Relax

Recent developments have clouded short- to near-term prospects at debt management specialist Relax Group.

The AIM-quoted company, whose chief executive Paul Carter left last month after what analysts believe to have been irreconcilable differences over financial tactics, says it expects interim results to June will be ‘significantly lower’ than for the five month period to December. Then, Chesterfield-based Relax increased pre-tax profits from £14,000 to £668,000 on turnover up 21% cent to £6.5m, but a new trading update from Chairman Bernard Asher and Carter’s replacement Ken Gaskell says the position has worsened since.

The duo warns a review by Relax’s new senior management team shows the deterioration in the company’s performance has had ‘a consequential impact on the group’s working capital position’. Relax’s banking facilities are now being ‘monitored closely’.

The company says the review has identified ‘significant cost savings’, which directors expect will have a positive impact in the 2010 financial year. However, until the picture becomes clearer, the shares are likely to remain out of favour.

They reached 88.5p at one point over the past 12 months and were highlighted by Growth Company Investor last year at 24.5p. Now they have fallen to 17.5p, down 9.25p this morning, it makes sense to cut your losses and consider taking a fresh look if and when current issues are resolved.