TIDMFRP
RNS Number : 9177X
Fairpoint Group PLC
03 September 2015
3 September 2015
Fairpoint Group plc
Half year results for the six months ended 30 June 2015
Fairpoint Group plc ("Fairpoint" or "the Group"), one of the
UK's leading providers of consumer professional services, today
announces its half year results for the six months ended 30 June
2015.
Highlights
Half year results are significantly ahead of the same period
last year, with a strong contribution from consumer legal services,
which delivered the earnings enhancements anticipated at the time
of the acquisition of Simpson Millar and Fosters in June and July
2014.
-- Reported and adjusted revenues and profits have increased significantly compared to the first half of 2014
o Revenue increased by 64% to GBP22.9m (2014: GBP13.9m)
o Adjusted profit before tax* increased by 21% to GBP4.1m (2014:
GBP3.4m)
o Adjusted basic earnings per share** increased by 19% to 7.38p
(2014: 6.20p)
o Reported profit before tax increased by 27% to GBP1.3m (2014:
GBP1.0m) after deducting exceptional costs of GBPnil (2014:
GBP1.2m), amortisation of acquired intangible assets of GBP2.3m
(2014: GBP1.1m) and unwinding of discount on contingent
consideration of GBP0.4m (2014: GBPnil)
o Reported basic earnings per share increased by 25% to 2.33p
(2014: 1.87p)
-- Fairpoint is now reshaped into a broadly based professional services group
o Legal Services is now the largest single business segment
representing 49% of total revenue in the period (2014: 8%)
o On a pro forma basis, Legal Services now represents 62% of
Group revenues
-- Strong balance sheet, cash generation and new enlarged long term bank facilities provide a platform for further
growth
o Net cash generated from operating activities of GBP4.9m (2014:
GBP1.0m)
o Net debt*** of GBP5.2m at 30 June 2015 (30 June 2014:
GBP7.1m)
o Expanded bank facilities with AIB Group (UK) plc ("AIB"),
agreed in August 2015, taking the total facility to GBP25.0m
-- Increased dividend reflecting strong profit and cash performance and confidence in the future
o Interim dividend increased by 7% to 2.45p (2014: 2.30p)
-- Well placed for strong performance in second half of 2015
o Contribution expected from acquisition in August 2015 of
Colemans CTTS solicitors and Holiday TravelWatch Limited
("Colemans"), a consumer legal services business, for an initial
cash consideration of GBP8.0m and GBP1.0m in shares
o Strong position to continue to develop the Legal Services
platform organically and through further acquisition supported by
an enlarged GBP25.0m financing facility
o Strong cost control across debt solutions activities is
expected to continue to deliver good margins and cash flows
* Profit before tax of GBP1.28m (2014: GBP1.01m) plus
amortisation of acquired intangible assets of GBP2.35m (2014:
GBP1.12m) plus unwinding of discount on contingent consideration of
GBP0.43m (2014: GBPnil) plus exceptional items of GBPnil (2014:
GBP1.23m)
** Adjusted for the net of tax effect of amortisation of
acquired intangible assets, unwinding of discount on contingent
consideration and exceptional items
*** Net debt is bank borrowings and finance lease liabilities
less cash
Chris Moat, Chief Executive Officer, said:
"Fairpoint has delivered another strong set of financial
results, both in terms of profitability and cash generation, whilst
continuing to execute its stated strategy of becoming a broadly
based professional services group.
The addition, post period end, of Colemans in August 2015 now
means that on a pro forma basis, legal services is expected to
represent almost two thirds of the Group's revenues. This is
expected to provide an important growth stimulus for the remainder
of 2015 and beyond and the Group is well placed to develop upon the
considerable opportunities within the legal services marketplace,
both organically and by acquisition."
