and well poised
to continue to make progress in growing the business in the medium term. The
FUM pipeline going into H2 is encouraging and overall, the opportunity remains
to consolidate its position as the leader in financial and professional
services in the PI and CN space and that the vast majority of businesses
acquired have integrated well and are performing to management's
expectations.
Elaine Cullen-Grant, CFO of Frenkel Topping Group statement:
Recurring revenue has grown by 10% to £6.5m following a record breaking six
months with £120m growth within FUM(2023: £56m) and a strong pipeline for
FUM remains for the second half of the year.
Non-recurring revenue has also grown by 13% with many business units showing
an improved performance on the prior year, particularly Somek which has grown
revenues by 25% from the prior year following our targeted growth in
recruitment of new expert witnesses.
Challenges within PIC, coupled with the backdrop of wage inflation and our
continued investment into our people means that our margin has been slightly
impacted, with an Adjusted EBITDA margin of 20.1% compared to 21.9% for the
same period in 2023. Whilst we do intend to continue to invest in the business
for the future, we expect this reversal in margin expansion to correct over
the medium term.
Having secured a revolving credit facility of £7.5m in January 2024, we have
begun to draw on this facility in order to fund both the initial consideration
payment in relation to NWL and deferred/contingent payments relating to prior
year acquisitions. As such the Group moves to a net debt position for the
first time.
30(th) June 24 30(th) June 23 31(st) December 23
Cash and cash equivalents 4,122 4,866 2,425
Revolving Credit Facility (5,400) - -
Net cash/(debt) (1,278) 4,866 2,425
Cash collection has remained strong with our increase in accrued income, trade
and other receivables only increasing by 2% despite the 12% growth in revenue.
This remains a key focus area and we are continuing to strengthen our credit
control processes.
Tax paid in the year includes a pre-acquisition liability in relation to NWL
of £127k and is therefore not fully comparable.
Overall, whilst down from the comparative period due to the backdrop of costs
relating to the acquisition made in the year, legal fees in connection with
the set-up of the revolving credit facility, wider acquisition integration
related costs and exceptional items, cash generated from operating activities
remains positive.
Frenkel Topping Group plc 6 Months 6 Months Year
Group income statement for the period: ended ended ended
30-Jun-24 30-Jun-23 31-Dec- 23
Unaudited Unaudited Audited
Notes £'000 £'000 £'000
REVENUE 17,870 16,042 32,809
Direct staff costs (10,977) (9,436) (18,943)
Gross Profit 6,893 6,606 13,866
Administrative expenses 2 (4,815) (3,996) (8,797)
Underlying profit from operations 3,197 3,200 7,233
- share based compensation (40) (314) (610)
- acquisition strategy, integration, reorganisation and exceptional (1,079) (276) (1,554)
costs
PROFIT FROM OPERATIONS 2,078 2,610 5,069
Finance and other income/ (fair value losses on investments) 11 4 20
Finance costs 3 (348) (186) (532)
Revaluation of contingent consideration - - (1,364)
PROFIT BEFORE TAX 1,741 2,428 3,193
Income tax expense (528) (628) (1,286)
PROFIT FOR THE PERIOD 1,213 1,800 1,907
Gains on property revaluation arising net of tax - - 80
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD 1,213 1,800 1,987
PROFIT ATTRIBUTABLE TO:
Owners of parent undertakings 1,073 1,680 1,661
Non-controlling interest 140 120 246
TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO:
Owners of parent undertakings 1,073 1,680 1,741
Non-controlling interest 140 120 246
0.
Earnings per share - basic (pence) 0.9 1.4 1.4
Earnings per share - diluted (pence) 0.8 1.3 1.3
Adjusted earnings per share - basic (pence) 1.8 1.7 4.3
Adjusted earnings per share - diluted (pence) 1.7 1.6 4.0
The results for the period are derived from continuing activities.
