TIDMFEN
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 GBP4.1m GBP3.6m +14%
-------- -------- ---------
Recurring revenue GBP3.2m GBP2.9m +10%
-------- -------- ---------
Gross profit GBP2.2m GBP2.1m +5%
-------- -------- ---------
Profit from operations(1) GBP0.8m GBP0.4m +100%
-------- -------- ---------
Statutory pre-tax
profit GBP596k GBP282k +111%
-------- -------- ---------
Basic EPS 0.6p 0.32p +88%
-------- -------- ---------
Cash from operations(2) GBP0.5m GBP0.5m -
-------- -------- ---------
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 GBP851m, up 12% (as at 30 June 2018: GBP759m)
-- GBP44m of new investment mandates in H1, in line with management's expectations
-- Assets on a DFM Mandate of GBP345m, up 11% (as at 30 June 2018: GBP312m)
-- New business income 30% higher at GBP0.9m than the comparative period in 2018 (GBP0.69M)
-- 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."
www.frenkeltopping.co.uk
Frenkel Topping Group plc
Paul Richardson, Non-Executive Tel: 0161 886 8000
Chairman
Richard Fraser, Chief Executive
Officer
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 Tel: 0207 930 0777
Shan Shan Willenbrock Mob: 07775 848537
Olivia Rosser
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 GBP4.1m (HY 2018:
GBP3.6m), predominantly driven by new business income which at
GBP896k 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 GBP44m of new investments mandates,
reflecting our strong competitive position and trusted brand. AUM
amounted to GBP851m, an increase of GBP72m 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
GBP345m (as at 30 June 2018: GBP312m).
Operating profit before share based compensation was GBP0.8m,
doubling from the GBP0.4m reported in HY2018, and EBITDA before
share based compensation was GBP905k, up 105%, reflecting the
Group's revenue growth. In the first half of 2019, GBP383K was
invested in marketing and developing talent compared to GBP449K 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 GBP328,000 in the half year
was lower than the GBP474,000 generated in the equivalent period in
2018. This was due to a GBP373,000 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 GBP668,000 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 GBP220,492 (2018 Interim
Dividend: 0.32 pence and GBP220,701). 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 6 Months 6 Months Yr Ended
Group Income Statement Jun-19 Jun-18 Dec-18
Unaudited Unaudited Audited
Note GBP'000 GBP'000 GBP'000
Revenue 4,071 3,624 7,661
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 815 406 1,708
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) 3 0.60 0.32 1.11
Earnings per share - diluted
(pence) 3 0.60 0.32 1.11
The results for the period are derived from continuing
activities.
Frenkel Topping Group plc
Group Statement of Financial 30-Jun-19 30-Jun-18 31-Dec-18
Position
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
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
Share Share Merger Other Own Retained Revaluation Total Non-controlling Total
Capital Premium share reserve controlling Interests
Interests
Reserve Reserve Reserve Earnings
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
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 393 400 5,315 (341) (4,449) 9,989 151 11,458 0 11,458
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 393 400 5,315 (341) (4,567) 10,553 178 11,931 43 11,974
Share based
compensation - - - - - 261 - 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 393 400 5,315 (341) (4,579) 10,576 178 11,942 82 12,024
=========== ============== ============== ============== ============== ================ ===================== ============ ================ ========
-- 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 GBP4,331,442 (31 December 2018:
GBP3,784,445).
-- 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 6 Months 6 Months Year
Group Cash Flow Statement ended ended ended
For the period to 30 June 2019 30-Jun-19 30-Jun-18 31-Dec-18
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
Profit before tax 596 282 1,144
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 1,372 1,760 1,984
========== ========== ==========
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 (GBP), 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 GBP414,440 GBP222,186 GBP766,735
per share (net profit for the period
attributable to equity holder of the
parent)
Earning for the purpose of diluted GBP414,440 GBP222,186 GBP766,735
earnings per share
Number of shares
78,657,349 78,657,349 78,657,349
Purpose for basic earnings per share (9,753,724) (9,388,016) (9,715,592)
---------------- ---------------- --------------
Less: own shares held 68,903,625 69,269,333 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 GBP668,365 representing 0.97 pence per share
was approved by the Shareholders at the AGM on 30(th) May 2019. The
final dividend was paid on 28(th) 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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END
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