Frp Advisory Group Regulatory News (FRP)

1 Nov 2005 07:00

Debt Free Direct Group PLC01 November 2005 1 November 2005 DEBT FREE DIRECT GROUP PLC TRADING UPDATE NEW IVA CASE RUN-RATE TREBLES YEAR ON YEAR Debt Free Direct Group (DFD), the leading debt advice and solutions company,today releases a trading update ahead of its interim results announcement, whichwill be made during the week commencing 28 November 2005. Highlights • 106% increase in turnover, compared to prior period• Year on year market in new IVAs doubles.• Year on year DFD's annualized new IVA case run-rate trebles.• Advertising cost per IVA fell by 30 per cent in the 6 months to 31 October 2005.• Anticipated profits for the full year comfortably in line with market expectations. Andrew Redmond, Chief Executive Officer, commented: "We are delighted to have significantly grown our market share in this rapidlyexpanding market and anticipate that the gap between us and the competition willwiden further in the months ahead. We are well positioned to grow faster thanother IVA providers as a result of our long term investment in people andreadily scalable systems. The current weakness of the unsecured debt market will be exacerbated byimpending economic triggers, such as the weak housing market and the prospect ofinterest rate rises as inflation continues to creep upwards. For increasingnumbers of consumers the "party is over" and the "debt hangover" has arrived. The IVA market grew by 41 per cent in 2004 and it is abundantly clear that newIVA growth in 2005 will eclipse that rate." Turnover and labour resources Turnover in the first half of the financial year grew by 106 per cent, comparedto the same period last year. Average monthly Employee turnover numbers £K (period end) - 6 months to 31 October 2003 309 57- 6 months to 30 April 2004 392 88- 6 months to 31 October 2004 515 117- 6 months to 30 April 2005 888 153- 6 months to 31 October 2005 1059 165 Employee numbers grew by 41 per cent during the same period. This reflects theinvestment in resources made, particularly in the second half of the financialyear ended April 2005. This is demonstrated by only 8 per cent growth inemployee numbers in the six months to October 2005. New IVA case run-rate Debt Free Direct's run-rate trends have continued to increase in the first halfof the financial year, as shown below: New IVAs monthly case run-rate Joint cases = 1 Joint cases = 2 - 6 months to 31 October 2003 72 96- 6 months to 30 April 2004 95 130- 6 months to 31 October 2004 110 147- 6 months to 30 April 2005 208 285- 6 months to 31 October 2005 266 365 Moreover, in the quarter ended October, the total new IVA run-rate was 346 / 475per month, which is ahead of market expectations. Consequently, the annualised new IVA run-rate has increased to 4152 / 5700 from3036 / 4212 in April 2005 and 1320 / 1764 in October 2004. Overall, the annualised new IVA case run-rate has more than trebled in the 12months to 31 October 2005. This compares with a doubling in the IVA marketsince December 2004. Clearly, Debt Free Direct continues to outperform thegrowth in the market as a whole. Further to our trading update, released on 3 October 2005, the above figuresinclude outsourced cases. At present, Debt Free Direct receives a fee for workcarried out prior to referral, whilst the case itself is registered in the nameof the IVA provider's Insolvency Practitioners. Market update The total number of IVAs registered in the UK market continues to grow apace.Commentators are now predicting that by September 2005 the annualised new IVArun-rate will have more than doubled when compared with 2004. As previously announced, these predictions do not surprise us, given (a) increased awareness of the IVA brought about by the advertising of DFD and others; (b) signals from the market in the United States (US). The proportion of individuals entering into the US equivalent of the IVA is now approximately 4 times greater than the proportionate number per capita of people entering into IVAs in the UK. These signals are supported by research recently published by Capital Economics.They conclude that households are "bowing under the pressure of their £1trillion debt mountain" and that a significant potential problem lies withunsecured debt arrears and anticipate a resultant doubling of bankruptcies by2008. Advertising cost per new IVA Further to our trading update of 3 October, we continue to benefit from mediabuying deals secured over the past year, which have allowed us to increase ouradvertising spend, whilst maintaining our margins. In the six months to 31 October 2005 our advertising cost per new IVA reducedfrom £1,252 in the year ended 30 April 2005 to £877, a reduction of 30 per cent. The above includes the impact of the outsourced cases but excludes the impact ofcounting joint cases as two. On that basis, the respective costs would be £922for the year ended 30 April 2005 and £638 for the six months to October 2005. Current trading and prospects The impact of the investment in resources made in the second half of thefinancial year ended April 2005, combined with the tangible benefits inadvertising costs per new IVA, are now being seen. Meanwhile, our new IVA case run-rates continue to grow as the market sizeincreases We are very confident, as a result, that the above will translate into profitscomfortably in line with expectations for the full year. We look forward toproviding more detail at the time of our interim results announcement. Enquiries: Debt Free Direct Group plcAndrew Redmond, Chief Executive Officer 01257 240599Paul Latham, Finance Director 01257 240529 Teather & Greenwood 020 7426 9000Mark DickensonJon Drage Financial Dynamics 020 7831 3113Ed Gascoigne-PeesDominick Peasley Note to Editors Debt Free Direct helps individuals find the best solution to their debtproblems, based upon an analysis of their particular financial circumstances.Financial information on an individual is processed through a computer model(The Best Advice Model) developed by Debt Free Direct in order to recommend asolution suitable for that individual's particular financial circumstances. Thesolutions offered range from basis advice, such as simply destroying creditcards and curbing unnecessary expenditure, to the following solutions: • consolidation loan• re-mortgage• informal arrangement• individual voluntary arrangement (IVA)• bankruptcy Debt Free Direct is unique in the marketplace in that, unlike most of itscompetitors who sell specific products, Debt Free Direct looks to provide thebest advice to the consumer and recommends them the most appropriate service. Debt Free Direct is based in Chorley, Lancashire, and was admitted to AIM inDecember 2002. This information is provided by RNS The company news service from the London Stock Exchange