Welcome to the FRP Advisory Group PLC full year results investor presentation. Throughout this recorded presentation, investors will be in listen-only mode. Questions are encouraged, and they can be submitted at any time using the Q&A tab situated on the right-hand corner of your screen. Simply type in your questions and press send. Before we begin, I would like to submit the following poll. I would now like to play you a recording of the results presentation before we move on to live Q&A with the management team.
Good morning, and thank you everyone for joining us today. For those in the room and those who are online, my name is Geoff Rowley, CEO. I'm joined by Gavin Jones, our CFO. Those of you who are regular attendees of this will notice that we are missing one in Jeremy French, who offers his apologies. He has a very small medical procedure this morning but will be back in circulation this afternoon. Turning to our business overview, our investment case. We are seeking to run a diversified advisory model, a specialist multi-service advisory model that supports clients through the entire corporate life cycle and drives through cycle performance. We have a strong track record of growth and a resilient model, which is underpinned by sustained organic growth, technology-driven efficiency gains, cross-pillar synergies, and expanded capabilities via acquisitions.
We seek to be a compounder by way of regular and progressive dividend policy and selective acquisitions. We've undertaken 16 complementary businesses since IPO with strict M&A criteria, which we'll talk about a bit later. We have a strong balance sheet that enables further M&A and a healthy pipeline. We seek to retain the culture as we grow, and that's through cross-pillar connectivity, a collaborative meritocratic culture, strong colleague retention, including partner and key work winners, and continued investment in our talent and leadership. We remain the number one appointment taker within the restructuring administration marketplace by volume, and we have continued market growth at 14%. In the context of what we do within that administration and wider insolvency restructuring space, there are high barriers to entry, which gives us confidence around our business proposition.
Most pleasingly, we have growing reputation in our other service pillars as well. We continue to believe that we have favorable market opportunities. There is structural driver of opportunities from consolidation in the mid-corporates. Expanding the quality of our mandates won, both retaining and expanding our referral network, and we are able to support SMEs, mid-cap, and larger projects, including private equity clients. We now have six complementary pillars. The largest offering we have is restructuring advisory, and that covers the complete range of restructuring from solvent solutions through to administrations, liquidations, and contentious insolvency and investigations. We have 62 partners presently within our business operating within that space. That's supported by our financial advisory team as well. That covers anything from transaction services, lender services, valuations, modeling, pensions advisory, and ESG services.
Most recently, we've added our real estate advisory, which was supported by the acquisition of Arc & Co, which we'll comment later on. That covers lender services, borrowers, investor services, and property asset management. Our forensic team undertakes various forensic investigations, dispute services, compliance and risk advisory, and forensic technology. Our corporate finance team is fundamentally a lead M&A team, and that can be involved from selling businesses, buying businesses, raising capital, special situations, which works closely obviously with our restructuring colleagues. We support the private equity community. We have management advisory. We undertake various transactions in the employee ownership trust space, and we have transaction tax services and strategic options reviews. Again, the corporate finance team works closely with our debt advisory colleagues, and that will include leveraged and corporate financing, growth financing, asset-based lending, and support around amends, extends, and special situations.
As of July 26, we now have a total of 110 partners across our business. In terms of our organic growth drivers, for revenue growth, that is achieved by way of looking to increase our partners. That can be by way of development of internal talent and promotions and lateral hires, seeking to increase our share of the wallet in our chosen marketplaces. Obviously, looking to drive average revenue per partner growth over the course of our operations, increasing market share, making sure that our pricing is appropriate for what we're doing, and seeking to achieve growth through that on a sensible basis, and obviously overall market growth across our six service lines.
In terms of profitable growth, we are obviously focused on trying to make sure we achieve a return on our marketing spend, focus on our utilization and recovery, and we'll talk about that a bit further within this presentation. Investment in our operating platform and processes. Obviously, there is a lot going on with technology at the present time. Ensuring that we continue on a continuous basis to upskill our workforce and make sure they are appropriately trained and can serve our clients well. Continue to serve the full range of clients profitably, so making sure we are looking across the range of services we provide, and ultimately, where possible, to undertake more complex quality mandates which provide for good quality revenue and high profitability. In terms of our acquisition strategy, we believe that we have a proven criteria-led playbook.
There continues to be consolidation opportunities within our marketplace, and we believe that we have the opportunity for differentiation versus other mid-tier firms. Their stats complemented by market expansion opportunities, and that's accelerating the deployment of skills and expertise into wider markets, be that services or locations. In terms of our overall strategy, firstly, organic growth supplemented by selective acquisitions, generally of small partner teams. Two, we have settled upon, and most of you will have heard us talk about this before, a pretty strict criteria, namely that firstly, we want to see a cultural fit, and if we don't see that, we will happily pass on opportunities. If we see the cultural fit, we want to ensure that there is a strategic rationale for us looking at that opportunity.
