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Frenkel Topping Group PLC   -  FEN   

Half-year Report

Released 07:00 03-Sep-2019

RNS Number : 9529K
Frenkel Topping Group PLC
03 September 2019
 

 

Frenkel Topping Group plc

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

 

Interim Results

 

Strategic Progress Delivers Robust Financial Performance

 

Frenkel Topping (AIM: FEN), a specialist independent financial advisor and asset manager focused on asset protection for vulnerable clients, announces its interim results for the six months ended 30 June 2019.

 

Financial Highlights

 

 

HY 2019

HY 2018

% change

Revenue

£4.1m

£3.6m

+14%

Recurring revenue

£3.2m

£2.9m

+10%

Gross profit

£2.2m

£2.1m

+5%

Profit from operations1

£0.8m

£0.4m

+100%

Statutory pre-tax profit

£596k

£282k

+111%

Basic EPS

0.6p

0.32p

+88%

Cash from operations2

£0.5m

£0.5m

-

Interim dividend

0.32p

0.32p

-

1 Profit from operations before share based compensations

2 Cash from operations before corporation tax

 

Operational Highlights and Outlook

·     Assets Under Management of £851m, up 12% (as at 30 June 2018: £759m)

·     £44m of new investment mandates in H1, in line with management's expectations

·     Assets on a DFM Mandate of £345m, up 11% (as at 30 June 2018: £312m)

·     New business income 30% higher at £0.9m than the comparative period in 2018 (£0.69M)

·     Client retention rate remained high at 98%

·     All model portfolio strategies achieved positive returns; H1 growth between 4%-12% according to the risk criteria set for the fund

·     Current trading is in line with management's expectations

 

Paul Richardson, Chairman of Frenkel Topping said:

 "I am pleased to report an excellent set of results and a period of significant progress. Despite challenging financial markets over the period, we have delivered a 14% increase in revenue, a 111% rise in pre-tax profit and made considerable progress against our strategic commitments.  New business income increased by 30% over the comparative period whilst client retention remained high at 98% - reflecting our ability to conservatively manage our clients' money and generate returns. Our growth has been supported by strategic investments made in developing talent and marketing which has invigorated and strengthened the business for the long term. 

 

"The Company has built a strong platform to generate further growth and current trading is line with management expectations."

 

The information communicated in this announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) No. 596/2014."

 

 

Frenkel Topping Group plc

 

www.frenkeltopping.co.uk

Paul Richardson, Non-Executive Chairman

Richard Fraser, Chief Executive Officer

Tel: 0161 886 8000

Stephen Bentley, Chief Finance Officer

 

Mark Holt, Commercial Director

 

 

finnCap Ltd

Tel: 020 7220 0500

Carl Holmes/James Thompson (Corporate Finance)

Tim Redfern / Richard Chambers (ECM)

 

 

 

TB Cardew

frenkeltopping@tbcardew.com

Tom Allison

Shan Shan Willenbrock

Olivia Rosser

 

Tel: 0207 930 0777

Mob: 07775 848537

 

 

For further information:

 

About Frenkel Topping: www.frenkeltopping.co.uk

 

Frenkel Topping provides specialist independent financial advice focussed on asset protection for clients. The specialist independent financial adviser has a market leading position providing advice and fund management services for personal injury trusts and clinical negligence awards and is well placed to provide services to a wider customer base.

 

The Company provides a range of wealth management services including bespoke investment portfolios, personal and corporate financial advice and tax planning. It is focused on increasing its assets under management by continued growth of the business by an increase in the number of highly qualified fee earners for the provision of its industry leading specialisms.

 

It has a national presence with offices in Manchester, Birmingham, Cardiff and London and has relationships and infrastructure in place to further grow its reach and target markets.

 

CEO Statement

 

Overview

 

I am pleased to report an excellent set of results, building on the progress announced in our 2018 financial accounts. We have made significant progress financially and operationally, underpinned by our strategic investments in the Frenkel Topping Academy, marketing and technology, enabling us to report solid growth across our key performance indicators.

