REG - FRP Advisory Grp PLC - Full Year Results
26/07/2023 07:00
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20230726:nRSZ1816Ha&default-theme=true
RNS Number : 1816H FRP Advisory Group PLC 26 July 2023
26 July 2023
FRP ADVISORY GROUP PLC
("FRP", the "Group" or the "Company")
Full Year Results
for the year ended 30 April 2023
FRP Advisory Group plc, a leading national specialist business advisory firm,
is pleased to announce its full year results for the year ended 30 April 2023
(FY2023).
Geoff Rowley, Chief Executive Officer of FRP Advisory Group plc, said:
"The Group made strong progress in the financial year to 30 April 2023, with
growth in the team, profits and dividends. A complementary business in Cyprus
was acquired, the Financial Advisory pillar was launched in response to client
demand and our Corporate Finance team were named 'UK Corporate Finance House
of the Year' at the National Real Deals Private Equity Awards 2023. Our
Restructuring team continues to make progress in the nature of projects and
depth of referral client base across all of our locations. Our Forensic
services team has been very active on many confidential projects along with a
number of high-profile mandates for listed businesses, for example WANdisco
plc, Inland Homes plc and Braemar plc.
The results achieved are ongoing testament to the quality of our colleagues
and their continued efforts to collaborate internally and provide a
high-quality service, to help achieve the best possible results for our
clients. The specialists at FRP can help across the entire economic life
cycle. Reflecting the continued development of our team we recently promoted
12 colleagues to Partners spanning across locations and service pillars. This
is a record number and shows our commitment to supporting internal career
progression. In a competitive market FRP continues to attract talented lateral
hire colleagues into the Group.
On behalf of the Board, I wish to express my gratitude for the contribution
made by our entire team.
In our new financial year, activity levels have been encouraging to date and
trading is in line with the Board's expectations. The short and medium-term
outlook for our business remains positive and we are confident of making
further progress."
Financial highlights
2023 2022
£m £m
Revenue 104.0 95.2
Adjusted underlying EBITDA* 27.0 25.7
Reported EBITDA 18.5 17.7
Adjusted profit before tax** 24.1 23.1
Reported profit before tax 15.6 15.1
Adjusted Total EPS (pence)*** 7.83 7.57
Basic EPS (pence) 5.58 5.35
Total dividend relating to the year (pence) 4.6 4.3
Net cash 22.9 18.1
· Another year of growth:
o Revenue increased by 9% to £104.0 million (2022: £95.2 million) with 8%
organic, and 1% inorganic.
o Adjusted underlying EBITDA* rose by 5% to £27.0 million (2022: £25.7
million).
o £1.3 million average revenue per Partner as at year-end (2022: £1.2
million).
o Reported profit before tax for the year grew to £15.6 million (2022:
£15.1 million).
· Strong balance sheet maintained with year-end net cash of
£22.9 million (2022: £18.1 million). Our banking facilities were refinanced
in July 2023 for 3 years, on better terms.
· Increased returns to shareholders:
o Total dividends of 4.6p relating to FY2023 (2022: 4.3p).
o Comprising three interim dividends of 0.85p per eligible Ordinary Share
and a final proposed dividend of 2.05p per eligible Ordinary Share for the
year ended 30 April 2023 recommended by the Board.
* Adjusted Underlying Earnings Before Interest Tax Depreciation and
Amortisation (EBITDA) excludes any exceptional costs and share-based payment
expenses that arise from a) the Employee Incentive Plan (EIP) funded on IPO
and b) deemed remuneration amortisation linked to acquisitions. See table in
the Financial Review section below.
** Reported Profit before Tax plus share based payments and exceptional items
*** Earnings adjusted by adding back share-based payments and related deferred
tax. Earnings per total weighted shares in issue. See Note 12 for more
details.
Operational highlights
· Delivering on our strategy to achieve organic growth,
supplemented by selective acquisitions.
· Continued growth in FRP team size:
o The FRP team grew by 9% (additional 47 colleagues year-on-year) to 551
excluding consultants (2022: 504).
o Growth was driven by demand-led lateral hiring and one acquisition.
o At 30 April 2023, the Group had 78 Partners (2022: 80), 361 other fee
earners (2022: 317) and 112 support staff (2022: 107).
o At year-end FRP's UK footprint covered 25 locations (2022: 26) with one
international office in Cyprus.
o In May 2023 the Group promoted a record 12 colleagues to Partner across
locations and service lines, demonstrating commitment to supporting internal
career progression and longer-term succession planning.
· Further progress across specialist service pillars:
o Restructuring team again the most active in the administration appointment
market
· Market share in the number of administration appointments
slightly increased to 14% (2022: 13%), in a recovering administration market.
o FRP Corporate Finance ranked as the 13(th) most active financial adviser
in the UK M&A market
· The Corporate Finance and Debt Advisory teams were involved in 73
(2022: 99) successful transactions with an aggregate deal value of £1.8
billion (2022: £3 billion) and £0.8 billion of debt raised (2022: £1.3
billion).
· Nationally the Corporate Finance and Debt Advisory teams comprise
67 fee earners (including 17 Partners) across 10 locations.
· FRP Corporate Finance continued to grow its brand presence, with
the launch of a dedicated website and LinkedIn page.
· Corporate Finance team were named 'UK Corporate Finance House of
the Year' at the National Real Deals Private Equity Awards 2023.
o Launch of the Financial Advisory pillar in February 2023
· Brings together our existing transaction related services
including buy and sell-side financial due diligence; lender services including
pre-lending due diligence and independent business reviews; valuation
services; financial modelling; board and C-suite advisory and pensions
advisory services.
o Our Forensic services team has been very active on many confidential
projects along with a number of high-profile mandates for listed businesses,
for example WANdisco plc, Inland Homes plc and Braemar plc.
· Strengthened operational infrastructure
o Implemented a new Risk Management Framework and the Group now aligns with
ISO 31000.
o Enhancements to the Group's Information Security Management System
("ISMS") and recommended for ISO 27001 certification as complying with ISO
27001:2013 in July 2023.
· Effective succession planning and incentivisation structures in
place.
o In March 2023, the Company successfully managed the vesting process of
shares gifted to colleagues at IPO.
o In June 2022, the Company executed a secondary share placing and given the
demand from investors, raised an additional £7.5 million gross through the
issue of new shares. Partner shareholders were invited to sell up to 20% of
their holding in return for signing an extended lock-in to June 2024.
The information contained within this announcement is deemed by the Group to
constitute inside information under the UK Market Abuse Regulation No.
596/2014.
Management will host a presentation for analysts this morning at 09:30am, for
details, please contact FRP@mhpgroup.com.
Enquiries:
FRP Advisory Group plc
Geoff Rowley, CEO
Jeremy French, COO
Gavin Jones, CFO
Enquiries via MHP
Cenkos Securities plc (Nominated Adviser and Joint Broker)
Katy Birkin/Max Gould (Corporate Finance)
Alex Pollen (Sales)
Tel: +44 (0) 207 397 8900
Investec Bank plc (Joint Broker)
Carlton Nelson / James Rudd (Corporate Broking)
Tel: +44 (0) 207 597 4000
MHP Group (Financial Public Relations)
Oliver Hughes
Charlie Barker
Catherine Chapman
Tel: +44 (0) 783 462 3818
FRP@mhpgroup.com (mailto:FRP@mhpgroup.com)
Notes to Editors
FRP is a leading national specialist business advisory firm established in
2010. It 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, 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.
· Financial advisory: transaction services including financial due
diligence, lender services, financial modelling, valuations, pensions and
company-side advisory services.
