Frp Advisory Group Regulatory News (FRP)

16 December 2020

FRP ADVISORY GROUP PLC

("FRP", the "Group" or the "Company")

Increasing size and profitability despite a subdued market

FRP Advisory Group plc, a leading UK professional services firm specialising in restructuring advisory, is pleased to announce its unaudited interim results for the six-month period ended 31 October 2020 ('H1 2021' or 'first half').

Highlights

Financial

· Revenue increased 14% in the first half to £35.9m, 9% on an organic basis

· Adjusted underlying EBITDA up 7% to £9.7m

· Adjusted PBT of £8.8m in line with Board expectations

· Strong balance sheet with cash at 31 October 2020 of £15.4m and an undrawn committed revolving credit facility (RCF) of £5m

· For the first half basic and diluted EPS is 2.48p. Adjusted EPS is 2.96p

· The Board declares an interim dividend for the first half of 1.6p per eligible3 share. This dividend will be based on shareholders per record date of 19 February 2021 and will be paid on Thursday 18 March 2021.The board intends to adopt a quarterly dividend payment schedule commencing in 2021

· The Board believes current trading is on track to comfortably achieve full year expectations

Operational

· 23% increase in fee earning staff to 331 compared to prior year of 270

· Marginal growth in administration appointments despite a subdued market, including high profile appointment to Edinburgh Woollen Mill, including Peacocks and Jaeger

· Three selective acquisitions in Newcastle, East Anglia and Kent

· Dedicated significant effort and resources (Corporate resilience hub, crisis toolkit) to play our part in helping businesses navigate the Covid-19 pandemic. None of our people were placed on furlough and we have not applied for any of the government backed lending schemes or delayed any tax settlements.

KPI Table

1. Adjusted for share based payments, deemed remuneration and exceptional costs. Underlying treats go-forward Partner compensation as a cost in both years to enable comparability, as prior year was a full distribution partnership. This is illustrated in the adjusted underlying EBITDA table.

2. Adjusted for share based payments, deemed remuneration and exceptional costs. Prior year was a full distribution partnership hence nil profit. This is not underlying.

3. The Employee Incentive Plan (EIP) established on IPO was used to grant options to staff. The trust holding these shares is not eligible for dividends, rights were waived. When the options vest from 2023 onwards, the shares will gain rights to dividends.

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

"I am pleased to report a positive first half year for the business in line with the Board's expectations. This is testament to our team's outstanding response to the challenges of Covid-19 which has allowed us to seamlessly provide the high-quality advice and service that our clients expect from us. Our resource flexibility and breadth has proven invaluable in the current climate, helping us to support businesses as they adapt to a fast-changing environment. We have a resilient business model, with complementary service lines that support clients throughout their entire lifecycle.

The pandemic and related government support measures have had a significant impact on both the UK corporate landscape and the UK insolvency market. Despite this, FRP has continued to marginally grow administration appointments year-on-year, demonstrating our continued market share growth against a subdued backdrop.

There is still uncertainty around the shape and scale of the economic recovery caused by the Covid-19 pandemic and additional pressures on some businesses from the UK leaving the EU. The medium-term outlook for our market is positive. The Group has sufficient resource flexibility to service an increase in demand. The Board believes current trading is on track to comfortably achieve full year expectations"

Enquiries:

FRP Advisory Group plc

Geoff Rowley, CEO

Jeremy French, COO

Gavin Jones, CFO

Enquiries via MHP

Cenkos Securities plc (Nominated Adviser and Sole Broker)

Max Hartley/Max Gould (Corporate Finance)

Alex Pollen (Sales)

Tel: +44 (0) 207 397 8900

MHP Communications (Financial Public Relations)

Oliver Hughes

Charlie Barker

Pete Lambie

Tel: +44 (0) 20 3128 8570

FRP@mhpc.com 

Notes to Editors

FRP is a professional services firm established in 2010 which offers a range of advisory services to companies, lenders, investors and other stakeholders, as well as individuals. These services include:

· Restructuring advisory: corporate financial advisory, formal insolvency appointments, informal restructuring advisory, personal insolvency and general advice to all stakeholders.

· Corporate finance: mergers and acquisitions (M&A), strategic advisory and valuations, financial due diligence, capital raising, special situations M&A and partial exits.

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

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

· Pensions advisory: pension scheme transaction advisory, pension scheme restructuring advisory, covenant advisory and corporate governance

Management statement 

We are pleased to report that FRP has continued to grow in the six months to 31 October 2020. In an unprecedented environment caused by the Covid-19 pandemic, we have continued to support our clients with high quality advice and have remained focused on achieving the best outcomes for all stakeholders. During the year we have adapted well to remote working and operated seamlessly. Despite the challenging environment, we have continued to build our team via demand-led lateral hires and we have completed three acquisitions. 

