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Company Fairpoint Group PLC
TIDM FRP
Headline

Half Yearly Report

Released 07:00 27-Sep-2012
Number 2719N07

RNS Number : 2719N
Fairpoint Group PLC
27 September 2012
 



Fairpoint Group plc

 

Half year results for the six months ended 30 June 2012

 

Fairpoint Group plc ("Fairpoint" or "the Group"), the leading provider of advice and solutions to financially stressed consumers, today announces its half year results for the six months ended 30 June 2012.

 

Highlights

 

Half year results are in line with management expectations.

 

·      Profits for the seasonally weaker first half have improved markedly from the first half of 2011

Adjusted profit before tax* of £3.0m (2011: £0.0m)

Adjusted basic earnings per share** of 5.26p (2011: 0.04p)

Statutory profit before tax was £2.1m (2011: loss of £2.1m) 

·      Strong revenue growth

Increase in revenue of 19% to £14.1m (2011: £11.8m), driven by a £2.0m increase in financial services revenues, largely from our claims management services

Debt management revenues grew by 11% to £2.8m (2011: £2.5m)

IVA revenues stabilised at £8.7m (2011: £8.7m)

·      Product diversification continues

Revenues from Diversified Activities, comprising our Debt Management and Financial Services Segments, rose to 38% of total revenue (2011: 26%)

Acquisition, out of cash flows, of a debt management book adding 915 DMP cases

59% of adjusted pre-tax profit* was from Diversified Activities

·      Strong cash generation

Net cash generated from operating activities of £6.5m (2011: £0.5m)

Net borrowings*** of £2.0m (30 June 2011: £7.6m)

Positive impact of recent VAT refund on exceptional fee income and net borrowings yet to be recognised in the Group`s results and anticipated to be broadly complete by the end of 2012

·      Progressive dividend policy

Increase in interim dividend declared of 11% to 1.95p (2011: 1.75p)

·      Continuing to strengthen and invest in our platform for future growth

New £13m facility secured against the Group's book of IVAs and DMPs

Strong cost control contributed to restoration of IVA profitability

Controlled upscaling of lending proposition (Loanextra)

Launch of new claims management proposition (Writefully Yours) since the half year-end

 

* Profit before tax of £2.1m (2011: loss of £2.1m) plus amortisation of acquired intangible assets of £0.7m (2011: £0.4m) plus exceptional items of £0.2m (2011: £1.7m)

** Adjusted for the net of tax effect of amortisation of acquired intangible assets and exceptional items

*** Net borrowings is bank borrowings and finance lease liabilities less cash

 

Chris Moat, chief executive officer, said:

 

"Fairpoint has reported a strong financial and operating performance in the first half of 2012, following a much improved second half of 2011. The Group has diversified its income streams and grown its revenues in subdued market conditions. Early progress in the development of claims management services has been strong, and additional products are under development to ensure continuing momentum in this area.

 

 "Strong cash generation has continued and since the end of the first half of 2011 we have reduced net borrowings by £5.6 million as well as returning £1.9 million to shareholders in the form of dividends. Our new enlarged banking facility provides a sound platform for further progress.

 

"In the second half of 2012 we expect to continue the momentum seen in the first half, benefitting from the normal seasonality of the business, a good stock of work in our back books, the benefit of acquisitions made in this and prior periods and continuing development of the financial services business.

 

"We are also well positioned to continue to play a leading role in the ongoing consolidation of the debt solutions market, as and when value-enhancing opportunities emerge to consolidate our market position and diversify our income streams."

 

Enquiries please contact:

           

Fairpoint Group Plc

Chris Moat, Chief Executive Officer                                                                                0844 826 1209

John Gittins, Finance Director

  

Shore Capital                                                                                                           020 7408 4090

(Nominated adviser and broker)

Pascal Keane / Edward Mansfield

 

MHP Communications                                                                                               020 3128 8100

Reg Hoare / Katie Hunt / Ben Griffiths

 

 

There will be an analyst presentation to discuss the results at 9.30am on 27 September 2012 at the offices of MHP Communications, 60 Great Portland Street, London, W1W 7RT

 

 Notes to editors:

Fairpoint Group plc is an AIM quoted consumer financial services business focused on serving financially stressed consumers. Our mission is to become the leader in money management solutions to the financially stressed consumer. Our business is structured into the following primary business lines in order to serve the needs of this consumer group:

1.   Individual Voluntary Arrangements (IVAs)

2.   Debt Management Plans (DMPs)

3.   Financial Services

www.fairpoint.co.uk 

 

 

 

 

 

 

Chairman`s statement

 

Overview

 

 

Fairpoint has continued its strategy of growth through diversification with strong financial, operating and cash flow improvements during the first half of 2012, building on the much improved second half of 2011.The Group has diversified its income streams and grown its revenues in subdued market conditions. Early progress in the development of claims management services has been strong and additional products are under development to ensure continuing momentum in this area.

