Frp Advisory Group Regulatory News (FRP)

17 Jan 2008 07:01

Fairpoint Group PLC17 January 2008 17 January 2008 FAIRPOINT GROUP PLC TRADING UPDATE Fairpoint Group plc ("Fairpoint" or "the group"), a leading provider of adviceand solutions to financially stressed consumers, today releases a trading updateahead of its preliminary results announcement, which will be made on 26 February2008. In overview • Fairpoint's lead volumes and lead acquisition costs both improved significantly in the final quarter of 2007. As a result, the group's market share of IVAs reached 28% in the final quarter of 2007. • Lead volumes have increased significantly in January (as expected) and are being delivered at substantially lower costs than the same period last year, in line with our October experience. • The business continues to progress with operational improvements and further cost reductions have been achieved. • The macro economic climate continues to be favourable to the group and the impact of the credit crunch is expected to lead to an increase in the number of financially stressed consumers who will need our assistance. Mortgage and credit card rates remain high and some 700,000 consumers are due to come out of fixed rate deals over the next 6 months and will face sharply increased mortgage costs. For over-indebted consumers, static or falling house prices will reduce the ability to pay off unsecured debt periodically by releasing equity from their houses. • A recent KPMG report forecast 130,000 borrowers entering into IVAs or bankruptcies in 2008, a rise of 19% over last year. We also expect 2008 to be a record year for the numbers seeking debt advice from the group. • The Board is confident in its outlook for the financial year 2008 Trading performance • Fairpoint's lead volumes and lead acquisition costs both improved significantly in the final quarter of 2007. January has started positively with lead volumes increasing as expected and cost per lead in line with expectations. • Contribution per lead was supported by strong conversion rates particularly within the IVA business, although the positive volume benefits were offset by lower fee levels. Lower agreed IVA fee levels are now coming through and there is some evidence of lower realisations, which may be the flip side of the higher volumes and consumer pressure currently being felt. • Whilst our mortgage and loan business has been impacted by the credit crunch which slowed trading in November and December, the business remains strongly profitable and is expected to grow with our lead volumes. • We continue to exercise strong cost control, with monthly overheads falling and the integration of Clear Start remaining on track to complete in quarter two, delivering anticipated synergies of £2 million in 2008. • Our strategic review is now complete and in addition to the cost savings previously announced the group has decided to cease all new business activity in Debt Free Direct Australia and dispose of the residual back book. The decision maximises shareholder value sooner rather than later, given higher returns on investment available in the UK. Whilst the Australian business was making good progress it would have remained cash negative throughout 2008 and would not have generated significant profit for several years. The disposal is expected to lead to an impairment charge of £500,000 in the results to 31st December 2007. Funding • The group has secured a five year revolving credit facility from its bankers, the Royal Bank of Scotland. The facility of £16 million will be used to replace existing funding and provide additional funds to enable the group to pursue opportunities that may arise in a rapidly changing market. There will be an analyst presentation to discuss the preliminary results at9.30am on 26th February 2008 at Financial Dynamics, Holborn Gate, 26 SouthamptonBuildings, London WC2A 1PB. Those analysts wishing to attend are asked tocontact Yasmeen Amorese at Financial Dynamics on +44 20 7269 7148 or atyasmeen.amorese@fd.com. Enquiries: Fairpoint Group plc Andrew Redmond, Chief Executive Officer 0845 296 0100Andrew Heath, Finance Director Designate 0845 296 0200 Numis SecuritiesChris Wilkinson 020 7260 1000Lee Aston Financial DynamicsEd Gascoigne-Pees 020 7269 7132Nick Henderson 020 7269 7114 Notes At Fairpoint we develop and operate consumer financial services businesses. We select markets or opportunities which show certain characteristics: • Growing and sustainable consumer demand. • Caused by deep-rooted market, regulatory or economic factors. • Where innovation and effective channel execution can give sustainable differentiation. As such our customers tend to be going through a period of life to which themass financial services market is unable to provide a solution. We make it our business to understand our customers in depth, to help themthrough their short term circumstances, and to continue that relationship, ifthey so choose, into the future. The solutions offered range from basic advice,such as simply destroying credit cards and curbing unnecessary expenditure, tothe following solutions: • consolidation loan • re-mortgage • informal arrangement • individual voluntary arrangement (IVA) • bankruptcy Fairpoint always seeks (unlike many of its competitors who sell specificproducts) to systematically and impartially deliver the best advice to theconsumer and recommend them the most appropriate solution. Over the last few years we have been very much focused on the over-indebtedmarket in the UK. Debt Free Direct has pioneered the debt advice and solutionsindustry and is a clear leader in the provision of IVAs, while Clear Start'simpartial approach has appealed to a new segment of consumers, and has helped totake the relationships with the banks into a new era. Our main objectives are to: • introduce to our existing customer base a further range of 'most wanted' financial products and solutions; • continue to increase our market share, in particular as the market goes through a phase of consolidation; • address the new growth market of cases where customers are over-extended on debt that is secured against their property. In the meantime we will continue to explore opportunities in markets that fitour investment criteria. Fairpoint is based in Chorley, Lancashire, and was admitted to AIM in December2002. This information is provided by RNS The company news service from the London Stock Exchange