It doesn't have to be with a capital S, but there does need to be a good business reason for us to do so. Finally, but by no means least, making sure that the economics of any transaction make good sense for us as the acquirer. Where we are undertaking acquisitions, we are obviously also looking to make sure that the businesses we acquire, that the senior people who become partners with FRP are locked in, and that there is a long-term commitment, not that we are just parting company with cash to acquire a business to find out the commitment isn't there on a longer term basis. Each deal we've undertaken obviously has the aim of strengthening the six pillars in which we are operating.
In support of our ability to undertake M&A, we continue to have net cash on our balance sheet as well as access to debt facilities, should that be appropriate. That all adds up to a strong balance sheet and a proven track record of successful M&A for us. In terms of where we are operating, we continue to have local expertise with global reach. We are now operating from just over 30 locations in the U.K. and two offices overseas. In terms of our overseas activity as well, that is often undertaken in the context of our membership of AICA for our corporate finance team, Eight International for our wider business on restructuring and forensics. Then we also have some best friend relationships with various people in different parts of the world. We're trying to make sure that we can serve clients.
Obviously, the U.K. does remain the heartland of what we do, we are very committed to believing that is a good strategy in the context of making sure we continue to grow year -on -year. In terms of the year under review and strategic highlights, obviously we are seeking compounding growth and returns. We obviously came to market as an income stock and continue to be that, but with a progressive dividend paid quarterly, supported by selective M&A. Our results contain a good element of strong organic growth, supplemented by M&A with particularly One Advisory and Arc & Co during the course of the year. We also made a minority investment in Queen's Tower Advisory, which is a transaction services business that has a very strong focus on delivering services through AI. We have a diversified advisory model.
We are still driven by our restructuring offering, which is the largest part of our business, we continue to see strong positive contributions from all of our other services. We continue to broaden our value proposition, creating a resilient, diversified model that serves clients throughout the corporate life cycle. In the year under review, we bolstered our financial advisory and launched our real estate advisory pillar following the acquisition of Arc. In terms of operational efficiency, we are very clear that we need to have that in focus on a continuous basis, we are applying more focus on our efficiencies and operating model and the use of technology, including AI.
In the year, we hired an operations director to review our existing processes, and we are at the start of implementing changes to make sure that we are fit for purpose as we are in 2026 and beyond. That's seen some changes as well in context of how we are onboarding clients with the use of First AML. We've launched a new intranet across the business, new expense system, and we have a number of other systems operated implementations that will occur during the course of this calendar year and into the remainder of FY 2027. Key to our continued success remains service line collaboration, and it is absolutely important that we retain that collaborative culture as we grow both across locations and across our service lines.
We saw a new marketing and BD director, HR business partner network, as all part of making sure that we are joining our teams together and making sure we are going to market as one. We have a continued focus on colleague development, and there are multiple leadership programs and career path opportunities being developed across the business on an ongoing basis. All of that hopefully feeds through to a consistent, resilient, profitable growth trajectory. This graph demonstrates that we have seen year-on-year growth throughout our existence. That is also most importantly underpinned by year-on-year profit growth. As is highlighted at the top of this graph, there are probably near constant challenges in the context of the markets in which we operate.
Hopefully that is well received in the context of the fact that FRP continues to develop for what we would say in the main has not necessarily been the most favorable of market conditions. It does show the resilience of our ability to continue to grow with a 16% revenue CAGR over the 15 years and a 19% revenue CAGR since IPO in 2020. Artificial intelligence. No one can have a presentation these days without addressing that. We are seeking to evolve our operating model to accelerate our speed to market, empower our people in delivery, and scale sustained value using the latest technology and AI. For us, it's about the investment for operational efficiency. We are taking a measured approach to AI focused principally on improving operational efficiency while accepting the ongoing importance of human-to-human interactions, human review of outputs, and applying professional skepticism.
Our intention is to grow the business while growing the headcount by a far lower rate, taking the benefit of technology. Just over a year ago, we hired AI consultants to help support how we best use AI and deliver a controlled and measured program of AI tools. Use cases initially concentrated on administrative, repetitive, and research-intensive tasks, including proposal preparation, turnaround times have reduced from approximately three to five days to just three to four hours in certain instances, and document analysis. Many colleagues are now building more advanced agents. Obviously, for most of what we do, we are operating in a regulated space, and therefore governance and risk controls are super important as we engage with the use of AI. A senior team has been established to govern AI use.