Enquiries:
Fairpoint Group Plc
Chris Moat, Chief Executive Officer 0845 296 0100
John Gittins, Group Finance Director
Shore Capital (Nomad and Broker)
Pascal Keane 020 7408 4090
Edward Mansfield
MHP Communications
Reg Hoare 020 3128 8100
Katie Hunt fairpoint@mhpc.com
There will be an analyst presentation to discuss the results at
9.15 for 9.30am on 3 September 2015 at the offices of MHP
Communications, 6 Agar Street, London, WC2 4HN
Notes to editors:
Fairpoint Group plc is an AIM listed consumer professional
services business specialising in the provision of consumer-focused
legal services, personal debt solutions and claims management. The
Group is structured into the following primary business lines:
1. Legal Services
2. Debt Management Plans (DMPs)
3. Claims Management
4. Individual Voluntary Arrangements (IVAs)
www.fairpoint.co.uk
Chairman's statement
I am pleased to report a strong set of results for the first
half of 2015, which reflect the anticipated earnings enhancements
from the acquisitions in consumer legal services the Group made in
June and July 2014. Significant progress has been made in
developing the Group's legal services offering, with Simpson Millar
and Fosters having been integrated well and with the acquisition of
Colemans in August 2015. At the same time, we have continued our
disciplined approach to margin and cash management in our
traditional debt solutions markets, taking into account the
difficult market conditions.
Strategy
Our core strategic themes will focus upon:
-- Developing our customer franchise by providing consumers with
a growing number of solutions which will improve their
circumstances;
-- Consolidation in our chosen markets, with a particular focus
on the legal services market place whilst we evaluate regulatory
developments in the debt management marketplace;
-- Clear differentiation of our solutions from those offered by our competitors; and
-- Focus on our cost agenda to maintain margin in the IVA and DMP segments.
Dividend
Our dividend policy takes into account the underlying growth in
adjusted earnings, whilst acknowledging the requirement for
continued organic and acquisition led investment.
In light of the results for the first half and taking into
account the requirements of the Group, the Board has recommended an
increase in the interim dividend of 7% to 2.45p (2014: 2.30p).
The interim dividend will be paid on 23 October 2015 to
shareholders on the register on 2 October 2015, with an ex-dividend
date of 1 October 2015.
People
We are reliant on the experience and commitment of our people
and I would like to thank the management and staff for all of their
hard work and dedication during the first half of 2015.
Outlook
We expect to make further progress in the second half of 2015,
benefitting from the normal seasonality of the business, continued
cost control and a first time contribution from the acquisition of
Colemans.
Beyond this, we anticipate targeting further value-enhancing
acquisition opportunities during 2015, to allow us to consolidate
our market position.
David Harrel
Chairman
Chief Executive Officer's review
Results
Group revenue increased by 64% to GBP22.9m (2014: GBP13.9m),
with legal services activities accounting for 49% (2014: 8%). This
mix change largely reflects the acquisition of Simpson Millar, the
Group's legal services platform, at the end of the first half of
last year. This trend of increasing contribution from legal
services activities will gather pace during the rest of 2015, given
the acquisition in August of Colemans.
Adjusted profit before tax* increased by 21% to GBP4.1m (2014:
GBP3.4m). Reported profit before tax increased by 27% to GBP1.3m
(2014: GBP1.0m), after deducting exceptional acquisition and
refinancing costs of GBPnil (2014: GBP1.2m), amortisation of
acquired intangible assets of GBP2.3m (2014: GBP1.1m) and the
unwinding of the discount on contingent consideration of GBP0.4m
(2014: GBPnil).
Adjusted basic earnings per share** increased by 19% to 7.38p
(2014: 6.20p). Basic earnings per share was 2.33p (2014: 1.87p) and
fully diluted earnings per share was 2.31p (2014: 1.85p).
Net debt*** at 30 June 2015 was GBP5.2m (30 June 2014:
GBP7.1m).
Operational review
Our Market places
The Group operates within the following two core market places
-
Legal Services
The legal services market is highly fragmented and has recently
been subjected to significant regulatory change, which is intended
to improve consumer choice and value. These changes are encouraging
industry consolidation and present a unique opportunity to create
more competitive consumer offerings. The acquisition of Simpson
Millar in June 2014, Fosters in July 2014 and the subsequent
acquisition of Colemans in August 2015 provide a significant
platform from which the Group can deploy its core skill of applying
process to professional services. On a pro-forma basis, Legal
Services are now expected to generate the majority of the Group's
income.
