FEN Frenkel Topping Group Plc

Frenkel Topping Group plc

("Frenkel Topping", "the Company" or the "Group")

Results for the 12 months ended 31 December 2023

A year of executing strategy and delivering a strong performance

Frenkel Topping Group (AIM: FEN), a specialist professional and financial services firm operating in the Personal Injury (PI) Clinical Negligence (CN) space, is pleased to announce its final results for the 12 months ended 31 December 2023 ("FY23").  These results demonstrate a strong performance through 2023 and the Board is pleased to report an encouraging start to the 2024 financial year.

Financial Highlights

*Adjusted EBITDA and Adjusted EPS are stated after adding back share based compensation, re-organisation, costs relating to our acquisition strategy and any exceptional items. 

Operational Highlights

·    Fifteenth consecutive year of high client retention (99%) in investment management services

·    Funds under management ("FUM") of £1,335m (as at 31 December 2022: £1,187m) - growth of 12% despite turbulent markets

·    Funds on a discretionary mandate of £820m (as at 31 December 2022: £715m) - growth of 15%, showing the resilience of our portfolios

·    New Money Market Solution launched in June 2023 attracting investment of £39m as at 31 December 2023

·    Two new Major Trauma Centres added by Cardinal Management Limited ("Cardinal")

·    KnowledgeHub delivered 19 expert training sessions with 7,970 registrations

·    Welfare Benefits Advice team identified over £2m in unclaimed benefits for our clients

·    The Group has signed a new £7.5m Revolving Credit Facility with Santander to support its growth and acquisition strategy

·    As announced this morning, we are continuing the roll-up strategy with a strategic bolt on acquisition of North West based cost consultant, North West Law Services Limited (NWL). NWL is a leading firm of cost consultants based in the North West with over 40 years experience in the field that will add to the Company's expertise in the area and work closely with the teams at Partners in Costs Limited, Bidwell Henderson Costs Consultants Limited and A&M Bacon Limited

·    Undertaken a group wide initiative to create a set of values that align and represent us as a Group

·    New Money Market Solution investment grown to £92m as at March 2024 from £39m in the last three months

·    Record numbers for pipeline of opportunities across the Group

·    Continuation of the Costs Training Academy

Richard Fraser, CEO of Frenkel Topping, said:

"Our 2023 results demonstrate the success of our acquisition strategy over recent years and the resilience of our business against the backdrop of challenging and volatile market conditions which saw a modest impact on the year end outturn as previously announced.

Non-recurring revenue has been pleasing, with 22% of the total 51% growth in this area coming from organic growth across our business units. This demonstrates the strength of the acquisition strategy  with the Company demonstrably identifying businesses that the management has been able to grow and capture upside opportunities as well as diversifying revenue streams. We will continue to explore synergies, to invest in our people, data and technology in order to help us to further take advantage of opportunities that the enlarged Group presents.

Additionally, we have continued to grow our FUM, in no small part thanks to Ascencia, which has again beaten its benchmarks and shown agility in launching the new Money Market Solution in response to market dynamics and client demand. This product, assisted by the hard work and tenacity of our sales team, has attracted investment from both new and existing clients with £39m of assets added by the year end, generating revenue for the Company and positive outcomes for our clients.

During the year the Frenkel Topping Charitable Foundation grew to new heights with bigger events, more fundraising and contributions up by 59% from 2022.

In 2024 we have continued to enhance our compliance framework in order to further embed FCA Consumer Duty into our operations and welcome the appointment of Consumer Duty Champions at board level. "

We continue to be optimistic about our long-term goal to grow to 15% market share in each of our business units."

For further information:     

About Frenkel Topping Group

The Frenkel Topping Group of companies specialises in providing financial advice and asset protection services to clients at times of financial vulnerability, with particular expertise in the field of personal injury (PI) and clinical negligence (CN).

For more than 30 years the Group has worked with legal professionals and injured clients themselves to provide pre-settlement, at-settlement and post-settlement services to help achieve the best long-term outcomes for clients after injury. It boasts a client retention rate of 99%.

Frenkel Topping Group is focused on consolidating the fragmented PI and CN space in order to provide the most comprehensive suite of services to clients and deliver a best-in-class service offering from immediately after injury or illness and for the rest of their lives.

The Group's services include the Major Trauma Signposting Partnership service inside NHS Major Trauma Centres, expert witness, costs, tax and forensic accountancy, independent financial advice, investment management, and care and case management.

The Group's discretionary fund manager, Ascencia, manages financial portfolios for clients in unique circumstances, often who have received a financial settlement after litigation. In recent years Ascencia has diversified its portfolios to include a Sharia-law-compliant portfolio and a number of ESG portfolios in response to increased interest in socially responsible investing (SRI).