This governance framework ensures investments remain targeted, risks are managed, and identified opportunities are assessed against commercial and operational objectives. During the year under review, embedding and platform and training. We saw a data estate preparation. Fundamentally, everything to do with AI ultimately feeds back to data. How our data is managed and is accessed is super important. We've had bespoke agents built to compile, review, interrogate, and analyze data for colleague review. Location administration support agents, desktop research agents, meeting preparation assistants, and meeting transcripts. Our forensic team, with the continued use of Relativity AI. Relativity is a platform we've used for a number of years, but that continues to become more advanced by the use of AI. An AI-enabled intranet, which is called Ethel, a CSG support team, adoption, marketing, thought leadership, and research tools.
We've now got 600 colleagues trained with 50 specialists training ongoing. For us, control scaling is important, and therefore AI activity is increasing. Proof of concepts are being tested and then rolled out widely. Training upskilling of colleagues in the use of AI tools will continue. It's about identifying further opportunities to use AI agents across each service line. For example, exploring restructuring deliverables. A key area for us will be reporting and creditor claim matching. A migration to cloud-based insolvency system linked to SharePoint, which should take place before this calendar year is out. I'll hand over to Gavin for our financials.
Thank you. In terms of the financial highlights, the key thing, our results are marginally better than the mid-May trading update, where I had a couple of at least growth points. We were slightly stronger than that in these final results. Revenue growth + 16%, of which 10% was organic and 6% from the acquisitions that we've made. Adjusted EBITDA growth, which is the profit metric we invite you to judge us on, grew by 12% in the year, but the margin underlying adjusted EBITDA was 26%. FRP always say we aim for a high -20% margin, north of 25%. Net cash at year-end was GBP 26.2 million. Also, after the year-end, we refinanced our bank facilities, so we've got some strong facilities above and beyond that net cash position. Adjusted EPS grew 11% in the year.
In terms of the income stock that Geoff mentioned, we are progressive quarterly dividend stock progressively growing. We are recommending here a GBP 0.028 final dividend, which makes the total dividends for the year GBP 0.058, 7% growth year-on-year. This EBITDA bridge walks you so you can see the revenue growth in the green bars. In terms of the cost growth, it's in two parts. There's the people cost element, which is the five first pink bars, and then OpEx growth on the right-hand side. Net hires and acquisitions, GBP 6 million. Colleague rollover, where in the previous year those colleagues worked for us for less than 12 months, that rollover impacted to GBP 2.5 million. Merit, that's the pay rises across the workforce, GBP 1.5 million. The increase of employers NI in the year impacted us by GBP 1 million.
Partner compensation, we've got a thing where new partners would have joined us, plus our profit model whereby 25% of our locations profit goes to the partner pool. Overall, that came to GBP 3 million. Consultants in the year and direct costs. These are in OpEx. GBP 1 million spent more on consultants. In terms of the direct costs, they are normally linked to people or client activity. They are largely direct costs growing in line with the business. In terms of the P&L, here you can see exactly the same in numbers, 16% revenue growth. You can see the personnel cost growth, GBP 14 million year-on-year. In terms of the OpEx growth, that GBP 6 million growth is broken down there. Increased spend on IT, for example, we've got a data loss prevention tool that's new. Investments in cloud storage.
I mentioned the consultant spend earlier on. We've got more modest investments in marketing and business development. We took on some new locations that had some costs, and then costs associated with the acquisitions. In terms of underlying adjusted EBITDA, we've only ever adjusted for these few items which are non-cash. I think going forward, now our employee options have now expired and they were funded on IPO by the partners. I think going forward into 2027, those costs will be dealt with as an operating cost. For the year under review, FY 2026, we had about a GBP 200,000 charge. That's not really seen here, but we just absorbed that as an operating cost. Going forward, we expect the costs linked to the long-term incentive plan to be around about GBP 2 million a year, and we'll deal with that as a normal operating cost.
In terms of the balance sheet, we've got a strong balance sheet. During the year, our work in progress or unbilled revenue did grow. I will address that on a couple of slides later. We've got a strong net cash position. As I mentioned earlier on, we refinanced our bank facilities, we've got strong facilities above and beyond what is currently here. We've got a committed line and an uncommitted accordion, which puts us in a really strong place in terms of M&A. We can also lend money to our EBT to acquire shares to fund future long-term incentive plan awards. You can also see on here our investment in Queen's Tower is shown as the investment in associates. That's new in the year. The other changes are mainly linked to the goodwill and intangibles arising on the Arc and the One Advisory acquisition.