 

 

Strategy

 

Our strategy is to be the first choice solutions provider for financially stressed consumers. We aim to:

 

·    Focus on our cost agenda in the individual voluntary agreement ("IVA") segment during a period of subdued market demand;

·    Continue to grow our debt management plan ("DMP") activities, both organically and through acquisition opportunities presented by a consolidating market;

·    Diversify into new, but related income streams such as lending and claims management services.

 

Our focus on providing solutions to financially stressed consumers has always placed us in markets which are subject to significant regulatory and competitive change.  Regulatory change is in strong evidence in our new segments, which presents opportunities to Fairpoint, given its relative size, funding and professional management.

 

Dividend

 

The Board is committed to a long-term progressive dividend policy, which takes into account the underlying growth in earnings and strong cash generation, whilst acknowledging the requirement for continued investment and short-term fluctuations in profits.

 

In light of the results for the first half, and taking into account the requirements of the Group and its future prospects, the board has recommended an increase in the interim dividend of 11% to 1.95p (2011: 1.75p).

 

The interim dividend will be paid on 26 October 2012 to shareholders on the register on 5 October 2012, with an ex-dividend date of 3 October 2012.

 

Changes to the board and shareholders

 

In May 2012 Derek Oakley, resigned his position as insolvency director, and accordingly stepped down from the Board. He will leave the business in November 2012 to pursue other interests and I would like to thank him for his contribution to the Group.  This change completes the evolution of the Board to a simplified, governance based structure.

 

Following the half year end, the Group announced that the entire stake previously held by Andrew Redmond, John Reynard, Paul Latham, Derek Oakley and Peter Byrne and his family (the founder shareholders of Fairpoint), comprising 9,826,027 ordinary shares (approximately 22.53% of the Company's issued share capital) were placed with a number of institutional and other investors at a price of 60 pence per share. As part of this transaction, and in order to enhance shareholder value, around £1m worth of these shares were acquired by the Company to be held in treasury.

 

This was a positive outcome for the Company; it recognises the strength of Fairpoint as an investment proposition and should increase the overall liquidity of our shares.

 

 

Outlook

 

In the second half of 2012 we expect to continue the solid progress made in the first half, benefitting from the normal seasonality of the business, a healthy stock of work in our back books, the benefit of acquisitions made in this and prior periods and continuing development of the financial services business.

 

We are also well positioned to continue to play a leading role in the ongoing consolidation of the debt solutions market, as and when value-enhancing opportunities emerge to consolidate our market position and diversify our income stream

 

 

 

 

 

Matthew Peacock

Chairman


Chief Executive Officer's review

 

Results

 

Group revenue from continuing operations in the first half of 2012 increased by 19% to £14.1m (2011: £11.8m), with Diversified Activities accounting for 38% of the Group revenue (2011: 26%). Adjusted profit before tax* was £3.0m (2011: £0.0m), of which 59% derived from Diversified Activities. Profit before tax was £2.1m (2011: loss of £2.1m). Adjusted basic earnings per share** was 5.26p (2011: 0.04p). Basic earnings per share was 3.72p (2011: loss per share of 3.78p) and fully diluted earnings per share was 3.70p (2011: loss per share of 3.78p). Exceptional items were £0.2m (2011: £1.7m).

.

Net borrowings*** at 30 June 2012 were £2.0m (30 June 2011: £7.6m).

 

 

* Profit before tax of £2.1m (2011: loss of £2.1m) plus amortisation of acquired intangible assets of £0.7m (2011: £0.4m) plus exceptional items of £0.2m (2011: £1.7m)

** Adjusted for the net of tax effect of amortisation of acquired intangible assets and exceptional items

*** Net borrowings is bank borrowings and finance lease liabilities less cash

 

 

 

Operational review

 

IVA services

 

Revenues from the Group's IVA activities were £8.7m (2011: £8.7m). The segmental adjusted pre-tax profit rose to £1.4m (2011: loss of £0.7m).