Chairman's report
Overview
With the COVID pandemic now behind us, much of the recent market commentary
has related to how businesses would cope with the ever-increasing challenges
of the future headwinds. Commentators were confident that the perfect storm of
rapidly rising inflation, higher interest rates, accelerating labour and
energy costs would lead to a surge in insolvencies. In fact, for some of the
past year, businesses proved this theory wrong and remained remarkably
resilient to the external challenges they were facing. In addition, HMRC and
the lending community proved supportive, as I suspect we all tried to work out
whether the difficulties were longer term or, as the Bank of England described
inflation, "transitory" in nature. However, the market reality has been that
whilst the higher volume liquidations market, which typically sees lower value
and less complex situations, has grown, larger restructurings principally
through administrations have continued to remain below pre pandemic levels.
Despite a largely unfavourable market backdrop for much of our financial year,
I am delighted that we were able to deliver another year of growth in revenue,
profits and dividends. It is to the credit of our colleagues that their focus
on bringing the right team to each assignment to deliver the best possible
results for our clients, continues to produce excellent outcomes and financial
performance for shareholders. I remain hugely appreciative and proud of the
dedication, commitment and professionalism of our colleagues across all our
offices.
It is also encouraging to see an increasing demand for our resources and
expertise, particularly in the latter months of the year, as the outlook, if
anything, has hardened in our favour, with interest rates predicted to remain
higher for longer in order to tame inflation.
Whilst restructuring activities comprise the majority of our activity, we
offer a diversified but complementary range of services to corporates across
their life-cycle. In February 2023, following increased client demand, we
launched our Financial Advisory service pillar. This function is focussed
around supporting management in making decisions about funding, pensions,
valuations and M&A due diligence. It dovetails neatly, where necessary,
with our Restructuring, Debt Advisory and Corporate Finance pillars
essentially bringing a full suite of advisory services to our clients. It is
also pleasing to report on the continued progress of our Forensic Services
team, conducting significant assignments for a number of clients including
some publicly listed companies. FRP Corporate Finance and our Debt Advisory
team remained active, with the former being named "UK Corporate Finance House
of the Year" at the Real Deals PE Awards. Undoubtedly market conditions for
M&A and Private Equity investing have softened but 73 transactions were
closed, and our colleagues remain active even if deal timescales and values
have proved to be less favourable than a year or so ago.
Continued profitable growth
We are pleased with the levels of growth during the year, with revenues of
£104 million, up 9% from the previous year (2022: £95.2 million). This
performance was driven by 8% organic growth, underpinned by the support
offered on some larger projects, with a further 1% coming from acquisitions.
Following an acquisition by the Group we treat the first 12 months
contribution as inorganic, with month 13 onwards becoming organic.
Adjusted underlying EBITDA of £27 million represented growth of 5% from the previous year (2022: £25.7 million). Reported EBITDA increased to £18.5 million (2022: £17.7 million). During the year we were pleased to welcome 47 new colleagues and the overall headcount grew 9% in the year, to 551 (2022: 504) and the number of Partners decreased by two, to 78.
Strong balance sheet
The Group's balance sheet remains strong with net cash balances at 30 April
2023 of £22.9 million (2022: £18.1 million), consisting of gross cash of
£27.7 million less a balance remaining on a term loan of £4.8 million. The
Group also has an undrawn revolving credit facility ("RCF") of £10 million
with Barclays Bank. These facilities were refinanced in July 2023 for 3 years
on better terms.
Consistently delivering on our growth strategy
Our strategy remains to seek steady and sustainable growth through organic
initiatives and selective acquisition opportunities. We were delighted to
welcome the team from APP Advisory in Cyprus, which we acquired in December
2022. Although this added a new, international office location, at the end of
FY2023 our total office footprint remained at 26 locations, as we closed one
smaller office in Milton Keynes. The Group explored several other acquisition
opportunities although we did not transact due to our highly selective
cultural fit, strategic fit, and acceptable deal economics criteria. We
continue to explore opportunities across each of our five service pillars.
Dividend
Since 2021, the Group's dividend policy has been to pay quarterly dividends.
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 ("EBT") which was seeded by Partners on
IPO, has waived its right to dividends with the corresponding amount retained
by the Group. Share options granted to employees first vested on 6 March 2023
onwards, and once exercised, these shares duly attract dividend rights.
The Board recommends a final dividend of 2.05p per eligible Ordinary Share for
the financial year ended 30 April 2023. Subject to approval by shareholders,
the final dividend will be paid on 27 October 2023 to shareholders on the
Company's register at close of business on 29 September 2023. If the final
dividend is approved, the total dividends paid by the Company relating to the
financial year ended 30 April 2023 will be 4.6p per eligible Ordinary Share
(2022: 4.3p).
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 on admission to AIM and shareholders can find more information on our governance arrangements in the Corporate Governance Statement in 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/.
Our Environmental, Social and Governance responsibilities include committing the Group to be 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. Upon
IPO, ordinary shares representing 8% of the Company's issued shares were
placed in an EBT, with the purpose of being granted to colleagues via share
options. Share options were granted to colleagues at IPO, and subsequent
joiners to the Group, with a vesting period of 3 years from the date of grant.
On 6 March 2023 the first tranche of share options became exercisable and now
there is a regular process in place for colleagues to exercise options either
on or after their vesting dates. By the end of FY2023, options over 7,865,946
ordinary shares had been exercised, with many colleagues retaining shares.
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 equity of the Group.
We believe that we are 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 continues.
Board changes
In March 2023, as part of the Board's succession planning, we welcomed Kathryn
Fleming to the board as an independent, Non-Executive Director. Kathryn is CFO
of Control Risks Group, a global risk management consultancy and is a member
of both their board and executive committee where she is responsible for
overseeing all aspects of the financial performance and strategy across its
worldwide operations. Prior to that she held senior executive roles at leading
professional service firms, Osborne Clarke and Eversheds. Her experience of
working in growing professional service firms with people at the core of the
proposition is very relevant to us at FRP.
In addition, on 30 April 2023, Non-Executive Director, David Adams, retired
from the Board. David had been on the board of FRP since shortly after its
inception in 2010 and his contribution to the Group has been invaluable. He
has also played a significant role in the creation and evolution of FRP's
Corporate Finance business. We are exceptionally grateful for David's
contribution over the last 13 years, and I personally have valued his wise
counsel as we have transitioned from a small restructuring business into a
listed, national, advisory firm. We wish him well in his retirement.
The Nomination Committee continues to review the Board's succession planning
and will announce any further Board changes in the usual way.
Annual General Meeting
The Company's Annual General Meeting will be held on 28 September 2023. 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/. (https://www.frpadvisory.com/investors/financials-documents/)
Looking ahead
In our new financial year activity levels have been encouraging to date and
trading is in line with the Board's expectations. The short and medium-term
outlook for our business remains positive and we are confident of making
further progress.
Nigel Guy
Non-Executive Chairman
25 July 2023
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
life cycle across our five complementary service pillars.
