Specialist business services firm FRP Advisory (FRP:AIM) is one of those businesses which many investors may have heard of but few are sure exactly what it does.

Put simply, FRP helps companies through each stage of their development, giving advice on raising capital, managing debt, acquisitions, corporate finance and forensic accounting. It is probably best-known for ‘crisis management’ where it helps companies either in restructuring or going through administration, two high-profile cases being Debenhams and The Body Shop.

RECENT CASE STUDIES

FRP works with companies of all sizes across many sectors, and investors in offshore gas producer IOG may know it as the firm which managed the company through administration, keeping it afloat, selling its subsidiaries to a joint venture partner in order to secure production and jobs, and ultimately making sure bondholders and HMRC were paid.

On a more positive note, FRP helped with the solvent wind-up of the film company ‘Chump & Sons’ which was set up to produce the hit Amazon series The Grand Tour.

Once the final episode had been filmed, the firm went into voluntary liquidation and the shareholders – including the show’s presenters – were able to walk away with the capital to move on to other TV projects.

Finally, in a story to warm the cockles in the run-up to Christmas, FRP secured the future of a vital speech therapy business for schools which was facing the threat of insolvency – it was able to find a buyer and save 19 jobs all before the start of the new school term.

WHAT ELSE DOES FRP DO?

While restructuring is the company’s mainstay, FRP gets a lot of work advising on M&A (mergers and acquisitions) in the lower mid-market working with business owners and management teams to raise finance for takeovers or arrange sales.

In 2023, the firm advised on 66 deals with a value of £1.5 billion and partner Dan Bowtell believes activity is set to pick up due a combination of factors.

‘Private equity will be one driver of this uplift. Historically, PE firms have held onto their investments for four to five years before exiting – however, many of these investments are now surpassing their typical hold period, leading to a growing number of businesses being prepped for sale.’

Bowtell also sees corporates becoming more active – as organic growth becomes harder to achieve, many are looking at M&A as a means of expanding, and he believes AI (artificial intelligence) and sustainable energy are set to be hotspots.

WHAT IS THE FIRM’S TRACK RECORD?

The company floated on AIM in 2020, but it was set up in 2011 and has grown its revenue every year bar 2013 with an impressive 15% average compound annual growth rate.

In the year to April 2024, revenue grew by 23% to £128 million while EBITDA (earnings before interest, tax, depreciation and amortisation) rose by 37% to £37 million and pre-tax profit rose by more than 90% to just under £30 million.

The top management team of chief executive Geoff Rowley and chief operating officer Jeremy French are co-founders, and in a short space of time have built the business into a global operation with more than 800 staff across 32 offices.

While most of that growth has been organic, management are always looking for opportunities to increase market share and earnings through bolt-on acquisitions at attractive prices, as in the case of Globalview Advisors which was purchased in October 2024 for £5.5 million or just five times EBITDA.

WHY INVEST NOW?

FRP’s shares have traded sideways more or less for the last three years, during which time both revenue and EBITDA have grown by 60%.

Earnings per share have also risen 60%, from 5.67p to 9.18p, meaning the stock has de-rated from a PE (price to earnings) multiple of 26.5 times in 2021 to 16.9 times last year’s earnings and 14.5 times the consensus forecast of 10.7p for the year to April 2025.

To us, this seems too cheap for a quality, established business generating way above-average growth across all its specialties, and we suspect at the rate the company is going forecasts for 2025 and 2026 will turn out to be too conservative.

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