In terms of the cash flow statement, the big item to call out here is the increase in trade and other receivables of GBP 15.5 million. This is mainly due to a WIP build that I'll cover on the next slide. We had a bit of a waiting to most cases that have a property angle, which has a slightly longer time to collect. However, we do have certainty on collecting those assets. The most important thing is valuing our WIP. Whenever we have any doubts over recoverability, we provide immediately. We would have full confidence in turning that WIP into cash. It's just from a free cash flow perspective, it's slightly weaker because of the growth in that WIP. I've put some slides on our work in progress here simply because of that growth.
The top slide, you can see there's a consistent WIP as a percentage of revenue is in a similar shape. You can also see here our WIP is growing in line with the growth of the business. The bottom left-hand chart shows our WIP days relative to our debtor days. WIP days at year-end were about 5.5 months. That's very safely within the guardrails that I would say are four to seven months. It's very safely within that range. Our debtor days are relatively modest. In terms of our top five WIP balances, I've listed them here. Palace Revive, MFS Group, Henry Construction, all have a property angle, which delays us converting that to cash because they're linked to property sales. Safe Hands is one of our cases that requires a Berkeley Applegate court application. We know we will collect that.
It's just dependent on a court application. The top five cases this year made up 18% of our WIP, whereas previously it was 10%. We do have certainty on collecting that WIP. This next slide shows two things. You can see here a clear correlation between our revenue and our cash collections, where approximately the cash collected in one year relates approximately to the revenue in the previous year. It's a nice trend that demonstrates us consistently converting that WIP into cash. On the right-hand side, I've given an update here on when we expect to turn the WIP on those bigger cases into cash. The MFS Group will be during FY 2027 and even into FY 2028 because it's a large property portfolio. Safe Hands is expected a Berkeley Applegate hearing in the second half of 2027.
Palace Revive, second half of 2027, and Henry Construction, hopefully in the first half of FY 2027. We do have certainty on collection. In terms of our capital allocation policy, most of our investment is organic growth. That's about new hires, technology, making sure we can grow sustainably on an organic basis. We've done small bolt-on M&A acquisitions, subject to our strict criteria that Geoff mentioned earlier on. We've also got our progressive ordinary dividend policy, where we pay three smaller interim dividends and a large final one. Recently, post year-end, we bought some shares and reseeded our employee benefit trust. We do have the facility to do that, which basically retains partners for the long term who are those key work winners. In terms of having any excess cash, we would have the ability to do a share buyback or return surplus to shareholders.
Back to Geoff for the market update.
Thank you, Gavin. In terms of acquisitions and investment, mentioned them briefly earlier, we had three sort of notes during the year. One Advisory Group, which was a team of three partners and 38 colleagues. That's part of our financial advisory offering, that's sort of broadened our position in terms of transactional services, additional support to clients in terms of the complexities of corporate governance and the financial reporting landscape. It enables us to increase our market share and offer new governance advisory services to clients. Arc & Co, which was two partners and 18 colleagues, that now sits firmly within our real estate advisory. That is a combination of expertise to deliver around integrated real estate offering, helping boards, lenders, and advisors in the sector. They're often working on complex mandates, generally around refinancing real estate assets.
That is enabling us to go to market with a more rounded and comprehensive real estate offering, having regard to the fact that across our wider business, we have for many years, particularly in restructuring, had multiple real estate-related transactions. It's about drawing that together, then through the real estate pillar, being able to better reference what we can do for clients from there. Then as a reference, we've taken a 25% non-controlling investment in Queen's Tower Advisory. That is a very much technology-enabled transaction support business, primarily from Big Four partners who are stepping out into a more entrepreneurial environment. It has been fascinating to see what they're able to do with technology in a very short period of time, having started from a sort of blank piece of paper, so to speak.
We see opportunities around how we collaborate, not least with private equity clients as they continue to go to market and develop their business. Obviously, cross-pillar activity remains key for us both in terms of, I guess, two key things. One is the cultural aspect, that we are not a business operating in silos where people only focus on their chosen specialism, we do see that as absolutely key to the overall success of FRP. Generally, we would also see that there are greater revenue and profitability opportunities where we are able to deploy more than one team in delivering client service. There are a number of examples here where we have had more than one service line delivering the client outcome from there. That is super key to that remains on a long-term basis.