The five service pillars are: Corporate Finance, Debt Advisory, Financial
Advisory, Forensic Services and Restructuring Advisory. We specialise in
finding strategic solutions to a range of situations for clients of all sizes,
including personal clients, SMEs, our core mid-market and high-profile more
complex, appointments.
We believe our agile, collaborative and entrepreneurial approach sets us apart
from our peers. Our offices continue to work together across our five
complementary service pillars as necessary, in order to deliver the best
possible service and outcome. The collaborative approach provides greater
opportunities across a wide range of clients.
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.
On 7 December 2022 we were pleased to announce the acquisition of APP Advisory
based in Limassol, Cyprus, which provides advisory, tax and audit services,
bringing two new Partners and an additional 15 team members to FRP. Adding
offices in selective new locations is part of our growth strategy and we
currently have 26 locations in the UK and one in Cyprus. All offices continue
to work well together, drawing on specialists from our five complementary
service pillars as necessary. Many assignments involve specialists from
several service pillars, working collaboratively to achieve the best possible
outcome. Cross pillar collaboration is possible due to FRP's connected
culture.
Our strong balance sheet gives us the flexibility to move quickly should
further acquisition opportunities arise.
Continued growth in footprint and team
At 30 April 2023, FRP had 25 UK offices, one international office and 551
colleagues, excluding consultants. The team grew 9% or by 47 colleagues year
on year (2022: 504).
Highlights included:
· In August 2022, we launched a Restructuring Advisory service
within East Anglia, with Richard Bloomfield as the appointment taking
Director.
· In December 2022, two new Partners, Augoustinos Papathomas and
Christina Papathomas, joined FRP as part of the acquisition of APP Advisory in
Cyprus. The rest of the APP team also joined FRP, comprising 14 colleagues
and one consultant.
· In February 2023, we launched the Financial Advisory pillar
bringing together our existing transaction related services including buy and
sell-side financial due diligence; lender services including pre-lending due
diligence and independent business reviews; valuation services; financial
modelling; board and C-suite advisory and pensions advisory services. More
than 20 of our experienced advisers formed a new team to support boards,
lenders and investors on mid-market transactions and advisory assignments.
· During FY2023, we announced 8 Director promotions and a further
86 promotions across a wide range of senior and specialist roles, from Office
Managers to Associate Directors/Senior Managers.
Immediately following the year-end, on 1 May 2023, 12 internal promotions to
Partner were announced, which were part of a total of 72 promotions across the
Group. This was a record number of promotions and, when combined with our
ongoing investments in learning and development, demonstrates the Group's
long-term commitment to developing talent and providing attractive career
paths.
In June 2023, we opened an additional office in Salisbury, to support
continued team and business growth from our Southampton office.
Strong trading results
FRP's revenue grew 9% year on-year to £104 million (2022: £95.2 million). 8%
was organic and inorganic growth was 1%. Following an acquisition we treat the
first 12 months contribution to the Group as inorganic, month 13 onwards
becomes organic. Adjusted underlying EBITDA grew 5% year-on-year to £27
million (2022: £25.7 million). We maintain a focus on cost control, whilst
modestly investing where necessary to continue sustainable profitable growth.
On a reported basis, EBITDA grew to £18.5 million (2022: £17.7 million).
Across all offices there is a constant focus on accurate monthly unbilled
revenue (work in progress or "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 £22.9 million (2022: £18.1
million). I am also pleased to report that in May 2022, all IPO liabilities to
Partners (and HMRC) were repaid.
Restructuring Market
Growth in the higher volume liquidations market, which are typically lower
value and less complex, continues, including Creditors Voluntary Liquidation's
and Compulsory Liquidations which increased by 20% in the financial year
(Source: London and Regional Gazettes).
The more complex Administration market, where FRP are particularly active,
increased by 40% comparing financial years FY2023 and FY2022. FRP's
Administration market share, by number of appointments, slightly grew
year-on-year to 14% (Source: London and Regional Gazettes), and has seen
encouraging levels of activity during Q4 FY2023 and post year-end. 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.
Given the long list of well documented headwinds facing UK corporates
including continuing interest rate rises, input cost inflation (i.e. wages,
energy, supplies and materials), weakening consumer demand, supply chain
disruption, Brexit and the withdrawal of pandemic support measures, it is
expected that the administration market should continue to experience greater
volumes during financial year 2024 and FRP is well placed to serve this
market.
Outside of the formal insolvency market, FRP has seen an encouraging increase
in demand for confidential advisory projects and enquiries for restructuring
services; this includes a number of mandates seeking to utilise the
Restructuring Plan. This corporate restructuring process was introduced into
law in 2020 and after a relatively hesitant start is now starting to be a
useful addition to the restructuring toolkit. The Group expects that demand
for its overall restructuring advisory services will continue to increase.
UK M&A Market
FRP Corporate Finance remains a UK member firm of Alliance of International
Corporate Advisors ("AICA"), an integrated network of middle-market M&A
advisory firms, and in the financial year over 40% of its disposals were to
international buyers. In November 2023, FRP Corporate Finance will host the
AICA European conference in London, which will assist in further developing
its international network. FRP Corporate Finance Partner Simon Davies has
been elected as the Chairman of the AICA for a two-year term in 2023 and 2024.
Simon was voted in at AICA's recent Annual Global Meeting, in Dublin.
The Corporate Finance team was involved in 73 successful transactions with an
aggregate deal value of £1.8 billion and £0.8 billion of debt raised. This
level of activity gives FRP Corporate Finance a c.1% market share of the UK
M&A market, by number of appointments (Source: Experian Market IQ). The
average deal value of £25 million places FRP Corporate Finance in the heart
of its target SME market.
The Corporate Finance team continued 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 FY2023 included:
o Sell-side adviser to multi-brand distributor, BTC Activewear on its sale
to New Wave Group AB.
o Sell-side adviser to WysePower, one of the UK's biggest providers of
temporary site solutions for construction projects, on its sale to RSK Group.
o Sell-side adviser to California-based Blueback Global on its sale to
TopSource Worldwide.
o Sell-side adviser to healthcare services provider, Partnering Health
Limited (PHL), on the management buyout.
o Buy-side M&A and debt adviser to LDC on its significant investment in
water and environmental sustainability specialist, Stonbury.
o Debt adviser to CBPE on a debt raise to fund the primary management buyout
of BKL, a leading SME accountancy firm.
o Debt adviser to Airedale Catering Equipment Group, and PE investor Rubicon
Partners on the refinancing of the group.
FRP's Corporate Finance and Debt Advisory teams now comprise 67 fee earners
(including 17 Partners) across 10 locations.
Financial Advisory Market
In response to increasing market demand from institutional lenders and private
equity, FRP launched a Financial Advisory pillar in February 2023 to develop
our financial and pre-lending review services, financial modelling expertise
and wider transaction services including financial due diligence for buy-side
and sell-side transactions. This pillar also includes our valuation services
which support transactions, disputes and complex restructuring situations,
together with our board and C-suite advisory and pensions advisory services.
These services bring already established FRP experts with many years'
experience into one team, so we can assist our clients in complex situations,
with straightforward advice based on thorough analysis.
Since the launch, this combined team has been actively engaged across all
these service areas. Demand for these services remains strong, and we will
continue to develop this team with appropriate hires across the country.
