‘Technical’ payment wipes out professional services firm’s profit

LANCASHIRE-based consumer professional services specialist Fairpoint Group’s profits have been wiped out by a £9m “technical” injection into its IVA segment.

The Chorley company, which offers legal services, debt management plans and claims management as well as individual voluntary arrangements (IVAs), reports a revenue increase of 41% to £54.1m (2014: 38.3m) for the year to December 31.

Adjusted pre-tax profit increased by 13% to £10.5m (2014: £9.3m), but the £9m non-cash impairment of goodwill in the group’s IVA segment mean there has been a loss before tax of £5.7m (2014: profit before tax of £3.4m) after amortisation and impairment of acquired intangible assets, unwinding of the discount on contingent consideration and exceptional items of £1.4m.

The AIM-listed company said its legal services division, which was only established in June 2014, was responsible for 58% of the group’s revenue (2014: 31%) and represents 67% of the groups revenue.

A highlight of the year was the acquisition in August 2015 of the trade and assets of Colemans-CTTS LLP and CT Support Services, a consumer legal services business, although chief executive Chris Moat said the positive benefits of these were only effective for four months of the period.
 
But Moat said the company’s performance had been boosted by the performance of Yorkshire legal business Simpson Millar in June 2013.

“This is the first full year we’ve had legal services under our belt and the 41% increase in revenue is very good news for the company,” he said.

However, continued difficult market conditions are anticipated for debt solutions which resulted in the non-cash impairment of goodwill in the IVA segment.

Moat said the £9m impairment related to the Iva business Clearstart which it purchased in 2007, and had experienced a 28% reduction in revenue year on year.
 
“The £9m was a non-cash technical accounting issue based on the value of its goodwill,” he said, pointing to the £10.5m profit figure as a more realistic reflection of the company’s performance.

“2015 was a significant year for Fairpoint as we continued our expansion into the legal services market, reporting strong growth in revenues and adjusted profits and completing the acquisition of Colemans to add market leading expertise in volume personal injury, conveyancing and travel law to the Group’s existing legal services offering.

“Having established a wide range of capabilities in consumer legal services, we expect to continue to pursue acquisition opportunities whilst also developing our organic growth agenda.”

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