Join our community of smart investors

Fairpoint Group transformed

Management has successfully grown profit and revenue while diversifying the business.
March 17, 2015

A strong set of full-year results from Fairpoint Group (FRP) shows the extent of the company’s diversification away from the flat market for individual voluntary agreements (IVA). Non-IVA activities made up 65 per cent of turnover in 2014 - up from 42 per cent the year before - thanks to the acquisition of three debt management books and the law firm Simpson Millar.

IC TIP: Buy at 125p

Since the latter deal was only signed in June, full-year revenues from Simpson Millar were not reflected in Fairpoint's financials. But the acquisition - for an upfront cost of £8.1m in cash and shares and a further consideration of up to £6m - has performed well so far. In six and a half months of trading, the new legal services division made £11.9m in revenues and £1.6m in pre-tax profits. Management expects to pursue further acquisitions in what remains a highly fragmented market for consumer legal services.

Overall, acquisitions helped swell Fairpoint's turnover by more than a third. Adjusted pre-tax profit rose 15 per cent to £9.3m before acquisition and financing costs of £2.5m and amortisation charges of £3.3m.

Broker Shore Capital forecasts full-year adjusted pre-tax profits of £10.1m this year and earnings per share of 17.8p.

FAIRPOINT (FRP)
ORD PRICE:125pMARKET VALUE:£55m
TOUCH:123-127p12-MONTH HIGH:164pLOW: 107p
DIVIDEND YIELD:5.1%PE RATIO:19
NET ASSET VALUE:105p*NET DEBT:16%

Year to 31 DecTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201029.45.99.64.0
201125.9-1.0-2.24.5
201234.410.518.65.5
201328.45.911.16.0
201438.33.46.66.4
% change+35-41-40+7

Ex-div: 21 May

Payment: 19 Jun

*Includes £34.2m of intangibles assets, or 78p a share