FRP's Financial Advisory team now comprises 23 fee earners including 7
partners.
Forensic Services Market
FY2023 was another year of growth and expansion for the Forensic Services
team. The team received further accreditations, which saw them gain
recognition for their industry expertise and experience in Chambers and Who's
Who Legal.
An enhanced eDiscovery tool, RelativityOne, was also launched: the transition
to this has improved the Forensic Services team's performance when processing
data, with access to new enhanced analytics and features.
The team launched a new global Forensics and Dispute Resolution network in
partnership with Eight International which has increased FRP's brand presence,
market profile and showcased combined cross-border and international
collaboration capabilities across all of the countries in which the Eight
International network operates.
Our Forensic Services team has seen an increase in investigation work in the
first part of 2023, across both forensic accounting and forensic technology.
Notable recent assignments include independent investigations at WANdisco plc,
Inland Homes plc and Braemar plc.
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.
Our specialist Learning and Development Senior Manager has implemented more
focused training options to reflect individual career progression,
incorporating a flexible approach to development across our five service
pillars. Continued support of colleagues in acquiring professional
qualifications and supporting their career aspirations remains a priority,
enabling 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.
Outlook
At FRP our five service pillars, now including Financial Advisory, are each
connected and work together as needed. This internal collaboration and always
putting the best team, from the right locations forward for each project is
part of FRP's culture, which helps achieve the best possible outcome for
clients.
Our Restructuring team are being engaged on projects due to a range of
pressures on UK Corporates including cost of financing, debts owed to HMRC,
supply chain issues, labour shortages, impact of inflation and weakening
consumer demand. We are also seeing institutional lenders and Investors
being more cautious on providing additional support, where they have not
received significant comfort on future viability. A number of these pressures
have yet to work through and some are at the early stages of being felt by
many UK companies. As activity levels continue to increase, our teams are
helping clients to preserve and generate value. Where early engagement is
possible to deploy innovative turnaround and restructuring solutions, to seek
to avoid formal insolvency.
Our Corporate Finance team have a strong pipeline although due to the increase
in interest rates and economic uncertainties, the market has seen demand for
more pre-deal due diligence and debt advice, with completion timelines
extending. The FRP Corporate Finance team are continuing to grow their
reputation and credentials in the mid-market arena, as evidenced by being
named 'UK Corporate Finance House of the Year' at the National Real Deals
Private Equity Awards 2023.
Our Forensic team has been very active on many confidential projects along
with a number of high-profile mandates for listed businesses, for example
WANdisco plc, Inland Homes plc and Braemar plc.
We have a strong balance sheet and recently refinanced our banking facilities
for 3 years from July 2023. As a UK focused business, the Russia/Ukraine
conflict does not have a material impact on FRP's operations.
In the current financial year, trading to date is in line with the Board's
expectations and we are confident of making further progress in the year.
Geoff Rowley
Chief Executive Officer
25 July 2023
Financial review
The following is an extract from the Strategic Report, which can be found in
the Company's Annual Report.
Revenue
FRP's revenue grew 9% year-on-year to £104 million (2022: £95.2 million). 8%
was organic growth and 1% inorganic, defined as an acquisition's first 12
months' contribution to the Group.
Adjusted underlying Earnings Before Interest Tax Depreciation and Amortisation
(EBITDA)
The Group grew profitably with adjusted underlying EBITDA* rising by 5% to
£27 million (2022: £25.7 million). We continue to maintain a focus on cost
control, while modestly investing, to continue executing on delivering
sustainable profitable growth.
£m 2023 2022
Reported Profit before tax 15.6 15.1
Add back depreciation, amortisation and interest 2.9 2.6
Reported EBITDA 18.5 17.7
Add share-based payment expense relating to the Employee Incentive Plan (EIP) 6.3 5.4
Add share-based payment expense - Deemed remuneration 2.1 2.6
Add back exceptional items 0.1 -
Adjusted underlying EBITDA* 27.0 25.7
*Adjusted underlying EBITDA excludes any exceptional costs and non-cash
share-based payment expenses that arise 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 9% through both acquisition and demand-led lateral hiring
and we opened one new office in Limassol, Cyprus, following the acquisition of
APP Advisory in December 2022.
The Group started the financial year with 504 colleagues, (excluding
consultants) operating out of 26 UK offices. By 30 April 2023, there were 25
UK offices and one international location, while the colleague number had
increased to 551 (excluding consultants), as set out in the table below:
Team FY2023 FY2022
Partners 78 80
Colleagues - fee earners 361 317
Total fee earners 439 397
Colleagues - support 112 107
Total (exc consultants) 551 504
Balance sheet and cash flow
The Group's balance sheet remains strong with a net cash balance as at 30
April 2023 of £22.9 million (2022: £18.1 million), consisting of gross cash
of £27.7 million, less a balance remaining on a term loan of £4.8 million.
The Group also has an undrawn RCF of £10 million with Barclays Bank. These
facilities were refinanced in July 2023 on better terms for 3 years.
The Group has repaid all IPO liabilities due to Partners, after a final
payment of £1.3 million was made in May 2022.
The Group has improved the staff utilisation rate to 65% (2022: 61%).
Utilisation is expected to be circa. 60% or greater. The Group monitors
utilisation and capacity and has a culture of internal collaboration whereby
colleagues can be utilised across different locations.
Dividend
Given the trading performance and strong balance sheet, the Board recommends a
final dividend, in line with its stated dividend policy to pay quarterly
dividends. The expected dividend pay-out ratio to eligible shareholders is
high at c. 70% of the Group's reported profit after tax.
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. As the
employee share options became exercisable from 6 March 2023, these shares will
attract dividend rights when converted. The Board recommends a final dividend
of 2.05p per eligible Ordinary Share for the financial year ended 30 April
2023. Subject to approval by shareholders, the final dividend will be paid on
27 October 2023 to shareholders on the Company's register at close of business
on 29 September 2023. If the final dividend is approved, the total dividends
paid by the Company relating to the financial year ended 30 April 2023 will be
4.6p per eligible Ordinary Share (2022: 4.3p).
Consolidated statement of comprehensive income
For the year ended 30 April 2023
Year Ended Year Ended
30 April 2023 30 April 2022
Notes £'million £'million
Revenue 104.0 95.2
Personnel costs 8 (64.3) (58.8)
Depreciation and amortisation (2.5) (2.1)
Other operating expenses (21.1) (18.6)
Exceptional costs 7 (0.1) -
Operating profit 6 16.0 15.6
Finance income 10 0.2 -
Finance costs 10 (0.6) (0.5)
Net finance costs (0.4) (0.5)
Profit before tax 15.6 15.1
Taxation 11 (2.9) (3.2)
Profit and total comprehensive income for the year attributable to the owners 12.7 11.9
of the Group
Earnings per share (in pence)
Total 12 5.13 4.90
Basic 12 5.58 5.35
Diluted 12 5.33 5.04
All results derive from continuing operations.
The Notes form part of these financial statements.