During the pandemic we have dedicated significant effort and resources to play our part in helping businesses navigate the crisis, survive and recover. In addition to our appointments, we have offered pro-bono advice and shared extensive business support resources through the Corporate Resilience hub on our website. As well as a crisis toolkit and Covid-19 business resources, we shared a range of insights, podcasts and templates to help businesses navigate the unprecedented situation. None of our people were placed on furlough and we have not applied for any of the government backed lending schemes or delayed any tax settlements.

Operational review

FRP offers a range of advisory services that are delivered by specialists from five complementary service pillars: restructuring, corporate finance, forensics, debt advisory and pension advisory.

The Restructuring Advisory team continued to be appointed on to high-profile, complex cases, with the recent appointment on Edinburgh Woollen Mill, which includes Peacocks and Jaeger. We remain focused on the quality of our work across small, medium and larger assignments which continues to give our referral network confidence in FRP.

The Corporate Finance team have been engaged to work on transactions and have been providing management teams with invaluable advice on the options available to them as they navigate the pandemic. The Debt Advisory team have continued to advise on refinancing options, but the availability of government backed funding and Private Equity houses delaying many investments during the uncertainty has reduced transactional activity. The Forensics team have been engaged on a variety of dispute cases and mismanagement issues. Pensions Advisory remain a key obligation for companies and covenant reviews are emerging as a priority for trustees and sponsor firms.

Our multi-disciplinary approach enables us to support businesses throughout their entire lifecycle and our resource flexibility and breadth has proven invaluable in the current environment. Our industry knowledge and investment in information security have contributed to our status on several panels (i.e. clearing bank panels, Pension Protection Fund) which enable us to work on larger, more complex cases. We now boast both the scale and credentials to handle assignments of all sizes, drawing on complementary specialists from different service lines as necessary in order to deliver the best possible service and outcome. By offering advice in specific areas, we have fewer conflicts of interest than many larger, full-service firms.

People and operations

The health, safety and wellbeing of all of our colleagues remains our key priority. Since the onset of the Covid-19 pandemic we have operated without interruption and this continued during the second national lockdown in November across the UK. Colleagues have adapted well to remote working during both lockdown periods and previous investments in our IT infrastructure have proven to be invaluable.

During the first half of financial year 2020/2021 our team grew to 412 as at 31 October 2020, representing 22% growth year-on-year (31 October 2019:339). Fee earners (including partners) increased by 23% in the year, rising to 63 Partners across 20 UK office locations, compared with 52 Partners at 31 October 2019. The increase in headcount is weighted towards the end of the first half of 2020/2021, including 27 colleagues from two acquisitions which completed in September. Colleagues gained from acquisitions only made a small contribution to FRP's revenue.

We have continued to invest in talent and made several demand-led lateral hires within the period at all levels. Our success rests on our reputation for delivering a high-quality service and working hard to achieve the best possible outcome for stakeholders. These new hires will further strengthen our referral network and will help us to win larger, more complex assignments. At FRP we want to preserve the strong culture of the firm by attracting and retaining skilled talented individuals, fostering collegiate behaviour and prioritising the development of our team.

Selective acquisitions

We continued to execute our strategy of organic growth supplemented by selective acquisitions. Net cash of £18.7m raised during the IPO will be used to invest in the business and some has already been deployed in helping to fund three acquisitions which completed during the period. These include:

- JDC Group - Based in Norwich, and specialising in corporate finance and forensic services, the firm, made up of 16 people including four Partners, had become East Anglia's leading independent corporate finance and forensic advisory practice.

- The assets and trade of Abbott Fielding Ltd - Based in Kent, Abbott Fielding specialises in corporate recovery and turnaround strategies. One Partner and a team of 10 joined FRP.

- A restructuring team and assets in Newcastle - Two Partners and a team of 13 combined with FRP's existing Newcastle operation.

These businesses are now all successfully integrated into the Group and performing in line with expectations.

Our approach to acquisitions continues to be highly selective, focusing on small, partner-led teams that share our cultural values and fit strategically within a service pillar and a region with growth potential.

The restructuring market

The Covid-19 pandemic and related government support measures have had a significant impact on the corporate landscape of the UK, and the UK insolvency market. These include both companies and individuals receiving support via government backed loan schemes (bounce-back, CBILS, CLBILS, CCFF), HMRC tax settlement delays, landlord eviction moratorium and the Furlough scheme. Further, there has been a slower court system delaying appointments.

During the six months to 31 October 2020 the number of formal company insolvencies (including administrations) reduced by 40% from 8,641 to 5,218* (*the Insolvency Service within England and Wales). Over this period, FRP's formal insolvency appointments were 390, down 24% compared with the prior year figure of 515. With regard to more complex administrations appointments, these decreased 19% from 885 to 714 nationally, however FRP has marginally grown the number of administration appointments year-on-year, despite this subdued backdrop.