 

The Group's revenue increased by 14% to £4.1m (HY 2018: £3.6m), predominantly driven by new business income which at £896k was 30% higher than the comparative period in 2018.  Recurring revenue is a healthy 78% of total revenue and our client retention rate remains high at 98%, reflecting positive performances from our portfolios and a focus on excellent customer service. 

 

The Company delivered £44m of new investments mandates, reflecting our strong competitive position and trusted brand. AUM amounted to £851m, an increase of £72m or 9% since the year end.  The Group's assets on a Discretionary Fund Management basis through Ascencia Investment Management ("Ascencia") were up 11% to £345m (as at 30 June 2018: £312m).

 

Operating profit before share based compensation was £0.8m, doubling from the £0.4m reported in HY2018, and EBITDA before share based compensation was £905k, up 105%, reflecting the Group's revenue growth.  In the first half of 2019, £383K was invested in marketing and developing talent compared to £449K in the comparable period which included reorganisation costs. Our disciplined cost control has ensured that a larger proportion of the growth in sales flows through to the bottom line, delivering a disproportionate increase in operating profit and profit before tax.

 

Despite the increase in operating profit and EBITDA, the cash generated from operating activities of £328,000 in the half year was lower than the £474,000 generated in the equivalent period in 2018. This was due to a £373,000 increase in working capital which resulted from the Group's new business generation.

 

Progress against our strategy

 

In 2018, we delivered good results, with solid execution, and outlined three core strategic aims for growing the business.  I am pleased to report that the Company is making good progress on these commitments to generate further growth over the long term:

 

1.    To grow organically our core business of independent financial advice for personal injury and clinical negligence awards.

 

We achieved good organic growth in the period under review and, as highlighted above, this has been supported by the investments we made over the past two years. We are proud of our graduate and apprenticeship programme which was launched to ensure talent is regularly introduced to the business.  This has been an excellent investment with newly qualified consultants winning new business, adding to AUM and, importantly, maintaining existing client relationships. Investments in marketing has also been key to driving this excellent set of results. 

 

2.    To increase the strength of our Discretionary Fund Management through Ascencia and expand its services to a wider audience. 

 

Despite economic headwinds, all our model portfolios in the investment management business achieved positive returns, each posting growth of between 4% and 12% according to the risk criteria set for the fund.  The performance reflects our expertise and the conservative approach we have to take in protecting our clients' money and generating returns.  In June, we appointed Tatton Asset Management Limited as investment manager for Ascencia's core and passive products as part of our strategy to expand its asset management capabilities.  This, together with Wellian Investment Solutions Limited as its portfolio research partner, will enable the Group to further scale the business and offer a broader range of products.  In the period under review, we launched the Ascencia Islamic Portfolio, a Sharia Law compliant investment portfolio which was developed to support the needs of our Muslim clients.  The Ascencia Islamic Portfolio is essentially multi-asset and consists of a blend of Shariah compliant equity focused exchange traded funds, managed fixed income solutions, together with an element of physically backed gold exposure. The new portfolio complements our existing Socially Responsible Investment Portfolios as there are number of synergies between the two.

 

3.    To grow the business through selective acquisitions to widen our market reach and position Obiter Wealth Management ("Obiter") as a Challenger Generalist IFA Brand. 

 

Obiter was established in response to demand from the solicitors and clients we work with to widen our expert witness services to include divorce cases, wills and probates and MBOs (Management Buy Outs).  We are actively sourcing M&A opportunities which complement Obiter and align themselves with our stated strategy. The Group has considered several businesses over the last six months, but we have a strict acquisition policy and will not make any acquisitions unless they meet our criteria.  We continue to have active discussions with firms and, if acquired, they will benefit from the back-office and technical support we have built in Manchester, while allowing us to extend the territories into which our core specialist service is offered. 

