REG - FRP Advisory Grp PLC - Full Year Results
22/07/2022 07:00
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RNS Number : 3713T FRP Advisory Group PLC 22 July 2022
22 July 2022
FRP ADVISORY GROUP PLC
("FRP", the "Group" or the "Company")
Full Year Results
For the year ended 30 April 2022
FRP Advisory Group plc, a leading national specialist business advisory firm,
is pleased to announce full year results for the year ended 30 April 2022.
Geoff Rowley, Chief Executive Officer of FRP Advisory Group plc, said:
"I am pleased to report another year of profitable growth. FRP is a resilient
business, with a track record of growth regardless of the economic conditions.
The UK M&A mid-market remains active, our Corporate Finance team have an
excellent pipeline to help clients realise their strategic ambitions.
Uncertainties still remain over how long troubled businesses can continue in
their current form or how proactive key creditors like HMRC and institutional
lenders will be on addressing over-due debts. Following the removal of
government support, inflationary pressures and other disruptive forces, the
Group has seen an increase in the level of enquiries for restructuring
services in recent months.
The Group has a strong balance sheet and the Board believes the medium-term
outlook for all the Group's markets is positive. Trading since 1 May 2022 is
in line with the Board's expectations."
Financial highlights
2022 2021
£m £m
Revenue 95.2 79.0
Adjusted underlying EBITDA* 25.7 23.0
Reported profit before tax 15.1 16.6
Adjusted Total EPS (pence)** 7.57 7.11
Basic EPS (pence) 5.35 6.06
Total dividend relating to year (pence) 4.3 4.1
Net cash 18.1 16.4
· £95.2 million revenue (2021: £79.0 million) an increase of 21%:
11% organic, 10% inorganic.
· Adjusted underlying EBITDA* rose by 12% to £25.7 million (2021:
£23 million).
· Net cash of £18.1 million. Cash of £24.9 million less a balance
remaining on a term loan of £6.8 million (2021: £24.4 million cash less
structured debt of £8 million) after:
o paying down all except £1.3 million of IPO liabilities relating to
Cessation profits owed to Partners and related tax liabilities. As at May 2022
all Partner IPO liabilities have been repaid.
o acquiring one business.
o the Group also has an undrawn revolving credit facility ("RCF") of £10
million.
· £1.2 million average revenue per Partner as at year end (2021:
£1.1 million).
· £15.1 million reported Profit Before Tax for the year (2021:
£16.6 million).
· Total dividends of 4.3p relating to FY2022 (2021: 4.1p), made up
of three Interim dividends of 0.8p per eligible Ordinary Share and a final
dividend of 1.9p per eligible Ordinary Share for the year ended 30 April 2022
recommended by the Board.
* Adjusted Underlying Earnings Before Interest Tax Depreciation and
Amortisation (EBITDA) excludes share based payment expenses that arises from
a) the Employee Incentive Plan (EIP) funded on IPO and b) deemed remuneration
amortisation linked to acquisitions. See table in the Financial Review
** Earnings adjusted by adding back share based payments and related deferred
tax. Earnings per total weighted shares in issue. See note 11 for more
details.
Operational highlights
· Delivering on our strategy to achieve both organic and inorganic
growth.
· 15% increase in FRP team size, supporting ongoing growth.
o The FRP team grew by 66 year on year to 504 excluding consultants
(2021: 438).
o Growth was driven by demand-led lateral hiring and one acquisition. At
30 April 2022 the Group had 80 Partners (2021: 73), 317 other fee earners
(2021: 277) and 107 support staff (2021: 88).
o At year end FRP's UK footprint covers 26 locations (2021: 22).
· Restructuring team again the most active in the administration
appointment market
o Market Share in the number of FRP Administration appointments was
consistent on an underlying basis at 13%, in a subdued Administrations market.
· FRP Corporate Finance has grown its market share to rank as the
12th most active financial adviser in the UK M&A market
o The Corporate Finance and Debt Advisory teams were involved in 99
successful transactions with an
aggregate deal value of £3 billion and £1.3 billion of debt raised.
o Nationally the Corporate Finance and Debt Advisory teams now comprises 73
fee earners (including 21 Partners) across 10 locations.
· The Group has been progressing projects to improve operational
efficiencies and risk management, which include:
o The rollout of four new systems: a new CRM system, a new HR system, a
Document Management System and an upgraded time recording system.
o Adopting a new Enterprise Risk Management (ERM) framework, which has
enabled ISO 31000 certification in July 2022.
Post balance sheet events
· In May 2022 the final £1.3 million payment of the IPO liability
relating to the Cessation profits owed to Partners was paid down.
· On 4 May 2022 393,700 new ordinary shares were issued as part of the
acquisition of BridgeShield Asset Management Limited.
· In June 2022, the company executed a secondary placing and given the
demand from investors, also raised an additional £7.5 million gross through
the issue of new shares. Partner shareholders were invited to sell 20% of
their holding in return for signing an extended lock-in to June 2024. This has
enabled us to introduce new institutional shareholders onto the share register
and further bolster our strong balance sheet as we continue to target
acquisitions. Currently 48.6% of the Group's shareholder base is now subject
to lock-in arrangements, including the Group Employee Benefit Trust (10.8%).
· On 21 June 2022 4,412,176 ordinary shares were transferred to the
Employee Benefit Trust for nil consideration, from a former Partner of the
Group.
· The Board recommends a final dividend of 1.9p per eligible ordinary
share for the financial year ended 30 April 2022. Subject to approval by
shareholders, the final dividend will be paid on 21 October 2022 to
shareholders on the Company's register at close of business on 23 September
2022. If the final dividend is approved, the total dividends declared by the
Company relating to the financial year ended 30 April 2022 will be 4.3p per
eligible ordinary share.
The information contained within this announcement is deemed by the Group to
constitute inside information under the Market Abuse Regulations No. 596/2014.
Management will host a presentation for analysts this morning at 09:30am, for
details, please contact FRP@mhpc.com.
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) 20 3128 8570
FRP@mhpc.com (mailto:FRP@mhpc.com)
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
Chairman's report
Overview
Since our IPO in March 2020, both FRP and the business community at large have
wrestled with the challenges of operating in a global pandemic and
increasingly volatile economic environment. Few had the ability to revert to a
well-thumbed playbook and for most it was a case of needing to show clear and
decisive leadership, coupled with flexibility and responsiveness. It is
against this background that I am delighted to report on another year of
excellent progress for FRP. In achieving this, I am hugely appreciative and
proud of the commitment, professionalism and dedication of our FRP colleagues,
who continued to focus on the needs of our clients in an ever-changing
environment.
The UK restructuring market during this period has remained subdued. For much
of the pandemic government support measures created liquidity, enabling
businesses to manage through the crisis. However, for a period following the
removal of the UK Government support measures, the expected influx of
corporate failures did not occur as lenders, Government forbearance and
available liquidity continued to provide a lifeline for many businesses.
This artificially low level of insolvency appointments started to increase
during the second half of calendar 2021 and into 2022, driven by an increase
in creditors voluntary liquidations ("CVLs"). The Administration market is one
of FRP's key areas of focus, as it enables us to work with slightly larger
businesses, where we can deploy the wide range of skill sets contained across
the FRP national network. Here, as expected, the increased activity has been
slower to return, although this market is now starting to show clear signs of
returning to growth. Notwithstanding this, we are pleased to be able to report
we maintained our administration market share during the year. If business
leaders thought better times were returning as the pandemic's threat receded,
then sadly they were disappointed as new challenges arose. These included
supply chain disruption, energy cost increases, labour shortages, rising
inflation and interest rates, all emerging at the same time as war on the
doorstep of Europe creating further turmoil. It is therefore unsurprising that
following the removal of UK government support measures and the onset of
serious headwinds facing UK corporates, the Group has seen an increase in the
level of enquiries for restructuring services in recent months. In May and
June 2022 the administration appointments show this market is up on prior year
but still below pre-pandemic 2019 levels.
Despite challenging trading conditions for certain parts of the economy, FRP
Corporate Finance had a busy and successful year, significantly growing its
market share to rank as the 12th most active financial adviser in the UK
M&A market. We have invested in this service line over the last couple of
years, both organically and through acquisition. Within the UK mid-market
arena there continues to be strong liquidity despite softening in the public
markets. The opportunity for corporate M&A occurs across all economic
cycles and the FRP team is available to help more clients reach their
strategic ambitions. The private equity funds have significant sums of
uninvested capital available, which they are always looking to put to work at
the right price, that reflects the prevalent market outlook. Debt Advisory,
which also works in similar markets to both Restructuring and Corporate
Finance, is also well placed to support businesses in the more challenging
environment over the coming months. Our developing pillars, Pensions
Advisory and Forensic Services continue to be important cogs in ensuring that
we can offer a full range of advisory services to our introducer base and
their clients. Connecting our five specialist service pillars across our
national office network where we can, remains core to our operating strategy.
Continued profitable growth
We are pleased with the levels of growth during the year, with revenues of
£95.2 million, up 21% from the previous year (2021: £79.0 million). The
growth was driven by organic (11%), underpinned by the support offered on some
larger projects, with 10% coming from the acquisitions. Following an
acquisition we treat the first 12 months contribution to the Group as
inorganic, month 13 onwards becomes organic.
Adjusted underlying EBITDA of £25.7 million grew by 12% from the previous
year (2021: £23.0 million). Reported EBITDA was £17.7 million (2021: £18.4
million). During the year we were pleased to welcome 66 new colleagues and the
overall headcount grew 15% in the year, to 504 (2021: 438). In addition, the
Partner cohort expanded by 7, to 80.
Strong balance sheet
The Group's balance sheet remains strong with net cash balances at 30 April
2022 of £18.1 million (2021: £16.4 million), consisting of gross cash of
£24.9 million less a balance remaining on a term loan of £6.8 million. The
Group also has an undrawn revolving credit facility ("RCF") of £10 million
with Barclays Bank.
Our balance sheet was strengthened further post period end, with the
successful raising of £7.5 million gross through a significantly
oversubscribed placing of new shares. I would like to both welcome and thank
our new and existing shareholders who participated in the Placing and look
forward to continuing on our growth journey with them.
Shortly after year end the Group repaid all IPO liabilities due to Partners,
with a final payment of £1.3 million in May 2022. Net cash of £18.1 million
(2021: £16.4 million), an undrawn £10 million RCF, the recent placing
raising £7.5 million and the ability to issue further equity, gives the Group
sufficient options to act as acquisition opportunities arise, subject to our
selective criteria of cultural fit, strategic fit and mutually acceptable
transaction economics.
Strategy
Our strategy remains to seek steady and sustainable growth through organic
initiatives and selective acquisition opportunities. We are delighted to
welcome the team from BridgeShield Asset Management Limited which we acquired
in April 2022 as well as colleagues in a further four new locations, bringing
our office footprint to 26 locations. The Group explored several acquisition
opportunities where we did not transact due to our highly selective approach
of cultural fit, strategic fit, and acceptable deal economics. We continue to
explore opportunities nationally across each of our five service pillars.
Further details are set out in the Strategic Report in FRP's Annual Report
& Accounts.
Dividend
The dividend policy of the Group from 2021 is to pay dividends quarterly. The
anticipated dividend pay-out ratio is c.70% of the Group's reported Profit
After Tax, to eligible shareholders.
