Full Year Trading Update

FRP Advisory Group plc

("FRP" or the "Group")

Full Year Trading Update

Double digit revenue and profit growth ahead of expectations; confident for the year ahead

FRP Advisory Group plc, a leading national specialist business advisory firm, announces a trading update for its full year ended 30 April 2024 ("FY 2024").

Excellent trading performance ahead of expectations

The Group achieved another year of strong profitable growth, with all five service pillars making positive contributions. The connection of our colleagues across these different pillars is a key point of differentiation at FRP. The Group ensures the right team from the right service line and locations are working on each project, to secure the optimal outcome for our clients.

Subject to audit, the Group expects to report revenues for FY 2024 of £128 million, up 23% on the prior year (FY 2023: £104 million), and adjusted underlying EBITDA* of £37 million, up 37% on the prior year (FY 2023: £27 million), both exceeding current market consensus**.  

Restructuring

FY 2024 was a challenging year for businesses with the impact of further increases in interest rates, inflationary pressure, higher costs of living and general market confidence. This caused the total number of company administrations to rise by 22%. Sectors that appear to have suffered the most include Construction and Retail. One of the key challenges for companies has been the ability to raise finance, with lenders' appetite for risk changing. Whilst there are more positive signs in the economy, we believe many businesses will continue to face challenges as they navigate their way through higher costs of borrowing and an increased cost base.

FRP's Restructuring team has been active nationwide across all sectors. As well as some high-profile appointments including the Body Shop, WiggleCRC, Inland Homes plc, Just Cashflow and Readers Digest, we have also been engaged on many mid-sized high quality projects across the UK.  FRP strengthened its market leading position in the administrations market, remaining the most active administration appointment taker in the UK by volume of appointments, and growing its market share to 16% (2023: 14%), which both include group appointments. Source: London and Regional Gazettes

Corporate Finance and Debt Advisory

Activity levels in our Corporate Finance team increased in the second half of the year as UK economic conditions began to stabilise and market sentiment improved. This was reflected in the team's performance, with cautious optimism and momentum continuing into the new financial year.

FRP's Corporate Finance and Debt Advisory teams closed 76 transactions in FY 2024 (FY 2023: 73) with an aggregate deal value of £1.4 billion (2023: £1.8 billion) and £0.6 billion of debt raised (FY 2023: £0.8 billion).  An average deal value of c. £20 million for the year maintains FRP Corporate Finance's position in the heart of the lower mid-market.

Financial Advisory

The first full year of trading for the combined Financial Advisory pillar has been positive, and the second half of the year saw increased activity across all service lines. As well as demand for due diligence services being high throughout the period, due to the overall risk environment of late, we have also seen more transactions take place as buyers and lenders are becoming increasingly active.

Our valuation specialists have been active with both mainstream projects and preparing valuations which underpin restructuring plans and schemes of arrangement.

Our pensions advisory specialists continue to work with trustees and corporates, increasingly those moving towards buying-out schemes with insurers and assisting those navigating the changing regulatory environment.

Forensic Services

The Forensic Services team had a very busy year across a multitude of high-profile investigations and litigation / arbitration disputes. We hired staff across multiple locations to meet the increase in demand for our services, including two lateral Partner hires to further increase our strength in investigations, and also to provide additional focus to serving private client assignments. 

Delivering on our M&A strategy

As previously announced, during the year the Group completed two acquisitions: Wilson Field Group and GWC. Wilson Field Group is based in Sheffield and provides restructuring advisory services both locally and nationally, supported by their website and operational platform. GWC is based in Douglas and provides advisory and insolvency services to clients registered and based in the Isle of Man. This further strengthens our international and off-shore presence. Together with FRP's Cyprus team and our partnership with global advisory organisation Eight International, FRP is now enable to better support clients on international matters.

Following the FY 2024 year-end, on 13 May 2024, the Group announced the acquisition of commercial finance and risk management specialists, Hilton-Baird Group. As a trusted partner for many leading Asset-Based Lenders (ABLs), Hilton-Baird will now be able to add additional value through its existing service lines by supporting complementary FRP service pillars, including restructuring advisory and debt advisory.