Debt Solutions
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Market conditions for the Group's debt solutions remain
challenging and we continue to take a disciplined approach to
marketing expenditure, ensuring that uneconomic activity is
minimised. The volume of new IVA solutions in England and Wales
decreased by over 30% to 19,426 in the first half of 2015 (2014:
27,791), (source: The Insolvency Service), a reflection of the
economic stability in the wider economy. These market conditions,
in our view, are likely to continue until bank base rate increases
adversely impact the financial circumstances of home owners who
typically have higher incomes.
* Profit before tax of GBP1.28m (2014: GBP1.01m) plus
amortisation of acquired intangible assets of GBP2.35m (2014:
GBP1.12m) plus unwinding of discount on contingent consideration of
GBP0.43m (2014: GBPnil) plus exceptional items of GBPnil (2014:
GBP1.23m)
** Adjusted for the net of tax effect of amortisation of
acquired intangible assets, unwinding of discount on contingent
consideration and exceptional items
*** Net debt is bank borrowings and finance lease liabilities
less cash
In the debt management sector, a rigorous regulatory agenda has
been driven by the Financial Conduct Authority (FCA) since it
assumed responsibility for the regulation of this sector from April
2014, including the release, in June 2015, of its thematic review
of the debt management sector. The Group has opted to suspend
acquisition activity in this sector for the foreseeable future,
whilst pricing and valuations evolve under the new regulatory
regime. As with all firms operating within this sector, since the
change in regulatory regime, the Group has traded under an interim
regulatory permission. Following this, the Group has submitted its
application for full regulatory permission and this is expected to
be processed during the second half of 2015.
Legal Services
Revenues in the legal services segment rose to GBP11.3m (2014 (2
weeks): GBP1.2m) reflecting the acquisition of Simpson Millar in
June 2014. The segmental adjusted pre-tax profit was GBP1.4m (2014
(2 weeks): GBP0.1m), with a small improvement in adjusted profit
margin to 13% (2014 (2 weeks): 10%). Compared to the full six month
period of the prior year (when it was not part of the Group), legal
services performed well with single digit organic growth in
revenues and profits. Simpson Millar provides consumer-focused
legal services with its main lines including: family, public law,
and complex personal injury law.
Our mission within legal services is to make law more accessible
to consumers. During the last 12 months we have taken a series of
actions aimed towards bringing this mission to life including:
- placing prime responsibility for the generation of new
customer enquiries into our Group marketing and helpline
function
- defining a pricing tariff for over 70 legal products, which
will enable us to communicate a price point for a fixed schedule of
services at the outset
- developing our infrastructure to operate more efficiently
- more recently adding a class leading volume personal injury,
conveyancing and travel law business to enhance our product
set.
In August 2015, the Group acquired Colemans, a provider of
consumer-focused legal services with leading expertise in volume
personal injury, volume conveyancing and travel law. On a pro forma
basis following the acquisition of Colemans, legal services are now
expected to represent at least 62% of the Group's revenues.
The initial consideration was GBP8.0m in cash and a further
GBP1.0m through the issue of 755,516 ordinary shares. Further
contingent consideration of up to GBP7.0m may be payable based on
the financial performance of Colemans for the 11 month period
ending June 2016 and the 12 month period ending June 2017. Colemans
has over 200 employees (of which 67 are direct fee earners, with
the rest facilitating the efficiency of those fee earners) based in
three offices in Manchester, Kingston and Acton. Colemans brings a
pronounced competency in volume personal injury law, which is
complementary to the range of services already offered in Simpson
Millar.
As previously announced, the acquisition of Colemans is expected
to incur GBP1.0m of legal, professional and integration costs in
the second half of 2015.
IVA services
Revenues from the Group's IVA activities were GBP5.6m (2014:
GBP6.7m). Revenues reduced largely as a result of fewer new cases,
due to the 30% market reduction in IVAs noted above.
IVA services segmental adjusted pre-tax profit was GBP1.0m
(2014: GBP1.3m). In light of the market conditions outlined above,
we have focused on profit margin management through cost control
and as a result, adjusted profit margin fell only slightly to 17%
(2014: 19%), despite reduced revenues.