The FRP Group Employee Benefit Trust which was seeded by Partners on IPO and
holds shares backing employee options, has waived its right to dividends and
the corresponding amount was retained by the Group. Once the employee shares
vest, on or after 6 March 2023, these shares will then attract dividend
rights.
The Board recommends a final dividend of 1.9p per eligible ordinary share for
the financial year ended 30 April 2022. Subject to approval by shareholders,
the final dividend will be paid on 21 October 2022 to shareholders on the
Company's register at close of business on 23 September 2022. If the final
dividend is approved, the total dividends paid by the Company relating to the
financial year ended 30 April 2022 will be 4.3p per eligible ordinary share
(2021: 4.1p).
Robust corporate governance
The Board firmly believes that a robust governance structure is appropriate to
optimise decision making for the business and its wider stakeholders. To
support this, FRP adopted the Quoted Companies Alliance ("QCA") Corporate
Governance Code in 2020 and you can find more information on our governance
arrangements in the Corporate Governance Statement on pages 37 to 40 of the
Group's Annual Report & Accounts. Further information on our Corporate
Governance structure is also available on our website at
https://www.frpadvisory.com/investors/corporate-governance/.
Greater focus is being placed on our Environmental, Social and Governance
responsibilities and we have committed to the Group being carbon neutral by
2030.
Our people
As a people business, FRP recognises the importance of keeping all colleagues
motivated, engaged and incentivised to perform at their best. We work hard to
retain our friendly, collaborative, entrepreneurial and meritocratic culture.
The Board were delighted to implement an Employee Incentive Plan in 2020. This
enabled granting employees at IPO options over FRP shares which were backed
1:1 by FRP shares in issue and held within an Employee Benefit Trust (EBT).
Employees were granted options subject to their service, which become
exercisable 3 years from IPO. As the EBT had headroom and the ability to be
replenished if IPO Partners left, the Board has been able to make additional
awards to new joiners (including Partners) since IPO to ensure colleagues have
an ownership stake (including indirectly via options) in the business.
We believe that we are becoming an increasingly attractive destination for
qualified and skilled people, with our regional office network and strong
culture offering considerable appeal in the marketplace. Retaining and
developing our team in a world where the competition for talent will become
more intense is a key priority and greater investment in this area will be
made in the coming years.
Annual General Meeting
The Company's Annual General Meeting will be held on 15th September 2022. The
Notice of Annual General Meeting will be posted in due course to those
shareholders who opted to receive hard copy communications and a copy will
also be made available on our website at
https://www.frpadvisory.com/investors/financials-documents/.
Looking ahead
Despite the negative and uncertain outlook being faced currently by the UK
economy, I am positive that FRP's relevant and collective skill set remains
highly sought after by our clients and advisers. Although we have only been
listed for just over two years, FRP has been in existence as an independent
business for 12 years and during this time has seen many changes in the
economic landscape and has flexed its business model accordingly to maximise
its competitive advantage. As a result, I remain confident in our ability to
both navigate uncertain times and indeed deploy our considerable expertise
exactly where it is needed. Current year trading reflects this and is in line
with expectation. We are grateful for the trust that our clients continue to
demonstrate in us and once again thank all of our colleagues without whom our
success would not be possible.
Nigel Guy
Non-Executive Chairman
22 July 2022
Chief Executive Officer's report
We have achieved another strong set of results by staying focused on doing the
basics well and giving clients honest, clear and considered advice.
Resilient and diversified business
With roots in restructuring, FRP has now evolved into a leading business
advisory firm with specialists supporting businesses throughout the corporate
lifecycle across our five complementary service pillars.
The five service pillars are: Corporate Finance, Debt Advisory, Forensic
Services, Pensions Advisory and Restructuring Advisory. We specialise in
finding strategic solutions to a range of situations for clients of all sizes,
including personal clients, SME's, our core mid-market and high-profile more
complex, appointments.
We believe our agile, collaborative and entrepreneurial approach sets us apart
from our peers.
Selective acquisitions, in line with our strategy
Our focus is organic growth, supplemented with selective acquisitions that
meet our strict criteria of:
· A cultural fit,
· A strategic fit, and
· Mutually acceptable transaction economics.
The acquisition of BridgeShield Asset Management Limited on 28 April 2022
expands our service offering to cover Property Asset Management services to
specialist lenders nationally. The firms' two Directors, Ben Hubbard and
Nick McAuliffe, joined FRP as Partners. The team, including three colleagues
and two consultants, are based at FRP Leigh-on-Sea.
Our strong balance sheet gives us the flexibility to move quickly should
further acquisition opportunities arise.
Continued growth in UK footprint and team
At 30 April 2022, FRP had 26 offices and 504 colleagues, excluding
consultants. The team grew 15% or by 66 colleagues year on year (2021: 438).
Highlights were:
· In October 2021 we opened a new office in Cambridge, led by a new
lateral Partner hire, Dan Bowtell, giving us a wider footprint in East Anglia.
· In November 2021 we opened a new office in Glasgow, comprising
two Partners Michelle Elliot and Stuart Robb, and 12 colleagues. All three of
our Scottish offices now share business and market intelligence, giving us
greater visibility and impact in their localities.
· In March 2022 we opened an office in Southampton with the
appointment of a new Partner, Sandy Kinninmonth.
· In April 2022, we extended our footprint in the North East, with
a new office in Sunderland.
· Also in April 2022, we acquired BridgeShield Asset Management
Limited with Nick McAuliffe and Ben Hubbard joining FRP as Partners. FRP
Leigh-on-Sea is a second Essex location alongside FRP Brentwood.
Strong trading results
FRP's revenue grew 21% year on-year to £95.2 million (2021: £79.0 million).
11% was organic, inorganic growth was 10%. Following an acquisition we treat
the first 12 months contribution to the Group as inorganic, month 13 onwards
becomes organic. Adjusted underlying EBITDA grew 12% year-on-year to £25.7
million (2021: £23.0 million). We maintain a focus on cost control, whilst
modestly investing where necessary to continue sustainable profitable growth.
On a reported basis, EBITDA was £17.7 million (2021: £18.4 million), with
the decline due to an increase in non-cash share based payment charges.
Across all offices there is a constant focus on accurate monthly unbilled
revenue (work in progress, WIP) valuation and managing cash collections. I am
pleased to report that after completing one acquisition in this Financial
year, we closed the year with net cash of £18.1 million (2021: £16.4
million). I am also pleased to report that in May 2022 all IPO liabilities to
Partners (and HMRC) have now been repaid.
Restructuring Market
Significant government support measures were made available to both sound and
struggling businesses alike during the pandemic, which have continued to
impact the more complex Administration market. Despite this, FRP's
Restructuring team had another strong year.
The higher volume and typically more straightforward liquidation market
(including Company Voluntary Liquidation's ("CVLs") and Compulsory
Liquidations) increased by 68% in our financial year, however the more complex
Administration market, where FRP are particularly active, declined by 22%
year-on-year. Despite this, FRP's Administration market share, by number of
appointments, was consistent year-on-year on an underlying basis at 13%.
(Source: London and Regional Gazettes). We continued to serve the full range
of UK clients across all sectors, including personal clients and SMEs, along
with the core mid-market and high-profile appointments.
UK M&A Market
In the financial year, FRP Corporate Finance was launched, which integrated
the existing Corporate Finance team with the JDC and Spectrum acquisitions in
the prior year. The Corporate Finance team was involved in 99 successful
transactions with an aggregate deal value of £3 billion and £1.3 billion of
debt raised. This level of activity gives FRP Corporate Finance a 1% market
share of the UK M&A market, by number of appointments (Source: Experian).
The average deal value of £30 million places FRP Corporate Finance in the
heart of its target SME market, with deals ranging in value from £3 million
to £150 million.
FRP Corporate Finance remains strong in its commitment to the private equity
community with over half of the deals in the period involving private equity:
including buy-side, sell-side and debt advisory transactions.
· Notable FRP Corporate Finance transactions in H2 2022
included:
o Sell-side adviser to Emma's Diary, an online communication platform for
pregnant women and new mothers, in its sale to Everyday Health Group Pregnancy
& Parenting.
o Sell-side adviser to Mr Fothergill's Seeds, a supplier of garden products,
in a £100 million+ buyout backed by Harwood Private Capital.
o Debt adviser on the £357.5 million ABL facility to help fund the
acquisition of McKesson UK, the parent company of Lloyds Pharmacy Group, by
AURELIUS.
o Sell-side adviser to Ludlow Healthcare Group, a specialist care provider,
to Holmleigh Care Group.
o Sell-side adviser to SSQ, a legal recruitment consultancy, to an Employee
Ownership Trust.
· FRP's Corporate Finance and Debt Advisory teams now comprise 76
fee earners (including 21 Partners) across 10 locations and we have seen a
positive impact on revenue from our FY2021 acquisitions.
Forensic Services and Pensions Advisory Markets
The Forensic Services team continue to be engaged on a variety of complex
disputes and investigations, many of which are confidential in nature. The
last year has seen the team grow their footprint in the Midlands and in East
Anglia. Over the next year or so, more international opportunities are
expected, as we continue to integrate this service with 8 International, a
global advisory organisation that was set up to meet a growing demand for
dedicated financial and operational support from businesses with an
international footprint.
The Pensions Advisory team has continued to provide services to scheme
trustees and sponsoring employers navigating through the ever changing
regulatory landscape. The implementation of the Pension Schemes Act 2021
legislation continues to bring a new dynamic to stakeholder considerations on
corporate transactions and the team have been working with their colleagues in
Corporate Finance and Debt Advisory to support their clients. Since last
reporting, the Pensions Advisory team have assisted clients to complete
transactions, agree significant forbearance to support sponsoring employers'
strategies but equally, particularly in the food and on-line retail sectors,
advised trustees in securing scheme buy-out obligations.
Empowering our outstanding people
As a professional services business, we understand that our people are central
to our success and our most valuable asset. As well as offering competitive
financial rewards, we offer opportunities for our team members to grow within
the business and reach their full potential.
During FY2022 the Group conducted a cultural survey with colleagues. Overall,
the feedback was very positive with colleagues feeling the internal culture
was excellent. However, we acknowledge that there will always be room for
improvement and the Board is constantly seeking feedback on ways the business
can develop. Here are a few things that were implemented in FY2022:
· Hired a specialist Learning & Development Senior Manager as
we continue to invest in this area, to support the continued development of
our nationwide team.
· Rolled out Ideadrop - an innovation platform for colleagues to
share ideas
· Established an Environment, Social and Governance ("ESG")
committee
· Continued support of colleagues in acquiring professional
qualifications and supporting their career aspirations, including for
promising young stars to become future Directors and Partners of the business
We work hard to attract and retain highly skilled professionals by creating a
rewarding, high-performance environment. We believe highly engaged colleagues
deliver excellent client service and results, and in turn, strengthen our
reputation in the market.
I am immensely grateful for all the hard work and commitment of all
colleagues, who contribute so much to the Group's success.
Outlook
FRP continues to demonstrate resilience, with a track record of growth
regardless of the economic conditions. At FRP our five service pillars work
together to provide solutions that achieve the best possible outcomes; while
colleagues are able to work seamlessly and service clients remotely we all
appreciate the ongoing value of working together physically with clients and
colleagues. As a UK focused business, the Russia/Ukraine conflict does not
have a material impact on FRP's operations.
