Business ramps up at FRP

It is a bitter truth that many people are prepared to be the midwives to success, but few are willing to take on the role of undertaker to failure. It is fortunate, therefore, that the likes of FRP Advisory (FRP) are on hand to restructure companies to save something for shareholders. As the economy has progressively worsened, the pace of mandates for restructuring services has picked up. FRP has a 13 per cent market share, and has seen a 39 per cent increase in administration appointments. In other words, business is brisk, and FRP has increased its headcount by 11 per cent to cope with demand. It is also unafraid of dealmaking. This month it acquired APP, a business services firm based in Cyprus, after raising £39mn via a placing in the summer.  

FRP’s success is based on the simple fact that insolvencies have been steadily rising this year. According to combined London and Regional Gazettes figures, there were 11,338 formal company insolvencies (excluding member voluntary liquidations) in England and Wales in the six months to 31 October 2022, which was 35 per cent higher than at this point in 2021. In other words, there are ample signs of distress in the economy to validate expectations of a sharp recession next year. Management reckons that many companies avoided making decisions on formal administration during the pandemic and that we are now seeing the tail effect of this. The other area that looks set to benefit is the forensic division as instances of fraud are expected to increase as growth slows.

FRP looks well placed to take advantage of the clear turn in the business cycle – the tide for many companies is going out fast. This explains Panmure Gordon’s forecast of a price/earnings ratio of 20 of 2023, but we keep our successful advice in place as the economy worsens. Buy.

Last IC View: Buy, 138p, 22 Jul 2022