The total number of fee paying IVAs under management at 30 June
2015 was 16,889 (30 June 2014: 18,717). The number of new IVAs
written in the first half of 2015 was 795 (2014: 1,464) and the
average gross fee per new IVA was GBP3,036 (2014: GBP3,458).
DMP services
Revenues in the DMP segment were GBP3.9m (2014: GBP3.9m) and the
segmental adjusted pre-tax profit was GBP1.5m (2014: GBP1.6m).
Our focus in the DMP segment has been on customer service to our
existing clients and engaging with the requirements of the new
regulatory regime. In line with the FCA thematic review, we have
implemented certain changes to our procedures and we expect our
application for full regulatory permission to be processed during
2015. In light of the regulatory environment, no acquisitions of
DMP back books were considered during the period.
The total number of DMPs under management at 30 June 2015 was
20,730 (2014: 21,422). Adjusted profit margin was broadly flat at
39% (2014: 40%).
Claims management
Revenues from our claims management activities were GBP2.1m
(2014: GBP2.1m) and the segmental adjusted pre-tax profit decreased
to GBP0.4m (2014: GBP0.6m) as the business invested in developing
new products and services.
Claims levels, largely relating to payment protection insurance
(PPI) reclaim activity from existing IVA clients have reached
maturity, whilst those from our debt management clients, conducted
through our "Writefully Yours" brand, are building well.
Outlook
Following the acquisition of Colemans, we have now established a
significant and diverse legal services platform and this is
expected to be accretive to earnings in the second half of 2015. In
addition, we expect to continue to pursue acquisition
opportunities, with particular focus on the legal services market,
as well as benefitting from further integration activity in this
segment, as we pursue our objective of making law more accessible
to consumers.
We anticipate that the market conditions in the IVA segment will
remain challenging and we will therefore continue to focus on
margin management and cash generation. We expect the development of
other claims products to mitigate in part the effects of the
maturing IVA claims activity. In DMP, we are focussed on existing
business whilst our application for full regulatory permission is
processed. Our debt solutions activities are expected to benefit
from their usual seasonally stronger second half, in part due to
lower anticipated marketing costs given the subdued markets.
As a result of the above factors, the Board is confident of
delivering good progress in line with market expectations for the
year as a whole, whilst further establishing the building blocks
for continuing growth.
Chris Moat
Chief Executive Officer
Finance Director's review
Financial highlights
Group revenue increased by 64% to GBP22.9m (2014: GBP13.9m).
This increase was largely as a result of the contribution from
Simpson Millar which was acquired in June 2014. Revenues within the
DMP and claims management segments were consistent with the first
half of 2014, but declined in the IVA segment.
The Group achieved a gross margin of 50% (2014: 50%) and
adjusted profit before tax* increased by 21% to GBP4.1m (2014:
GBP3.4m). The increased revenue from legal services and a
controlled cost base have led to the improved results.
The Group incurred no exceptional costs during the first half of
2015. During the first half of 2014, the Group incurred exceptional
costs of GBP1.2m represented by GBP0.7m of costs in relation to the
acquisition of Simpson Millar and GBP0.5m of costs associated with
the refinance of the Group with AIB.
Reported profit before tax was GBP1.3m (2014: GBP1.0m).
The Group's tax charge was GBP0.3m (2014: GBP0.2m). The tax
charge on adjusted profits was GBP0.8m (2014: GBP0.7m). This
represents an effective rate of 20.3% (2014: 21.5%), the reduction
largely resulting from the change in corporation tax rates during
the year.
The total comprehensive income for the six months ended 30 June
2015 was GBP1.0m (2014: GBP0.8m).
Earnings per share (EPS)
Adjusted basic EPS** was 7.38p (2014: 6.20p). Basic EPS was
2.33p (2014: 1.87p). Diluted EPS was 2.31p (2014: 1.85p).
Cash flows
Cash generated from operations was GBP5.5m (2014: GBP1.8m)
representing 128% of adjusted profit before finance costs. The cash
flows for the six months ended 30 June 2014 included cash outflows
associated with exceptional costs of GBP0.7m and GBP1.3m of one-off
working capital outflows associated with Simpson Millar. There were
no cash outflows associated with exceptional costs for the six
months ended 30 June 2015. In legal services, work in progress days
at 30 June 2015 were 101 (30 June 2014: 96) and the acquisition of
Colemans is not expected to significantly extend this working
capital investment in work in progress, given the high volume and
shorter term nature of its case portfolio.