 

Ogden Rate

 

In previous announcements we have commented on the impact of the Ogden Rate (Personal Injury Discount Rate ("PIDR")) when it was cut to -0.75% from the then long standing 2.5% and the likelihood of an increase in lump sum settlements. We believe that these settlements have and will continue to filter through to larger investments for claimants, particularly given the latest government announcement to increase the rate upwards, but only to -0.25% following a number of consultations. Mark Holt, the Group's Commercial Director has been heavily involved in the consultation process and comments:

 

"The incremental increase in the PIDR will not see claimants rush back to settling claims with the inclusion of Periodical Payments, moreover the trend to settle for once and for all lump sums will continue, somewhat unaffected by this latest rate increase"

 

As previously announced, the change in the Ogden Rate is not predicted to have a significant impact on Frenkel Topping.  The Company views the change as an opportunity for potential clients and solicitors to seek its expertise.

 

Dividend

 

In June 2019 the Company paid a final dividend in respect of FY18 of £668,000 or 0.97 pence per share.  This represents a total dividend for 2018 of 1.29 pence per share (2017: 1.203 pence) to shareholders.  The Board has reviewed the dividend and is mindful of the Group's earnings growth potential and future expansion plans. With this in mind, the Company will maintain an interim dividend of 0.32 pence per share which amounts to £220,492 (2018 Interim Dividend: 0.32 pence and £220,701). The interim dividend will be paid on 26 September 2019 to shareholders on the register at close of business on 13 September 2019 and the shares will trade on an ex-dividend basis from 12 September 2019.

 

Outlook

 

We are trading in line with management's expectations and expect to continue to invest in the business to ensure future growth. The Board is mindful of the broader political and economic uncertainty but remains confident that our strong platform, together with our high client retention rate and ability to generate new business will enable us to deliver growth in the second half of 2019 and beyond. I would like to thank all of our staff for their hard work and steadfast focus on delivering for our clients and creating excellence in everything we do.  It is very encouraging to see how hard everyone is working to deliver on our strategic commitments and position Frenkel Topping for success over the longer term.

 

Richard Fraser, CEO       
 

Frenkel Topping Group plc

 

Group Income Statement

 

 

 

 

Note

 

 

Revenue

 

Direct Staff Costs

 

(1,838)

 

(1,560)

 

(2,943)

Gross Profit

 

           2,232

 

          2,064

 

          4,718

 

 

 

 

 

 

 

Administrative Expenses

 

 

 

 

 

 

Share Based Compensation

 

(270)

 

(159)

 

(386)

Development and Reorganisation Costs

 

(383)

 

(449)

 

(701)

Formal Sales

 

                    -  

 

                   -  

 

(165)

Other

 

(1,034)

 

(1,209)

 

(2,309)

Total Administrative Expenses

 

(1,687)

 

(1,817)

 

(3,561)

 

 

 

 

 

 

 

Profit from Operations before share based compensation and formal sale process

 

Share Based Compensation

 

(270)

 

(159)

 

(386)

Formal Sales

 

                    -  

 

                   -  

 

(165)

 

 

 

 

 

 

 

Profit from Operations

 

546

 

247

 

1,157

 

 

 

 

 

 

 

Other Gains & Losses

 

 

 

 

 

 

Finance income

 

53

 

24

 

(13)

Finance Costs

 

(3)

 

                   -  

 

 

Share of profits from investments accounted for using the equity method

 

                    -  

 

11

 

                   -  

 

 

 

 

 

 

 

Profit Before Tax

 

596

 

282

 

1,144

 

 

 

 

 

 

 

Taxation

 

(143)

 

(60)

 

(349)

 

 

 

 

 

 

 

Profit for Period

 

453

 

222

 

795

 

 

 

 

 

 

 

Gains on property revaluation arising net of Tax

 

                    -  

 

                   -  

 

27

 

 

453

 

222

 

822

 

 

 

 

 

 

 

Minority interest

 

(39)

 

                   -  

 

(29)

 

 

 

 

 

 

 

Profit and Total Comprehensive Income Attributable to:

 

 

 

 

 

 

Owners of Parent Undertakings

 

414

 

222

 

793

 

 

 

 

 

 

 

Earnings per share - basic (pence)

0.60

 

0.32

 

1.11

Earnings per share - diluted (pence)

0.60

 

0.32

 

1.11

 

 

The results for the period are derived from continuing activities.
 