Frenkel Topping has earned a reputation for commercial astuteness underpinned by a strong moral obligation to its clients, employees and wider society, with a continued focus on its Environmental, Social and Governance (ESG) impact.

For more information visit:      www.frenkeltoppinggroup.co.uk

Chairman's Statement

Overview

On behalf of the Frenkel Topping Group (FTG) Board of Directors, I am pleased to report on another positive year of growth for the Group in which we continued to deliver against our strategy.

The Group's performance in the last financial year demonstrates its resilience in a challenging financial market, as well as further progress made through our focused acquisition strategy and continued consolidation of the PI and CN space.

Following fundraises in 2020 and 2022 the Group has worked to consolidate the much-fragmented PI and CN space, making key acquisitions which fit with the culture and values of the existing businesses.

Whilst we have not yet fully maximised the opportunities the enlarged Group presents, we are beginning to see the fruits of our labour, with acquisitions made in prior years showing increased revenues and EBITDA compared to when they were acquired. Furthermore, the continued embedding of our services within our professional client base is beginning to open the door to more opportunities to add FUM than we have previously seen.

Having stepped into the role of Chairman during February 2024, I would like to take the opportunity to express my gratitude to Tim Linacre for his stewardship and expertise in the role since 2020. Further, I am pleased that he remains on the Board as a Senior Non-Executive Director as we step forward into the next chapter of this journey.

Dividend            

Total dividends proposed for the year are 1.375p per share (FY 2022: 1.37p), reflecting the Board's intention to continue to invest in the future of the business.

Outlook

Our industry continues to face headwinds as increased compliance costs and higher interest rates encourage clients to place money into lower margin money market funds. However, the Group now provides a broad range of services where we have the opportunity to cross sell, thereby accelerating organic growth. There is also the opportunity to achieve synergies across the Group as earn-out payments come to an end, enabling better integration of our various operations.

Consequently, although we face many challenges, we remain confident that the Group will continue to prosper over the coming year.

Christopher Mills

Chairman

Chief Executive Officer's Statement

Review of the Year

I am very pleased to report on another strong 12-month period against the backdrop of market volatility. This is a testament to the hard work of the staff across all of our business units and I would like to thank them for their efforts during the year.

Additionally, the investments made into acquisitions across recent years were especially important in diversifying revenue streams which helped to protect us against the full impact of financial markets.

Further, we are pleased to report another year where our in-house discretionary fund manager, Ascencia Investment Management (Ascencia), has outperformed its benchmarks, as shown within the CFO's report. Ascencia's conservative multi-asset investment approach continues to deliver a smooth client investment experience with a focus on asset protection.

High interest rates have meant many potential new Court of Protection clients were inclined to hold funds within the Government's Court Funds Office accounts rather than to invest. In June 2023, in part in response to this, Ascencia launched its 'Money Market Solution' which provides clients with an investment solution that benefits from the higher interest rate environment. This product, assisted by the hard work and tenacity of our sales team, has attracted investment from both new and existing clients with £39m of assets added by the year end. Whilst funds in this Money Market Solution product earn a lower fee than those invested in our other investment solutions, moderately impacting the overall full year outturn, we are confident that they will be redeployed to higher fee products across our proposition as financial markets turn.

During the year we continued to focus on integrating the acquisitions made in prior years in order to maximise the commercial opportunities being a larger Group presents. This will continue to be a focus in the year ahead, particular with a view to harnessing the newly available data.

Whilst doing so, we are also exploring further acquisition opportunities. We are looking at a number of businesses which complement our service offering and give us increased access to clients, be it via new services offered, client relationships or increased geographical spread.  We remain firmly focused on the PI and CN space.

We are proud to have added two new sites to Cardinal's Major Trauma Signposting (MTSP) service and discussions continue in respect of a number of further sites. This partnership with the NHS provides a vital bedside service to patients at the earliest possible opportunity. At each MTSP site, Cardinal has selected a legal panel which comprises law firms who provide the highest quality of care and service to patients which in turn provides significant opportunity for the Group to further strengthen its relationships with PI and CN departments within law firms nationally.

Consumer Duty

During the year we welcomed the launch of the FCA's Consumer Duty guidance, putting clients' needs first in order to improve outcomes for consumers. This aligns well with the customer focused approach we have always had. Moreover, we began the current financial year with the launch of the Frenkel Topping Group Values (detailed within the Strategic Report section of our Annual Report) which will be at the heart of everything we do moving forward, enhancing what we offer to our clients, as well as our people and ultimately our shareholders. These values align with Consumer Duty and throughout 2024 we will continue to review and enhance our compliance framework, further embedding the Consumer Duty and undertaking an assessment of value for our clients. Consumer Duty is expected to result in certain modest changes to our working practices which we are currently reviewing with a keen eye on making sure that clients' best interests are always put first and fair value is delivered.

