Despite headwinds...

Administrations still below pre-pandemic levels

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Company failures were minimised by government schemes

Business advisory firm FRP Advisory said administrations remain below pre-pandemic levels despite pressures facing businesses.

The firm said growth in the higher volume liquidations market has continued, including creditors voluntary liquidations and compulsory liquidations.

However, the formal administration appointment market still remains below the onset of the Covid-19 lockdown as companies took advantage of government schemes to prop up their balance sheets.

In an update on trading for the six months to the end of October, it noted the long list of well documented headwinds facing UK corporates. These include recent interest rate rises, supply chain disruption, input cost inflation (i.e. wages, energy, supplies and materials), Brexit and the withdrawal of pandemic support measures.

“Many troubled UK corporates have avoided the need to consider and implement formal restructuring processes as they took advantage of the government-backed support measures made available during the pandemic.

“Furthermore, key creditors like HMRC have a tax arrears backlog to address and institutional lenders continue to be supportive where possible.

“The group expects that as the headwinds further impact the UK economy that the demand for [its] restructuring services will continue to increase.”

It said performance remained strong during the first half, with continued growth in revenues and profits.

The group expects to report revenue for H1 2023 of £49.4m, up 10% on the prior year (H1 2022: £44.7m), and underlying adjusted EBITDA of £11.6m, up 5% on the prior year (H1 2022: £11.1m), in line with the board’s expectations to date.

FRP has seen an increase in demand for confidential advisory projects and enquiries for restructuring services compared to last year.

The team has a good pipeline of existing M&A and Debt Advisory mandates and the level of new enquiries remains encouraging, although rising interest rates and the forecast recessionary period continued to impact the buyers’ appetite, particularly in consumer exposed sectors.

This is likely to reduce mainstream M&A activity over H2 compared to last year. Conversely, this should lead to an increase in debt refinancings and restructuring related M&A activity, said the company.

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