 

Frenkel Topping Group plc

 

 

 

 

 

 

Group Statement of Financial Position

 

 

 

ASSETS

 

 

 

 

 

 

NON-CURRENT ASSETS

 

 

 

 

 

 

Goodwill

 

7,020

 

7,020

 

7,020

Property, Plant and equipment

 

1,672

 

1,402

 

1,424

Investments

 

                -  

 

25

 

               -  

Deferred tax

 

30

 

53

 

10

 

 

8,722

 

8,500

 

8,454

CURRENT ASSETS

 

 

 

 

 

 

Accrued income

 

864

 

822

 

982

Trade receivables

 

1,547

 

1,358

 

1,535

Other receivables

 

686

 

210

 

160

Investments

 

751

 

1,202

 

1,136

Cash at bank and in hand

 

620

 

558

 

848

 

 

4,469

 

4,150

 

4,661

 

 

 

 

   

 

 

TOTAL ASSETS

 

13,192

 

12,650

 

13,115

 

 

 

 

 

 

 

EQUITY AND LIABILITIES

 

 

 

 

 

 

EQUITY

 

 

 

 

 

 

Share capital

 

393

 

393

 

393

Share Premium

400

 

400

 

400

Merger reserve

5,315

 

5,315

 

5,315

Revaluation reserve

178

 

151

 

178

Own share reserve

 

(4,579)

 

(4,449)

 

(4,567)

Other reserve

(341)

 

(341)

 

(341)

Retained earnings

 

10,576

 

9,989

 

10,553

Non-controlling interest

 

82

 

               -  

 

43

TOTAL EQUITY

 

12,024

 

11,458

 

11,974

CURRENT LIABILITIES

 

 

 

 

 

 

Current taxation

 

354

 

223

 

216

Trade and other payables

 

745

 

969

 

926

 

 

1,098

 

1,192

 

1,142

 

 

 

 

 

 

 

LIABILITIES > 1 YEAR

 

69

 

               -  

 

               -  

 

 

 

 

 

 

 

TOTAL LIABILITIES

 

1,167

 

1,192

 

1,142

 

 

 

 

 

 

 

TOTAL EQUITY AND LIABILITIES

 

13,192

 

12,650

 

13,115

Consolidated Statement of Changes in Equity For the period to 30 June 2019

 

 

 

 

 

 

 

 

Balance 1 January 2018

393

400

5,315

 

(341)

 

(4,449)

10,253

151

11,722

 

11,722

Share based payments

-

             -

             -

 

             -

 

             -

159

                    -

159

 

159

Dividend Paid

          -

             -

             -

 

             -

 

             -

(640)

                    -

(640)

 

(640)

Tax Charge Relating to the Share Option Scheme

          -

             -

             -

 

             -

 

             -

(5)

                    -

(5)

 

(5)

Total transactions with owners recognised in equity

    -

             -

             -

 

             -

 

             -

(486)

                    -

(486)

 

(486)

Profit for the period

-

-

-

 

-

 

-

222

-

222

 

222

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance 30 June 2018

New shares issued

-

-

-

 

-

 

-

-

-

0

 

0

Purchase of own shares

-

-

-

 

-

 

(118)

-

-

(118)

 

(118)

Share based payments

          -

             -

             -

 

             -

 

             -

245

                    -

245

 