The medium term outlook for our key markets remains positive. Our Corporate
Finance team have an excellent pipeline to help clients realise their
strategic ambitions. Despite softening in the capital markets, mid-market
M&A activity levels are strong with institutional lenders and private
equity well financed with significant capital to deploy; plus there is also
considerable overseas interest in UK assets. Our Restructuring team are
well-positioned to service the expected increase in demand stemming from the
increasing challenges and disruption emerging in the economy. However,
uncertainties still remain over how long the available corporate 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.
The Group has a strong balance sheet and a network of offices that are
connected to ensure each project is serviced by the right team of specialists
from across the UK. In the current financial year, we plan to continue making
progress in areas which we can control to deliver our strategy of sustainable
profitable growth.
Current year trading to date is in line with Board expectation.
Geoff Rowley
Chief Executive Officer
22 July 2022
Financial review
The following is an extract from the Strategic Report, which can be found in
the Company's Annual Report.
Financial review
Revenue
FRP's revenue grew 21% year on-year to £95.2 million (2021: £79.0 million).
11% was organic growth and 10% inorganic, defined as an acquisition's first 12
months contribution to the Group. Inorganic growth was mainly due to the
Corporate Finance businesses acquired in the prior year. Adjusted underlying
EBITDA grew 12% year-on-year to £25.7 million (2021: £23.0 million). We
continue to maintain a focus on cost control while modestly investing, to
continue executing on delivering sustainable profitable growth.
Adjusted underlying Earnings Before Interest Tax Depreciation and Amortisation
(EBITDA)
The Group grew profitably with adjusted underlying EBITDA* rising by 21% to
£25.7 million (2021: £23.0 million).
£m 2022 2021
Reported profit before tax 15.1 16.6
Add back depreciation, amortisation and interest 2.6 1.8
Reported EBITDA 17.7 18.4
Add share based payment expense relating to the Employee Incentive Plan (EIP) 5.4 3.7
Add share based payment expense - Deemed remuneration 2.6 0.9
Adjusted underlying EBITDA* 25.7 23.0
*Adjusted underlying EBITDA excludes any exceptional costs and share based
payment expenses that arises from a) the Employee Incentive Plan (EIP) funded
on IPO and b) deemed remuneration amortisation linked to acquisitions.
FRP team growth
The FRP team grew by 15% through both acquisition and demand-led lateral
hiring and we opened four new offices in Cambridge, Glasgow, Southampton and
Sunderland and a second Essex location in Leigh-on-Sea, following the
acquisition of BridgeShield Asset Management Limited.
The Group started the financial year with 438 colleagues, (excluding
consultants) operating out of 22 offices. By 30 April 2022, this number had
increased to 504 (excluding consultants), operating out of 26 offices, as set
out in the table below:
Team FY 2022 FY 2021
Partners 80 73
Colleagues - fee earners 317 277
Total fee earners 397 350
Colleagues - support 107 88
Total (exc Consultants) 504 438
Balance sheet and cash flow
The Group's balance sheet remains strong with an unaudited net cash balance as
at 30 April 2022 of £18.1 million (2021: £16.4 million), consisting of gross
cash of £24.9 million less a balance remaining on a term loan of £6.8
million. The Group also has an undrawn RCF of £10 million with Barclays
Bank.
The Group has repaid all IPO liabilities due to Partners, after a final
payment of £1.3 million was made in May 2022.
Dividend
Given the trading performance and strong balance sheet, the Board intends to
propose a final dividend, in line with its stated dividend policy to pay
dividends quarterly. The expected dividend pay-out ratio is 70% of the Group's
reported Profit After Tax, to eligible shareholders.
The FRP Staff Employee Benefit Trust which was seeded by Partners on IPO and
which holds shares that back employee options, has waived its right to
dividends and the corresponding amount was retained by the Group. Once the
employee shares vest, on or after 6 March 2023, these shares will then attract
dividend rights. The Board recommends a final dividend of 1.9p per eligible
ordinary share for the financial year ended 30 April 2022. Subject to approval
by shareholders, the final dividend will be paid on 21 October 2022 to
shareholders on the Company's register at close of business on 23 September
2022. If the final dividend is approved, the total dividends paid by the
Company relating to the financial year ended 30 April 2022 will be 4.3p per
eligible ordinary share (2021: 4.1p).
The Group have changed their dividend recognition policy. Previously the Group
recognised interim dividends at the point when the Board declared publicly,
however going forward the Group will recognise interim dividends when paid.
The impact of this change results in the de-recognition of a £1.8 million
interim divided liability in FY2021 as it was paid in FY2022, with a
corresponding increase in net assets and retained earnings of the same
amount. There was no impact on the Group's profit or cash flows for the year
ended 30 April 2021.
Consolidated statement of comprehensive income
For the year ended 30 April 2022
Year Ended Year Ended
30 April 2022 30 April 2021
Notes £'000 £'000
Revenue 95,156 78,987
Personnel Costs 7 (58,796) (46,572)
Depreciation and amortisation (2,131) (1,551)
Other operating expenses (18,618) (14,027)
Operating profit 6 15,611 16,836
Finance costs 9 (495) (233)
Profit before tax 15,116 16,604
Taxation 10 (3,205) (2,993)
Profit and total comprehensive income for the year attributable to the owners 11,911 13,611
of the Group
Earnings per share (in pence)
Total 11 4.90 5.69
Basic 11 5.35 6.06
Diluted 11 5.04 5.81
All results derive from continuing operations.
The notes form part of these financial statements.
Consolidated statement of financial position
As at 30 April 2022
As at As at
30 April 2022 30 April 2021
(restated)
Notes £'000 £'000
Non-current assets
Goodwill 12 10,200 9,600
Other intangible assets 12 727 794
Property, plant and equipment 13 2,847 2,241
Right of use asset 13 6,279 3,527
Deferred tax asset 18 2,431 925
Total non-current assets 22,484 17,087
Current assets
Trade and other receivables 14 46,063 42,373
Cash and cash equivalents 15 24,924 24,383
Total current assets 70,987 66,756
Total assets 93,471 83,843
Current liabilities
Trade and other payables 16 30,159 32,888
Loans and borrowings 17 2,000 1,600
Lease liabilities 17 1,365 872
Total current liabilities 33,524 35,360
Non-current liabilities
Other creditors 16 5,716 5,531
Loans and borrowings 17 4,800 6,400
Lease liabilities 17 4,913 2,768
Total non-current liabilities 15,429 14,699
Total liabilities 48,953 50,059
Net assets 44,518 33,784
Equity
Share capital 20 243 243
Share premium 25 23,730 23,730
Treasury shares reserve 25 (23) (19)
Share based payment reserve 25 (1,139) (4,135)
Merger reserve 25 1,287 1,287
Retained earnings 25 20,420 12,678
Shareholders' funds 44,518 33,784
Approved by the Board and authorised for issue on 22 July 2022.
Jeremy French Gavin Jones
Director
Director
Company Registration No. 12315862
Consolidated statement of changes in equity
As at 30 April 2022
Called up share capital Share premium account Treasury share reserve Share based payment reserve Merger reserve Retained earnings Total equity
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 30 April 2020 238 18,975 (19) 361 (90) 1,037 20,502
Profit and total comprehensive income for the year - - - - - 13,611 13,611
Other movements - - - - - 20 20
Issue of share capital 5 4,755 - - 1,377 - 6,137
Dividends (restated) - - - - - (4,990) (4,990)
Share based payment expenses - - - 3,700 - - 3,700
Deemed remuneration - - - (5,196) - - (5,196)
Transfer to retained earnings - - - (3,000) - 3,000 -
Balance at 30 April 2021 (restated) 243 23,730 (19) (4,135) 1,287 12,678 33,784
Profit and total comprehensive income for the year - - - - - 11,911 11,911
Other movements - - (4) - - 4 -
Dividends - - - - - (9,173) (9,173)
Share based payment expenses - - - 5,402 - - 5,402
Unwind of deemed remuneration - - - 2,594 - - 2,594
Transfer to retained earnings - - - (5,000) - 5,000 -
Balance at 30 April 2022 243 23,730 (23) (1,139) 1,287 20,420 44,518
Consolidated statement of cash flows
As at 30 April 2022
Year Ended Year Ended
30 April 2022 30 April 2021
£'000 £'000
Cash flows from operating activities
Profit before taxation 15,116 16,604
Depreciation, amortisation and impairment (non cash) 2,131 1,551
Share based payments: employee options 5,402 3,700
Share based payments: deemed remuneration 2,594 943
Net finance expenses 495 232
Increase in trade and other receivables (3,571) (2,833)
Decrease in trade and other payables (2,431) (4,982)
Tax paid (5,462) (4,447)
Net cash from operating activities 14,274 10,768
Cash flows from investing activities
Purchase of tangible assets (1,398) (1,114)
Acquisition of subsidiaries less cash acquired (365) (10,599)
Acquisition of trade and assets - (1,610)
Net cash used in investing activities (1,763) (13,322)
Cash flows from financing activities
Proceeds from share sales - 3,760
Dividend (9,173) (4,990)
Principal elements of lease payments (1,165) (911)
Drawdown of new loans - 8,000
Repayment of loans and borrowings (1,200) -
Interest paid (432) (233)
Net cash (used in) / generated from financing activities (11,970) 5,626
Net increase in cash and cash equivalents 541 3,072
Cash and cash equivalents at the beginning of the year 24,383 21,311
Cash and cash equivalents at the end of the year 24,924 24,383
Notes to the financial statements
For the year ended 30 April 2022
1. General information
FRP Advisory Group plc (the "Company") and its subsidiaries' (together "the
Group") principal activities include the provision of specialist business
advisory services for a broad range of clients, including restructuring and
insolvency services, corporate finance, debt advisory, forensic services and
pensions advisory.
The Company is a public company limited by shares registered in England and
Wales and domiciled in the UK. The address of the registered office is 110
Cannon Street, London, EC4N 6EU and the company number is 12315862.
2. Significant accounting policies
The following principal accounting policies have been used consistently in the
preparation of the consolidated financial statements:
2.1 Basis of preparation
These financial statements have been prepared in accordance with UK-adopted
International Accounting Standards ('IFRS') and with the requirements of the
Companies Act 2006 as applicable to companies reporting under those standards.
The financial statements are prepared in sterling, which is the
presentational currency of the Group. Amounts in these financial statements
are rounded to the nearest £'000, unless otherwise stated.
2.2 Historic cost convention
The financial statements have been prepared under the historical cost
convention.
2.3 Basis of consolidation
The financial statements incorporate the results of FRP Advisory Group plc
and all of its subsidiary undertakings as at 30 April 2022.
FRP Advisory Trading Limited has eight wholly owned subsidiaries, FRP Debt
Advisory Limited, FRP Corporate Finance Limited, Litmus Advisory Limited,
Abbott Fielding Limited, JDC Accountants & Business Advisors Limited, JDC
Holdings Limited, Spectrum Corporate Finance Limited, and BridgeShield Asset
Management Limited, as well as being a member of FRP Advisory Services LLP and
Apex Debt Solutions LLP.
During the year the Group completed one acquisition. The assets, liabilities
and entity acquired have been consolidated within these Financial Statements,
in accordance with IFRS 3. The newly acquired entity is BridgeShield Asset
Management Limited.
