Frp Advisory Group Regulatory News (FRP)

13 January 2011

Fairpoint Group plc

Trading Update

Fairpoint Group plc ("Fairpoint" or "the Group"), the leading provider of advice and solutions to financially stressed consumers, today releases a trading update ahead of its preliminary results announcement, which will be made on 15 March 2011.

Financial performance in line with expectations and outlook

Financial performance has been in line with expectations, with profits from continuing activities ahead of the corresponding period in 2009. The number of financially distressed consumers is expected to grow in 2011 as public sector cost savings are realised and this positions the Group well for further growth in 2011.

Strong growth in customer numbers and a broader business

The Group's strategic priority continues to be to create a broader business serving the wider needs of financially distressed consumers and an update on these priorities will be given with the preliminary results. The Group has continued to make good progress in this regard.

·; Fairpoint now has 35,300 (31 December 2009: 26,342) customers in long term debt solutions, and the Group has built a compelling proposition across the full range of debt solution products and services.

·; In particular our debt management business has grown rapidly, supported by the successful integration of third party case portfolios, with four transactions completed during 2010. Fairpoint now has over 12,750 customers on debt management plans (31 December 2009: 5,539).

·; Our roll out of value added services has proven popular with customers, providing over 25,000 solutions in 2010 (Year to 31 December 2009: 4,706) and we have returned our Financial Services business segment to profitability.

·; Profits have grown in our debt solutions business through continued disciplined marketing investment and operating efficiency in a relatively quiet market place.

·; Operating cash flow remains healthy and has allowed the Group to invest over £3.0million on acquisitions and £1.5million on returns to shareholders during the year whilst maintaining borrowings to prudent levels of £5.0million (FY2009: £4.5million).

·; The Moneyextra business acquired in July 2010 has now been successfully integrated and is on track, adding to our financial service revenues in 2011.

·; Exceptional and discontinued activity costs to deliver the integration of Moneyextra have been £0.3m higher than anticipated. As a result the earnout provisions of the deal have been renegotiated and the provisions for these, at year end, will have reduced as the vendor earnout percentage falls from 49% to a range between 0 and 20%. The earnout is now only exercisable at the end of 2013 and is expected to be around £1.2million.

Opportunities from a changing market place

The market place for debt solutions has been characterised by: 

·; A consolidating debt management sector - a combination of increased regulatory hurdles and increased competitive intensity has resulted in the anticipated commencement of consolidation in the debt management sector. Fairpoint, as a significant debt solutions provider but with a relatively small DMP market share, has been a beneficiary of this throughout 2010 and expects opportunities to grow through 2011.

·; A brief period of respite for UK consumers - throughout the second half of 2010 macro economic conditions were relatively benign for consumers with negligible growth in unemployment levels and a stable interest rate environment. We expect this to reverse in 2011 as the effects of the Comprehensive Spending Review and a VAT increase flow through to the market place. Early indications of this were seen in November with unemployment rates increasing for the first time in eight months. This will be a catalyst for a resumption in growth for debt solutions.

·; A more budget conscious consumer - we have seen a strong and growing demand by consumers who seek our cost saving solutions to make their money go further. This applies to both consumers seeking debt solutions as seen in consumer appetite for our "Switching services" and to consumers at large where interest in, for example, vouchering services is growing strongly.

Chris Moat, CEO of Fairpoint, commented:

"2010 has been a successful year for Fairpoint with growth in customer numbers, solutions offered and profitability. Our expectations are for a strong and growing market in 2011, which I am confident we are well placed to benefit from."

Preliminary results

There will be an analyst presentation to discuss the preliminary results at 9.30am on 15 March 2011 at Financial Dynamics, Holborn Gate, 26 Southampton Buildings, London WC2A 1PB.

Those analysts wishing to attend are asked to contact Justine Cording at Financial Dynamics on +44 (0) 20 7269 7265 or at justine.cording@fd.com.

Enquiries:

Fairpoint Group plc

Chris Moat, Chief Executive Officer 0845 296 0100

Andy Heath, Finance Director 0845 296 0200

Shore Capital (Nomad and Joint Broker)

Pascal Keane 020 7408 4090

Edward Mansfield

Oriel Securities (Joint Broker)

Tom Durie 020 7710 7600

Emma Griffin

Financial Dynamics

Nick Henderson 020 7269 7114

Laura Pope 020 7269 7243