As regards our operational efficiency, colleague growth, and utilization, you will see the chart here which covers the last few years. We have seen a slight dip in utilization over the year, notwithstanding the fact that we continued to progress in our overall results. We are very much focused on looking at where we are around our operating model, around our ongoing hiring strategy, things like looking at more regional capability and sharing of resource, and obviously also linking back into the position of what we do with technology. That's not something that we want to see. We want to see that go back up. We're very comfortable where it is, as I say, from a management perspective, super keen to make sure that that continues in the right direction, going back up.
On the market update as regards restructuring, we continue to have a very strong position in relation to the administration market. The numbers we've actually shown there are slightly suppressed because we haven't on the MFS case where we have had, it's a good couple of hundred of administration appointments in relation to that. We've not shown that as a total percentage because we think that over inflates where we are. We continue to see strong position in that administrations market with 14%. We're holding market share on liquidations at 5%, the combined position is, again, 6% for us as a whole. Yeah, we continue to do really well in the context of those markets in which we operate.
As regards our origination channels, as you know, as a business, we are always dependent on people referring opportunities to us, and therefore growing the referral network to drive recurring, repeatable origination opportunities is super important for us. That is a well spread position, so we have relationships in terms of government and regulatory bodies. Almost certainly to get onto any of those panels, there is a high degree of credibility and depth of skill set and infrastructure that we have to demonstrate. I mentioned earlier about the ability to replicate what FRP looks like from scratch would be a very difficult thing to achieve in many of our markets. Lenders, we continue to be on every major U.K. lending bank panel as regards restructuring and financial advisory. The legal community continues to be super important for us.
I have to say that that is a reciprocal world, so we are very important to many lawyers in the context of the opportunities we are able to deliver each and every year. The wider accountants network is again important across the business, particularly in our regional offices, then increasingly engaging with investors, including private equity, is important, and particularly on some of the higher value mandates that we win. In terms of an outlook, our medium term guide rails is to continue to deliver organic growth and focus on high single digit organic growth across our business. For that to be supported by selective criteria-led M&A. We are keen on doing so, we are equally very happy to turn away opportunities, we won't just undertake M&A for the sake of saying that in any given period we have acquired businesses.
It has to be the right opportunity to maintain a strong balance sheet and focus on our free cash flow conversion, to ensure that we continue with a disciplined capital allocation policy, as outlined by Gavin earlier. Hopefully all of that continues to add up to high adjusted EBITDA margins of 25% +, recognizing that as we now go forward, we will be absorbing the cost of those LTIPs having with the EBT that was previously seeded, having now been exhausted. In terms of our overall outlook, our strategy is built around steady and sustainable growth, both through organic initiatives and selective acquisition opportunities. As regards trading in the first few months of the current financial year remains positive and in line with the board's expectations, with good activity levels across all locations and several high-profile appointments, including the involvement in the MFS Group. Acquisitions.
Recently acquired businesses are performing and integrating in line with our expectations. The launch of the real estate advisory pillar represents upside potential for us. As regards the pipeline, the M&A pipeline remains healthy, and we are in active discussions at various stages on several opportunities. Lastly, culture remains super key to us, albeit Gavin and I will call out the wording under there talks about our balance sheet, which I'm not sure is entirely what we meant to say. Hopefully we can make the link between the fact that we have a strong culture that leads to a strong balance sheet. Might be a slight tenuous link, but we'll claim it in any event. Yes, that culture is super important for us.
Ladies and gentlemen, please do continue to submit your questions using the Q&A tab situated on the top right corner of your screen. While the company take a few moments to view those questions submitted today, I would like to remind you that a recording of this presentation, along with a copy of the slides and the published Q&A, can be accessed via investor dashboard. Gavin, at this point, if I may hand over to you to chair the Q&A, and I'll pick up from you at the end. Thank you.
Thank you very much indeed. Thank you very much for everyone's questions. There are a lot of really good questions here. The first one, I think I'll jointly answer with Geoff. I'll read it out and give my view. This first question, it says, "Acquisitions to date have slowed, and have historically always been of immaterial value to FRP's market cap. Is there benefit to FRP remaining listed if it's not to keep making acquisitions?" Related to that, there was a rather pointed question, "Why should shareholders hold FRP shares when there's little strategy to drive shareholder value?" My view on that, our acquisitions criteria, as Geoff mentioned in the presentation, is very strict. We've got a criteria of the cultural fit, the strategic fit, and the price. We will not buy anything at any price.
We do have an active pipeline at the moment. Equally, if you buy the wrong business, it can cause a lot of problems on the integration. We don't want to overpay. We want to bring people into FRP that will add value and contribute. Equally, in terms of the performance of FRP over the years, since it's been listed, I think it hasn't necessarily been reflected in the share price. We, like you, would also be disappointed that the progress of FRP has not been mirrored in the share price. Geoff, what would you add?