Frenkel Topping Group plc
Group Statement of Financial Position as at: 30-Jun-24 30-Jun-23 31-Dec-23
Unaudited Unaudited Audited
£'000 £'000 £'000
ASSETS
NON CURRENT ASSETS
Goodwill and other intangibles 30,546 29,250 29,210
Plant, property and equipment 3,289 2,717 2,998
Loans receivable 149 168 151
33,984 32,135 32,359
CURRENT ASSETS
Accrued income 8,180 4,903 6,066
Trade receivables 12,031 11,086 11,282
Other receivables 1,364 1,146 896
Investments 111 101 107
Cash and cash equivalents 4,122 4,866 2,425
25,808 22,102 20,776
TOTAL ASSETS 59,792 54,237 53,135
EQUITY AND LIABILITIES
EQUITY
Share capital 640 637 640
Share premium 22,706 22,705 22,706
Merger reserve 6,492 6,245 6,492
Revaluation reserve 559 479 559
Own share reserve (2,134) (2,134) (2,134)
Other reserve (341) (341) (341)
Retained earnings 14,178 14,149 13,134
Equity attributable to owners of the parent company 42,100 41,740 41,056
Non-controlling interests 312 238 344
TOTAL EQUITY 42,412 41,978 41,400
CURRENT LIABILITIES
Current taxation 1,222 1,075 999
Trade and other payables 7,092 7,375 8,112
8,314 8,450 9,111
LONG TERM LIABILITIES 9,066 3,809 2,624
TOTAL EQUITY AND LIABILITIES 59,792 54,237 53,135
Frenkel Topping Group plc 6 Months 6 Months Year
Group Cash Flow Statement ended ended ended
For the period: 30-Jun-24 30-Jun-23 31-Dec- 23
Unaudited Unaudited Audited
£'000 £'000 £'000
Profit before tax 1,741 2,428 3,193
Adjustments to reconcile profit for the period to cash generated from
operating activities:
Finance income/loss (11) (4) (20)
Finance costs 348 186 532
Revaluation of contingent consideration - - 1,364
Goodwill write off - - 62
Share based compensation 121 242 499
Depreciation 389 304 720
(Increase)/decrease in accrued income, (1,694) (1,660) (2,736)
trade and other receivables
(Decrease)/increase in trade and other payables 53 405 612
Cash generated from operations 947 1,901 4,226
Income Tax paid (648) (363) (1,014)
Cash generated from operating activities 299 1,538 3,212
Investing Activities
Acquisition of plant, property and equipment (160) (148) (290)
Acquisition of subsidiaries (3,277) (1,100) (3,518)
Cash acquired on acquisition of subsidiaries 232 - -
Cash (used) / generated in investing activities (3,205) (1,248) (3,808)
Financing activities
Exercise of share options - 1 1
Dividend paid (172) (165) (1,451)
Repayment of borrowing (71) (36) (201)
Loans received 5,400 - 237
Interest received 6 4 13
Interest element of lease payments (24) (17) (38)
Principal element of lease payments (266) (197) (516)
Other interest paid (270) - (10)
Cash used in financing 4,603 (410) (1,965)
(Decrease)/ increase in cash 1,697 (120) (2,561)
Opening cash 2,425 4,986 4,986
Closing cash 4,122 4,866 2,425
Closing Cash and Cash Equivalents
Cash 4,122 4,866 2,425
Cash is held at National Westminster Bank Plc and Santander UK Plc.
Notes to the Interim Financial Statements
1. Revenue and Segmental Reporting
All of the Group's revenue arises from activities within the UK.
Revenue arising from recurring and non-recurring sources is as follows:
6 Months 6 Months Year
ended ended ended
30-Jun-24 30-Jun-23 31-Dec- 23
£'000 £'000 £'000
6,451 5,899 11,961
Recurring
Non-recurring 11,419 10,143 20,848
_______ _______ _______
Total revenue 17,870 16,042 32,809
_______ _______ _______
Operating Segments
The Group's chief operating decision maker is deemed to be the CEO. The CEO
has identified the following operating segments:
Financial Services
This segment includes our independent financial advisory, discretionary fund
management and financial services businesses.
Costs Law
This segment includes each of our costs law services businesses.
Other Professional Services
This segment includes our major trauma signposting, forensic accountancy, care
and case management and medico-legal reporting businesses.
Central Services
This is predominantly a cost centre for managing Group related activities or
other costs not specifically related to a product.
Financial services Costs Other Professional Services Central Services Total
Law
6 Months ended June 2024
£'000 £'000 £'000 £'000 £'000
Revenue 6,826 4,607 6,375 62 17,870
Adjusted EBITDA 2,546 1,036 1,600 (1,597) 3,585
Financial services Costs Other Professional Services Central Services Total
Law
6 Months ended June 2023
£'000 £'000 £'000 £'000 £'000
Revenue 6,305 4,162 5,550 25 16,042
Adjusted EBITDA 2,287 1,056 1,437 (1,251) 3,529
Financial services Costs Other Professional Services Central Services Total
Law
Year ended December 2023
£'000 £'000 £'000 £'000 £'000
Revenue 12,778 8,355 11,570 106 32,809
Adjusted EBITDA 4,405 2,183 3,244 (1,879) 7,953
2. Administrative Expenses
The following table analyses the nature of expenses:
6 Months 6 Months Year
ended ended ended
30-Jun-24 30-Jun-23 31-Dec- 23
£'000 £'000 £'000
Depreciation 389 329 720
Share based compensation 40 314 610
Acquisition strategy, integration, reorganisation and exceptional costs 1,079 276 1,554
Other administrative expenses 3,307 3,077 5,913
Total Other administrative expenses 4,815 3,996 8,797
3. Interest and similar items
6 Months 6 Months Year
ended ended ended
30-Jun-24 30-Jun-23 31-Dec- 23
£'000 £'000 £'000
Interest on lease liabilities 24 17 38
Loan and other interest charges 166 - 160
Unwinding discount - deferred consideration 158 169 334
Total finance costs 348 186 532
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