Call the restructuring team – someone’s winning as rates rise and inflation bites

Image by Steve Buissinne from Pixabay

Restructuring and advisory firm FRP expects to report a surge of new business instructions as more challenging trading sweeps through the UK economy.

In a half year trading update to the stock market this morning, listed advisory firm FRP said it 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).

Translated to the full year, FRP said it expects to make pre-tax profits of £28.8m on turnover of £112.2m. 

The firm has teams in Manchester, Preston, Nottingham, Leicester, Birmingham, Leeds and Bristol amongst its network of 25 regional offices.

During the 2023 calendar year, the restructuring market has seen an increase in activity levels, including administrations approaching pre-pandemic levels.

In the supporting statement the FRP said: “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 to create commercial solutions to achieve the best possible outcome.

Earlier this week the government’s insolvency statistics revealed that corporate insolvencies rose by 18% in October compared to the previous month driven by a rise in the number of directors choosing to close their companies voluntarily.

There were 2,315 business insolvencies in October in England and Wales, which was also 18% higher than October last year and 57% higher than October 2019 before the pandemic. Of the total number, 1,889 were creditors’ voluntary liquidations.

Those same economic challenges have dented the UK mergers and acquisition market, dampening the appetite for vendors to sell in a depressed market..

Deal volumes are down compared to the prior year. While FRP claims its team are “an active player in the mid-market” it 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).

The pipeline of new opportunities for 2024 remains solid, the company told the markets in a statement this morning. “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.”

Geoff Rowley, CEO of FRP Advisory Group, 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.”