No, I concur with that. When we came to market, we did so deliberately as actually primarily an income stock with the ability to undertake selective M&A. Our view was, and remains, that certainly as regards professional services, people businesses, there are too many instances of buy and build strategies where management teams have felt compelled to buy as part of that strategy and have bought the wrong businesses, and that ultimately damages shareholder value rather than improve it. We are very comfortable in continuing with our selective approach. In terms of our overall growth, we consider it's important that it's balanced between M&A when it's the right opportunities, together with the ability to develop our own talent, and create the partners of the future, and the ability to have lateral hires.
We think if you were focused on any one of those to the exclusion of others, that's not in the right interest of the company and its shareholders.
The next question is for Jeremy. I'll read it out first. "Historically, FRP has had strong partner retention. Can management comment on whether the recent partner departures, in H1 2026, for example, reflect normal retirements, or does FRP expect to see greater partner churn going forward?"
No, I don't think we expect to see greater partner churn. I think it's predominantly retirements. We'd already hoped to be ahead of the game in terms of perhaps four that we can see at the end of the current year. We would accept that we had a couple of people leave us that probably we were pleased with. That was the outcome from one acquisition we did during the height of COVID, where perhaps we didn't quite get close enough to get the culture right. I think we would still say that we look to be the master of the destiny when we are looking at partners coming in and exiting the firm. We're still a good place to be, compared with quite a lot of the competition, and do not expect to see increased churn.
The next question I'll answer. The question reads, "Some years ago, I challenged whether FRP should go to the full main market. There was a bit of a debate at the time around inheritance tax and CGT advantages of AIM." That doesn't apply so much now, therefore Tom asks again. I was recently talking to some of our brokers about this very point, and I think while the barrier to going into the FTSE 250 tracker index has lowered, a few years ago it was approximately GBP 750 million, it's now GBP 500 million. I still think that our market cap isn't quite large enough to make that move in terms of moving across and getting onto the FTSE 250 trackers to lose those IHT investors. It's something that we closely follow, and I think for now, we're probably not large enough to move up into the main market.
We also mustn't forget there's quite a lot of internal costs in terms of one-off moving up and ongoing costs are greater in terms of audit fees, et cetera. To that point, is there anything else that you would add, Geoff?
No. Again, I know there's the discussion around tracker funds, we actually had the discussion with an investor, one of our investors earlier this week, and I think they were of the view that it would have about a 2% impact and therefore we'd just be at the bottom of a pile, not necessarily finding ourselves seeing significantly increased liquidity or therefore reflection in value. We certainly know we've seen a couple of instances of not dissimilar business to ours moving to the main market, and it hasn't delivered what they thought it would do. Of course, we will keep it under review as we do with everything, but at this moment in time, we don't think that would be the right thing for FRP.
The next question is for Jeremy, and it talks about our utilization rates decreasing over the past few years from 68% to 67%, and now to 65%. Is this a trend you expect to continue, or will you revert back to your previous mean, back to the high- 60%, Jeremy?
I don't think it's a trend we want to see. There's potentially some inconsistencies in the way comparing there. We do have, certainly as a corporate finance function, we are now making sure that people do time sheets, whereas some of the acquired businesses, that was not their modus. You can't say that's a completely like- for- like calculation. The utilization in terms of revenues, it's utilization times recovery to give you your revenues. We are conscious some of the ways we're trying to bring in AI is to make sure that we're being more focused on the number of people we've got and certainly starting to challenge us to if we do have any employee churn, do we go like- for- like, or we go for slightly lower grades and bringing them in?
Focus on getting the pyramid the right shape to make sure utilization is high- 60%. When we get very busy, it might sneak into the 70%, but we're not far off where we would want to be.
The next question I think I will answer, and then I'll pass over to Geoff as well. What has the GBP 3 million investment in Queen's Tower Advisory proved so far? Just a brief recap, we mentioned earlier on Queen's Tower provide financial due diligence services to private equity clients. It is a startup, so it started from a blank sheet of paper. How they have used AI and tech in terms of doing things very efficiently has been incredibly impressive, actually. We've learned a lot in terms of our financial due diligence team, in terms of how we've looked at what they do. We've been very impressed with how they've recruited partners, how they've won mandates, how they've delivered stuff. From our perspective, I think it's going very well. Geoff, what would you add on the QT investment?
No, as you say, it's been interesting to see the business develop from that blank sheet of paper. Obviously, for us, there's also the angle in the sense of they're generally working with larger private equity companies and the ability for us to be cross-sold into that as regards where we are. Far in line and, as you say, it's a very helpful thing in terms of us being able to also further reference the use of technology in terms of how that business is being developed.