245

Tax credit relating to share option scheme

-

-

-

 

-

 

-

(6)

-

(6)

 

(6)

Dividend paid to shareholders

          -

             -

             -

 

             -

 

             -

(220)

                    -

(220)

 

(220)

Acquisition of Subsidiary

 

 

 

 

 

 

 

 

 

 

14

14

 

 

 

 

 

 

 

 

 

 

 

 

 

Total transactions with owners recognised in equity

          -

             -

             -

 

             -

 

(118)

19

                    -

(99)

14

(85)

Profit and total comprehensive income for the period

          -

             -

             -

 

             -

 

             -

545

                    -

545

29

574

Other comprehensive income

          -

             -

             -

 

             -

 

             -

               -  

27

27

 

27

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance 31 December 2018

Share based compensation

-

-

 

-

 

-

-

261

 

261

Dividend paid to shareholders

-

-

 

-

 

-

(668)

-

(668)

 

(668)

Building Depreciation

 

 

 

 

 

 

 

13

 

13

 

13

Share option scheme

-

-

-

 

-

 

-

3

-

3

 

3

 

 

 

 

 

 

 

 

 

 

 

 

 

Total transaction with owners recognised in equity

-

-

-

 

-

 

             -

(391)

                    -

(391)

0

(391)

Purchase of own shares

          -

             -

             -

 

             -

 

(12)

               -

                    -

(12)

 

(12)

Profit and total comprehensive income for the period

          -

             -

             -

 

             -

 

             -

414

                    -

414

39

453

Balance 30 June 2019

 

 

·      The share capital represents the number of shares issued at nominal price.

·     The merger reserve represents the cost of the shares issued to purchase the non-controlling interest at market value at the date of the acquisition and the excess of fair value over nominal value of shares issued to acquire Ascencia Investment Management (formerly Frenkel Topping Investment Management Limited.)

·      The other reserve represents the excess paid for the non-controlling interest over the book value at the date of the acquisition.

·    The own shares reserve represents the cost of 3,105,708 (31 December 2018: 3,067,576) shares held by the company and the 6,648,016 (31 December 2018: 6,648,016) held by the Frenkel Topping Group Employee Benefit Trust.  The open market value of the shares held at 30 June 2018 was £4,331,442 (31 December 2018: £3,784,445).

·    Retained earnings represents the profit generated by the Company since trading commenced, together with dividends paid, share premium cancelled and share based payment and credits.

·      The Company has conformed with all capital requirements as imposed by the FCA.

Frenkel Topping Group plc

 

Group Cash Flow Statement

 

For the period to 30 June 2019

 

 

Profit before tax

 

Adjustments to reconcile profit for the period to cash generated from operating activities:

 

 

 

 

Unrealised (Gains / Losses) on Investments

 

(53)

(24)

13

Share based compensation

 

270

159

404

Depreciation

 

90

36

95

(Increase)/Decrease in accrued income, trade and other receivables

(495)

83

(292)

Increase/ (Decrease)/ in trade and other payables

122

(62)

32

Cash generated from operations

530

474

1,396

Income Tax paid

 

(202)

     -

(268)

Cash generated from operating activities

328

474

1,128

 

 

 

 

 

Investing Activities

 

 

 

 

Acquisition of property, plant and equipment

(143)

(31)

(87)

IFRS 16 Implementation

 

(183)

-

-

Net Investment Disposals / (Purchases)

438

(1,061)

(1,031)

Cash (used) / generated in investing activities

 

112

(1,092)

(1,118)

Financing activities

 

 

 

 

Own shares purchased

 

-

-

(118)

Dividend paid

 

(668)

(640)

(860)

Cash used in financing

 

(668)

(640)

(978)

(Decrease)/ increase in cash

 

(228)

(1,258)

(968)

 

 

 

 

 

Opening cash

 

848

1,816

1,816

Closing cash

 

620

558

848

 

 

 

 

 

Closing Cash and Cash Equivalents

 

 

 

 

Cash

 

620

558

848

Cash equivalents

 

751

1,202

1,136

Closing cash and cash equivalents

 

  

Cash is held at National Westminster Bank Plc.