Consolidated statement of financial position
As at 30 April 2023
As at 30 April As at 30 April
2023 2022
Notes £'million £'million
Non-current assets
Goodwill 13 10.8 10.2
Other intangible assets 13 0.6 0.7
Property, plant and equipment 14 2.5 2.8
Right of use asset 14 6.5 6.3
Deferred tax asset 19 2.5 2.4
Total non-current assets 22.9 22.5
Current assets
Trade and other receivables 15 58.3 46.1
Cash and cash equivalents 16 27.7 24.9
Total current assets 86.0 71.0
Total assets 108.9 93.5
Current liabilities
Trade and other payables 17 29.7 30.2
Loans and borrowings 18 1.6 2.0
Lease liabilities 18 1.2 1.4
Total current liabilities 32.5 33.5
Non-current liabilities
Other creditors 17 4.8 5.7
Loans and borrowings 18 3.2 4.8
Lease liabilities 18 5.3 4.9
Total non-current liabilities 13.3 15.4
Total liabilities 45.8 49.0
Net assets 63.1 44.5
Equity
Share capital 21 0.2 0.2
Share premium 27 32.0 23.7
Own shares (EBT) 27 (0.0) (0.0)
Share based payment reserve 27 1.3 (1.1)
Merger reserve 27 1.3 1.3
Retained earnings 27 28.3 20.4
Shareholders' equity 63.1 44.5
Approved by the Board and authorised for issue on 25 July 2023.
Jeremy
French
Gavin Jones
Director
Director
Company Registration No. 12315862
Consolidated statement of changes in equity
For the year ended 30 April 2023
Called up share capital Share premium account Own Share based payment reserve Merger reserve Retained earnings Total equity
shares
(EBT)
£'million £'million £'million £'million £'million £'million £'million
Balance at 30 April 2021 0.0 0.0 (0.0) (4.1) 1.3 12.7 9.8
Profit and total comprehensive income for the year - - - - - 11.9 11.9
Other movements - - (0.0) - - 0.0 -
Issue of share capital 0.2 23.7 23.9
Dividends - - - (9.2) (9.2)
Share based payment expenses - - - 5.4 - - 5.4
Deemed remuneration - - - 2.6 - - 2.6
Transfer to retained earnings - - - (5.0) - 5.0 -
Balance at 30 April 2022 0.2 23.7 (0.0) (1.1) 1.3 20.4 44.5
Profit and total comprehensive income for the year - - - - - 12.7 12.7
Other movements - - 0.0 - - (0.0) -
Issue of shares 0.0 8.5 - - - - 8.5
Share issue costs - (0.2) - - - - (0.2)
Dividends - - - - - (9.8) (9.8)
Share based payment expenses - - - 6.3 - - 6.3
Deemed remuneration additions - - - (1.0) - - (1.0)
Deemed remuneration charge - - - 2.1 - - 2.1
Transfer to retained earnings - - - (5.0) - 5.0 -
Balance at 30 April 2023 0.2 32.0 (0.0) 1.3 1.3 28.3 63.1
Consolidated statement of cash flows
For the year ended 30 April 2023
Year Ended Year Ended
30 April 2023 30 April 2022
Notes £'million £'million
Cash flows from operating activities
Profit before taxation 15.6 15.1
Depreciation, amortisation and impairment (non cash) 13,14 2.5 2.1
Share based payments: employee options (non cash) 8 6.3 5.4
Share based payments: deemed remuneration (non cash) 8 2.1 2.6
Net finance expenses 10 0.4 0.5
Increase in trade and other receivables (11.6) (3.6)
(Decrease) / increase in trade and other payables (2.2) 1.6
Tax paid (2.0) (5.5)
Net cash from operating activities 11.1 18.3
Cash flows from investing activities
Purchase of tangible assets 14 (0.6) (1.4)
Acquisition of subsidiaries less cash acquired 24 (1.6) (4.4)
Interest received 0.2 -
Net cash used in investing activities (2.0) (5.8)
Cash flows from financing activities
Proceeds from share sales 21 7.5 -
Dividends paid 22 (9.8) (9.2)
Principal elements of lease payments (1.4) (1.2)
Repayment of loans and borrowings 18 (2.0) (1.2)
Interest paid (0.6) (0.4)
Net cash used in financing activities (6.3) (12.0)
Net increase in cash and cash equivalents 2.8 0.5
Cash and cash equivalents at the beginning of the year 24.9 24.4
Cash and cash equivalents at the end of the year 16 27.7 24.9
Notes to the Financial Statements
For the year ended 30 April 2023
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
financial 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 £'million, 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 2023.
FRP Advisory Trading Limited has eleven owned subsidiaries, FRP Debt Advisory
Limited, FRP Corporate Finance Limited, FRP Corporate Advisory Limited, Litmus
Advisory Limited, Abbott Fielding Limited, JDC Accountants & Business
Advisors Limited, JDC Holdings Limited, Spectrum Corporate Finance Limited,
BridgeShield Asset Management Limited, FRP Advisory (Cyprus) Limited and APP
Audit Co Limited, as well as being a member of FRP Advisory Services LLP.
During the year FRP Corporate Finance Limited was renamed to FRP Corporate
Advisory Limited, and a new entity set up called FRP Corporate Finance
Limited. The Group also completed one acquisition as set out in Note 24. The
assets, liabilities and entity acquired have been consolidated within these
Financial Statements, in accordance with IFRS. The newly acquired entities are
FRP Advisory (Cyprus) Limited and APP Audit Co 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 2023:
· IAS 16 Property, Plant and Equipment (Amendment): Proceeds before
Intended Use
· IAS 37 Provisions, Contingent Liabilities and Contingent assets
(Amendment): Onerous Contracts: Cost of Fulfilling a Contract
· IFRS 3 Business Combinations (Amendment): Reference to the
Conceptual Framework
· Annual Improvements Cycle 2018 to 2020
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.
IFRS standards effective for accounting periods commencing on or after 1
January 2023
• IAS 1 Amendment: Disclosure of Accounting Policies
• IAS 8 Amendment: Definition of Accounting Estimates
• IAS 1 Amendment: Classification of Liabilities as
Current or Non-current and Non-current Liabilities with Covenants
• IAS 12 Amendment: Deferred Tax related to Assets and
Liabilities arising from a Single Transaction
• IFRS 16 Amendment: Lease Liability in a Sale and
Leaseback
• IAS 12 Income Taxes: Deferred Tax related to Assets
and Liabilities arising from a Single Transaction
• IFRS 17 Insurance Contracts (Amendment): Initial
Application of IFRS 17 and IFRS 9 - Comparative Information
• IFRS 17 Insurance Contracts and Amendments to IFRS 17
• Amendments to IAS 12 Income taxes: International Tax
Reform - Pillar Two Model Rules
• Amendments to IAS 7 Statement of Cash Flows and IFRS 7
Financial Instruments: Disclosures: Supplier Finance Arrangements
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.
2.6 Going concern
The business has been, and is currently, both profitable and cash generative.
It has consistently grown year on year for 13 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 £22.9 million. In July 2023 the Group
refinanced its bank facilities with Barclays, which expire in 3 years' time on
better terms. As part of these facilities, the Group has available an undrawn
£10 million committed revolving credit facility ("RCF"). Ongoing operational
cash generation and this cash balance mean the Group has sufficient resources
to both operate and move swiftly should acquisition opportunities arise. The
Group also has the capacity to raise funds through share issue, demonstrated
with the £7.5 million gross raise in June 2022.