A strong financial performance

FRP traded strongly during the first half of the financial year given the market conditions. The Group generated £35.9m in revenues over the six months to 31 October 2020, up by 14% on the same period last year (£31.4m). Organic growth accounted for 9% of this total, while inorganic growth contributed 5%. Adjusted underlying EBITDA was £9.7m, up 7% compared with the same period last year (£9.1m).

Profit before tax for the period was in line with the Board's expectations. Reported profit after tax for the half was £5.9m. Converting work in progress (WIP) to cash remains a top priority, however our success in winning larger, more complex assignments may extend the working capital cycle. Due to our continued profitability and cash generation, in line with our stated dividend policy the Board has declared an interim dividend of 1.6p per eligible share for the first half. This dividend will be payable to shareholders on the register on 19 February 2021 with an ex-dividend date of 18 February 2021.

Going concern

During the first half FRP has continued to grow profitably. We adapted quickly to operate remotely during lockdown periods. We have continued to service clients uninterrupted and recruit during the Covid-19 pandemic period. We had a cash surplus of £15.4m at 31 October 2020 and an undrawn revolving credit facility (RCF) of £5m. The Board continues to monitor cashflow forecasts.

Current trading & outlook

Despite the challenges of Covid-19 pandemic, our people have responded well we have continued to provide the high-quality advice and service that our clients expect from us. Our breadth of services has enabled us to help clients review their businesses and adapt or evolve as needed, in a fast-changing environment. We have a robust business model, with complementary service lines able to support clients throughout their entire lifecycle.

The Covid-19 pandemic and related support measures have had a significant impact on the corporate landscape of the UK, and the UK insolvency market. Despite this, FRP has continued to grow, demonstrating our strong market position and resilient model against a subdued backdrop.

Trading for the first half and to date has been in line with the Board's expectations. The Board believes current trading is on track to comfortably achieve full year expectations.

There remains a significant degree of uncertainty around the shape and scale of economic recovery, combined with potential additional pressure as the UK leaves the EU. The medium-term outlook for our market is positive. The Group has sufficient resource flexibility to service an increase in demand.

Geoff Rowley Nigel Guy

CEO Non-Executive Chairman

Table showing how underlying adjusted EBITDA is calculated

Notes

All profits for the prior year under the partnership model prior to IPO were allocated to the partners of the business and shown as a staff cost. In illustrating the prior year underlying EBITDA these profits of circa. £15.2m have been added back so as to show on a like for like basis with current ongoing plc model. To create a comparative for the current plc model, go-forward partner compensation has been deducted and shown as a staff cost of £7m.

At present the Company has expensed in H1 2021 but not adjusted underlying EBITDA for:

· Transaction costs incurred during three acquisitions £0.2m

· Employers National Insurance due on the EIP awards when the options vest in 2023, £0.4m accrued in the period

Table showing how adjusted Earnings per Share (EPS) is calculated

Prior year there were no shares in issue as the company was not listed, hence there is no EPS comparative

FRP Advisory Group Plc

Consolidated statement of comprehensive income

for the six months ended 31 October 2020

All results derive from continuing operations.

Prior to the group reorganisation on 6 March 2020, the Group was headed by a partnership. Under the terms of the partnership agreement, all profits for the c. 10 month period to IPO and prior year were automatically allocated to the partners, with the allocation being presented within staff costs.

FRP Advisory Group Plc

Consolidated statement of financial position

for the six months ended 31 October 2020

Approved by the board and authorised for issue on 15 December 2020

Jeremy French Gavin Jones

Director Director

Company Registration No. 12315862

FRP Advisory Group Plc

Consolidated statement of changes in equity

for the six months ended 31 October 2020

Prior to the group reorganisation on 6 March 2020, the Group was headed by a partnership. Under the terms of the partnership agreement, all members' interests, including partner capital, was considered to be a liability of the partnership. As such, the group has recorded no net assets or equity, other than amounts relating to the adoption of IFRS, prior to 6 March 2020.

FRP Advisory Group Plc

Consolidated statement of cash flows

for the six months ended 31 October 2020

FRP Advisory Group Plc

Notes to the Financial Statements

for the six months ended 31 October

1. General information

FRP Advisory Group plc (the "Company") and its subsidiaries' (together "the Group") principal activities include the provision of specialist business advisory services for a broad range of clients, including restructuring and insolvency services, corporate finance, debt advisory, forensic services and pensions advisory.

The Company is a public company limited by shares registered in England and Wales and domiciled in the UK. The address of the registered office is 110 Cannon Street, London, EC4N6EU and the company number is 12315862.

