Fairpoint

Debt management and finance specialist Fairpoint Group plans new products and acquisitions after lifting annual pre-tax profits 420% to £5.7m.

The Lancashire-based company, which is continuing a turnaround in its fortunes under chief executive officer Chris Moat, increased revenues 9.5% to £13.5m in 2009 and reduced the cost of sales 7.2% to £15.4m. Marketing costs fell from 28% to 20% of revenue and direct costs for each new individual voluntary arrangement (IVA) fell 13% to £647.

AIM-quoted Fairpoint upped finance income by 16% to £4.4m, while finance costs more than halved to £379,000 and profitability benefited from the absence of 2008’s £1.3m of restructuring costs. The company, which cut net borrowings by £2m to £4.5m and is reinstating dividend payments, grew debt management revenue 35% to £3.1m and profits from that source rose two-and-a-half times to £1m, as marketing disciplines improved, turning a higher percentage of inquiries into deals.

Moat reports a good reception for Fairpoint’s pilot ‘value added products’. These include steering cash-strapped clients into cheaper ways of paying for such items as utilities, insurance and mobile phones, a high-volume, low-margin business where the company makes money through commissions from the providers to which it urges clients to switch.

In Moat’s view, unemployment, a generator of much of Fairpoint’s business, is unlikely to fall significantly any time soon, while economic recovery will put upward pressure on interest rates and increase business from people with debt repayment problems. City analysts see a near-30% profits increase this year to £7.4m pre-tax.

Highlighted by Growth Company Investor a year ago at 51.5p, the shares have now reached 76p. There is scope for further progress.