Fairpoint in line for major VAT rebate
TRADING at debt management company Fairpoint worsened during the first six months of 2011 as it slumped to a pre-tax loss of £1.6m (2010:£1.7m profit) as sales dropped by 15% to £11.8m (£13.9m).
The Chorley-based firm blamed the loss on £1.7m of exceptional costs, without which it said adjusted earnings were at break even (£0m) level. Exceptional costs principally related to writedowns in the value of outgoing IT infrastructure used in its IVA business.
The company said that since it issued a profit warning in May indicating the “benign” economic environment, which meant the IVA market declined by around 11.5%.
Fairport said that trading had been “in line with expectations” since the profit warning and pointed to a number of positive factors which it said would help it to return to profit by the end of the year.
These include a £1.4m annualised reduction in the cost base of its core IVA business, which trades as Debt Free Direct and Clear Start UK. It also said the new IT system within the IVA business would bring further savings, and that it expected rapid growth in its financial services division during the second half of the year.
It offers secured loans to customers and will soon begin a trial of a short-term money lending business. It also has a money management division selling pre-paid debit card and utility switching services.
More significantly, however, the company said that it expects a gain of between £5m-£9m in the form of a refund for VAT services which it said had been “erroneously” charged against the group since June 2007. This follows a recent court ruling in the sector, although Fairpoint said “the precise timing and quantum” of the payout are not yet certain.
Chief executive Chris Moat said: “Our strategy of diversifying the business has continued and is increasing in pace and delivery.
“We are growing our debt management business, largely through acquisition and have now launched our lending business trial which we believe will provide a platform for growth through 2012.”