Interest paid was GBP0.2m (2014: GBP0.1m).
During the first half of 2015 the Group made tax payments of
GBP0.4m (2014: GBP0.6m).
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Investing cash outflows were GBP0.7m (2014: GBP9.3m), with 2014
reflecting in particular the cash element of the Simpson Millar
acquisition of GBP5.0m (net of cash balances acquired) and the
acquisition of two DMP businesses (one via a corporate acquisition,
the other via an asset acquisition).
Financing cash outflows were GBP4.0m (2014: cash inflows
GBP10.1m), including dividend cash outflows which increased to
GBP1.8m (2014: GBP1.6m).
* Profit before tax of GBP1.28m (2014: GBP1.01m) plus
amortisation of acquired intangible assets of GBP2.35m (2014:
GBP1.12m) plus unwinding of discount on contingent consideration of
GBP0.43m (2014: GBPnil) plus exceptional items of GBPnil (2014:
GBP1.23m)
** Adjusted for the net of tax effect of amortisation of
acquired intangible assets, unwinding of discount on contingent
consideration and exceptional items
*** Net debt is bank borrowings and finance lease liabilities
less cash
Financing
The Group's net debt*** position as at 30 June 2015 was GBP5.2m
(30 June 2014: GBP7.1m).
In August 2015 the Group agreed a GBP5.0m extension to its
previous GBP20.0m banking facility with AIB, taking the total
facility to GBP25.0m. The new committed facility comprises a
GBP17.0m revolving credit facility and an GBP8.0m term loan,
providing the Group with significant financing headroom. This new
facility extends to May 2019.
The new facility supported the acquisition of Colemans and
provides long term financing to underpin the Group's growth and
acquisition strategy.
John Gittins
Group Finance Director
*** Net debt is bank borrowings and finance lease liabilities
less cash.
Consolidated statement of comprehensive income - Period from 1
January 2015 to 30 June 2015
Period from 1 January Period from 1 January Year ended 31 December
to 30 June 2015 to 30 June 2014 2014
Unaudited Unaudited Audited
Amortisation Amortisation Amortisation
of acquired of acquired of acquired
intangible intangible intangible
assets, assets, assets,
unwinding unwinding unwinding
Adjusted of discount Total Adjusted of discount Total Adjusted of discount Total
* on contingent * on contingent * on contingent
consideration consideration consideration
and and and
exceptional exceptional exceptional
items items items
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------- ---------- -------------- --------- ---------- -------------- -------- ---------- -------------- ---------
Revenue 22,882 - 22,882 13,942 - 13,942 38,324 - 38,324
Cost of sales (11,369) - (11,369) (6,997) - (6,997) (18,000) - (18,000)
---------------- ---------- -------------- --------- ---------- -------------- -------- ---------- -------------- ---------
Gross profit 11,513 - 11,513 6,945 - 6,945 20,324 - 20,324
Amortisation
of acquired
intangibles - (2,347) (2,347) - (1,117) (1,117) - (3,272) (3,272)
Other
administrative
expenses (8,192) - (8,192) (4,666) (1,229) (5,895) (12,988) (2,534) (15,522)
---------------- ---------- -------------- --------- ---------- -------------- -------- ---------- -------------- ---------
Total
administrative
expenses (8,192) (2,347) (10,539) (4,666) (2,346) (7,012) (12,988) (5,806) (18,794)
Finance income
- unwinding of
discount on
IVA
revenue 871 - 871 1,262 - 1,262 2,332 - 2,332
Finance income
- other 104 - 104 2 - 2 93 - 93
---------------- ---------- -------------- --------- ---------- -------------- -------- ---------- -------------- ---------
Profit (loss)
before finance
costs 4,296 (2,347) 1,949 3,543 (2,346) 1,197 9,761 (5,806) 3,955
Finance costs (239) (427) (666) (186) - (186) (506) - (506)
---------------- ---------- -------------- --------- ---------- -------------- -------- ---------- -------------- ---------
Profit (loss)
before
taxation 4,057 (2,774) 1,283 3,357 (2,346) 1,011 9,255 (5,806) 3,449
Tax (expense)
credit (822) 562 (260) (721) 505 (216) (1,839) 1,248 (591)
---------------- ---------- -------------- --------- ---------- -------------- -------- ---------- -------------- ---------
Profit (loss)
for the period 3,235 (2,212) 1,023 2,636 (1,841) 795 7,416 (4,558) 2,858
---------------- ---------- -------------- --------- ---------- -------------- -------- ---------- -------------- ---------
Total
comprehensive
income (loss)
for the period 3,235 (2,212) 1,023 2,636 (1,841) 795 7,416 (4,558) 2,858
Earnings per
Share
Basic 7.38 2.33 6.20 1.87 17.17 6.62
Diluted 7.30 2.31 6.13 1.85 16.95 6.53
* Before amortisation of acquired intangible assets, unwinding
of discount on contingent consideration and exceptional items.
