2 September 2010

Relax Group

HOLD

27/11/2008 Robert Tyerman

Prospects have improved for restructured debt management specialist Relax Group after a 17 per cent annual pre-tax profits fall to £2.78 million.

AIM-quoted Relax, formerly Debts.co.uk, increased revenue nearly 20 per cent to £13.8 million in the year to July. However, the company, which has been adding debt and arrears book management to individual voluntary arrangements (IVAs) in its business mix, also had to bear exceptional costs of £2.8 million involved in acquisitions and rationalisation and, after these and other exceptional items, showed pre-tax profits down from £3.4 million to a mere £14,000.

Acquisitions, chiefly Relax Finance and PB Recovery, had a strong impact on the second-half performance of Chesterfield-based Relax, which ended its financial year with cash reduced from £1.2 million to £886,000. With rationalisation benefits also showing through and demand for debt management plans, IVAs and other instruments on the rise, chief executive Paul Carter says 2009 ‘should exceed market expectations’ in a sector that is gaining from the economic recession. Analysts expect pre-tax profits up 50 per cent to £4.2 million in the year to next July.

Past travails in the IVA market (now mostly resolved) and internal issues knocked the shares of Debts.co.uk/Relax all the way from 219.5p in 2006 to 18p earlier this month. Recommended by Growth Company Investor at 24.5p in August and now trading at 23.5p, the shares are worth holding.

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Sector: General Financial

Companies: Relax (suspended on 6 October, 2009)

Market cap: £7.2m

PE Forecast: 1.7

Share price: 23.5p

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