2. Basis of preparation and accounting policies

The financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union, in accordance with the IFRS Interpretations Committee("IFRIC") interpretations, and with those parts of the Companies Act 2006 as applicable to companies reporting under IFRS. The financial statements comply with IFRS as issued by the International Accounting Standards Board (IASB).

The financial statements are prepared in sterling, which is the presentational currency of the Company. Monetary amounts in these financial statements are rounded to the nearest £000.

This condensed consolidated half year financial information does not comprise statutory accounts withing the meaning of Section 435 of the Companies Act 2006. Statutory accounts for the year ended 30 April 2020 were approved by the board of directors on 26 August 2020 and delivered to the Registrar of Companies. The report of the auditor on those accounts was unqualified, did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report and did not contain statements under section 498 (2) or (3) of the Companies Act 2006.

2.1 Basis of consolidation

The financial statements incorporate the results of FRP Advisory Group plc and all of its subsidiary undertakings as at 31 October 2020.

FRP Advisory Group plc is the 100% shareholder of FRP Advisory Trading Limited. FRP Advisory Trading Limited has five wholly owned subsidiaries, FRP Debt Advisory Limited, FRP Corporate Finance Limited, JDC Holdings Limited, Abbott Fielding Limited and Litmus Advisory Limited. FRP Advisory Trading Limited is also a member of FRP Advisory Services LLP and Apex Debt Solutions LLP. JDC Holdings Limited has two subsidiaries, Jon Dodge & Co Limited and Walton Dodge Forensic Limited. FRP also has the economic rights of JDC Accountants & Business Advisors Ltd.

2.2 Significant accounting policies 

Adopted in preparation of the half year condensed consolidated financial statements are consistent with those followed in the preparation of the group's annual financial statements for the year ended 30 April 2020.

2.3 Going concern

The Group has been, and is currently, both profitable and cash generative. The business has consistently grown year on year for 10 years and has proved to be resilient, growing in both periods of economic growth and recession.

At 31 October 2020 the group had £15.4m of cash reserves, higher than historic positions due to funds raised during the IPO. The group also has an undrawn £5m committed revolving credit facility (RCF). Ongoing operational cash generation and this cash balance mean we have sufficient resources to both operate and move swiftly should acquisition opportunities arise.

The quality of client service, strong referral network and barriers to enter the market, together with the strong cash position, make the board confident that the company will continue to grow. In terms of diversification, offices can adapt quickly to supporting each other and work on both higher value assignments or higher volume lower value jobs. Also, the business has 4 other pillars: Pensions, Forensics, Corporate Finance and Debt Advisory that both support the restructuring offering but also earn fees autonomously.

With specific regard to the 2020 coronavirus (COVID-19) virus pandemic, the Group immediately adapted our ways of working, clients were continually serviced without interruption. Consequently, our cash generation and profitability were not significantly impacted by COVID-19. Given our strong financial position no employees of the firm have so far been made redundant or furloughed and none of the other Government assistance schemes available (grants, emergency loans, tax settlement delays) were utilised. Throughout the 'lock-down' period we have continued to win new client appointments, retain existing employees and attract new employees.

Remote working has reduced colleague interaction, limiting virus exposure to our Partners and colleagues. Colleagues that choose to come into work are temperature checked and work in a socially distanced layout.

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.

Having due consideration of the financial projections, the level of debt and the available facilities, it is the opinion of the directors that the group has adequate resources to continue in operation for the foreseeable future and therefore consider it appropriate to prepare the Financial Statements on the going concern basis.

3. Earnings per share

The earnings per share has been calculated using the profit for the year and the weighted average number of ordinary shares outstanding during the year, as follows:

Earnings per share has not been reported for the comparative period as the group was headed by an LLP and there was no share capital in issue. The potential ordinary shares which arise as a result of the options in issue are not dilutive under the terms of IAS 33 because the share options are backed by shares already in issue. Accordingly, there is no difference between the basic and dilutive loss per share.

The Employee Benefit Trust does not have an entitlement to dividends, holding 18,750,000 shares of the above 239,558,637 shares.

For the year ended 30 April 2020 the business was a full distribution partnership for c. 10 months. The 0.87p EPS relates to the c. 2 months as a plc. The six month period to 31 October 2019 was a full distribution partnership.

4. Dividend

The Board declares an interim dividend for the first half of 1.6p per eligible* share. This dividend will be based on shareholders per record date of 19 February 2021 and will be paid on Thursday 18 March 2021.

*An Employee Incentive Plan (EIP) established on IPO was used to grant options to staff. The trust holding these shares is not eligible for dividends, rights were waived. When the options vest from 2023 onwards, the shares will gain rights to dividends.

5. Trade and other receivables

6. Trade and other payables