All of the profit and comprehensive income for the period is
attributable to equity holders of the parent.
Consolidated statement of financial position as at 30 June
2015
Company Number 04425339
As at 30 June As at 30 As at 31
2015 June 2014 December
2014
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
ASSETS
Non Current Assets
Property, plant and equipment 1,405 1,268 1,175
Goodwill 17,279 15,995 16,770
Other intangible assets 14,954 17,236 17,424
Trade receivables and amounts recoverable
on IVA services 7,363 10,222 8,294
Total Non Current Assets 41,001 44,721 43,663
-------------------------------------------- -------------- ----------- ------------
Current Assets
Trade receivables and amounts recoverable
on IVA services 13,472 14,608 15,366
Other current assets 6,338 2,574 3,630
Unbilled income 5,755 4,629 5,359
Cash and cash equivalents 2,563 4,612 2,370
Total Current Assets 28,128 26,423 26,725
-------------------------------------------- -------------- ----------- ------------
Total Assets 69,129 71,144 70,388
-------------------------------------------- -------------- ----------- ------------
EQUITY
Share capital 450 450 450
Share premium account 2,514 2,514 2,514
Treasury shares (727) (727) (727)
ESOP share reserve (517) (517) (517)
Merger reserve 11,842 11,842 11,842
Other reserves 254 254 254
Retained earnings 31,657 31,236 32,359
Total equity attributable to equity
holders of the parent 45,473 45,052 46,175
-------------------------------------------- -------------- ----------- ------------
LIABILITIES
Non Current Liabilities
Long-term financial liabilities 6,900 11,463 9,338
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Deferred consideration - - 140
Contingent consideration 2,565 5,086 2,201
Deferred tax liabilities 1,078 1,816 1,253
Total Non Current Liabilities 10,543 18,365 12,932
-------------------------------------------- -------------- ----------- ------------
Current Liabilities
Trade and other payables 8,612 7,021 7,707
Contingent consideration 3,000 - 2,435
Deferred consideration 184 - 260
Short-term borrowings 813 298 588
Current tax liability 504 408 291
Total Current Liabilities 13,113 7,727 11,281
-------------------------------------------- -------------- ----------- ------------
Total Liabilities 23,656 26,092 24,213
-------------------------------------------- -------------- ----------- ------------
Total Equity and Liabilities 69,129 71,144 70,388
-------------------------------------------- -------------- ----------- ------------
Consolidated statement of cash flows for the period from 1
January 2015 to 30 June 2015
Period from Period from Year ended
1 January 1 January 31 December
to 30 June to 30 June 2014
2015 2014
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
Cash flows from continuing operating
activities
---------------------------------------------- ------------ ------------ -------------
Profit after taxation 1,023 795 2,858
Taxation 260 216 591
Share based payments charge 36 36 82
Depreciation of property, plant and
equipment 324 182 385
Amortisation of intangible assets and
development expenditure 2,656 1,320 3,752
Finance income - other (104) (2) (93)
Finance costs 666 186 506
(Increase) Decrease in trade and other
receivables (279) 137 263
Increase (Decrease) in trade and other
payables 905 (1,094) (470)
Cash generated from operations 5,487 1,776 7,874
Interest paid (224) (147) (985)
Income taxes paid (382) (628) (1,230)
---------------------------------------------- ------------ ------------ -------------
Net cash generated from operating activities 4,881 1,001 5,659
---------------------------------------------- ------------ ------------ -------------
Cash flows from investing activities
Purchase of property, plant and equipment
(PPE) (480) (145) (271)
Interest received 104 2 93
Purchase of trademarks (1) - (4)