 

Segmental revenues in the period were unchanged on the first six months of 2011, as a result of subdued market demand and average fees for new IVAs. Active management of the portfolio, however, means that the total number of fee paying IVAs under management at 30 June 2012 was 20,772 (30 June 2011: 20,659). The number of new IVAs written in the first half of 2012 fell by 26% to 2,217 (2011: 3,005) and the average gross fee per new IVA was £3,450 (2011: £3,654).

 

The return to profitability in the period was due to both the reduction in the IVA cost base, which took effect from the second half of 2011, and to the impact of increased IVA claims management activities.  This had the effect of increasing returns to creditors and in turn increasing IVA supervisory fees from the existing portfolio.

 

DMP services

 

Revenues in the DMP segment increased by 11% to £2.8m (2011: £2.5m) and the segmental adjusted pre-tax profit increased to £1.2m (2011: £1.1m).

 

The segment has benefited from the effect of one DMP back book acquisition made in May 2012 and the total number of DMPs under management at 30 June 2012 was 16,090 (30 June 2011: 14,780). Further progress in our acquisition pipeline has been made in recent months and we anticipate the acquisition of further DMP back books from sub scale operators seeking to exit this increasingly competitive and regulated market. These acquisitions, which will be financed from our existing resources, will benefit DMP activity in 2013 and beyond.

 

Financial services

 

Revenues from our financial services activities were £2.6m (2011: £0.6m) and the segmental adjusted pre-tax profit was £0.7m (2011: loss of £0.2m).

 

In the first half of 2012 we have continued to make significant headway in a programme of payment protection insurance (PPI) reclaim activity for our IVA portfolio. This has made a significant contribution to the segmental performance in the first half.  Claims monies which are secured through this activity increase the contributions to IVAs and so are beneficial to creditors.  Claims performance and creditor response is still developing, but our experience to date is that most creditors accept our claims and make payments directly to ourselves in line with the terms of the IVA agreement.  

 

This segment also includes revenues and costs of our payday lending pilot, volumes for which continue to grow in a controlled manner as we refine and develop our proposition using the Loanextra brand. 

 

                                              

Outlook

 

We continue to assess the market to identify good opportunities to acquire back books at attractive rates and further consolidate our strong market position, with the intention of delivering improving revenue growth in future years.

 

Claims management services are expected to continue making a strong contribution to results in the near term with further product development underway to drive future growth. Revenues from this business in 2012 to date have benefitted from PPI claims on our IVA portfolio. We expect to further develop this business for our DMP customers and in July we launched our new in house claims management business, Writefully Yours. We continue to monitor claims progress closely during this embryonic period, whilst we also explore additional opportunities to expand our offering.

 

Our short term lending business continues to be developed in a controlled manner.  The regulatory landscape is evolving, as are patterns in customer demand, and we are developing our product to fit current and future needs. We are closely evaluating the performance of our portfolio as we scale the business.

 

In line with our normal seasonal trading patterns, second half profitability will benefit from reduced marketing spend in the run up to Christmas.  

 

As a result of the above factors, the Board is confident of delivering a strong financial performance in the current year and establishing the building blocks for continuing growth.  

 

 

 

 

 

Christopher Moat

Chief Executive Officer

 

 

 

 

 

Finance Director's review

 

Financial highlights

 

The Group's revenue increased by 19% to £14.1m (2011: £11.8m). The increase was largely due to £2.0m growth in financial services revenues to £2.6m (2011: £0.6m).

 

Adjusted profit before tax* increased to £3.0m (2011: £0.0m). Gross margin rose to 48% (2011: 28%). The increased revenue from claims management services, accompanied with improved margins and a more controlled cost base, allowed the Group to record a much improved adjusted profit before tax.

 

During the first half of 2012, the Group incurred exceptional costs of £0.2m (2011: £1.7m). These costs related to legal and professional costs associated with the refinancing that was completed in April 2012. In the first half of 2011, £1.5m of the exceptional costs were in relation to the impairment of the Group's legacy IVA systems and a further £0.2m related to group restructuring.

