13th Feb 2023 17:26
(Alliance News) - FRP Advisory Group PLC will be able to cope with an earnings fall due to its chunky cash position, according to Liberum.
Liberum maintained FRP's "buy" rating, with a target price of 170.0 pence from 185.0 pence in December.
Shares in the London-based business advisory firm closed 5.8% lower at 137.50 pence each in London on Monday.
FRP on Monday said it expects to see a rise in insolvencies in the UK as companies continue to suffer from inflation and increased costs of borrowing.
Turning to its own business results, the company said that, for the nine months to January 31, it expects revenue and adjusted earnings before interest, tax, depreciation and amortisation to be "broadly" in line with the consensus for financial year 2023.
"As a result of the mix of work being weighted towards lower margin liquidation activity and uncertainty around the timing of deal closures, we leave revenue estimates unchanged at GBP100 million and GBP105 million in FY 23 and FY 24, but reduce profits," Liberum analysts James Allen and Nick Anderson said.
FRP said it anticipates more activity in the higher-value restructuring and administration market in 2023, but noted that volumes are yet to recover to pre-Covid levels.
"We retain our positive view on the shares and expect the company to benefit from increased restructuring demand in 2023," the Liberum analysts said.
Liberum said FRP is one of the firm's "most able to withstand" a fall in earnings, due to "its strong net cash position".
FRP back in December reported net cash of GBP21.0 million at October 31, doubling from GBP9.2 million the year prior
FRP noted it has "seen an increase in the number of liquidation mandates in line with the widely reported increase in the overall number of insolvencies for companies during 2022".
In 2022, total insolvencies in England & Wales rose by 57% to 22,109 from 14,059 in 2021, the UK government's Insolvency Service said at the end of January. Administrations increased 55% to 1,231 from 796.
Chief Executive Officer Geoff Rowley said: "The restructuring team is well positioned to service the expected increase in demand and has proven itself to be resilient during a period when troubled UK businesses have been supported by government backed loans, other sources of liquidity and support."
The company will release its results for the financial year to April 30 in mid-May.
By Harvey Dorset, Alliance News reporter
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