Half Year Trading Update

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: [phone]

Investec Bank plc (Joint Broker)

Carlton Nelson/James Rudd (Corporate Broking)

Tel: [phone]

MHP (Financial Public Relations)

Oliver Hughes

Charlie Barker

Catherine Chapman

Tel: [phone]

[e-mail]  

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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