2.4 New and amended standards adopted by the Group
The Group has applied the following new standards and interpretations for the
first time for the annual reporting period ending 30 April 2022:
· IFRS 9 Financial Instruments, IAS 39 Financial Instruments:
Recognition and Measurement, IFRS 7 Financial Instruments: Disclosures, IFRS 4
Insurance Contracts and IFRS 16 Leases (Amendments): Interest Rate Benchmark
Reform - Phase 2
· IFRS 4 Insurance Contracts (Amendment): Extension of the
Temporary Exemption from Applying IFRS 9
· IFRS 16 Leases (Amendment): Covid-19-related Rent Concessions
Beyond 30 June 2021
The adoption of the standards and interpretations listed above has not led to
any changes to the Group's accounting policies or had any material impact on
the financial position or performance of the Group.
2.5 Standards issued but not yet effective
At the date of authorisation of these financial statements, the following
standards and interpretations relevant to the Group and which have not been
applied in the financial statements, were in issue but were not yet effective.
The Group's and Company's management have reviewed the application of the
amendments and have concluded that there is no expected material impact on the
Group and Company financial statements.
Standard Effective date, annual period beginning on or after
IAS 16 Property, Plant and Equipment (Amendment): Proceeds Before Intended Use 1 January 2022
IAS 37 Provisions, Contingent Liabilities and Contingent Assets: (Amendment): 1 January 2022
Onerous Contracts - Cost of Fulfilling a Contract
IFRS 3 Business Combinations (Amendment): Reference to the Conceptual 1 January 2022
Framework
Annual Improvements to IFRSs (2018 - 2020 cycle) 1 January 2022
IAS 1 Presentation of Financial Statements (Amendment): Classification of 1 January 2023
Liabilities as Current or Non-current and Classification of Liabilities as
Current or Non-current - Deferral of Effective Date
IAS 1: Presentation of Financial Statements and IFRS Practice Statement 2 1 January 2023
Making Materiality Judgements (Amendment): Disclosure of accounting policies
IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors: 1 January 2023
Amendments in relation to the definition of accounting estimates
IAS 12 Income Taxes: Amendments in relation to deferred tax related to assets 1 January 2023
and liabilities arising from a single transaction
IFRS 17 Insurance Contracts and Amendments to IFRS 17 1 January 2023
IFRS 17 Insurance Contracts (Amendment): Initial Application of IFRS 17 and 1 January 2023
IFRS 9 - Comparative Information
2.6 Going concern
The business has been, and is currently, both profitable and cash generative.
It has consistently grown year on year for 12 years and has proved to be
resilient, growing in both periods of economic growth and recession.
At year end the Group had net cash of £18.1 million. The Group entered into
an £8 million structured term loan repayable over five years, during FY2021
and had £6.8 million outstanding at 30 April 2022. The Group also has
available an undrawn £10 million committed revolving credit facility ("RCF").
Ongoing operational cash generation and this cash balance mean we have
sufficient resources to both operate and move swiftly should acquisition
opportunities arise. As seen post year end, the Group also has the capacity to
raise funds through share issue, demonstrated with the £7.5 million raise as
part of a secondary placing transaction.
The quality of client service, strong referral network and barriers to enter
the market, together with the strong cash position, make the Board confident
that the company will continue to grow. In terms of diversification, offices
can adapt quickly to supporting each other and work on both higher value
assignments or higher volume, lower value jobs. Pensions Advisory, Forensic
Services, Corporate Finance and Debt Advisory can both support the
Restructuring Advisory offering and also earn fees autonomously.
Management have conducted sensitivity analysis by reducing revenue by over 50%
and separately decreasing margin by 75%: both scenarios show FRP to be in a
strong financial position with available cash resources. These sensitivities
represent extreme scenarios that are highly unlikely to occur.
In the unlikely event that the business had a significant slowdown in cash
collections the business has a number of further options available to preserve
cash.
FRP was able to operate seamlessly during the pandemic and is well placed to
manage future developments. As a UK focused business the Russia/Ukraine
conflict does not have a material impact on FRP's operations.
Having due consideration of the financial projections, the level of
structured debt and the available facilities, it is the opinion of the
Directors that the Group has adequate resources to continue in operation for a
period of at least 12 months from signing these financial statements and
therefore consider it appropriate to prepare the Financial Statements on the
going concern basis
2.7 Deemed Remuneration
Deemed remuneration arises during acquisitions, where an element of the
consideration has an equity component and is subject to a lock-in period, in
order to retain the fee earners post acquisition. This equity compensation is
not treated as part of the cost of acquisition but is reflected in the share
based payment reserve and amortised through the statement of comprehensive
income as a share-based payment staff cost, over the lock-in period.
2.8 Subsidiaries
Subsidiaries are all entities (including structured entities) over which the
Group has control. The Group controls an entity when the Group is exposed to,
or has rights to, variable returns from its involvement with the entity and
has the ability to affect those returns through its power to direct the
activities of the entity.
The financial statements of trading subsidiaries are included in the
consolidated financial statements from the date control is achieved until the
date that control ceases. The accounting period of the subsidiaries are
changed when necessary to align them with that of the Group.
2.9 Transactions eliminated on consolidation
Intra-Group balances, and any gains and losses or income and expenses arising
from intra-Group transactions, are eliminated in preparing the historical
financial information. Losses are eliminated in the same way as gains, but
only to the extent that there is no evidence of impairment.
2.10 Foreign currencies
Transactions in currencies other than pounds sterling are recorded at the
rates of exchange prevailing at the dates of transactions. At each reporting
end date, monetary assets and liabilities that are denominated in foreign
currencies are retranslated at the rates prevailing on the reporting end date.
Gains and losses arising on translation are included in the income statement
for the period.
2.11 Revenue recognition and unbilled revenue
Revenue is recognised when control of a service or product provided by the
Group is transferred to the customer, in line with the Group's performance
obligations in the contract, and at an amount reflecting the consideration
the Group expects to receive in exchange for the provision of services.
Revenue from contracts with customers is recognised when the Group satisfies
a performance obligation for a contracted service. The Group applies the
following five step model:
· Identify the contract with a customer;
· Identify the individual performance obligations within the
contract;
· Determine the transaction price;
· Allocate the price to the performance obligations; and
· Recognise revenue as the performance obligations are fulfilled.
The Group considers the terms of engagement, either through court appointment
or otherwise agreed, issued to customers to be contracts.
There are no significant judgements required in determining the Group's
performance obligations in its contracts as the significant majority of
contracts contain only one performance obligation.
Transaction price is determined by agreed hourly rates or a fixed fee stated
within the letters of engagement or court appointment. If the fee basis is
fixed or time based, the provisioning method is based on estimated
recoverability of the current unbilled revenue with reference to the billing
to date and future billing to be performed as a proportion of costs to date
and estimated costs to complete the contract.
Where work is contingent and not based on time-cost, fees are fully provided
until performance obligations are satisfied as at this point there is no risk
of a material reversal of revenue. Contingent work generally includes
investigations, corporate finance services, some forensic work, and other
assignments where the outcome is determined by either a judge, pre-trial
agreement or completion of a transaction. The Group adopts a prudent approach
in only recognising revenue on cases that have been resolved with all costs
incurred expensed in the relevant month.
The Group recognises revenue from the following activities:
· Insolvency and advisory services;
· Debt advisory services; and
· Corporate finance services.
Insolvency and advisory services
For the Group's formal insolvency appointments and other advisory engagements,
where remuneration is typically determined based on hours worked by
professional Partners and colleagues, the Group transfers control of its
services over time and recognises revenue over time if the Group:
· Provides services for which it has no alternative use or means of
deriving value; and
· Has an enforceable right to payment for its performance completed
to date, and for formal insolvency appointments has approval from creditors to
draw fees which will be paid from asset realisations.
Progress on each assignment is measured using an input method based on costs
incurred to date as a percentage of total anticipated costs.
In determining the amount of revenue and the related balance sheet items (such
as trade receivables, unbilled income and deferred income) to recognise in the
period, management is required to form a judgement on each individual contract
of the total expected fees and total anticipated costs. These estimates and
judgements may change over time as the engagement completes and this will be
recognised in the consolidated statement of comprehensive income in the period
in which the revision becomes known. These judgements are formed over a large
portfolio of contracts and are therefore unlikely to be individually material.
Invoices on formal insolvency appointments are generally raised having
achieved approval from creditors to draw fees. This is typically settled on a
timely basis from case funds. On advisory engagements, invoices are generally
raised in line with contract terms.
Where revenue is recognised in advance of the invoice being raised (in line
with the recognition criteria above) this is disclosed as unbilled revenue
within trade and other receivables.
Unbilled revenue
Unbilled revenue recognised by the Group falls into one of three categories:
insolvency & advisory services, corporate finance services and debt
advisory services.
When the Group is engaged to work on large and complex administration
assignments it can take longer to negotiate final fees with creditors and
therefore our appointment on these more complex cases can increase our
unbilled revenue and extend the cash conversion cycle. Within our sector
work in progress days (unbilled revenue) can typically range from five to
seven months.
Debt advisory services
Revenue will typically be recognised at a point in time following satisfaction
of the performance obligation(s) in the contract, at which point the Group is
typically entitled to invoice the customer, and payment will be due.
Corporate Finance services
Fees typically comprise a non-refundable retainer and a success fee based on a
fixed percentage of the transaction value. Non-refundable retainer fees are
recognised over the course of the contract during which the ongoing provision
of services, which vary by assignment, is delivered. The scope and value of
the retainer is agreed upon commencement and reviewed regularly over the
delivery period. Retainer fees are invoiced to the client and are payable in
the first three to four months. Success fees are deferred and recognised on
completion when unconditional contracts have been exchanged.
2.12 Goodwill
Goodwill is initially measured at cost (being the excess of the aggregate of
the consideration transferred and the amount recognised for non-controlling
interests and any previous interest held over the net identifiable assets
acquired and liabilities assumed). If the fair value of the net assets
acquired is in excess of the aggregate consideration transferred, the Group
re-assesses whether it has correctly identified all of the assets acquired
and all of the liabilities assumed and reviews the procedures used to measure
the amounts to be recognised at the acquisition date.
If the reassessment still results in an excess of the fair value of net assets
acquired over the aggregate consideration transferred, then the gain is
recognised in the income statement.
After initial recognition, goodwill is measured at cost less any accumulated
impairment losses. The goodwill is tested annually for impairment irrespective
of whether there is an indication of impairment. For the purpose of impairment
testing, goodwill acquired in a business combination is, from the acquisition
date, allocated to each of the Group's cash-generating units that are expected
to benefit from the combination, irrespective of whether other assets or
liabilities of the acquiree are assigned to those units.
2.13 Intangible assets other than goodwill
Intangible assets acquired separately from a business are recognised at cost
and are subsequently measured at cost less accumulated amortisation and
accumulated impairment losses. Intangible assets acquired on business
combinations are recognised separately from goodwill at the acquisition date
at the fair value.
Amortisation is recognised so as to write off the cost or valuation of assets
less their residual values over their useful lives, being 25% on a
straight-line basis for computer software, and 8% on a straight-line basis for
client lists.
2.14 Property, plant and equipment
Property, plant and equipment are stated at cost net of accumulated
depreciation and accumulated impairment losses.
Cost comprises purchase cost together with any incidental costs of
acquisition.
Depreciation is provided to write down the cost less the estimated residual
value of all tangible fixed assets by equal instalments over their estimated
useful economic lives on a straight-line basis. The following rates are
applied:
Computer equipment 25%
Fixtures and fittings 15%
Leasehold improvements Over the term of the lease
Right of use assets Over the term of the lease
Motor vehicles 25%
2.15 Financial instruments
The Group classifies financial instruments, or their component parts, on
initial recognition as a financial asset, a financial liability or an equity
instrument in accordance with the substance of the contractual arrangement.