The next two questions are for Jeremy and I. I'll read out the two questions. I'll give part of an answer, then pass over to Jeremy. What is your percentage churn rate for staff? I can give you that statistic. This year it was 11% voluntary attrition, the previous year 10%. We understand the market norm for professional services is around about 15%. We would say we've got good retention. Above and beyond that, we do see more movement in the junior colleagues, particularly in certain support areas, location support. We've got very strong retention in terms of our partner headcount and our key work with us. The other question was, do you utilize flexible labor, i.e., freelance consultants, to allow flex in your workforce of people that are not directly on your books? For Jeremy.
Just on your earlier point on the churn, some of the businesses that we have acquired that are not so much time related, but potentially slightly more sales related, direct to client, you are inevitably going to get a higher churn within that population. It's a slightly different type of staffing. Gavin, sorry on the second bit, just ask me again on the second bit.
It talks about would we bring in external consultants to flex that are not on our payroll if we had the need to.
We have the ability and always have had the ability for staff to work a lot more than the hours they do. Our engine room, the people that are regularly busy are always working within the 85%-90% utilization to 110%-115% utilization. You would be looking to actually get your utilization up. In terms of an external workforce, I think difficult to hold together, difficult to make sure that they were the right people, and you could regulate the activity in the right way. I think in our domain, that is not where you would look for your additional resource. Geoff, what would you say on that?
I know that flexible thing applies in certain instances in the law where people are contracting. From my knowledge across our core restructuring and indeed corporate finance space, I don't see that flexible consultant model being a prevalent or even a regularly used position. Interestingly, obviously, one of our service offerings is our transitions business where we actually support clients on providing short-term support from a panel of individuals and people of their, it's not beyond the realms of possibility that we could access that.
That question actually takes me back to COVID when in the very early days, everyone thought the economy was going to properly shut, and we had multiple of our accountancy clients saying, "We assume that the economy's going to crash. You guys are going to be beyond busy as restructuring specialists. Please will you take some of our team who are going to be super quiet and just pay them their wage cost? We don't want any margin. We just want to see." Obviously, that never came to fruition. Yeah, I don't see that operating model. As I said earlier, our job is always to keep open-minded about what's happening, and if there is something that we should be doing because that's the direction of travel, then of course we'd be looking at that.
I have a question that I'll answer. What is preventing revenue growth from converting into EBITDA growth? I do accept that in 2026 and 2025 there was a disconnect. However, it is worth reminding that in 2024, our revenue grew by 23% and profits grew by 37%. I think it is a very fair challenge. We're always looking to keep in a fair balance, compensation for colleagues and partners, investments in the business, and returns to shareholders, and I do think we have to do more in terms of our operational efficiency. That's one of the reasons why we hired an operations director. That's one of the reasons why we hired AI consultants to help us review our operating model because we think we can do more in terms of how we process work more efficiently in terms of that dropdown should be far stronger.
Geoff, is there anything that you would add on that?
No, I think that all makes sense, Gavin.
We have another question here. What is the sustainable level of organic growth after allowing for recruitment and acquisitions? I think in our deck earlier on, we mentioned we're striving towards high single-digit organic growth at least. That will be predicated on bringing in some more work winners, people with new specialties. We're also doing a lot in terms of our marketing, our business development campaigns, and it's really about the quality of the service we do and staying close to our referral network. I have another question here, one for Jeremy, potentially. What returns must acquisitions achieve before further debt capacity is used? I think it's worth mentioning here that we have a net cash position, so we don't have any drawn debt. Jeremy, from your perspective-
Sorry, what returns before?
Further debt capacity is used.
You're clearly going to want to make sure that when we pay a multiple, that we are going to get an extended life that far exceeds the multiple. First off, you're working on bedding the business down, trying to expand the capabilities and work through to get a significant return. In terms of actually putting numbers on it, Gavin, I think that's more you than me.
I think the correct answer is we've not used debt in the normal sense, generally for acquiring businesses. I think the returns we are seeking are not linked to our debt capacity. We are looking at businesses as to whether we think they will deliver the relevant margin.
Yeah.
The majority of deals that we've done to date, we are able to just use our existing cash resources. There's a sort of slightly wider piece here in the sense that for larger acquisitions, we would most likely find ourselves competing with private equity, the reality of life in the current environment is that the multiples that we are able / willing to pay will not meet those of private equity. The chances of us wanting to have a significant drawdown of debt for the purposes of an acquisition to acquire something of notable size, I think is relatively limited at this moment in time.
