REG - FRP Advisory Grp PLC - Half Year Trading Update

Frp AdvisoryAnnouncement

17/11/2023 07:00

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RNS Number : 7568T  FRP Advisory Group PLC  17 November 2023

FRP Advisory Group plc

("FRP" or the "Group")

 

Half Year Trading Update

 

FRP Advisory Group plc, a leading national specialist business advisory
firm, announces a trading update for the half year ended 31 October 2023 ("H1
2024").

 

Strong first half performance

 

The Group's performance was strong during the first half, with continued
growth in revenues and profits as well as further investment in the team.

 

The Group expects to report revenue for H1 2024 of £58.7m, up 19% on the
prior year (H1 2023: £49.4m), and underlying adjusted EBITDA* of £15.5m, up
34% on the prior year (H1 2023: £11.6m).

 

Restructuring

 

During the 2023 calendar year, the restructuring market has seen an increase
in activity levels, including administrations approaching pre-pandemic levels.
Companies with significant borrowings who have rolled off lower interest rate
arrangements are now subject to much higher debt service costs, with interest
rates now considerably higher than the 2009-2021 period. Businesses are also
exposed to much higher levels of cost inflation. Certain sectors such as
construction, property, casual dining and food service, retail, administrative
and support services are finding current trading conditions particularly
challenging.

 

FRP continues to be one of the most active Restructuring Advisory businesses
in the UK, supporting clients on both stress and distress situations where we
create commercial solutions to achieve the best possible outcome.

 

Wilson Field was acquired in September 2023. The team serve clients both
locally in Sheffield and nationally through a digital platform. Integration of
the business continues as planned and their results for the seven weeks
post-acquisition are in line with the Board's expectations.

 

Corporate Finance (including Debt Advisory)

 

FRP Corporate Finance has continued to invest in both external and internal
talent.

 

The challenging conditions seen across the broader economy have impacted the
UK M&A market, with deal volumes down as expected compared to the prior
year. The team has remained an active player in the mid-market and has closed
25 transactions in H1 2024, with a combined value of £537 million and raising
£209 million of debt (H1 2023: 40 deals with a combined value of £1.2
billion and raising £552 million of debt).

 

Moving into H2 2024, the pipeline of new opportunities remains solid and we
are continuing to see good levels of activity across the national Corporate
Finance practice. We are seeing signs of an increase in debt refinancing and
restructuring related M&A activity.

 

Forensic Services

 

Compared to the prior year, Forensic Services have seen a high level of
activity across both investigations and disputes. Some of this increase has
been driven by an uptick in fraud related matters and clients requiring
independent investigations.

 

Financial Advisory

 

The team is actively engaged in a range of assignments including option
reviews and transaction due diligence, where stakeholders are seeking more
assurance on the viability of new investments and re-financing given the
greater cost of capital and a higher risk environment. Our valuation
specialists have been active with both mainstream projects and preparing
valuations which underpin restructuring plans and schemes of arrangements.

 

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

 

Balance sheet strength and discipline

 

The Group's balance sheet remains strong with an unaudited net cash balance as
at 31 October 2023 of £11.7m** (H1 2023: £21.0m). In addition, the Group has
an undrawn revolving credit facility of £10m.

 

As our activity levels have increased, there has been the expected growth in
our unbilled revenue (also known as work in progress or 'WIP') although we
have consistently maintained our discipline around appropriate valuation. The
increase has arisen as FRP has been appointed on new, large and/or complex
administration assignments that have assets other than cash (i.e. property)
and/or a longer creditor approval process before fees can be drawn. FRP
continues to have a strong track record of converting WIP into cash.

 

**£15.7m gross cash less £4m of structured debt (H1 2023: £26.6m less
£5.6m), repayable over approximately three years.

 

Continued investment in our people and operations

 

FRP's 28 offices work together, drawing on specialists from different teams as
necessary, in order to deliver the best possible service and outcome for our
clients.

 

We continued to selectively grow our headcount, increasing the number of total
Colleagues by 13% over H1 2024 (16% year-on-year) due to demand-led lateral
hiring and 63 new colleagues following the Wilson Field acquisition. The
increase in Partners was driven by 12 internal promotions on 1 May 2023,
facilitated by our investments in developing internal talent. Three further
internal promotions to Partner occurred on 1 November 2023.

 

                                    31-Oct-23  30-Apr-23  31-Oct-22
 Partners                           88         78         80
 Other Fee earners                  396        361        342
 Subtotal - Fee earners             484        439        422
 Support                            138        112        114
 Total Colleagues (ex Consultants)  622        551        536

 

The Group continues to improve its operational platform, achieving formal
Information Security ISO 27001 certification and launching both a new
Leadership programme and Learning Management System (LMS) with bespoke
training content to assist Colleagues' learning, development and career paths.

 

Outlook

 

Trading since 1 May 2023 has been positive and if current activity levels
continue, the Board remains confident of at least achieving full year
expectations.***

 

***The Company believes consensus market expectations for FY 2024 to be
revenue of £112.2m and adjusted EBITDA of £28.8m.

 

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

 

"FRP performed well in the first half, with our team, revenues and profits all
continuing to grow. We continued to take market share and made further
progress against our strategy, which remains to deliver sustainable profitable
growth by ensuring our five service pillars work together to provide solutions
that achieve the best possible outcomes.

 

Looking ahead, we remain confident of making further progress, with leading
positions in our core markets and a team and structure that leaves us well
positioned to support corporates through the business cycle and respond to
increased demand for our services."

 

Notice of results

 

The Group expects to report its unaudited results for the half year ended 31
October 2023 on 12 December 2023.

 

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

 

Enquiries:

 

FRP Advisory Group
plc

Geoff Rowley, CEO

Jeremy French, COO

Gavin Jones, CFO

Enquiries via MHP

 

Cavendish Capital Markets Limited (Nominated Adviser and Joint Broker)

Katy Birkin/Stephen Keys/George Lawson (Corporate Finance)

Tel: +44 (0) 207 220 0500

 

Investec Bank plc (Joint Broker)

Carlton Nelson/James Rudd (Corporate Broking)

Tel: +44 (0) 207 597 4000

 

MHP (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 and valuations, financial due diligence, capital raising,
special situations M&A and partial exits.

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

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

·      Financial advisory: transaction services including financial due
diligence, lender services, financial modelling, valuations, pensions and
company-side advisory services.

 

 

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