 

Amortisation of acquired intangible assets increased to £0.6m (2011: £0.4m) as a result of the acquisitions made during 2011 and the first half of 2012.

 

Profit before tax was £2.1m (2011: loss of £2.1m).

 

The Group's tax charge was £0.5m (2011: £0.5m credit). The tax charge on adjusted profits was £0.7m (2011: £0.0m). This represents an effective rate of 24.5% (2011: 26%), the reduction from the previous period resulted from the change in corporation tax rates during the year.

 

The total comprehensive income for the 6 months ended 30 June 2012 was £1.6m (2011: loss of £1.7m).

 

Earnings per share (EPS)

 

Adjusted basic EPS** was 5.26p (2011: 0.04p). Basic EPS was 3.72p (2011: loss per share of 3.78p). Diluted EPS was 3.70p (2011: loss per share of 3.78p).

 

 

 

* Profit before tax of £2.1m (2011: loss of £2.1m) plus amortisation of acquired intangible assets of £0.7m (2011: £0.4m) plus exceptional items of £0.2m (2011: £1.7m)

** Adjusted for the net of tax effect of amortisation of acquired intangible assets and exceptional items

 

 

 

Share capital

 

Following the half year end, the Company acquired 1,666,667 shares at 60 pence per share to be held in treasury as part of a sale of shares by its founding shareholders.

 

Cash flows

 

Net cash generated from operating activities increased significantly by £6.0m to £6.5m (2011: £0.5m). The £3.0m of additional adjusted profit before tax* and strong management of working capital were the main contributors to this improvement.

 

Investing cash outflows decreased to £0.9m (2011: £1.6m), as the Group made one acquisition in the period compared to three in the previous comparable period.

 

Financing cash outflows of £4.9m (2011: inflow of £1.4m) are due to a net repayment on the Group's bank facilities of £3.7m (2011: net drawdown of £2.5m) and dividend payments of £1.2m (2011: £1.1m).

 

 

Financing

 

In April 2012, the Group signed a new enlarged £13m asset based revolving credit facility with PNC Financial Services UK Limited ("PNC"). This facility replaces the Group's previous £8m committed facility which was due to expire in December 2012.

 

The new facility, which has a four year maturity, is secured against the Group's book of IVAs and DMPs.

 

The exceptional legal and professional costs associated with the refinancing were £0.2m.

 

This facility will enable the Group to continue its strategy of investment to diversify its activities and in particular, to acquire back books in the IVA and DMP markets.  

 

Net borrowings* at 30 June 2012 were £2.0m (30 June 2011: £7.6m).

 

VAT

 

In April 2012, the Group received a VAT refund of £9.0m from HMRC following the decision in Paymex Ltd v HMRC, which found that fees relating to IVAs were exempt supplies. This refund related to net VAT payments made by the Group since 1 June 2007.

 

This amount is currently deposited in a client account and at 30 June 2012 no revenue or cash has been recognised in the Group's financial statements. The programme of processing this refund through IVA cases is anticipated to be largely completed during the second half of 2012, and will result in increased distributions to creditors and exceptional fee income for the Group.

 

 

 

 

 

 

John Gittins

Group Finance Director

 

 

 

  

 

 

* Net borrowings is bank borrowings and finance lease liabilities less cash

 

 

 

 

 

 

 

Consolidated statement of comprehensive income - Period from 1 January 2012 to 30 June 2012

 

 

 


Period from 1 January to 30 June 2012

Unaudited

 

Period from 1 January to 30 June 2011

Unaudited

 

Year ended 31 December 2011

Audited

 

 

 

 

 

 

 

 

 

Adjusted *

Amortisation of acquired intangible assets and exceptional items

 

 

 

 

 

Total

 

 

 

 

 

Adjusted *

 

Amortisation of acquired intangible assets and exceptional items

 

 

 

 

 

Total

 

 

 

 

 

Adjusted *

 

Amortisation of acquired intangible assets and exceptional items

 

 

 

 

 

Total


£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000











Revenue

14,132

-

14,132

11,827

-

11,827

25,890

-

25,890

Cost of sales

(7,358)

-

(7,358)

(8,514)

-

(8,514)

(14,888)

-

(14,888)











Gross profit

6,774

-

6,774

3,313

-

3,313

11,002

-

11,002

Amortisation of acquired intangibles

-

(643)

