Fairpoint Group provides a range of consumer targeted professional services. The group’s core business is a consumer legal operation (76% of H116 revenues), supported by legacy debt solutions services.
Current forecasts give a prospective yield of a remarkable 11% and the PER just 4.7x …and that is for the current year to Dec 2016.
Positive news surrounding this share is as follows:
- * The proposed whiplash reforms proposed by George Osborne in his Autumn statement last year have been dropped by the government
* Q3 data from Insolvency Service: personal insolvencies +19%, IVAs +29% year on year https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/562493/Q3_2016_statistics_release_-_commentary.pdf
* Forecast improvement in Mortgage Approvals http://www.tradingeconomics.com/united-kingdom/mortgage-approvals/forecast
* Maximum earn-out payment o deferred consideration for Simpson Millar Solicitors due financial performance exceeding the financial hurdles set http://www.investegate.co.uk/fairpoint- ... 4001EOMHZ/
Most of the above relates to national statistics and there is no way for me to know if FRP will get a bigger/smaller share of those improvements. There is also nothing I know about regarding the Simpson Miller financial hurdles i.e. how strenuous were those targets?
In FRP's Half year report* they said that an increase in exceptional costs has resulted in a sharp fall in first half pretax profit, and added that performance in the second half is likely to be similar. For the six months ended June 30, the company recorded pretax profit of £819k, down from £1.3 million pretax profit in the year ago period, on revenue of £28.3m and £22.9m, respectively. Exceptional costs, including amortization costs, in the period totaled £3.1m versus £2.8m.
Profit, before tax and exceptional items, remained broadly flat at £4.0m
The company said its previously announced decision to wind down debt management services business will lead exceptional costs in the second half of around £2.5m and a non-cash asset impairment charge of £5.5m.
The group has used a bank facility provided by AIB to finance acquisitions. That is reflected in higher net debt mid-year of £15.6m.
The company is changing into a focused legal services business and I see the current issues as temporary and reflected in the company's statement that the interim dividend level being maintained at 2.45p, reflecting confidence in the Group's transition into a Legal Services business.
For further reference see their last webinar* and the Equity Development note*
FWIW I bought a few shares in Fairpoint today...
NB * This forum only allows a max of three links so I will post the missing links in the next message (hopefully)
Carcosa