13th Mar 2014 11:40
LONDON (Alliance News) - Fairpoint Group PLC Thursday reported a decline in 2013 pretax profits, after 2012 revenue was boosted by a VAT refund.
The AIM-listed financial services business, which focuses on advising people in financial trouble, reported a GBP5.9 million pretax profit in 2013, compared with a GBP10.5 million pretax profit in 2012.
Revenue declined to GBP28.4 million from GBP34.4 million, largely because of GBP4.5 million in fee income resulting from the VAT refund. In April 2012, Fairpoint received a GBP9.0 million VAT refund from the UK's HMRC after it was found that fees relating to individual voluntary arrangements were "exempt supplies".
Even without the refund, revenue was still down in 2013, largely because of a reduction in the individual voluntary arrangements segment. That was partly offset by growth within claims management, largely because the payment protection insurance scandal has seen the UK's major banks set aside over GBP20.0 billion to compensate customers mis-sold insurance products and for administrative expenses of the redress schemes.
Individual voluntary arrangements, which are agreements with creditors to pay all or part of any debts, have been under pressure in spite of increasing volumes. Fairpoint said that the volumes have been driven by consumers with lower disposable incomes, meaning fee levels have fallen.
Fairpoint said it expects those conditions to continue until the central bank base rate increases "adversely impact the financial circumstances of home owners who typically have higher incomes."
Chief Executive Christopher Moat said the Fairpoint is continuing to look to acquire debt solutions' back books at attractive rates and further consolidate market position, with the intention of delivering improving revenue growth.
"The acquisition of two back books in January 2014...underpins this improvement for 2014. We will also continue our focus on cost control, given the challenging market conditions anticipated for IVA services," Moat said in a statement.
"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, including legal services," Moat added.
Chairman David Harrel said Fairpoint expects to generate good returns in 2014 while it is also looking to diversify its income stream.
Fairpoint increased its full-year dividend to 6.00 pence from 5.50 pence.
Fairpoint shares were Thursday quoted at 127.00 pence, down 1.2%.
By Samuel Agini; [email protected]; @samuelagini
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