(643)

-

(423)

(423)

-

(946)

(946)

Other administrative expenses

(5,541)

(249)

(5,790)

(5,321)

(1,749)

(7,070)

(10,967)

(4,133)

(15,100)











Total administrative expenses

(5,541)

(892)

(6,433)

(5,321)

(2,172)

(7,493)

(10,967)

(5,079)

(16,046)

Finance income - unwinding of discount on IVA revenue

1,922

-

1,922

2,148

-

2,148

4,254

-

4,254

Finance income - other

5

-

5

3

-

3

6

-

6











Profit (loss) before finance costs

3,160

(892)

2,268

143

(2,172)

(2,029)

4,295

(5,079)

(784)

Finance costs

(122)

-

(122)

(122)

-

(122)

(259)

-

(259)











Profit (loss) before taxation

3,038

(892)

2,146

21

(2,172)

(2,151)

4,036

(5,079)

(1,043)

Tax (expense) credit

(744)

218

(526)

(5)

506

501

(1,063)

1,148

85











Profit (loss) for the period

2,294

(674)

1,620

16

(1,666)

(1,650)

2,973

(3,931)

(958)











Total comprehensive income (loss) for the period

2,294

(674)

 

1,620

 

16

 

(1,666)

 

(1,650)

 

2,973

 

(3,931)

 

(958)

 











 

Earnings per Share

 










Basic



3.72



(3.78)



(2.20)











Diluted



3.70



(3.78)



(2.20)





















 

* Before amortisation of acquired intangible assets and exceptional items.

 

All of the profit (loss) and comprehensive income (loss) for the period is attributable to equity holders of the parent.

 

 

 

 

Consolidated statement of financial position as at 30 June 2012

 

 

 

 

 

 

As at

30 June

2012

As at

30 June

2011

As at

31 December

2011

 

 

Unaudited

Unaudited

Audited

 

 

£'000

£'000

£'000

ASSETS

 

 

 

 

Non Current Assets

 

 

 

 

Property, plant and equipment

 

1,305

1,503

1,397

Goodwill

 

11,972

13,882

11,972

Other intangible assets

 

7,396

7,304

7,253

Total Non Current Assets

 

20,673

22,689

20,622

Current Assets

 

 

 

 

Trade receivables and amounts recoverable on IVA services

 

21,777

24,580

24,068

Other current assets

 

1,755

1,375

1,234

Cash and cash equivalents

 

2,097

1,266

1,468

Total Current Assets

 

25,629

27,221

26,770

Total Assets

 

46,302

49,910

47,392

 

EQUITY





Share capital

 

436

436

436

Share premium account

 

528

528

528

ESOP share reserve

 

(517)

(517)

(517)

Merger reserve

 

11,842

11,842

11,842

Other reserves

 

254

254

254

Retained earnings

 

24,058

23,594

23,556

Total equity attributable to equity holders of the parent

 

36,601

36,137

36,099

LIABILITIES

 




Non Current Liabilities





Long-term financial liabilities

 

4,000

9,586

231

Deferred tax liabilities

 

334

914

366

Total Non Current Liabilities

 

4,334

10,500

597

Current Liabilities

 

 

 

 

Trade and other payables

 

4,177

2,946

2,949

Short-term borrowings

 

125

104

7,627

Current tax liability


1,065

223

120

Total Current Liabilities

 

5,367

3,273

10,696

Total Liabilities

 

9,701

13,773

11,293

Total Equity and Liabilities

 

46,302

49,910

47,392

 

 

 

 

 

Consolidated statement of cash flows for the period from 1 January 2012 to 30 June 2012

 

 

 

 

 

 

Period from  1 January to 30 June 2012

Period from  1 January to 30 June 2011

Year ended 31 December

 2011

 


Unaudited

Unaudited

Audited


£'000

£'000

£'000

Cash flows from continuing operating activities




Profit (loss) on continuing operations before tax

2,146

(2,151)

(1,043)

Share based payments charge

50

18

42

Depreciation of property, plant and equipment

183

204

402

Amortisation of intangible assets and development expenditure

772

613

1,300

Impairment of Moneyextra.com goodwill and brand

-

-

2,876

Loss on disposal of non current assets

-

1,456

1,519

Interest received

(5)

