FY 2015 on track
​Fairpoint provides a range of retail consumer targeted professional services pivoted on debt solutions and legal services and today gave a reassuring update on trading, saying that FY15 results will be in line with expectations. That means 'double digit' year-on-year growth in segmental revenues and adjusted profit and improved margins.
Importantly, the potential impact of proposed changes to small claims limits and whiplash claims outlined in the Autumn Statement has no impact this year, looks manageable i.e. affects 8% of pro-forma revenues, appear specifically focused on whiplash claims relating to road traffic accidents and may well present an opportunity to leverage in-house competitive advantages in processing volume low-cost legal claims.
The key driver for the group is continued development of consumer legal services business Simpson Millar LLP, with the current year underpinned by the Colemans acquisition last August.
In summary, the strategic transition and evolution progresses. Debt solutions remains profitable and cash generative, but in the absence of any recovery in market volumes the shift towards legal services will continue.
The shares' reaction to the Autumn Statement was perhaps inevitable after a strong run, but looks overdone. The increased breadth and balance of group activities post recent acquisitions should leave it well-placed to capitalise as reform is rolled out, and certainly limits the downside.
The current, well-covered 5% prospective FY16 yield provides material attractions pending further clarification, possibly with the FY15 results, due on 16 March.
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