Frenkel Topping anticipates renewed growth after consolidation

Bosses at Salford-based Frenkel Topping say the firm will return to growth after a period of investment during the first half of the financial year.

The specialist financial adviser focuses on protecting vulnerable clients.

In results for the six months to June 30, today, it revealed that revenues rose slightly from £3.627m to £3.624m, while last year’s pre-tax profit of £1.003m was cut to £282,000.

The AIM-listed company said the six month period was one of stable trading following team changes in 2017.

It says significant investment in developing staff will begin to contribute to earnings in the second half and following years.

And it added that current trading is in line with expectations and the board remains confident of the Company’s growth prospects.

Today’s results explained that the fall in profits was due to the investment in trainee consultants, its graduate academy, and marketing costs.

Net cash reserves and cash equivalents at the end of the six month trading period stood at £1.8m, compared with £1.9m at December 31, 2017, following payment of the company’s final dividend to shareholders of £600,000.

The interim dividend for the six months is recommended at 0.32p per share, compared with 0.2969p per share, which the company says reflects its confidence in the firm’s growth trajectory.

Assets under management of £759m compared with £752m at June 1, 2017.

All model portfolio strategies in the firm’s investment management division achieved positive returns during the reporting period.

Paul Richardson, non-executive chairman, said today: “The board is confident that, following a significant period of investment in the company’s systems and personnel, the company will return to growth in the coming quarters.

“This will be delivered through the three arms of our business: our core activities in Frenkel Topping; our general advice business, Obiter Wealth Management and our investment management arm, Ascencia.

“Despite these significant levels of investment, Frenkel Topping has retained strong operating margins and cash flow, demonstrating the strength of the established underlying business.”

He added: “We remain focused on reaching AUM (assets under management) of £1bn and expect that a combination of organic growth and focused acquisition strategy will accelerate the growth of the business and strengthen the existing platform.”

And he went on: “I joined the board almost 12 months ago after it had decided that selling the business was not in the best interest of shareholders and after my predecessor had decided to step down.

“Once on board, the executive team worked together to develop and implement the strategy and culture for growing the business as I have explained in my previous reports, and significant progress has been made with the implementation of those plans.

“Having achieved this, it is now appropriate that I step back from the role of executive chairman and into the more traditional role of non-executive chairman. This change is made with immediate effect.”

Jeremy Grime, a financial analyst with financial adviser FinnCap, commented on today’s results, saying: “Following some AUM attrition in quarter one, the company is investing in consultants and further hires are in the pipeline.

“As a market leader in the niche of vulnerable clients the shares are very cheap, which we are confident will change as the company returns to its growth trajectory following the period of building solid foundations from which to grow.

“We note that AUM flows are now ahead of expectations and expert witness fees are ahead year-on-year which bodes well for the full year outcome.

“We maintain our 45p target price.”

Trading in Frenkel Topping shares this morning reached a 33p high.