Financial instruments are recognised on trade date when the Group becomes a
party to the contractual provisions of the instrument. Financial instruments
are recognised initially at fair value plus, in the case of a financial
instrument not at fair value through profit and loss, transaction costs that
are directly attributable to the acquisition or issue of the financial
instrument. Financial assets are derecognised when the contractual rights to
the cash flows from the financial asset expire, or when the financial asset
and substantially all the risks and rewards are transferred. A financial
liability is derecognised when it is extinguished, discharged, cancelled or
expires.
2.16 Non-derivative financial instruments
Non-derivative financial instruments comprise trade and other receivables,
cash and cash equivalents, loans and borrowings and trade and other payables.
All financial instruments held are classified as financial assets or
liabilities held as at amortised cost.
Trade and other receivables and Trade and other payables
Trade and other receivables are recognised initially at transaction price less
attributable transaction costs. Trade and other payables are recognised
initially at transaction price plus attributable transaction costs. Subsequent
to initial recognition they are measured at amortised cost using the effective
interest method, less any expected credit losses in the case of trade and
other receivables. If the arrangement constitutes a financing transaction,
for example if payment is deferred beyond normal business terms, then it is
measured at the present value of future payments discounted at a market rate
of interest for a similar debt instrument.
Interest bearing borrowings
Interest bearing borrowings are recognised initially at their fair value.
Subsequent to initial recognition, interest bearing borrowings are stated at
amortised cost using the effective interest method.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits. Bank
overdrafts that are repayable on demand and form an integral part of the
Group's cash management are included as a component of cash and cash
equivalents for the purpose only of the cash flow statement.
2.17 Impairment of tangible and intangible assets
At each reporting end date, the Group reviews the carrying amounts of its
tangible and intangible assets to determine whether there is any indication
that those assets have suffered an impairment loss. The impairment indicator
assessment applies to all assets including assets with indefinite useful
lives, and goodwill for which an impairment assessment is performed annually
regardless of whether an impairment indicator exists or not. If any such
indication exists, the recoverable amount of the asset is estimated in order
to determine the extent of the impairment loss (if any). Where it is not
possible to estimate the recoverable amount of an individual asset, the Group
estimates the recoverable amount of the cash-generating unit to which the
asset belongs.
Recoverable amount is the higher of fair value less costs to sell and value in
use. In assessing value in use, the estimated future cash flows are
discounted to their present value using a pre-tax discount rate that reflects
current market assessments of the time value of money and the risks specific
to the asset for which the estimates of future cash flows have not been
adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated
to be less than its carrying amount, the carrying amount of the asset (or
cash-generating unit) is reduced to its recoverable amount. Impairment losses
are recognised immediately in the consolidated statement of comprehensive
income.
Where an impairment loss subsequently reverses, the carrying amount of the
asset (or cash-generating unit) is increased to the revised estimate of its
recoverable amount, but so that the increased carrying amount does not exceed
the carrying amount that would have been determined had no impairment loss
been recognised for the asset (or cash-generating unit) in prior years. The
reversal of an impairment loss is recognised immediately in profit or loss.
Impairment of goodwill is not reversed.
2.18 Taxation
The tax expense represents the sum of the tax currently payable and deferred
tax.
Current tax
The tax currently payable is based on taxable profit for the year. Taxable
profit differs from net profit as reported in the income statement because
it excludes items of income or expense that are taxable or deductible in other
years and it further excludes items that are never taxable or deductible. The
company's liability for current tax is calculated using tax rates that have
been enacted or substantively enacted by the reporting end date.
Deferred tax
Deferred tax is the tax expected to be payable or recoverable on differences
between the carrying amounts of assets and liabilities in the financial
statements and the corresponding tax bases used in the computation of taxable
profit and is accounted for using the balance sheet liability method.
Deferred tax liabilities are generally recognised for all taxable temporary
differences and deferred tax assets are recognised to the extent that it is
probable that taxable profits will be available against which deductible
temporary differences can be utilised. Such assets and liabilities are not
recognised if the temporary difference arises from goodwill or from the
initial recognition (other than in a business combination) of other assets and
liabilities in a transaction that affects neither the tax profit nor the
accounting profit.
The carrying amount of deferred tax assets is reviewed at each balance sheet
date and reduced to the extent that it is no longer probable that sufficient
taxable profits will be available to allow all or part of the asset to be
recovered.
Deferred tax is calculated at the tax rates that are enacted or substantively
enacted when the liability is settled, or the asset is realised. Deferred tax
is charged or credited to the consolidated statement of comprehensive income
except when it relates to items charged or credited to equity, in which case
the deferred tax is also dealt with in equity.
Deferred tax assets and liabilities are offset when there is a legally
enforceable right to set off current tax assets against current tax
liabilities and when they relate to income taxes by the same taxation
authority and the Group intends to settle its current tax assets and
liabilities on a net basis.
2.19 Employee benefits
The Group operates defined contribution plans for its employees. A defined
contribution plan is a post-employment benefit plan under which the Group
pays fixed contributions into a separate entity and will have no legal or
constructive obligation to pay further amounts. Obligations for contributions
to defined contribution pension plans are recognised as an expense in the
periods during which services are rendered by employees.
Termination benefits are recognised immediately as an expense when the Group
is demonstrably committed to terminate the employment of an employee or to
provide termination benefits.
2.20 Provisions
A provision is recognised in the statement of financial position when the
Group has a present legal or constructive obligation as a result of a past
event, that can be reliably measured and it is probable that an outflow of
economic benefits will be required to settle the obligation. Provisions are
determined by discounting the expected future cashflows at a pre-tax rate
that reflects risks specific to the liability.
In common with comparable businesses, the Group is involved in a number of
disputes in the ordinary course of business which may give rise to claims.
Provision is made in the financial statements for all claims where costs are
likely to be incurred and represents the cost of defending and concluding
claims. The Group carries professional indemnity insurance and no separate
disclosure is made of the cost of claims covered by insurance as to do so
could seriously prejudice the position of the Group. There are currently no
provisions held at year end for legal claims.
2.21 Leases
The Group leases a number of properties in various locations around the UK
from which it operates.
All leases are accounted for by recognising a right of use asset and a lease
liability except for:
· Leases of low value assets; and
· Leases with a duration of twelve months or less.
In accordance with IFRS16, lease liabilities are measured at the present value
of the contractual payments due to the lessor over the lease term, with the
discount rate determined by reference to the rate inherent in the lease at the
commencement date.
Variable lease payments are only included in the measurement of the lease
liability if they depend on an index or rate. In such cases, the initial
measurement of the lease liability assumes the variable element will remain
unchanged throughout the lease term. Other variable lease payments are
expensed in the period to which they relate.
On initial recognition, the carrying value of the lease liability also
includes:
· Amounts expected to be payable under any residual value
guarantee;
· The exercise price of any purchase option granted in favour of
the Group if it is reasonably certain to assess that option;
· Any penalties payable for terminating the lease, if the term of
the lease has been estimated on the basis of termination option being
exercised.
Right of use assets are initially measured at the amount of the lease
liability, reduced for any lease incentives received, and increased for:
· Lease payments made at or before commencement of the lease;
· Initial direct costs incurred; and
· The amount of any provision recognised where the Group is
contractually required to dismantle, remove or restore the leased asset
(typically leasehold dilapidations).
Subsequent to initial measurement, lease liabilities increase as a result of
interest charged at a constant rate on the balance outstanding and are reduced
for lease payments made.
Right of use assets are depreciated on a straight-line basis over the
remaining term of the lease or over the remaining economic life of the asset
if, rarely, this is judged to be shorter than the lease term.
When the Group revises its estimate of the term of any lease (because, for
example, it re-assesses the probability of a lessee extension or termination
option being exercised), it adjusts the carrying amount of the lease liability
to reflect the payments to make over the revised term, which are discounted
at the same discount rate that applied on lease commencement. The carrying
value of lease liabilities is similarly revised when the variable element of
future lease payments dependent on a rate or index is revised. In both cases
an equivalent adjustment is made to the carrying value of the right of use
asset, with the revised carrying amount being depreciated over the remaining
(revised) lease term.
2.22 Financing income and expenses
Financing expenses comprise interest payable, finance charges on leases
recognised in profit or loss using the effective interest method, unwinding
of the discount on provisions, and net foreign exchange losses that are
recognised in the statement of comprehensive income.
Other interest receivable and similar income include interest receivable on
funds invested and net foreign exchange gains.
Interest income and interest payable are recognised in the statement of
comprehensive income as they accrue, using the effective interest method.
2.23 Share capital
Ordinary shares are classified as equity. Equity instruments issued by the
Company are recorded at the proceeds received, net of direct issue costs.
2.24 Share based payments
Equity settled share-based payments to employees and others providing similar
services are measured at the fair value of the equity instruments at the grant
date.
The fair value determined at the grant date of the equity settled share based
payments is expensed on a straight-line basis over the vesting period, based
on the Group's estimate of the number of equity instruments that will
eventually vest, with a corresponding increase in equity. At the end of each
reporting period, the Group revises its estimate of the number of equity
instruments expected to vest. The impact of the revision of the original
estimates, if any, is recognised in the statement of comprehensive income such
that the cumulative expense reflects the revised estimate, with a
corresponding adjustment to other reserves. Where equity settled share based
payments of the Parent Company have been issued to employees of its
subsidiaries this is recognised as a cost of investment in the Parent Company
financial statements and as an expense and capital contribution in the
subsidiary.
The Employee Benefit Trust has been consolidated.
2.25 Dividends
Interim dividends are recognised in the financial statements when they are
paid. Final dividends which are recommended for shareholder approval after the
year end balance sheet date, are disclosed as a post year end event. Prior
year dividends have been restated as details in 2.27.
2.26 Liabilities to Partners
The Group recognises liabilities to Partners, and due to the nature of the
transactions discloses these amounts separately to other payables. Upon IPO in
March 2020 the Group had cessation profits due to Partners and related tax due
to HMRC totalling £22.0 million, these have been disclosed separately to the
go forward profits due to Partners as part of the ongoing profit share
agreements that Partners have with Group companies. As at 30 April 2022, of
the IPO liabilities £1.3 million was outstanding and post year end in May
2022 this was repaid, so all IPO liabilities have been satisfied. Going
forward the only liabilities to Partners are the go-forward profit shares.
2.27 Restatement of prior year results
In March 2022 the Group's annual report for FY2021 was reviewed by the
Financial Reporting Council ("FRC"). The review was based on the annual report
and accounts and did not benefit from detailed knowledge of the business or an
understanding of the underlying transactions entered into and therefore
provides no assurance that the annual report is correct in all material
respects. It was, however, conducted by staff of the FRC who have an
understanding of the relevant legal and accounting framework. Following the
review by the FRC, the Group have changed their dividend recognition policy.
Previously the Group recognised interim dividends at the point when the Board
declared publicly, however, going forward the Group will follow paragraph 2.10
of the ICAEWs Technical Release 02/17BL and recognise interim dividends when
paid. The impact of this change results in the de-recognition of a £1.8
million interim divided liability in FY2021 as it was paid in FY2022, with a
corresponding increase in net assets and retained earnings of the same
amount. There was no impact on the Group's profit or cash flows for the year
ended 30 April 2021.
