How you can profit – as stricken firms are getting helped
WHEREVER you turn, the numbers are shocking. The economy shrank by nearly 6 per cent in March alone, the worst fall since monthly records began in 1997.
The Bank of England expects an economic slump of 25 per cent in this quarter and 2020 is set to suffer from the deepest recession since 1706.
Even worse perhaps, economists say that we will not see a full recovery until 2022 at the earliest.
The figures and forecasts are deeply depressing for thousands of firms. But they are likely to spell good news for one corner of the economy – insolvency practices.
These firms thrive in hard times, and one example is FRP Advisory, which specialises in selling off companies that are beyond repair, as well as helping businesses back on their feet if they have fallen into only temporary financial distress.
FRP was listed on the stock market on March 6, one of the few successful flotations of recent months. Priced at just 80p, the shares have since shot up to £1.24, but they have long-term potential, too.
The firm was floated when stock markets were tumbling, the UK had yet to enter lockdown and few could predict the full economic impact of coronavirus. Since then, conditions have changed dramatically.
FRP is far smaller than the big accountancy firms such as PwC and Deloitte, but manages to punch well above its weight. In the past few weeks alone, the group has been appointed to sort out Debenhams and the restaurant chain Carluccio’s. Laura Ashley may well be on the list, too, while other highprofile cases include BHS, Patisserie Valerie and Aquascutum.
FRP was founded by Geoff Rowley and Jeremy French, both with decades of experience in the corporate restructuring field. The duo worked together at Vantis, an accountancy firm that grew too fast and itself came to an untimely end in 2010.
Rowley and French’s part of the group was in good shape, however, so they bought it from the administrators and set up their own shop, taking 170 people with them. Learning from Vantis’s mistakes, they have run FRP with extreme caution, and the business has gone from strength to strength, now employing 360 staff.
Turnover rose from £17.4million in the year to April 2011 to £54.3 million in the year to April 2019, while profits soared even faster.
Last week, Rowley revealed that turnover would rise more than 16 per cent to £63.2million for the year to April 30, 2020, comfortably ahead of expectations.
Profits of just over £14 million are expected, rising to at least £16.2 million in the 12 months to April 2021. A dividend of 0.7p is forecast for the year just ended, rising to 3.9p for the current year.
FRP intends to be generous on the dividend front, making half-yearly payments this year but moving to quarterly distributions in 2021.
As a business that generates most of its money from companies in trouble, FRP is well positioned for the coming months. Chancellor Rishi Sunak has stepped in to help firms and their employees, but that support will not last indefinitely. Once it is withdrawn, thousands of firms face an uncertain future.
Payments for FRP’s assignments range in value from a few thousand pounds to several million. The group tackles about 1,500 cases a year and that number should rise as the company expands and the economy droops.
Rowley and French have built a strong culture across the group, centred on fairness and a desire to help struggling businesses wherever possible. The group has other strings to its bow, including a forensic services division, which delves into fraud and bribery allegations.
After ten years as a privatelyowned business, Rowley and French floated FRP primarily to fund growth and promote the business. They also made some money for themselves, raising £57million from the flotation that was shared among 50 partners.
The partners remain heavily invested in FRP, however, collectively owning just over 50 per cent of the company.
They were also keen to reward employees, so every staff member has been granted shares - a move that should encourage team spirit and a group-wide commitment to success.