With businesses in turmoil and the economy in its deepest recession in 300 years, a surge in corporate collapses seemed likely. The reality has been a little more complicated, amid unprecedented government support for businesses and now a strong bounce-back in consumer spending.
However, that has not stopped FRP Advisory storming ahead since its AIM debut in March last year. Shares in the restructuring specialist, known for its work on administrations including Patisserie Valerie, ended last week at 125p — an 56 per cent rise on their float price of 80p — giving FRP a market cap of £303 million.
The firm was founded in 2010 via a management buyout of the business services unit of accountancy firm Vantis. Since then, FRP has carved out a niche as an alternative to bigger players such as Deloitte and KPMG, both of which have recently spun off their restructuring units. Anecdotally, it is known for often winning work by undercutting its larger rivals.
FRP has also become the go-to restructuring firm for retail tycoon Philip Day, who has been accused of using financial engineering to steer the bulk of his collapsed Edinburgh Woollen Mill empire into the arms of allies.
In a trading update last month, FRP said its first full-year results as a listed company would exceed its expectations, with revenues expected to jump 25 per cent to £79 million. The corporate finance team, which FRP is trying to grow to curb reliance on restructuring work, had a busy year. It won mandates including advising Italian chain Prezzo on its sale to private equity firm Cain International.
However, despite the impact of the pandemic on businesses, work for the restructuring specialists has been subdued, with FRP reporting a 26 per cent decline in insolvency appointments year-on-year. Although the firm has grown its market share, winning big administration mandates including Debenhams, activity across the sector has been held back by Covid support schemes. In other words, the undertakers have been under-employed.
For all the corporate woe, many in the restructuring industry are questioning whether the predicted wave of insolvencies will actually happen, due to the success of the state’s support. There is still likely to be a jump in failures as the schemes are wound down, but it may be more of a stream than the once-feared tsunami.
FRP has been doing very well out of the pandemic, but much of this growth is already priced in. It’s time to take a breath and see what happens later this year. Hold.