Software development (118) - (638)
Purchase of intangible assets - (266) -
Purchase of debt management and legal
services books (219) (2,698) (2,890)
Acquisition of subsidiaries - (6,208) (9,683)
Net cash absorbed by investing activities (714) (9,315) (13,393)
---------------------------------------------- ------------ ------------ -------------
Cash flows from financing activities
Equity dividends paid (1,761) (1,596) (2,582)
(Payment) Proceeds of long-term borrowings (2,438) 11,462 9,925
Proceeds (Payment) of short-term borrowings 225 199 (100)
Net cash absorbed by financing activities (3,974) 10,065 7,243
---------------------------------------------- ------------ ------------ -------------
Net change in cash and cash equivalents 193 1,751 (491)
Cash and cash equivalents at start
of period 2,370 2,861 2,861
Cash and cash equivalents at end of
period 2,563 4,612 2,370
---------------------------------------------- ------------ ------------ -------------
Consolidated statement of net debt as at 30 June 2015
------------------------------------------------------
Net debt comprises:
Period from Period from Year ended
1 January 1 January 31 December
to 30 June to 30 June 2014
2015 2014
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
-------------------------- ------------ ------------ -------------
Short term borrowings 813 298 588
Long term borrowings 6,900 11,463 9,338
Cash and cash equivalent (2,563) (4,612) (2,370)
Net debt 5,150 7,149 7,556
-------------------------- ------------ ------------ -------------
Consolidated statement of changes in equity for the period from
1 January 2015 to 30 June 2015
Share ESOP
Share Premium Merger Treasury Other Share Retained Total
Capital Account Reserve Shares Reserves Reserve Earnings Equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1 January
2014 436 528 11,842 (727) 254 (517) 32,001 43,817
Changes in equity
for the
six months ended 30
June
2014:
Total comprehensive
income
for the period - - - - - - 795 795
Share based
payment expense - - - - - - 36 36
Issue of shares 14 1,986 - - - - - 2,000
Dividends of 3.85
pence
per share - - - - - - (1,596) (1,596)
Balance at 30 June
2014 450 2,514 11,842 (727) 254 (517) 31,236 45,052
Changes in equity
for the
six months ended 31
December
2014:
Total
comprehensive
income
for the period - - - - - - 2,063 2,063
Share based
payment expense - - - - - - 46 46
Dividends of 2.30
pence
per share - - - - - - (986) (986)
Balance at 31
December
2014 450 2,514 11,842 (727) 254 (517) 32,359 46,175
Changes in equity
for the
six months ended 30
June
2015:
Total comprehensive
income
for the period - - - - - - 1,023 1,023
Share based
payment expense - - - - - - 36 36
Dividends of 4.10
pence
per share - - - - - - (1,761) (1,761)
Balance at 30 June
2015 450 2,514 11,842 (727) 254 (517) 31,657 45,473
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 2015, which
are unaudited, were approved by the Board on 2 September 2015. The
financial information contained in this interim report does not
constitute statutory accounts as defined by s434 of the Companies
Act 2006. This report has neither been audited nor reviewed
pursuant to guidance issued by the Auditing Practices Board.
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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
2014.
The statutory accounts for the year ended 31 December 2014 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 AIB Group (UK) plc
extends to 2019 and was refinanced in August 2015 to provide a
total facility of GBP25m. For the purpose of considering going
concern the board has considered a period of at least 12 months
from the date of approving these interim results.
2 Tax expense
For the period ended 30 June 2015 tax is charged based on the
estimated average annual effective corporation tax rate of 20.25%
(period ended 30 June 2014: 21.50%).