(3)

(6)

Interest expense

122

122

259

Decrease in trade and other receivables

1,979

1,338

1,991

Increase (decrease) in trade and other payables

1,223

(293)

(1,135)





Cash generated from operations

6,470

1,304

6,205

Interest paid

(331)

(122)

(259)

Income taxes received (paid)

369

(655)

(1,362)

Net cash generated from operating activities

6,508

527

4,584

Cash flows from investing activities




Purchase of property, plant and equipment (PPE)

(91)

(103)

(134)

Interest received

5

3

6

Purchase of intangible assets

(396)

(294)

(587)

Purchase of debt management and IVA books

(449)

(1,240)

(2,960)





Net cash absorbed by investing activities

(931)

(1,634)

(3,675)

Cash flows from financing activities




Equity dividends paid

(1,168)

(1,051)

(1,805)

(Repayment of) Proceeds from long-term borrowings

(3,665)

2,500

1,500

Payment of short-term borrowings

(114)

(54)

(114)





Net cash absorbed by financing activities

(4,947)

1,395

(419)

Net change in cash and cash equivalents

630

288

490

Cash and cash equivalents at start of period

1,468

978

978

Cash and cash equivalents at end of period

2,098

1,266

1,468

 

 

Consolidated statement of changes in equity for the period from 1 January 2012 to 30 June 2012

_____________________________________________________________________________________________________

 

 
 
 
 
 
Share Capital
£’000
Share Premium Account £’000
 
Merger Reserve
£’000
 
Other Reserves £’000
 
ESOP Share Reserve £’000
 
 
Retained Earnings £’000
 
Total Equity
£’000
Balance at 1 January 2011
436
528
11,842
254
(517)
26,277
38,820
 
 
 
 
 
 
 
 
Changes in equity for the six months ended 30 June 2011:
 
 
 
 
 
 
 
 
Total comprehensive loss for the period
-
-
-
-
 
-
(1,650)
(1,650)
 
Share based payment expense
-
-
-
-
 
-
18
18
 
Dividends
-
-
-
-
 
-
(1,051)
(1,051)
 
 
 
 
 
 
 
 
 
Balance at 30 June 2011
436
528
11,842
254
(517)
23,594
36,137
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Changes in equity for the six months ended 31 December 2011:
 
 
 
 
 
 
 
 
 
 
Total comprehensive income for the period
-
-
-
-
 
-
692
692
 
Share based payment expense
-
-
-
-
 
-
24
24
 
Dividends
-
-
-
-
 
-
(754)
(754)
 
 
 
 
 
 
 
 
Balance at 31 December 2011
436
528
11,842
254
 
(517)
23,556
36,099
 
 
 
 
 
 
 
 
Changes in equity for the six months ended 30 June 2012:
 
 
 
 
 
 
 
 
Profit and total comprehensive income for the period
-
-
-
-
 
-
1,620
1,620
 
Share based payment expense
-
-
-
-
 
-
50
50
 
Dividends
-
-
-
-
 
-
(1,168)
(1,168)
 
 
 
 
 
 
 
 
 
Balance at 30 June 2012
436
528
11,842
254
(517)
24,058
36,601

 

 

 

 



Notes

 

1          Status of financial information

           

The financial information set out in this report is based on the consolidated financial statements of Fairpoint Group plc and its subsidiary companies (together referred to as the 'Group'). The accounts of the Group for the six months ended 30 June 2012, which are unaudited, were approved by the Board on 26 September 2012. The financial information contained in this interim report does not constitute statutory accounts as defined by s434 of the Companies Act 2006.

 

         These accounts have been prepared in accordance with the accounting policies set out in the Annual Report and Financial Statements of Fairpoint Group plc for the year ended 31 December 2011. The statutory accounts for the year ended 31 December 2011 have been filed with the registrar of Companies. The auditors' report on those accounts was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under section 498 (2) or 498 (3) of the Companies Act 2006.

 

 

Going concern

 

The Group`s business activities, together with the factors likely to affect its future development, performance and position are set out in the chairman`s statement and chief executive officer`s review. The financial position of the Group, its cash flows, liquidity position and borrowing facilities are described in the finance director`s review.

 

The financial statements have been prepared on a going concern basis. The Group's existing facility with PNC Financial Services UK Ltd extends to 2016 and provides a facility of £13m. For the purpose of considering going concern the board has considered a period of at least 12 months from the date of signing these financial statements.

