Financial Plans

Financial service business Fairpoint Group have seen their shares plummet, and have issued a debt warning as activity levels fall. The company shares have dropped by a fifth, from 19.5p to 68.5p, a drop of 22.16%, and the North West have cited sluggish activity – due to falling unemployment levels – as the main reason.

Compared to the end of last year, unemployment has fallen nationally, this saw drop in personal insolvencies as of the first quarter of this year. The number of Individual Voluntary Arrangement – known as an IVA’s, have fallen by 8%, leading to the average value of new arrangements to drop, Fairpoint has pointed out that creditors are now taking on clients with smaller debts and lower monthly payments.

The company have made it clear that they expect a slow start to the new financial year, saying personal insolvencies should fall over the next six months. This could have a massive effect on the IVA market, and could cause a fall of 11.5% over the course of the whole year – average fees are also likely to see a drop.

IVA is the abbreviation of individual voluntary arrangement .

Fairpoint Group has also commented that unemployment could begin to rise again – leading to a similar trend in interest rates and subsequent higher numbers of IVA. To cover the dip, the company is implementing a reduction in market spending, which in turn will reduce volumes, and is considering ways to lower its cost base by about a million pounds. In addition, it is looking to drive its financial services division – including product switching and price comparison services.

In a released statement, Fairpoint said ‘Notwithstanding the mitigating actions being taken across the group, the board now expects that profit before tax for the current financial year will be substantially lower than market expectations.’ They also added that they were looking forward to a strong recovery next year – in the face of prevailing market conditions. With a greatly reduced dependence on IVA’s, they can see a doubling of non IVA income streams in the next couple of years.

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