Notes (continued)
3 Earnings per share (EPS)
Period from Period from Year ended
1 January to 1 January 31 December
30 June 2015 to 2014
30 June
GBP'000 2014 GBP'000
GBP'000
------------------------------------ ---------------- ------------ -------------
Numerator
Profit for the period - used in
basic and diluted EPS 1,023 795 2,858
Denominator
Weighted average number of shares
used in basic EPS 43,830,708 42,524,667 43,183,055
Effects of:
* employee share options 488,021 511,838 569,725
Weighted average number of shares
used in diluted EPS 44,318,729 43,036,505 43,752,780
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 Period from 1 January Year ended 31 December
to 30 June 2015 to 30 June 2014 2014
Unaudited Unaudited Audited
Amortisation Amortisation Amortisation
of acquired of acquired of acquired
intangible intangible intangible
assets, assets, assets,
unwinding unwinding unwinding
Adjusted of discount Total Adjusted of discount Total Adjusted of discount Total
* on contingent * on contingent * on contingent
consideration consideration consideration
and and and
exceptional exceptional exceptional
items items items
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------- ---------- -------------- -------- ---------- -------------- -------- ---------- -------------- --------
Total
comprehensive
income (loss)
for the
period 3,235 (2,212) 1,023 2,636 (1,841) 795 7,416 (4,558) 2,858
Adjusted
earnings
per share *
Basic 7.38 6.20 17.17
Diluted 7.30 6.13 16.95
* Before amortisation of acquired intangible assets, unwinding
of discount on contingent consideration and exceptional items.
4 Dividends
During the interim period, the final dividend relating to the
year ended 31 December 2014 of 4.10p per share was paid (6 months
ended 30 June 2014: 3.85p). Dividends were waived on 2,082,753 (6
months ended 30 June 2014: 2,158,565) of the 45,024,875 ordinary
shares (6 months ended 30 June 2014: 43,609,346 ordinary shares).
Of the dividends waived, 888,586 relate to shares held by the
Fairpoint Group plc Employee Benefit Trust and 1,194,167 relate to
shares held in treasury.
Notes (continued)
5 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 and operational
strategies.
Measurement of operating segment profit and assets
The accounting policies of the operating segments are as
described in the Group's 2014 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
exceptional items, unwinding of discount on contingent
consideration and amortisation of goodwill, brands and acquired
intangible assets) 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
four operating segments - Individual Voluntary Arrangements (IVA),
Debt Management Plans (DMP), Claims Management and Legal Services.
These segments are the basis on which the Group is structured and
managed, based on its principal services provided. The reportable
segments reflect the Group's current and future strategic focus on
IVAs, DMPs, Claims Management and Legal Services activities, which
each contribute a significant proportion of the Group's
revenue.
The segments are summarised as follows:
- IVA consists primarily of the Group company Debt Free Direct
Limited, the core debt solution brand. 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 in as little as five years of the
agreement commencing.
- DMP consists primarily of the Group company Lawrence Charlton
Limited, the trading brand used to provide 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 more than 5 years
to complete and offer consumers a fixed repayment discipline as
well as third party management of creditors.
- Claims Management activities involves enhancing the financial
position of our customers through Payment Protection Insurance
(PPI) and other claims and offering a switching facility on
personal outgoings such as utility costs, with the primary
objective of making the consumers' money go further.
- Legal services activities provide a range of consumer-focused
legal services with main lines being family, personal injury and
clinical negligence through 13 offices around the UK.
Notes (continued)
5 Segment analysis (continued)
Six month period ending 30 June 2015
Claims Legal
IVA Debt M'ment M'ment Services Unallocated Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Total external revenue 5,587 3,901 2,079 11,315 - 22,882
Total operating profit 91 1,517 392 1,321 - 3,321
Finance income - unwinding
of discount on IVA revenue 871 - - - - 871
Finance income - other - - - 102 2 104
Adjusted profit before finance
costs 962 1,517 392 1,423 2 4,296
Finance expense - - - - (239) (239)
Adjusted profit (loss) before
taxation 962 1,517 392 1,423 (237) 4,057
Amortisation of acquired
intangible assets (235) (1,644) (121) (347) - (2,347)
Finance cost - unwinding
of discount on contingent
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