We have appointed our existing non-executive director Rt. Hon. Mark Field as Non-Executive Consumer Duty Champion for Frenkel Topping Limited (FTL) and Ascencia. I have taken on the role of Executive Champion for Ascencia whilst Mark Holt has taken on the same role for FTL. Mark will also be the Executive Champion for Cardinal alongside Andrew Pemberton, Cardinal's Managing Director.

Market Landscape

According to industry data from NHS Litigation Authority and media sources, the NHS paid out Clinical Negligence Damages of £2bn across a total of 6,888 claims during the 12 months to 31 March 2023.

Road traffic accidents accounted for 29,429 deaths or serious injuries with £2.4bn paid out on motor insurance claims during 2023.

Outlook

2024 has seen a solid start across our transactional businesses and we continue to be optimistic about our long-term goal to grow to 15% market share in each of our business unit. Trading is in line with expectations and there is as a strong pipeline of new FUM opportunities being pursued. However, we are mindful of the market backdrop, consumer duty and the ongoing integration of acquisitions and so it is prudent to maintain our existing expectations for FY2024.

Richard Fraser

Chief Executive Officer

Chief Financial Officer's Report

We are pleased to report continued growth on prior years following the continued success of our acquisition strategy. Revenue has grown by 32% to £32.8m (2022: £24.8m) with profit from operations up 76% to £5.1m (2022: 2.9m) and adjusted EBITDA up by 31% to £8.0m (2022: £6.1m).

Non-recurring revenue

The strong growth of 51% in non-recurring revenue has been very pleasing, demonstrating the success of the Group's acquisition strategy over recent years.

Cardinal was acquired in January 2022 and Somek & Associates (Somek) and N-Able Services were acquired during September 2022 and the impact of having them for the full year makes up 29% of the increase, with the remaining 22% coming from organic growth across all of our business units. This translates to an acquisition related growth in Adjusted EBTIDA of 15% and organic growth of 16%.

Forths (acquired 2020) and Bidwell Henderson (acquired 2021) closed the year with record numbers of active files. Meanwhile Somek has grown their number of expert witnesses by 19% during the year which further increases capacity to accept new instructions. The onboarding of expert witnesses remains a key area of focus for 2024 and we expect to achieve similar levels of growth throughout the year ahead.

Recurring Revenue

It is reassuring that our recurring revenue has continued to grow, (9% on FY22) and that the year-end FUM has increased. However, growth in FUM was moderately impacted by market conditions which the Group has not been entirely immune from.

This has been further supported by the launch of the Money Market Solution, as discussed within the CEO's Statement, which diversified our revenue streams during the year, and leaves funds poised to be redeployed to other investment solutions as markets recover.

The performance of our discretionary fund management business Ascencia Investment Management has again been strong and has continued to outperform its key benchmarks:

*Benchmark for Ascencia Growth 3 is ARC Sterling Cautious and for Ascencia Growth 4 is ARC Sterling Balanced Asset

Margin

Despite the inflationary challenges presented across 2023 and recent years, we are pleased to have kept control of our Adjusted EBITDA margin:

As financial markets recover and we continue to add FUM, we do expect to begin to see some margin improvement in the coming years.

Working Capital

Cash generated from operating activities has increased to £3.2m (2022: £0.7m), an increase of 357%. Moreover, as a percentage of profit before tax this has increased from 36% in 2022 to 168% in 2023.

This reflects the strength of our debtor book and shows that investment made into organic growth within the Group in prior years is now beginning to turn to cash.

The decrease in closing net cash position of £2.4m compared to the prior year (2022: £5.0m) is as a result of £3.5m of deferred consideration payments made in the year relating to acquisitions made in prior years.

Earnings Per Share (EPS)

Adjusted EPS has increased to 4.26 pence (2022: 3.78 pence) and 4.02 pence (2022: 3.55 pence) for basic and diluted respectively. This increase of 13% shows the success of our acquisition strategy to date and organic growth.

The statutory EPS is down from the prior period, primarily due to the revaluation of contingent consideration payable in relation to acquisitions made in prior years. This revaluation gave rise to an expense of £1.4m within the current year however should be viewed as a positive as it shows the success of these businesses and their continued growth.

Revolving Credit Facility

In January 2024, the Group secured a revolving credit facility of £7.5m with Santander. The facility will be used to continue to pursue our acquisition strategy, as outlined in the CEO Statement & Strategic Report, as well as to fund contingent consideration payments due in 2024 and future years.

Elaine Cullen-Grant

Chief Financial Officer

group STATEMENT of comprehensive income

for the year ended 31 December 2023

All amounts are derived from continuing operations.

The Notes to the Financial Statements form an integral part of these financial statements.

group STATEMENT of FINANCIAL POSITION

As at 31 December 2023