3. Critical accounting judgements and key sources of estimation
uncertainty
In the application of the Group's accounting policies, Directors are required
to make judgements, estimates and assumptions about the carrying amount of
assets and liabilities that are not readily apparent from other sources. The
estimates and associated assumptions are based on historical experience and
other factors that are considered to be relevant. Actual results may differ
from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the period in which the
estimate is revised, if the revision affects only that period, or in the
period of the revision and future periods if the revision affects both current
and future periods.
The following are the critical judgements, apart from those involving
estimates (which are dealt with separately below), that have been made in the
process of applying the Group's accounting policies and that have had the most
significant effect on amounts recognised in the financial statements, as
listed below:
Deemed remuneration
Deemed remuneration arises during acquisitions, where compensation in the form
of equity is subject to a lock-in period, in order to retain the key fee
earners post acquisition. This is a judgement area but the guidance in IFRS 3
Business Combinations is followed. As the equity compensation is restricted
until the key fee earners have completed the required lock-in period, it is
not considered to be part of the cost of the acquisition and it is initially
recognised in the share based payments reserve as a debit to the reserve and
amortised through the statement of comprehensive income over the lock-in
period. Compensation for the acquisitions made in the year was in the form of
equity subject to a lock-in period. The Directors have made the judgement that
this equity compensation is deemed remuneration. Note 23 provides further
detail on the acquisitions in the year.
Key source of estimation uncertainty
The judgements involving estimates and assumptions which have a significant
risk of causing a material adjustment to the carrying amount of assets and
liabilities are as follows.
Impairment of goodwill
The Group records all assets and liabilities acquired in business
combinations, including goodwill, at fair value. Goodwill is not amortised but
is subject, at a minimum, to annual tests for impairment. The initial goodwill
recorded, and subsequent impairment review require management to determine
appropriate assumptions (which are sources of estimation uncertainty) in
relation to cash flow projections over a five year period, the terminal growth
rate and the discount rate used to discount the cash flows to present value.
Due to the size and nature of goodwill it is considered an area of estimation
uncertainty. The balance of goodwill is £10.2 million (2021: £9.6 million).
See Note 12 for further details on the Group's assumptions.
Unbilled revenue
Time recorded for chargeable professional services work is regularly reviewed
to ensure that only what the Directors believe to be recoverable from the
client is recognised as unbilled revenue within prepayments and accrued
revenue.
Estimates are made with allocating revenue to the performance obligation and
the valuation of contract assets. The Group estimates the contract completion
point, costs yet to be incurred and the potential outcome of the contract.
Significant assumptions are involved on a case-by-case basis in order to
estimate the time to complete an assignment and the resultant final
compensation, where variable consideration is involved, and which results in
the recognition of unbilled revenue.
Management base their assumptions on historical experience, market insights
and rational estimates of future events. Estimates are made in each part of
the business by engagement teams with experience of the service being
delivered and are subject to review and challenge by management. The balance
of unbilled revenue at year end was £35.3 million (2021: £35.1 million).
Refer to Note 14 for further detail on unbilled revenue.
Share based payments
The charge related to equity settled transactions with employees is measured
by reference to the fair value of the equity instruments at the date they are
granted, using an appropriate valuation model selected according to the terms
and conditions of the grant. Judgement is applied in determining the most
appropriate valuation model and in determining the inputs to the model.
Third-party experts are engaged to advise in this area where necessary. There
is estimation uncertainty in the determination of assumptions related to the
number of options which are expected to vest, by reference to historic leaver
rates and expected outcomes under relevant performance conditions. The share
based payment expense for the year was £8.0 million (2021: £4.6 million).
Refer to Note 22 for further detail on share based payments.
4. Financial risk management
The Group is exposed to a variety of financial risks through its use of
financial instruments which result from its operating activities. All of the
Group's financial instruments are classified as financial assets or
liabilities measured at amortised cost.
The Group does not actively engage in the trading of financial assets for
speculative purposes. The most significant financial risks to which the
Group is exposed are described below.
Credit risk
Credit risk associated with cash balances is managed by transacting with major
global financial institutions and periodically reviewing their
creditworthiness. The Group mainly banks with Barclays Bank plc and Natwest
whose credit ratings are A-1 short term, (Standard & Poor's) and A-2 short
term, (Standard & Poor's) respectively. Accordingly, the Group's
associated credit risk is limited.
Generally, the Group's maximum exposure to credit risk is limited to the
carrying amount of the financial assets recognised at the balance sheet date,
as summarised below.
Credit risk is the risk of financial risk to the Group if a counter party to
a financial instrument fails to meet its contractual obligation. The nature
of the Group's debtor balances, the time taken for payment by clients and the
associated credit risk are dependent on the type of engagement.
As at As at
30 April 2022 30 April 2021
Credit Risk £'000 £'000
Trade receivables 7,178 4,855
Cash and cash equivalents 24,924 24,383
32,102 29,238
On formal insolvency appointments (which form the majority of the Group's
activities), invoices are generally raised having achieved approval from
creditors to draw fees. This is typically settled on a timely basis from case
funds. The credit risk on these engagements is therefore considered to be
extremely low.
The Group's trade receivables are actively monitored by management on a
monthly basis. The Group provides a variety of different professional services
in line with its pillars to spread credit risk over its service lines. The
Group also controls cash collection of its insolvency assignments in line with
the terms of appointment.
The ageing profile of trade receivables that were not impaired is shown
within Note 14. The Group does not believe it is exposed to any material
concentrations of credit risk.
The Group reviews unbilled revenue on a case-by-case basis. On a monthly
basis, following the receipt of information implying irrecoverability the
appropriate provisions are booked. The unbilled revenue disclosed within the
accounts is net of provisioning, therefore the Group does not consider the
unbilled revenue disclosed on the balance sheet to be of material credit risk.
Unbilled revenue represented £35.3 million (2021: £35.1 million).
Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulty in
meeting its obligations associated with its financial liabilities. The Group
seeks to manage financial risks to ensure sufficient liquidity is available
to meet foreseeable needs and to invest cash assets safely and profitably.
The contractual undiscounted maturities of borrowings, trade payables and
other financial liabilities are disclosed below.
As at As at
30 April 2022 30 April 2021
Liquidity risk £'000 £'000
Within 1 year 26,301 31,424
Within 2-5 years 11,986 13,994
Beyond 5 years 3,996 935
42,283 46,353
The discounted carrying value of these liabilities is £41.2 million (2021:
£44.2 million), comprising £6.3 million lease liabilities (2021: £3.6
million), £6.8 million loans (2021: £8.0 million), and £28.1 million trade
and other payables (2021: £32.6 million).
Interest rate risk
Interest rate risk is the risk that the value of a financial instrument or
cash flows associated with the instrument will fluctuate due to changes in
market interest rates. Interest bearing assets including cash and cash
equivalents are considered to be short term liquid assets. It is the Group's
policy to settle trade payables within the credit terms allowed and the Group
does therefore not incur interest on overdue balances.
The Group has a £8 million term loan (£6.8 million outstanding as at April
2022) with an interest base rate plus 3% repayable over a 4 year period. The
company has an interest risk management risk strategy and reforecasts cashflow
whenever the base rate changes, base interest rates are currently low and in
the medium term it is expected that this will remain stable.
In terms of sensitivity analysis, if interest rates increased by 200 basis
points or 2% the incremental FY2022 impact would reduce the Profit Before Tax
by £0.2m. If base rate (prevailing at the date of signing of 1.25%) reduced
there would be a negligible impact on the Group's FY2022 Profit before tax.
Foreign currency risk
There is no material risk associated with foreign currency transactions or
overseas subsidiaries.
Capital management
The Group monitors the capital requirements within the Group and maintains a
capital management policy that enable the Group to meet requirements it may
face. Shortly after year end the Group repaid all IPO liabilities due to
Partners, with a final payment of £1.3 million in May 2022. Net cash of
£18.1 million (2021: £16.4 million), an undrawn £10 million RCF, the recent
placing raising £7.5 million and the ability to issue further equity, gives
the Group sufficient options to act as acquisition opportunities arise,
subject to our selective criteria of cultural fit, strategic fit and mutually
acceptable transaction economics.
5. Operating segments
The Group has one single business segment and therefore all revenue is derived
from the provision of specialist business advisory services as stated in the
principal activity. The Chief operating Decision Maker (CoDM) is the Chief
Executive Officer. The Group has five pillars which individually do not meet
the definition of a disclosable operating segment.
The Group's assets are held in the UK and all its capital expenditure arises
in the UK. The Group's operations and markets are located in the UK.
All revenue is recognised in relation to contracts held with customers. No
customer contributed 10% or more of the Group's revenue.
6. Operating profit
Operating profit has been arrived at after charging:
Year Ended Year Ended
30 April 2022 30 April 2021
£'000 £'000
Depreciation of owned assets 794 677
Depreciation of right of use assets 1,270 835
Amortisation of intangible assets 67 39
Fees payable to the Group's auditor for the audit of the Group accounts 90 80
Fees payable to the auditor for other services
the auditing of Subsidiary accounts 25 20
Expenses relating to short term leases 329 52
7. Director and employee information
The average number of Directors and employees during the year was:
Year Ended Year Ended
30 April 2022 30 April 2021
Number Number
Directors 7 7
Fee earning employees (including Partners) 397 314
Non fee earning employees 107 77
The aggregate payroll costs of these persons were as follows:
£'000 £'000
Wages, salaries and Partner compensation charged as an expense 46,402 38,426
Social security costs 3,673 2,892
Pension costs - defined contribution scheme 725 611
Share-based payment expense 7,996 4,643
58,796 46,572
Two directors are currently included in the Company pension scheme.
8. Directors' remuneration and emoluments (including Partner profit
allocations)
Details of emoluments paid to the key management personnel (including Partner
profit allocations in respect of Messrs Rowley and French) are as follows:
Year Ended Year Ended
30 April 2022 30 April 2021
£'000 £'000
Directors' emoluments 2,729 2,571
Benefits in kind (inc. pension contributions) 27 19
Share option award - 180
2,756 2,769
Remuneration (including Partner profit allocation) disclosed above include the
following amounts paid to the highest paid Director:
£'000 £'000
Remuneration for qualifying services 1,304 1,353
9. Finance expense
Year Ended Year Ended
30 April 2022 30 April 2021
£'000 £'000
On bank loans and overdrafts measured at amortised cost 305 93
On lease liability 190 140
Total finance expense 495 233
10. Taxation
Year Ended Year Ended
30 April 2022 30 April 2021
£'000 £'000
Current tax
UK Corporation tax 4,699 4,194
Deferred tax
Reversal of temporary differences (1,494) (1,201)
Total tax charge 3,205 2,993
Reconciliation of tax charge:
Year Ended Year Ended
30 April 2022 30 April 2021
£'000 £'000
Profit before tax 15,116 16,604
Corporation tax in the UK at 19% 2,872 3,155
Effects of:
Non-deductible expenses 866 26
Other permanent differences (533) (188)
Total tax charge 3,205 2,993
The UK Budget 2021 announcements on 3 March 2021 included an increase to the
UK's main corporation tax rate to 25%, which is due to be effective from 1
April 2023. The relevant corporation tax rate has been applied in the
calculation of deferred tax balances.