Just when you look at those private equity investments and how well they stand the test of time, from just going back to that organic growth point, I think we can see the scope for increased levels of quality lateral hire, which would all be considered to be organic. It's a bit of twin edged.
The only other thing I would add is when we do an acquisition, we must stress the importance of the cultural fit, the ability for those colleagues to come in and collaborate with other colleagues. We do not want to run a silo that isn't integrated with the rest of the business. One, we want an economic return, but we also want them to collaborate such that one on one is greater than two once they're part of FRP. The next question I have is one for Geoff. On M&A, is there a sweet spot in terms of the size of acquisition? Also, do you see construction or built environment as an area you plan to go into?
I've partially answered the question on sweet spot. At the moment, the deals we've undertaken, we would refer to as bolt-ons. In part, that is driven by the fact that, as I say, the multiple that we're able to pay somewhat precludes us from saying that looking at something much larger because we're just against a very different party in terms of valuations. I think our sweet spot will remain as we are at the present time. As Jeremy says, we shall see what the PE model throws out in due course as we go through the second iterations of sponsor-owned professional services businesses. We're somewhat still in the first iteration at the moment.
In the construction/built environment, interestingly, we did look at a business a while back that was involved in construction disputes and actually had quite a lot of crossover with our forensic team and financial advisory. In terms of what they did, looked very sensible. Unfortunately, the margins that they were making were so low that it didn't look sensible. We spent quite a lot of time working out if we could do stuff to bring them into a margin range that we could ultimately explain to you as our investors as to why we would make that acquisition. We couldn't get there. We politely declined.
It's not an absolute target area. Again, as with all these things, if there is a sensible business for us to look at that has sufficient connectivity to what we do already and ultimately would enhance the prospect of what we can do for our clients, there's no reason as to why we wouldn't go into something of that nature. It's not a specific target for us to achieve that.
The next question I have, maybe one for Geoff. Could you please explain the barriers to entry in the mid-market?
If we take that in the context of a restructuring business, for the mid-market, obviously firstly, we are regulated in what we do, and that requires therefore infrastructure in relation to both your operating systems, but particularly if you define mid-market as wanting to go into having institutional relationships with parties such as clearing banks or government agencies, that the barriers there fundamentally are critical mass. Equally, things such as very strong IT systems, the ability to be audited about what you're doing and everything else from there. I always use the example is that even if I said I wanted to depart from FRP because I've got some great clients and why don't I go off and set up on my own?
That would be a very short-lived experience because most of the clients I work with would say, "It doesn't matter how much we like you don't meet the requirements in terms of what we need to see from a provider" for that to be something that they would work with you. To answer it in a slightly different way, I don't think a mid-market player has set up on their own properly in a number of years. You've got Quantuma, which has now been subsumed into KR8. Quantuma came into place six, seven years ago. Effectively that was a fallout from Tenon, it wasn't a genuine, let's go and create something entirely new. It's not a world where you see regular new entrants in the context of operating in the mid-market.
I'll deal with one final question, and then I'll hand over to some final comments from Geoff before we close. The final question. You've previously highlighted that there's been a weighting towards the second half for profits. However, this has not necessarily happened in the last two years. Is this a structural change or anything to call out? You're quite right. I think when you look at FRP historically, there has been a slight weighting in profit towards the second half, and also there's been a trend of slightly net WIP build in the first half and stronger cash collections in the second half. I think a little bit of this can be explained by you might have slightly more work days in the second half. Sometimes you start to get more decisions made after Christmas into the new year, budgets being done, et cetera.
There are some tax deadlines that come up in January that trigger some activity. I guess I don't think there's anything structurally massive that's changed in the U.K. We would've just had some timing on where certain large jobs would've done. For example, The Body Shop contribution and the weighting early on in that project did sway quite a lot in the previous year. I don't think there's any big structural changes to call out there. However, it is something that we are cognizant of and we'll continue to monitor how that mix between the first half and the second half plays out in future. If I could hand back to Geoff now. Thank you very much for all the questions. If I could hand back to Geoff for some closing comments.
Obviously, just to say that a lot of hard work, but we continue to be pleased with the progress that we've made year -on- year. We remain positive about what the opportunities are to continue to progress and grow the business. Of course, we remain grateful for our ongoing shareholder support. Hopefully more positivity to come as we go through each year. Thank you.
Fantastic. Geoff, Gavin, Jeremy, thank you very much indeed for updating investors today. Could I please ask investors not to close this session as you'll now be automatically redirected to provide your feedback which will help the company better understand your views and expectations. On behalf of the management team, we would like to thank you for attending today's presentation, and good morning to you all.