Investment improves Churchwood’s prospects, says Naden

STOCKPORT-based debt management firm Churchwood Financial trebled pre-tax profits in the year to March 31, 2009 to £1.6m (2008: £462,000), according to newly-field accounts.

The company also saw its sales increase by almost 50% to £13.7m (£9.4m) during the year, which, when combined with revenues from its insolvency arm Kingsgate Financial brought group revenues to more than £24m and operating profits to around £3.1m, according to chief executive Paul Naden.

Naden, who spent much of last year attempting to hammer out a £30m buy-out which would have seen founder Mike Noblett sell the majority of his shares, said that the business had continued to trade well since these figures were filed, despite the distraction of the stalled deal negotiations.

“For 2010, turnover will be around the same – we’ll probably push up by another £1m but our ebitda will increase to over £6m. There’s some deal costs in there as well, but even when they’re stripped out it’s probably around £5m.”

He attributes its improving performance on a decision to ditch loan broking and other product cross-selling to concentrate on its core debt management and IVA services, as well as a decision to source its own leads from a sister firm rather than buying them in the open marketplace.

“We’re trying to be more self-sufficient in terms of our leads so that we know we’re generating that right quality of calls and that they’re compliant,” he said.

“We continue to work on improving our compliance procedures, which I think at the moment are second to none.”

Naden believes that compliance will become much more important to the sector following a review of the sector by the Office of Fair Trading, which is planning to impose tougher criteria on companies looking to operate in the sector from next year.

“The industry is going to go through major changes as the regulator steps on the gas – and rightly so,” he said.

“It will force some people who aren’t complying out of business, which is no bad thing. There are too many one-man bands setting up shop every six months and it’s time the industry cleaned up its act.”

He added that the buy-out negotiations were likely to recommence at some stage towards the end of the year but said that a decision to put it on the back burner had allowed the group to concentrate on operational matters, including the move to a new 22,000 sq ft headquarters at the former home of National Tyre Services.

“All of the shareholders are in agreement of what we want to do and something will happen – it’s just a case of when.”

Another Manchester-based debt management firm, Chase Saunders Ltd, has recently been placed into liquidation after it was wound up owing creditors more than £2.2m.

Liquidators Clarke Bell said that there were few assets to realise as the company merely operated under the terms of a licence provided by former parent Chase Saunders Holdings Ltd, which is still operational. A new business known as InTouch Financial Solutions is now understood to be operating from Chase Saunders’ city centre offices.

“I think the collapse of yet another local debt management company indicates just how fragile this sector can be for firms who have appeared to burn their cash on the acquisition trail,” said Bev Budsworth, managing director of Trafford Park-based IVA specialist The Debt Advisor.

“Firms that concentrate on growth by acquisition need to remember that it’s an expensive business and that they need to keep their finger on the pulse in terms of managing costs when acquiring a debt book.

“Prudence is the watch word and firms should adopt a balanced approach to business growth.”