In order to deliver sustainable profitable growth, FRP's strategy remains to focus on organic growth, supported by acquisitions that meet the Group's strict criteria of cultural alignment, strategic fit and mutually acceptable economics. There is a healthy M&A pipeline and active dialogue across a range of opportunities.

Balance sheet strength

The Group's balance sheet is strong. In the first half of FY 2024, there was a build-up in the Group's unbilled revenue or work-in-progress (WIP) which impacted cash, however this was offset by strong cash collections in the second half. The Group's unaudited net cash balance as at 30 April 2024 was £29.7 million (30 April 2023: £22.9 million). Net cash represents gross cash of £32.9 million less a term loan of £3.2 million. The Group also has an undrawn £10 million revolving credit facility and an accordion acquisition facility that enables the Group to act swiftly on any acquisitions that meet FRP's criteria.

Within our industry, WIP days of between 4-7 months is typical. As at 30 April 2024, FRP's WIP days were just below 5 months, which sits comfortably within the target range. Furthermore, the Group continues to apply a robust monthly valuation methodology of its WIP.

It is anticipated that WIP will increase as FY 2025 begins and therefore the recent acquisition of Hilton-Baird Group, involving a cash payment of c. £5.6m, was financed by drawing £7.2m on FRP's £25m accordion acquisition facility, with both the surplus drawn balance and remaining available amount to draw for future acquisitions.

Given the Group's positive trading performance and strong balance sheet, the Board currently expects to recommend a final dividend in line with its stated dividend policy at the time of the Final Results.

Continued team growth and investment in operations

FRP continued to grow its team during the financial year by 19%, representing an additional 106 colleagues. This growth included the teams from the acquisitions of Wilson Field Group and GWC. A summary of colleague numbers are below:

During the year the Group launched a Project Management Office (PMO) to oversee key projects including: key system changes, data governance, data strategy and implementing operational efficiencies leveraging the latest technological tools.

Colleague engagement, developing talent and managing succession is a key focus of the Group. During the year, many new programmes were added to our Learning Management System and over a hundred colleagues participated in a leadership programme. Following our year-end, seven internal promotions to Partner were announced, which were part of a total of 87 promotions across the Group. This was a record number of promotions and when combined with our ongoing investment in Learning and Development, demonstrates the Group's long-term commitment to developing talent and providing attractive career paths. FRP has also been working on well-being initiatives through a partnership with the Charlie Waller Trust, the launch of a Balanced Minds Committee and launching a Mind.Set podcast series online. The Group made two senior hires on 1 May 2024, both with significant HR and people leadership experience. Claire Dale joined as new People Director to lead on FRP's "People proposition" and Louise Jackson joined as a new non-executive Director and Remuneration Committee chair.

FRP's offices, across 27 locations in the UK and 2 international locations, continue to work well together, drawing on specialists from different service lines as necessary, in order to provide each assignment with the right team to deliver the best possible service and outcome.  

Notice of results

The Group expects to report its audited results for FY 2024 on 24 July 2024.

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

"The Group made excellent progress in FY 2024, continuing to execute our strategy while growing revenues and profits for the thirteenth year. The results achieved are testament to the quality of our colleagues and their continued efforts to provide a high-quality service to achieve the best possible results for our clients. On behalf of the Board, I wish to express my gratitude for the contribution made by our entire team.

Activity levels across all our locations and pillars are encouraging. As a result, we start our new financial year with confidence of making further positive progress."

* Adjusted underlying EBITDA excludes exceptional costs and a share-based payment expense that arises from a) the Employee Incentive Plan (EIP) funded on IPO and b) deemed remuneration amortisation linked to acquisitions.

** Current consensus FY 2024 market expectations for revenue and adjusted EBITDA of £123 million and £32 million respectively.

The information contained within this announcement is unaudited and 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

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. The Restructuring team serves the full range of UK clients across all sectors, with assignments ranging from personal clients, SMEs to larger corporates.

·      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.