11. Earnings per share
The earnings per share ("EPS") has been calculated using the profit for the
year and the weighted average number of ordinary shares outstanding during the
year, as follows:
£m EPS Adjusted EPS EPS Adjusted EPS
2022 2022 2021 (restated) 2021 (restated)
Reported Profit after tax 11.9 11.9 13.6 13.6
Add Share based payments - 8.0 - 4.6
Less deferred tax - (1.5) - (1.2)
Adjusted Profit after tax 11.9 18.4 13.6 17.0
Total shares in issue 243,191,489 243,191,489 239,393,684 239,393,684
Total share EPS (pence) 4.90 7.57 5.69 7.11
Weighted average shares in issue excluding EBT 222,669,711 222,669,711 224,441,489 224,441,489
Basic EPS (pence) 5.35 8.27 6.06 7.58
Dilutive potential ordinary shares under share option schemes 13,424,101 13,424,101 9,976,097 9,976,097
Weighted diluted shares in issue 236,093,812 236,093,812 234,417,586 234,417,586
Diluted EPS (pence) 5.04 7.80 5.81 7.26
The Employee Benefit Trust has waived its entitlement to dividends and is not
included within weighted average shares in issue. It holds 22,531,865 shares
of the 243,191,489 shares in issue at 30 April 2022 (2021: 18,750,000). When
options are exercised by employees, dividend rights accrue.
On 4 May 2022 393,700 new ordinary shares were issued as part of the
acquisition of BridgeShield Asset Management Limited. These are not considered
dilutive for the above calculations.
12. Goodwill and other intangible assets
Computer
software Client List Goodwill Total
£'000 £'000 £'000 £'000
Cost
At 1 May 2020 10 - 750 760
Additions - 833 8,850 9,683
At 30 April 2021 10 833 9,600 10,443
At 1 May 2021 10 833 9,600 10,443
Additions - - 600 600
Disposals (10) - - (10)
At 30 April 2022 - 833 10,200 11,033
Amortisation
At 1 May 2020 (10) - - (10)
Charge for the period - (39) - (39)
At 30 April 2021 (10) (39) - (49)
At 1 May 2021 (10) (39) - (49)
Charge for the period - (67) - (67)
Disposals 10 - - 10
At 30 April 2022 - (106) - (106)
Net book value
At 30 April 2021 - 794 9,600 10,394
At 30 April 2022 - 727 10,200 10,927
Additions to goodwill in the year relate to acquisitions as set out in Note
23.
Following initial recognition, goodwill is subject to impairment reviews, at
least annually, and measured at cost less accumulated impairment losses. Any
impairment is recognised immediately in the consolidated statement of
comprehensive income and is not subsequently reversed.
There are three steps to performing an impairment review:
· Allocating the goodwill to the relevant cash-generating unit
(CGU) or multiple CGUs.
· Determining the recoverable amount of the CGU to which the
goodwill belongs.
· Recognising any impairment losses after performing an impairment
review of the CGU or CGUs.
Goodwill acquired in a business combination represents future economic
benefits arising from assets that are not capable of being individually
identified and separately recognised. Goodwill does not generate cash flows
independently from other assets or groups of assets and so the recoverable
amount of goodwill as an individual asset cannot be determined. However,
goodwill often contributes to the cash flows of individual or multiple CGUs.
Therefore, goodwill acquired in a business combination must be allocated from
the acquisition date to each of the acquirer's CGUs or groups of CGUs that are
expected to benefit from the synergies of the business combination.
The definition of a CGU is "the smallest identifiable group of assets that
generates cash inflows that are largely independent of the cash inflows from
other assets or groups of assets" (per IAS 36).
For the Group a CGU is represented by:
· A net cash inflow stream from a group of acquired Partners
· A net cash inflow from an entire location
· An entire entity (parent or subsidiary entities within a group)
· Departments or business units within an entity
In accordance with IAS 36, a CGU to which goodwill has been allocated shall be
tested for impairment annually and whenever there is indication of impairment
by comparing the carrying amount of the unit, including the goodwill, with the
recoverable amount of the unit.
If the recoverable amount of the unit exceeds the carrying amount of the unit,
the unit and the goodwill allocated to that unit shall be regarded as not
impaired. If the carrying amount of the unit exceeds the recoverable amount of
the unit, the entity shall recognise an impairment loss.
Goodwill
At 30 April 2022:
· Debt Advisory £750k
· JDC Group £3,210k
· Spectrum £5,640k
· BridgeShield £600k
The recoverable amount is the higher of a CGU's fair value less costs to sell
and its value in use. In brief the fair value less costs to sell is likely to
involve a valuation of the CGU if sold at an arm's length and deducting the
costs of disposal.
The value in use will involve a discounted cash flow ('DCF') calculation
estimating the future cash inflows and outflows to be derived from the
continuing use of the CGU, The DCF calculation would include the estimated net
cash flows, if any, to be received for the disposal of the CGU at the end of
its useful life.
Key assumptions used in value in use calculation
The key assumptions for the value in use calculation are those regarding:
· Number of years of cash flows used and budgeted EBITDA growth
rate;
· Discount rate; and
· Terminal growth rate.
Number of years of cash flows used
The recoverable amount of the CGU is based on a value in use calculation using
specific cash flow projections over a 5-year period and a terminal growth
rate thereafter. The cashflow projections for the 5-year period assume a
growth rate for each CGU between 0% to 7.5% (2021: 7.5%) based on prior
performance and future expectation.
The 5-year forecast is prepared considering members' expectations based on
market knowledge, numbers of new engagements and the pipeline of
opportunities.
Discount rate
The Group's post-tax weighted average cost of capital has been used to
calculate a Group pre-tax discount rate of 12.9% (2021: 12.9%), which
reflects current market assessments of the time value of money for the period
under review and the risks specific to the Group.
Terminal growth rate
A terminal growth rate of 1.0% (2021: 1.0%) is used. This is derived from
members' expectations based on market knowledge, numbers of new engagements,
and the pipeline of opportunities.
Sensitivity to changes in assumptions
With regard to the assessment of value in use for Debt Advisory, JDC,
Spectrum, and BridgeShield CGU, the Directors believe that reasonably possible
changes in any of the above key assumptions would not cause the carrying value
of the unit to exceed its recoverable amount.
13. Property, plant and equipment
30 April 2022
Property, Plant and Equipment
Leasehold Computer Fixtures and Leasehold Motor
properties (right of use asset)
equipment fittings improvements vehicles Total
£'000 £'000 £'000 £'000 £'000 £'000
Cost
At 1 May 2020 7,233 1,715 622 1,681 7 11,258
Arising on acquisitions - 74 5 145 - 224
Additions 413 401 181 120 - 1,114
Disposal (46) - - - - (46)
At 30 April 2021 7,600 2,190 808 1,946 7 12,550
At 1 May 2021 7,600 2,190 808 1,946 7 12,550
Arising on acquisitions - 6 - - - 6
Additions 4,022 461 251 686 - 5,421
Disposal - (991) (142) (557) - (1,690)
At 30 April 2022 11,622 1,666 917 2,075 7 16,287
Depreciation
At 1 May 2020 (3,238) (1,042) (281) (705) (3) (5,269)
Depreciation charge for the period (835) (339) (110) (227) (1) (1,512)
Disposals - - - - - -
At 30 April 2021 (4,073) (1,381) (391) (932) (4) (6,781)
At 1 May 2021 (4,073) (1,381) (391) (932) (4) (6,781)
Depreciation charge for the period (1,270) (397) (114) (280) (3) (2,064)
Disposals - 991 142 551 - 1,684
At 30 April 2022 (5,342) (787) (362) (661) (7) (7,161)
Net book value
At 30 April 2021 3,527 808 417 1,013 3 5,769
At 30 April 2022 6,279 879 554 1,414 - 9,126
14. Trade and other receivables
Group as at Group as at
30 April 2022 30 April 2021
Trade and other receivables £'000 £'000
Trade receivables 7,178 4,855
Other receivables 3,625 2,466
Unbilled revenue 35,261 35,052
46,063 42,373
The ageing profile of non-related party trade receivables is as follows:
As at As at
30 April 2022 30 April 2021
Due in £'000 £'000
<30 Days 3,353 2,286
30-60 Days 1,700 1,182
60-90 Days 784 309
90-180 Days 847 586
>180 Days 494 492
Total 7,178 4,855
All of the trade receivables were non-interest bearing and receivable under
normal commercial terms. The Directors consider that the carrying value of
trade and other receivables approximates to their fair value.
The acquisition completed during the year fell within FRP's five service
pillars, and therefore the treatment of providing or writing off acquired
receivables follows the Group policy.
All trade receivables and unbilled revenue are derived from contracts with
customers. Unbilled revenue constitutes income recognised based on stage of
completion but not yet billed to the customer. Write offs happen on a
case-by-case basis immediately following the receipt of information implying
irrecoverability.
The gross receivables have increased in line with the growth of the business.
The expected loss provision for trade receivables is calculated on the gross
carrying amount of trade receivables less any specific loss allowance, and is
detailed below as follows:
As at 30 April 2021 <30 days 30-60 days 60-90 days 90-180 days >180 days Total
£'000
£'000
£'000
£'000
£'000
£'000
Expected loss rate 0% 0% 5% 2% 59% 13%
Gross carrying amount 2,286 1,182 324 601 1,210 5,603
Expected credit loss provision - - (15) (15) (718) (748)
2,286 1,182 309 586 492 4,855
As at 30 April 2022
Expected loss rate 0% 2% 3% 7% 62% 12%
Gross carrying amount 3,367 1,735 810 913 1,289 8,114
Expected credit loss provision (14) (35) (27) (66) (795) (936)
3,353 1,700 784 847 494 7,178
15. Cash and cash equivalents
Group as at Group as at
30 April 2022 30 April 2021
£'000 £'000
Cash at bank and in hand 24,924 24,383
16. Trade and other payables
Group as at Group as at
30 April 2022 30 April 2021
(restated)
Current liabilities £'000 £'000
Trade payables 1,556 877
Other taxes and social security costs 7,428 5,849
Liabilities to Partners go forward 9,129 9,074
Liabilities to Partners cessation profits at IPO 1,302 5,440
Deferred consideration - 813
Other payables and accruals 10,743 10,835
30,159 32,888
Group as at Group as at
30 April 2022 30 April 2021
Non-current liabilities £'000 £'000
Other payables and accruals 1,443 -
Liabilities to Partners go forward - 245
Liabilities to Partners cessation profits at IPO - 1,114
Partner capital 4,273 3,833
Deferred consideration - 339
5,716 5,531
The liabilities to Partners mentioned in both of the above tables includes tax
due to HMRC on their behalf.
Other payables and accruals includes £7.1 million of staff costs (2021: £4.5
million).
17. Loans and borrowings
Group as at Group as at
30 April 2022 30 April 2021
£'000 £'000
Current borrowings
Bank loan 2,000 1,600
Lease liability 1,365 872
3,365 2,472
Non-current borrowings
Bank loan 4,800 6,400
Lease liability 4,913 2,768
9,713 9,168
Bank loan is repayable
Within one year 2,000 1,600
Within two to five years 4,800 6,400
6,800 8,000
The above £6.8 million (2021: £8 million) five-year term loan is with
Barclays Bank plc (Barclays) and is repayable over 20 quarterly instalments.
Interest rate is the Bank of England base rate, plus 3%. The Group also has a
£10 million revolving credit facility with Barclays that was undrawn at 30
April 2022, running until 30 November 2023. Barclays have security over FRP
entities for both the RCF and the term loan, in the form of both a fixed and
floating charge over the Group's assets.
