Finance firm announces £13m share placing and £3m acquisition

Frenkel Topping, the Salford-based financial services firm, has raised £13m through a share placing.

It also announced the acquisition of Leeds-based Forth Associates for £3m.

The business said it intends to use the placing proceeds to extend its share of the personal injury and criminal negligence sectors.

It said as the company’s mergers and acquisitions strategy has evolved the board has decided to focus its search solely on a consolidation in the pre-settlement professional services market for personal injury and clinical negligence as a route to further increase assets under management (AUM) instead of acquiring other independent financial advisory firms.

The directors say they consider this to be a more effective and a less risky approach to increasing the group’s AUM and will yield higher levels of organic growth than a traditional IFA firm.

Up to 32.5 million new ordinary shares were placed, at 0.5p each, with institutional and other investors at a price of 40p pe share.

Frenkel Topping has bought 99.99% of the shares in Forth Associates Limited from Richard Forth and Anthony Flint, an owner-managed forensic accountancy firm. Forth has offices in Leeds and Manchester.

The combination of the two companies will create the largest independent provider of financial expert witness reports to the claimant marketplace.

Alongside this announcement, Frenkel Topping also published a trading update which confirmed it delivered a robust performance for fiscal year 2019 and this positive momentum has continued into 2020, despite the spread of COVID-19 which has presented unprecedented challenges to businesses and the world economy.

During the past six months the company has enjoyed strong organic growth and delivered £75m of new investment mandates, a 70% increase than in the comparable period last year.

As a consequence, AUM is up 13% as at June 30, to £962m, compared with £851m a year ago.

Total revenues are expected to be up nine per cent to £4.4m, of which about £3.5m was recurring revenue and more than £950,000 was generated by organic new business generation.

EBITDA is expected to increase by around 16% to £1.1m against the previous year.

As at June 30, 2020, the company had £1.7m of net cash and marketable securities, up from £1.4m a year ago, reflecting the cash generative nature of the business and the company’s focus on maintaining a strong balance sheet.

The statement said Frenkel Topping is well positioned to continue to deliver strong organic growth in the second half of the year.

The board is, therefore, confident that the company is on track to meet expectations for 2020.

Frenkel Topping chief executive, Richard Fraser, said: “This is an exciting time for Frenkel Topping and today’s Ppacing is a transformative step towards achieving our ambition of becoming the market leader in the PI and Clin Neg marketplace, where we have more than 40 years of expertise.

“The net proceeds of the placing and the acquisition of Forths builds on our strong organic growth as we become the largest independent provider of financial expert witness reports to the claimant marketplace.

“We have known Forths for many years and not only is this business a good strategic fit, our discussions have shown we have similar cultures with a shared customer centric ethos.

“Looking ahead, the placing enables us to capitalise on the significant opportunities available, to acquire pre-settlement professional services business in the PI and Clin Neg markets and provide claimants with a full-service offering.

“We are delighted with the strong support shown by both new and existing investors and it is particularly pleasing to see high-quality institutional investors join our shareholder register.

“The board and the management team look forward to building on our success by continuing to grow our core business as well as executing our buy and build strategy, delivering high-quality services to our clients and generating strong and sustainable returns for our shareholders.”

Richard Forth, chief executive of Forth Associates, said: “Being part of the Frenkel Topping team is a hugely positive move that creates some exciting opportunities for us to deliver an even better service offering to our clients, while further strengthening Forths’ position in the wider marketplace.
“We now have the backing of a parent company that shares the same values and ambitions. It will be business as usual for both teams in Manchester and Leeds, and we look forward to joining two great brands with a strong heritage.”