 

 

2        Tax (expense) credit

         

For the period ended 30 June 2012 tax is charged based on the estimated average annual effective corporation tax rate of 24.5% (period ended 30 June 2011: 26.5%).

 

 

3        Segment analysis

 

          Reportable segments

 

          Factors that management used to identify the Group's reportable segments

 

          The Group's reportable segments are operating divisions that offer different products and services.  They are managed separately because each business requires different marketing strategies.

 

          Measurement of operating segment profit and assets

 

          The accounting policies of the operating segments are as described in the Group's 2011 Annual Report and Accounts which are available on the Company's website at www.fairpoint.co.uk

 

          The Group evaluates performance on the basis of adjusted (for brand amortisation and exceptional items) profit before taxation from continuing operations.

 

          Segment assets exclude tax assets and assets used primarily for corporate purposes.

 

          The chief operating decision maker has organised the Group into three operating divisions; Individual Voluntary Arrangements (IVA), Debt Management and Financial Services.  These divisions are the basis on which the Group is structured and managed, based on its principal services provided.  These are summarised as follows:

 

-   IVA consists primarily of Group companies Debt Free Direct Limited and Clear Start UK Limited, the core debt solution brands. The primary product offering of these brands is an IVA which consists of a managed payment plan providing both interest and capital forgiveness and results in a consumer being debt free within five years of the agreement commencing. 

 

-   Debt Management consists primarily of the Group company Lawrence Charlton Limited, the trading brand used to provide Debt Management Plans (DMPs) for consumers. DMPs are generally suitable for consumers who can repay their debts in full, if they are provided with some relief on the rate at which interest accrues on their debts. They could take 15 years to complete and offer consumers a fixed repayment discipline as well as third party management of creditors.

 

-   Financial Services fall into four distinct categories:

 

claims management solutions - consisting mainly of reclaims for payment protection insurance for our existing IVA and DMP portfolio.

value added services - a wide range of solutions fall under this category. All of them have the primary objective of making the core debt solution work smoothly. Examples include products such as prepaid bank accounts and utility switching services.

Moneyextra.com - internet portal providing a wide range of products and comparison services.

payday lending - consumer loans.

 

 

 

        Six month period ending 30 June 2012

 


IVA

Debt Management

Financial Services

 

Unallocated

Total


£'000

£'000

£'000

£'000

£'000

Total external revenue

8,739

2,826

2,567

-

14,132







Total operating (loss) profit

(571)

1,154

650

-

1,233







Finance income - unwinding of discount on IVA revenue

1,922

-

-

-

1,922







Finance income - other

-

-

-

5

5

Adjusted profit before finance costs

1,351

1,154

650

5

3,160







Finance expense

-

-

-

(122)

(122)







Adjusted profit (loss) before taxation

1,351

1,154

650

(117)

3,038







Amortisation of acquired intangible assets

(236)

(407)

-

-

(643)

Exceptional items

-

-

-

 (249)

(249)







Profit (loss) before taxation

1,115

747

650

(366)

2,146

Tax





(526)







Profit for the period





1,620







 

Balance sheet assets






Reportable segment assets

39,530

5,537

1,236

-

46,303

Capital additions

404

567

36

-

1,007

Depreciation and amortisation

(489)

(451)

(15)

-

(955)

 

 

 

 

Six month period ending 30 June 2011

 


IVA

Debt Management

Financial Services

 

Unallocated

Total


£'000

£'000

£'000

£'000

£'000

Total external revenue

8,706

2,535

586

-

11,827







Total operating (loss) profit

(2,868)

1,097

(237)

-

(2,008)







Finance income - unwinding of discount on IVA revenue

2,148

-

-

-

2,148







Finance income - other

-

-

-

3

3

Adjusted (loss) profit before finance costs

(720)

1,097

(237)

3

143







Finance expense

-

-

-

(122)

(122)







Adjusted (loss) profit before taxation

(720)

1,097

(237)

(119)

21







Amortisation of acquired intangible assets

(188)

(235)

-

-

(423)

Exceptional items

(1,749)

-

-

-

(1,749)







(Loss) profit before taxation

(2,657)

862

(237)

(119)

(2,151)