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 support each other and work on both higher value
assignments or higher volume, lower value jobs. Financial Advisory, Forensic
Services, Corporate Finance and Debt Advisory can all support the
Restructuring Advisory offering and also earn fees autonomously.
Management have conducted sensitivity analysis by reducing revenue by over 35%
and separately increasing direct costs by 25% over the next 12 months: both
scenarios show FRP to be in a healthy financial position with available cash
resources. The Group has also assessed the impact of inflation, rising
interest rates and climate change. 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.
When preparing the budget for future years, the Group undertakes significant
stress testing in areas utilisation, recovery and WIP days. These help the
Group highlight and prepare for future eventualities.
FRP 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 a
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.
The assets and liabilities of foreign operations, including goodwill, are
translated into GBP at the exchange rates at the reporting date. The income
and expenses of foreign operations are translated into GBP at the rates ruling
when the transactions occur, or appropriate averages. Foreign currency
differences on translating the opening net assets at an opening rate and the
results of operations at actual rates are recognised in retained earnings.
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.
Our property asset management team recognise revenue (typically LPA
receivership work) as performance obligations are delivered during a project.
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. The Group applies the simplified approach to providing for
expected credit losses, which permits the use of the lifetime expected loss
provision for trade receivables. The Group makes specific provisions for
lifetime expected credit losses against trade receivables where additional
information is known regarding the recoverability of those balances. For the
remaining trade receivables balances, the Group has established an expected
credit loss model based on historical data. 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 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 includes 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.
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 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.
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:
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 24 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 £10.8 million (2022: £10.2 million).
See Note 13 for further details on the Group's assumptions.
Unbilled revenue
Time recorded for chargeable professional services work is regularly reviewed
to ensure that only that which the Directors elieve 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 £45.8 million (2022: £35.3 million).
Refer to Note 15 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 £8.4 million (2022: £8.0
million). Refer to Note 23 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. The definition of default is when a client
or member of other party are unable to pay the amounts due based on internal
credit risk management procedures and information.
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.
Year Ended Year Ended
30 April 2023 30 April 2022
Credit Risk £'million £'million
Trade receivables 7.9 7.2
Cash and cash equivalents 27.7 24.9
35.6 32.1
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 15. 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 amounted to £45.8 million (2022: £35.3 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.
Year Ended Year Ended
30 April 2023 30 April 2022
Liquidity risk £'million £'million
Within 1 year 25.2 26.3
Within 2-5 years 8.9 12.0
Beyond 5 years 4.1 4.0
38.2 42.3
The discounted carrying value of these liabilities is £37.4 million (2022:
£41.2 million), comprising £6.5 million lease liabilities (2022: £6.3
million), £4.8 million loans (2022: £6.8 million), and £26.1 million trade
and other payables (2022: £28.1 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 term loan of £4.8 million as at April 2023 and had a rate
of interest being base plus 3% repayable over a 3 remaining years. This was
refinanced on better terms in July 2023. The company has an interest risk
management strategy and reforecasts cashflow whenever the base rate changes.
The recent rise in base interest rates has increased repayments due, but the
Group is well placed to meet the amounts due.
In terms of sensitivity analysis, if interest rates increased by 200 basis
points or 2% the incremental FY2023 impact would reduce the Profit before tax
by £0.1 million. If base rate (prevailing at the date of signing of 5%)
reduced, there would be a marginal increase in the Group's FY2024 Profit
before tax.
Foreign currency risk
While the Group now has a location operating in Cyprus with a primary currency
of Euro, it is considered that 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 enables the Group to meet requirements it may
face. In May 2022, the Group repaid all IPO liabilities due to Partners, with
a final payment of £1.3 million. Net cash of £22.9 million (2022: £18.1
million), an undrawn £10 million revolving credit facility ("RCF"), the
secondary share placing raising £7.5 million in June 2022 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 service pillars which individually do
not meet the definition of a disclosable operating segment.
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 2023 30 April 2022
£'million £'million
Depreciation of owned assets 0.8 0.8
Depreciation of right-of-use-assets 1.6 1.3
Amortisation of intangible assets 0.1 0.1
Fees payable to the Group's auditor for the audit of the group accounts 0.1 0.1
Expenses relating to short term leases 0.4 0.3
7. Exceptional costs
Year Ended Year Ended
30 April 2023 30 April 2022
£'million £'million
Operating items
Costs in relation to June 2022 share placing 0.1 -
Total exceptional costs 0.1 -
8. Director and employee information
The average number of Directors and employees during the year was:
Year Ended Year Ended
30 April 2023 30 April 2022
Number Number
Directors 7 7
Fee earning employees (including Partners) 406 370
Non fee earning employees 97 90
The aggregate payroll costs of these persons were as follows:
£'million £'million
Wages, salaries and Partner compensation charged as an expense 51.2 46.4
Social security costs 3.6 3.7
Pension costs - defined contribution scheme 1.1 0.7
Share-based payment expense 6.3 5.4
Deemed remuneration 2.1 2.6
64.3 58.8
9. Directors' remuneration and emoluments (including Partner profit
allocations)
Details of emoluments paid to directors (including Partner profit allocations
in respect of Messrs Rowley and French) are as follows:
Year Ended Year Ended
30 April 2023 30 April 2022
£'million £'million
Directors' emoluments 2.8 2.7
Benefits in kind (inc. pension contributions) 0.0 0.0
2.8 2.7
Remuneration (including Partner profit allocation) disclosed above include the
following amounts paid to the highest paid Director:
£'million £'million
Remuneration for qualifying services 1.4 1.3
One director is currently included in the company pension scheme.
10. Finance income and expense
Year Ended Year Ended
30 April 2023 30 April 2022
£'million £'million
On short term deposits and investments 0.2 -
Total finance income 0.2 -
On bank loans and overdrafts measured at amortised cost 0.4 0.3
On lease liabilities 0.2 0.2
Total finance expense 0.6 0.5
11. Taxation
Year Ended Year Ended
30 April 2023 30 April 2022
£'million £'million
Current tax
UK Corporation tax 3.0 4.7
Deferred tax
Deferred tax credit (1.7) (1.5)
Reversal of temporary differences 1.6 -
Total tax charge 2.9 3.2
Reconciliation of tax charge:
Year Ended Year Ended
30 April 2023 30 April 2022
£'million £'million
Profit before tax 15.6 15.1
Corporation tax in the UK at 19.5% (2022: 19%) 3.0 2.9
Effects of:
Non-deductible expenses 0.4 0.9
Other permanent differences (0.5) (0.5)
Total tax charge 2.9 3.2
The UK Budget 2021 announcements on 3 March 2021 included an increase to the
UK's main corporation tax rate to 25%, which was effective from 1 April 2023.
The relevant corporation tax rate has been applied in the calculation of
deferred tax balances.
