Between 2002 and 2004, personal bankruptcies burgeoned by 48 per cent and growth in the IVA (Individual Voluntary Arrangement) market was a stellar 71 per cent.

What’s more, according to DTI statistics, the trend continued last year with bankruptcies rising 30 per cent and the IVA market fattening by 82 per cent. With consumer debt standing at £1.13 trillion, and unsecured debt forecast to swell to over £200 billion this year, the investment case for quoted debt advice players is compelling, a fact not lost on the market.

Riding high on consumer indulgence

Debt Free Direct has seen its shares race from 150p at the start of 2005 to 378p and Andrew Redmond, chief executive, recently cheered followers with news that annual profits to April will come in at the top end of analysts’ numbers.

Brought to AIM at 65p last year by Charles Stanley, Debtmatters (see article opposite) has had an equally terrific run. Again, full year profits are set to smash forecasts, with the predicted £2.1 million pre-tax figure expected to yield earnings per share of 5.9p. That should rocket 125 per cent higher to 13.3p the following year.

The forward p/e ratios of both firms are very racy, but so are their growth rates. Both still look good for your money.

Accuma sitting pretty

IVA outfit Accuma came to the market at 82p in March 2005 and has just raised £12 million at 200p. Like the two ventures just mentioned, its full year figures to July are set to comfortably beat City estimates. ‘Clean’ pre-tax profits of £1.99 million, ahead of £4.2 million from sales of £13.7 million the following year, should produce 2007 earnings of 13.2p. At first glance, the 274.5p shares look fully valued on a forward multiple of 20.8, but closer examination reveals earnings are forecast to grow 71.2 per cent between July ‘06 and ‘07, and the modest PEG (price to earnings growth ratio) of 0.3 further justifies my confidence.

Invocas poised to strike

If you feel you’ve missed out on all of the above, keep your eyes peeled for the Charles Stanley-advised Invocas. It provides personal and corporate debt solutions in Scotland and according to finance man Stephen Lightley, ‘we’re in the second week of marketing the float and it’s going well. We are looking to raise at least £5.5 million of new money, for a market capitalisation of £30 million.’

Invocas offers punters a different angle, since it does not administer IVAs. Instead it manages a portfolio of personal and corporate insolvency cases, and has a 15.6 per cent share of the market for Protected Trust Deeds north of the border.

A Protected Trust Deed is similar to an IVA, providing a legal framework for indebted Scots to make part repayments of debts over three years with protection from creditors. Roughly 80 per cent of Invocas’ turnover comes from Trust Deed work, with the rest arising from administrations, receiverships, and ‘sequestrations’, the Scottish moniker for bankruptcy.

Invocas is enjoying fantastic growth – pre-tax profits powered ahead 250 per cent to £1.98 million in the year to March ’05 – and prospects are exciting with the average Scottish person’s debt thought to be 31 per cent higher than the UK average.

Says Lightley – ‘the situation in Scotland is as bad, if not worse, than the UK. Scotland has a greater number of house repossessions than the UK, credit card debt is greater, and the citizens advice bureau is seeing an increase in the number of people through their doors.’

Invocas occupies a terrific spot in a market still only in its formative stages, and Protected Trust Deeds and sequestrations can only be carried out by licensed insolvency practitioners living in Scotland, shutting out rival players from south of the border.