Tax





501







Loss for the period





(1,650)







 

Balance sheet assets






Reportable segment assets

43,304

6,086

520

-

49,910

Capital additions

311

1,303

23

-

1,637

Depreciation and amortisation

(2,029)

(235)

(9)

-

(2,273)

 

 

 

        Year ended 31 December 2011

 


IVA

Debt Management

Financial Services

 

Unallocated

Total


£'000

£'000

£'000

£'000

£'000

Total external revenue

18,208

5,330

2,352

-

25,890







Total operating (loss) profit

(2,097)

2,041

91

-

35







Finance income - unwinding of discount on IVA revenue

4,254

-

-

-

4,254







Finance income - other

-

-

-

6

6

Adjusted profit before finance costs

2,157

2,041

91

6

4,295







Finance expense

-

-

-

(259)

(259)







Adjusted profit (loss) before taxation

2,157

2,041

91

(253)

4,036







Amortisation of acquired intangible assets

(419)

(527)

-

-

(946)

Exceptional items

(1,994)

-

(2,139)

-

(4,133)







(Loss) profit before taxation

(256)

1,514

(2,048)

(253)

(1,043)

Tax





85







Loss for the year





(958)







 

Balance sheet assets






Reportable segment assets

42,531

4,818

43

-

47,392

Capital additions

1,082

2,609

60

-

3,751

Depreciation and amortisation

(1,078)

(609)

(15)

-

(1,702)

 

 

 

The Group's operations are located wholly within the United Kingdom.

 

Segment assets consist primarily of property, plant and equipment, intangible assets, trade and other receivables and cash. 

 

Capital expenditure comprises additions to property, plant and equipment and intangible assets.

 

 

 

4      Earnings per share (EPS)

                       

Period from

1 January to

30 June 2012

 

£'000

Period from

 1 January to

 30 June 2011

 

£'000

Year ended

31 December

 2011

 

£'000

Numerator




Profit (loss) for the period - used in basic and diluted EPS

1,620

(1,650)

(958)





Denominator




Weighted average number of shares used in basic EPS

43,609,346

43,609,346

43,609,346

Effects of:




-       employee share options *

130,198

-

-





Weighted average number of shares used in diluted EPS

43,739,544

43,609,346

43,609,346





 

* In respect of the period from 1 January 2011 to 30 June 2011 and the year ended 31 December 2011, the additional shares relating to employee share options (226,291 and 202,450 respectively) have been excluded from the calculation of diluted earnings per share as they would have an anti-dilutive effect.

 

Adjusted EPS figures are also presented as the directors believe they provide a better understanding of the financial performance of the Group. The calculations for these are shown below:

 


Period from 1 January to 30 June 2012

Unaudited

 

Period from 1 January to 30 June 2011

Unaudited

 

Year ended 31 December 2011

Audited

 

 

 

 

 

 

 

 

 

Adjusted *

Amortisation of acquired intangible assets and exceptional items

 

 

 

 

 

Total

 

 

 

 

 

Adjusted *

 

Amortisation of acquired intangible assets and exceptional items

 

 

 

 

 

Total

 

 

 

 

 

Adjusted *

 

Amortisation of acquired intangible assets and exceptional items

 

 

 

 

 

Total


£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000











Total comprehensive income (loss) for the period

2,294

(674)

 

1,620

 

16

 

(1,666)

 

(1,650)

 

2,973

 

(3,931)

 

(958)

 

 

Weighted average number of shares used in basic EPS

 

   43,609,346



 

43,609,346



 

43,609,346



 

Weighted average number of shares used in diluted EPS

 

43,739,544

 



 

43,609,346

 

 



43,609,346

 

 













 

Earnings per Share

 










Basic

5.26



0.04



6.82













Diluted

5.24



0.04



6.79























 

* Before amortisation of acquired intangible assets and exceptional items.

 

 

5      Dividends       

           

During the interim period, the final dividend relating to the year ended 31 December 2011 of 2.75p per share was paid (6 months ended 30 June 2011: 2.5p). Dividends were waived on 1,129,618 (6 months ended 30 June 2011: 1,129,618) of the 43,609,346 ordinary shares.

 

 

6      Interim Report

           

A copy of this report is available on the Company's website at www.fairpoint.co.uk


This information is provided by RNS
The company news service from the London Stock Exchange
 
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