18. Deferred tax
Group as at Group as at
30 April 2022 30 April 2021
£'000 £'000
Deferred tax (asset)/liability brought forward (925) 124
Recognised in profit and loss for the period (1,494) (1,200)
Deferred tax on acquisition (13) 151
Deferred tax (asset) (2,431) (925)
The deferred tax provision is analysed as follows:
Group as at Group as at
30 April 2022 30 April 2021
£'000 £'000
Accelerated capital allowance 65 138
Other temporary differences - (14)
Share based payments (2,635) (1,200)
Deferred tax on acquisition 138 151
(2,431) (925)
19. Financial instruments
Group as at Group as at
30 April 2022 30 April 2021
£'000 £'000
Financial assets held at amortised cost 32,102 29,238
Financial liabilities held at amortised cost 42,283 36,556
20. Share capital
Group as at Group as at
30 April 30 April 2021
2022
Allotted, called up and fully paid £ £
243,191,489 Ordinary shares of £0.001 each 243,191 243,191
On 4 May 2022 393,700 new ordinary shares were issued as part of the
acquisition of BridgeShield Asset Management Limited.
In June 2022, the company executed, a secondary placing and given the over
subscription also raised an additional £7.5 million through the issue of
5,357,143 new shares.
21. Dividends
For FY2022 a dividend of £1,796k, equivalent to 0.8p per eligible ordinary
share, was declared on 12 February 2021 and paid on 11 June 2021. A dividend
of £1,796k, equivalent to 0.8p per eligible ordinary share, was declared on
28 September 2021 and paid on 24 December 2021. A dividend of £1,796k,
equivalent to 0.8p per eligible ordinary share, was declared on 15 December
2021 and paid on 24 March 2022. The Board recommends a final dividend of 1.9p
per eligible ordinary share for the financial year ended 30 April 2022.
Subject to approval by shareholders, the final dividend will be paid on 21
October 2022 to shareholders on the Company's register at close of business on
23 September 2022. If the final dividend is approved, the total dividends paid
by the Company relating to the financial year ended 30 April 2022 will be 4.3p
per eligible ordinary share.
22. Share based payments
Number of
share options
April 2022
Outstanding at the beginning of the year 16,163,479
Granted during the year 2,448,975
Forfeited during the year (276,168)
Outstanding at the end of the year 18,336,286
Exercisable at the end of the year -
The weighted average life of outstanding options was two years (2021: two
years).
Details of the number of share options outstanding by type of company scheme
were as follows:
Employees Non-executive Total
directors
Outstanding at the beginning of the year 16,025,979 137,500 16,163,479
Granted during the year 2,448,975 - 2,448,975
Forfeited during the year (276,168) - (276,168)
Outstanding at the end of the year 18,198,786 137,500 18,336,286
Exercisable at the end of the year - - -
Option arrangements that exist over FRP Advisory Group plc's shares at the end
of the year are detailed below:
April Exercise
Date of grant 2022 Price (£) Vesting
From 6 March 2020 18,198,786 - from 06/03/2023
From 6 March 2020 137,500 0.001 from 06/03/2023
Weighted average fair value per option is £0.85 (2021: £0.71).
The Group uses a Black Scholes model to estimate the fair value of share
options. The options were issued over shares held by the FRP Advisory Group
Employee Benefit Trust. The following information is relevant in the
determination of the fair value of the above options. The assumptions inherent
in the use of this model, at the time of issue, are as follows:
· The options are nil cost for the employee scheme established on
IPO and nominal cost for the Non-Executive scheme;
· The option life is the estimated period over which the options
will be exercised. The options have no expiry date to discount, so three years
has been considered a reasonable expected life as those awarded are required
to remain in employment for three years;
· No variables change during the life of the option (such as the
dividend yield remaining zero);
· The volatility rate has been based on the Groups share price
since IPO
· A risk-free interest rate of 0.6% has been used (2021: 0.6%); and
· 100% of the options issued under the employee scheme are expected
to vest. 100% of the options issued to the Non-Executive Directors are
expected to vest.
The total recognised share-based payment expense during the year by the Group
was £5.4 million (2021: £3.7 million).
23. Acquisitions
The Group's growth strategy is to focus on organic growth supported by
selective inorganic opportunities where there is a cultural, strategic and
mutually acceptable transactional economics fit. The Group made one
acquisition in the year as detailed below. The acquisition strategically fits
into the Group's five service pillars and we believe there to be revenue
synergies of the combinations.
Date Name Location Type Percentage bought Pillars
28 April 2022 BridgeShield Asset Management Limited Leigh-on-Sea Share 100% Restructuring advisory
Acquisition costs of £0.03 million (2021: £0.4 million) relating to the
acquisition have been expensed in the period but not adjusted for in adjusted
underlying EBITDA.
BridgeShield Asset Management Limited
The fair values of BridgeShield Asset Management Ltd at the acquisition date
on 28 April 2022, following the purchase price allocation exercise are
detailed below:
Book value Fair value
£'000 £'000
Net assets acquired
Property, plant and equipment 6 6
Trade Receivables 20 20
Unbilled revenue 99 99
Cash 235 235
Trade Payables (1) (1)
Accruals (33) (33)
VAT (8) (8)
Corporation tax (40) (40)
Total provisional fair value 278 278
Consideration 878
Goodwill 600
Cash flow £'000
Cash paid as consideration on acquisition 600
Less cash acquired at acquisition (235)
Net cash outflow 365
Fair value
Consideration £'000
Initial consideration - Cash 600
Consideration settled in cash post year end 278
Total Consideration 878
After year end, on 4 May 2022 equity compensation of £500k was also granted
to certain vendor fee earners. As this is subject to a lock-in, this will not
been included within the cost of the acquisition but in FY2023 is expected to
be accounted for as deemed remuneration within the share based payment reserve
in the Statement of Changes in Equity.
The key shareholders who sold BridgeShield joined the Group as Partners. Other
new colleagues who TUPE'd to the Group received nil cost option awards, from
the Employee Incentive Plan (EIP) funded on IPO.
Acquisition costs has been absorbed but not adjusted for in adjusted
underlying
EBITDA.
The acquisition contributed £nil of revenue and £nil to the Group's
underlying EBITDA for the period between the date of acquisition and the
balance sheet
date.
The company provides property asset management advice to specialist short-term
lenders across bridging, refurbishment and development finance. It supports
lenders across the UK, advising on asset management, LPA receiverships and
loan risk management. They will work closely with the Brentwood office
providing growth opportunities within the restructuring pillar.
24. Leases
Group as at Group as at
30 April 2022 30 April 2021
£'000 £'000
Expenses relating to short term leases 329 52
Lease interest 190 140
Cash outflow for leases 1,355 911
The carrying value of right of use assets all relate to leasehold land and
buildings.
Undiscounted lease liabilities cashflows in relation to right of use assets
fall due as follows:
Group as at Group as at
30 April 2022 30 April 2021
£'000 £'000
Due within one year 1,570 988
Due within two to five years 1,470 2,063
Due after more than five years 3,996 935
7,036 3,986
25. Reserves
Called-up share capital
The called-up share capital reserve represents the nominal value of equity
shares issued.
Share premium account
The share premium account reserve represents the amounts above the nominal
value of shares issued and called up by the Company.
Treasury shares reserve
The Treasury shares reserve represents the shares of FRP Advisory Group plc
that are held in Treasury or by the Employee Benefit Trust.
Share based payment reserve
The share-based payment reserve represents:
· The cumulative expense of equity-settled share-based payments
provided to employees, including key management personnel, as part of their
remuneration.
· Deemed remuneration arising from acquisitions, which is amortised
over the lock-in period.
Merger reserve
The merger reserve represents the difference between the nominal value of
shares issued and the fair value of the assets received. The merger reserve
arose following: a share for share exchange between FRP Advisory LLP and FRP
Advisory Group plc as part of the group reorganisation in March 2020 and a FRP
Advisory Group plc share for share exchange in the JDC Group acquisition.
Retained earnings
The retained earnings reserve represents the Group's cumulative net gains and
losses less distributions. Transfers from the share based payment reserve to
retained earnings are subject to Board approval.
26. Related party transactions
FRP Advisory Services LLP provides services to FRP Advisory Trading Ltd, a
subsidiary of FRP Advisory Group Plc.
Relating to the financial year FRP Advisory Trading Ltd contracted services
valued at £19.9 million (2021: 17.1 million) from FRP Advisory Services LLP.
Geoff Rowley and Jeremy French are Directors of FRP Advisory Group plc, FRP
Advisory Trading Ltd and designated members of FRP Advisory Services LLP.
27. Control
There is no one ultimate controlling party of FRP Advisory Group plc. It is
listed on London Stock Exchange AIM market but the IPO vendor Partners are
treated as a concert party with a holding of c. 49%.
28. Events after the reporting period
The Board of Directors proposed a final dividend of 1.9p per eligible ordinary
share for the final quarter to 30 April 2022 (2021: 1.6p). Subject to approval
by shareholders, the final dividend will be paid on 21 October 2022 to
shareholders on the Company's register at close of business on 23 September
2022.
On 4 May 2022 393,700 new ordinary shares were issued as part of the
acquisition of BridgeShield Asset Management Limited.
In June 2022, the company executed, a secondary placing and given the over
subscription also raised an additional £7.5 million through the issue of new
shares. Partner shareholders were invited to sell 20% of their holding and
sign an extended lock-in to June 2024. This has enabled us to introduce new
institutional shareholders onto the share register and further bolster our
strong balance sheet as we continue to target attractive acquisitions.
Alongside placing the majority of FRP Partners entered into extension of their
lock-in arrangements until June 2024. Currently 48.6% of the Group's
shareholder base is now subject to lock-in arrangements, including the Group
Employee Benefit Trust (10.8%).
On 21 June 2022 4,412,176 ordinary shares were transferred to the Employee
Benefit Trust for nil consideration, from a former Partner of the Group.
Post year end, the final £1.3 million payment of the IPO liability relating
to the Cessation profits owed to Partners was paid down.
29. Capital commitments
At the balance sheet date, the Group had no material capital commitments in
respect of property, plant and equipment (2021: £nil).
30. Contingent liabilities
The Group is from time to time involved in legal actions that are incidental
to its operations. Currently the Group is not involved in any legal actions
that would significantly affect the financial position or profitability of
the Group.
NOTE
The financial information set out above does not constitute the Group's
statutory accounts for the year ended 30 April 2022 but is derived from those
accounts. Statutory accounts for 2022 will be delivered to the Registrar of
Companies following the company's annual general meeting. The auditors have
reported on these accounts; their report was unqualified, did not draw
attention to any matters by way of emphasis without qualifying their report
and did not contain statements under s498(2) or (3) of the Companies Act 2006.
The information included in this announcement is taken from the audited
financial statements which are expected to be dispatched to the members
shortly and will be available at www.frpadvisory.com
(https://protect-eu.mimecast.com/s/YKItC76jQIzmMgrTWub0L?domain=frpadvisory.com)
This announcement is based on the Group's financial statements, which are
prepared in accordance with UK adopted International Accounting Standards
('IFRS') in conformity with the requirements of the Companies Act 2006.
Neither an audit nor a review provides assurance on the maintenance and
integrity of the website, including controls used to achieve this, and in
particular whether any changes may have occurred to the financial information
since first published. These matters are the responsibility of the directors
but no control procedures can provide absolute assurance in this area.
Legislation in the United Kingdom governing the preparation and dissemination
of financial information differs from legislation in other jurisdictions.
This preliminary statement was approved by the Board of Directors on 22 July
2022.
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