Cash equivalents are held in liquid investments.

 

 

Notes to the Interim Financial Statements

 

1.    Basis of preparation and accounting policies


Basis of preparation

The Company's interim result consolidates the results of the Frenkel Topping and its subsidiary undertakings up to 30 June 2019.  Frenkel Topping is a limited liability company incorporated and domiciled in England & Wales and whose shares are quoted on AIM, a market operated by The London Stock Exchange. The consolidated financial information of Frenkel Topping is presented in Pounds Sterling (£), which is also the functional currency of the parent.

 

The financial information contained in this interim report does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. It does not therefore include all the information and disclosures required in the annual financial statements and should be read in conjunction with the Company's annual financial statements as at 31 December 2018 which have been prepared in accordance with IFRS's as adopted by the European Union.

 

The financial information for the 6 months ended 30 June 2019 and 30 June 2018 is unaudited.

 

The Company's statutory accounts for the year ended 31 December 2018 have been delivered to the Registrar of Companies. The report of the auditors on these accounts was unqualified and did not contain a statement under Section 498(2) or (3) of the Companies Act 2006.

 

The Company has not applied IAS 34, Interim Financial Reporting, which is not mandatory for UK Companies, in the preparation of these interim financial statements.

 

The Company has considered the provisions of IFRS 9 Financial Instruments and has concluded that it has no effect on the valuation of its assets and its liabilities shown in its balance sheet.

 

The Company has also considered the provisions of IFRS 15 Revenue from Contracts with Customers and has concluded that it has no significant effect on the Company's approach to revenue recognition.

 

The Company has implemented the provisions of IFRS 16 Leases and has applied the modified retrospective approach.

 

Significant accounting policies

The accounting policies used in the preparation of the financial information for the six months ended 30 June 2019 are in accordance with the recognition and measurement criteria of International Financial Reporting Standards ('IFRS') as adopted by the European Union and are consistent with those which will be adopted in the annual statutory financial statements for the year ended 31 December 2018.

 

2.            Revenue Segmental Reporting

All of the Company's revenue arises from activities within the UK.  Management consider there to be only one operating segment within the business based on the way the business is organised and the way results are reported internally.

 

 

3.            Earnings per ordinary share

 

 

6 months

6 months

Year ending

 

June 2019

June 2018

December 2018

Earnings

 

 

 

Earning for the purpose of basic earnings per share (net profit for the period attributable to equity holder of the parent)

£414,440

£222,186

£766,735

Earning for the purpose of diluted earnings per share

£414,440

£222,186

£766,735

Number of shares

 

 

 

Purpose for basic earnings per share

 

Less: own shares held

78,657,349

 

(9,753,724)

----------------

68,903,625

78,657,349

 

(9,388,016)

----------------

69,269,333

78,657,349

 

(9,715,592)

--------------

68,941,757

 

---------------

---------------

----------------

Purpose of diluted earnings per share

68,903,625

69,269,333

68,941,757

 

---------------

---------------

---------------

 

 

 

 

Basic EPS pence

0.60

0.32

1.11

Diluted EPS

0.60

0.32

1.11

 

4.            Dividend

A final dividend of £668,365 representing 0.97 pence per share was approved by the Shareholders at the AGM on 30th May 2019.  The final dividend was paid on 28th June 2019.  The total dividend paid in relation to 2018 being 1.29 (2017: 1.2203) pence per share.

 

5.            The Board of Directors approved the interim report on 2 September 2019.
 

6.            Copies of this report are available from the company website on www.frenkeltopping.co.uk

 

7.            The information communicated in this announcement is inside information for the purposes of Article 7 of Regulation 596/2014

 

 

- Ends -


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