12. 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:
EPS Adjusted EPS EPS Adjusted EPS
2023 2023 2022 2022
Reported Profit after tax £m 12.7 12.7 11.9 11.9
Add Share based payments £m - 8.4 - 8.0
Less deferred tax £m (1.7) (1.5)
Adjusted Profit after tax £m 12.7 19.4 11.9 18.4
Total average shares in issue 248,305,296 248,305,296 243,191,489 243,191,489
Total share EPS* (pence) 5.13 7.83 4.90 7.57
Weighted average shares in issue excluding EBT 228,182,054 228,182,054 222,669,711 222,669,711
Basic EPS (pence) 5.58 8.52 5.35 8.27
Dilutive potential ordinary shares under share option schemes 10,711,511 10,711,511 13,424,101 13,424,101
Weighted diluted shares in issue 238,893,564 238,893,564 236,487,512 236,487,512
Diluted EPS (pence) 5.33 8.14 5.04 7.80
The Employee Benefit Trust has waived its entitlement to dividends and is not
included within weighted average shares in issue. It holds 20,123,242 shares
of the 249,401,058 shares in issue at 30 April 2023 (2022: 22,531,865). When
options are exercised by employees, dividend rights accrue.
*Total share EPS is an alternative performance measure used by management to
assess performance.
13. Goodwill and other intangible assets
Client List Goodwill Total
£'million £'million £'million
Cost
At 1 May 2021 0.8 9.6 10.4
Additions 0.6 0.6
At 30 April 2022 0.8 10.2 11.0
At 1 May 2022 0.8 10.2 11.0
Additions 0.6 0.6
At 30 April 2023 0.8 10.8 11.6
Amortisation
At 1 May 2021 (0.0) - (0.0)
Charge for the period (0.1) - (0.1)
At 30 April 2022 (0.1) - (0.1)
At 1 May 2022 (0.1) - (0.1)
Charge for the period (0.1) - (0.1)
At 30 April 2023 (0.2) - (0.2)
Net book value
At 30 April 2022 0.7 10.2 10.9
At 30 April 2023 0.6 10.8 11.4
Additions to goodwill in the year relate to acquisitions as set out in Note
24.
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 2023:
· Spectrum £5.6m
· JDC Group £3.2m
· Debt Advisory £0.8m
· BridgeShield £0.6m
· APP £0.6m
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 6% (2022: 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% (2022: 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% (2022: 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, BridgeShield, and APP 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.
14. Property, plant and equipment
Leasehold Computer Fixtures and Leasehold
Properties (right of use asset) equipment fittings improvements Total
£'million £'million £'million £'million £'million
Cost
At 1 May 2021 7.6 2.2 0.8 1.9 12.5
Additions 4.0 0.5 0.3 0.7 5.4
Disposal - (1.0) (0.1) (0.6) (1.7)
At 30 April 2022 11.6 1.7 0.9 2.1 16.3
At 1 May 2022 11.6 1.7 0.9 2.1 16.3
Arising on acquisitions 0.1 0.0 0.0 0.0 0.1
Additions 1.7 0.4 0.1 0.1 2.3
Disposals - (0.2) - - (0.2)
At 30 April 2023 13.4 1.9 1.0 2.2 18.5
Depreciation
At 1 May 2021 (4.1) (1.4) (0.4) (0.9) (6.8)
Depreciation charge for the period (1.3) (0.4) (0.1) (0.3) (2.1)
Disposals - 1.0 0.1 0.6 1.7
At 30 April 2022 (5.3) (0.8) (0.4) (0.7) (7.2)
At 1 May 2022 (5.3) (0.8) (0.4) (0.7) (7.2)
Depreciation charge for the period (1.6) (0.4) (0.1) (0.3) (2.4)
Disposals - 0.1 - - 0.1
At 30 April 2023 (6.9) (1.1) (0.5) (1.0) (9.5)
Net book value
At 30 April 2022 6.3 0.9 0.6 1.4 9.1
At 30 April 2023 6.5 0.8 0.5 1.2 9.0
15. Trade and other receivables
Group as at Group as at
30 April 2023 30 April 2022
Trade and other receivables £'million £'million
Trade receivables 7.9 7.2
Other receivables 4.6 3.6
Unbilled revenue 45.8 35.3
58.3 46.1
The ageing profile of non-related party trade receivables is as follows:
As at As at
30 April 2023 30 April 2022
Due in £'million £'million
<30 Days 4.1 3.4
30-60 Days 1.6 1.7
60-90 Days 0.8 0.8
90-180 Days 0.8 0.8
>180 Days 0.6 0.5
Total 7.9 7.2
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
non-recoverability.
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. Changes
from prior periods are due to specific loss allowances, and are detailed below
as follows:
As at 30 April 2022 <30 Days 30-60 Days 60-90 Days 90-180 Days >180 Days Total
Expected loss rate 0% 2% 3% 7% 62% 12%
Gross carrying amount 3.4 1.7 0.8 0.9 1.3 8.1
Expected credit loss provision (0.0) (0.0) (0.0) (0.1) (0.8) (0.9)
3.4 1.7 0.8 0.8 0.5 7.2
As at 30 April 2023
Expected loss rate 5% 2% 2% 16% 64% 16%
Gross carrying amount 4.3 1.6 0.8 1.0 1.6 9.3
Expected credit loss provision (0.2) (0.0) (0.0) (0.2) (1.0) (1.4)
4.1 1.6 0.8 0.8 0.6 7.9
16. Cash and cash equivalents
Group as at Group as at
30 April 2023 30 April 2022
£'million £'million
Cash at bank and in hand 27.7 24.9
17. Trade and other payables
Group as at Group as at
30 April 2023 30 April 2022
Current liabilities £'million £'million
Trade payables 1.9 1.6
Other taxes and social security costs 8.4 7.4
Liabilities to Partners go forward 10.3 9.1
Liabilities to Partners cessation profits at IPO - 1.3
Deferred consideration - 0.4
Other payables and accruals 9.1 10.3
29.7 30.2
Group as at Group as at
30 April 2023 30 April 2022
Non-current liabilities £'million £'million
Other payables and accruals 0.7 1.4
Partner capital 4.1 4.3
4.8 5.7
All of the trade payables were non-interest bearing and under normal
commercial terms. The Directors consider that the carrying value of trade and
other payables approximates to their fair value.
The liabilities to Partners mentioned in both of the above tables includes tax
due to HMRC on their behalf.
Other payables and accruals includes £5.5 million of staff costs (2022: £7.1
million).
18. Loans and borrowings
Group as at Group as at
30 April 2023 30 April 2022
£'million £'million
Current borrowings
Bank loan 1.6 2.0
Lease liability 1.2 1.4
2.8 3.4
Non-current borrowings
Bank loan 3.2 4.8
Lease liability 5.3 4.9
8.5 9.7
Bank loan is repayable
Within one year 1.6 2.0
Within two to five years 3.2 4.8
4.8 6.8
The above £4.8 million (2022: £6.8 million) loan is with Barclays Bank plc
(Barclays) and is repayable over quarterly instalments of £0.4m. Interest
rate was 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
2023, running until 30 November 2023. These facilities were refinanced in July
2023 on better terms, for 3 years. The Directors consider that the carrying
value of loans and borrowings approximates to their fair value.
