Fairpoint
SPECULATIVE BUYDebt management, IVA and refinancing specialist Fairpoint is bullish after turning a £501,000 annual loss into a £1.1m pre-tax profit.
The Lancashire-based company, formerly Debt Free Direct and steered since May by chief executive officer and ex-Direct Line luminary Chris Moat, recovered from a poor first half-year and achieved revenues of £26.5m. AIM-quoted Fairpoint cut marketing costs to from 36% to 28% of revenue, sorted out integration issues with a key acquisition, adapted to new industry IVA fee curbs by reducing IVA costs by 18% and raised the contribution of debt management to £1m.
Moat says the company is overcoming finance groups’ resistance to IVAs and restored conversions from debt advice to more lucrative IVAs to 28% in the last quarter of the year. He insists refinancing sub-prime mortgages was previously an insignificant part of Fairpoint’s activities and has now been virtually ‘mothballed’.
Last year, the company reduced borrowings from £10.9m to £8.9m and has since cut that to £7.8m. Financial difficulties among poorer sections of the community are Fairpoint’s bread and butter and, according to Moat, the company can adjust relatively painlessly to clients’ being unemployed for six months or so, though long-term joblessness would present problems.
Fairpoint shares collapsed from 581p in 2006 to 22.25p last June, reflecting problems under previous management. They have rallied to 51.5p, but there should be scope for further improvement longer term, if Moat’s strategy continues to pay off.
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Market cap: £22m
PE Forecast: 5.8
Share price: 51.5p
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