19. Deferred tax
Group as at Group as at
30 April 2023 30 April 2022
£'million £'million
Deferred tax asset brought forward 2.4 0.9
Recognised in profit and loss for the period 0.1 1.5
Deferred tax asset brought forward 2.5 2.4
The deferred tax provision is analysed as follows:
Group as at Group as at
30 April 2023 30 April 2022
£'million £'million
Accelerated capital allowance (0.2) (0.1)
Share based payments 2.8 2.6
Deferred tax on acquisition (0.1) (0.1)
2.5 2.4
20. Financial instruments
Group as at Group as at
30 April 2023 30 April 2022
£'million £'million
Financial assets held at amortised cost 35.6 32.1
Financial liabilities held at amortised cost 38.1 42.3
21. Share capital
Group as at Group as at
30 April 2023 30 April 2022
Allotted, called up and fully paid £ £
249,401,058 (2022: 243,191,489) Ordinary shares of £0.001 each 249,401 243,191
On 4 May 2022, 393,700 new Ordinary Shares were issued as part of the
acquisition of BridgeShield Asset Management Limited.
In June 2022 5,357,143 new shares were issued as part of a £7.5 million gross
raise linked to an oversubscribed secondary share placing.
On 16 December 2022, 321,226 new Ordinary Shares were issued as part of the
acquisition of FRP Advisory (Cyprus) Limited and APP Audit Co Ltd.
On 30 March 2023, 137,500 new Ordinary Shares were issued under the company
share option scheme.
22. Dividends
For FY2023 a dividend of £1,887k, equivalent to 0.85p per eligible Ordinary
Share, was declared on 15 September 2022 and paid on 23 December 2022. A
dividend of £1,882k, equivalent to 0.85p per eligible Ordinary Share, was
declared on 13 December 2022 and paid on 24 March 2023. A dividend of
£1,959k, equivalent to 0.85p per eligible Ordinary Share, was declared on 13
February 2023 and paid on 16 June 2023. The Board recommends a final dividend
of 2.05p per eligible Ordinary Share for the financial year ended 30 April
2023. Subject to approval by shareholders, the final dividend will be paid on
27 October 2023 to shareholders on the Company's register at close of business
on 29 September 2023. If the final dividend is approved, the total dividends
paid by the Company relating to the financial year ended 30 April 2023 will be
4.6p per eligible Ordinary Share.
23. Share based payments
Number of Number of
share options share options
April 2023 April 2022
Outstanding at the beginning of the year 18,336,286 16,163,479
Granted during the year 2,112,312 2,448,975
Forfeited during the year (295,595) (276,168)
Exercised during the year (7,865,946) -
Outstanding at the end of the year 12,287,057 18,336,286
Exercisable at the end of the year 4,387,779 -
The weighted average life of outstanding options was one year (2022: 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 18,198,786 137,500 18,336,286
Granted during the year 2,112,312 - 2,112,312
Forfeited during the year (295,595) - (295,595)
Exercised during the year (7,728,446) (137,500) (7,865,946)
Outstanding at the end of the year 12,287,057 - 12,287,057
Exercisable at the end of the year 4,387,779 - 4,387,779
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 12,287,057 - from 06/03/2023
Weighted average fair value per option is £0.97 (2022: £0.85).
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 Group's share price
since IPO
· A risk-free interest rate of 3% has been used (2022: 0.6%); and
· 100% of the options issued under the employee scheme are expected
to vest.
The total recognised share-based payment expense relating to the employee
incentive plan during the year by the Group was £6.3 million (2022: £5.4
million).
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.
Value of deemed
remuneration
£'million
As at 1 May 2021 5.2
Amortised in the year (2.6)
As at 30 April 2022 2.6
As at 1 May 2022 2.6
Granted in the year 1.0
Amortised in the year (2.1)
As at 30 April 2023 1.5
24. 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.
APP (FRP Advisory Cyprus Limited and APP Audit Co Limited)
Date Name Location Type Percentage bought Services
7 December 2022 FRP Advisory Cyprus Limited (formerly APP Advisory Limited) Cyprus Share 100% Restructuring Advisory
7 December 2022 APP Audit Co Limited Cyprus Share 49% Class A (Voting) and 100% Class B (Economic rights) Audit
Acquisition costs of £0.01 million (2022: £0.03 million) relating to the
acquisition have been expensed in the period but not adjusted for in adjusted
underlying EBITDA.
The fair values of APP at the acquisition date on 7 December 2022, following
the purchase price allocation exercise are detailed below.
On 16 December 2022, equity compensation of £540k was also granted to certain
vendor fee earners. As this is subject to a lock-in, this has not been
included within the cost of the acquisition but as deemed remuneration within
the share based payment reserve in the Statement of Changes in Equity.
The key shareholders who sold APP joined the Group as Partners.
The acquisition contributed £439k of revenue and £105k to the Group's
underlying EBITDA for the period between the date of acquisition and the
balance sheet
date.
Book value Fair value
£'million £'million
Combined net assets acquired
Right of use assets 0.1 0.1
Trade receivables 0.5 0.5
Unbilled revenue 0.2 0.2
Cash 0.5 0.5
Trade payables (0.2) (0.2)
Accruals (0.2) (0.2)
VAT (0.1) (0.1)
Corporation tax (0.0) (0.0)
Total 0.8 0.8
Consideration 1.4
Goodwill 0.6
Cash flow £'million
Cash paid as consideration on acquisition 1.4
Less cash acquired at acquisition (0.5)
Net cash outflow 0.9
Cash outflow linked to the consideration paid on the acquisition of
subsidiaries.
JDC (prior year acquisition) £0.4m
BridgeShield (prior year acquisition) £0.3m
APP (see above) £0.9m
£1.6m
25. Leases
Group as at Group as at
30 April 2023 30 April 2022
£'million £'million
Expenses relating to short term leases 0.4 0.3
Lease interest 0.2 0.2
Cash outflow for leases 1.7 1.4
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 2023 30 April 2022
£'million £'million
Due within one year 1.9 1.6
Due within two to five years 1.3 1.5
Due after more than five years 4.1 4.0
7.3 7.0
26. Cash flow of financing activities
Note Bank Loan Lease Liability
At 1 May 2021 8.0 3.6
Repayment of principal (1.2) (1.2)
New contracts entered - 3.9
At 30 April 2022 6.8 6.3
At 1 May 2022 18 6.8 6.3
Repayment of principal (2.0) (1.4)
New contracts entered - 1.6
At 30 April 2023 4.8 6.5
27. 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.
Own shares (EBT)
The own shares reserve represents the shares of FRP Advisory Group plc that
are held in the Employee Benefit Trust ("EBT").
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.
28. 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 £21.1 million (2022: 19.9 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.
29. 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.
30. Events after the reporting period
A dividend of £2.0m, equivalent to 0.85p per eligible Ordinary Share, was
declared on 13 February 2023 and paid on 16 June 2023.
31. Capital commitments
At the balance sheet date, the Group had no material capital commitments in
respect of property, plant and equipment (2022: £nil).
32. 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 2023 but is derived from those
accounts. Statutory accounts for FY 2023 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 available at
www.frpadvisory.com/investors/
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 25 July
2023.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END FR PPUPCMUPWPPARecent news on Frp Advisory
See all newsREG - FRP Advisory Grp PLC - AIM Rule 17 Update
AnnouncementREG - FRP Advisory Grp PLC - Director/PDMR Shareholding
AnnouncementREG - FRP Advisory Grp PLC - Q3 Trading Update and Dividend Declaration
AnnouncementREG - FRP Advisory Grp PLC - Appointment of Joint Corporate Broker
AnnouncementREG - FRP Advisory Grp PLC - Director/PDMR Shareholding
Announcement