Fairpoint - Work at Home

Transcription

1 Fairpoint Transformed

2 Fairpoint is a diversified consumer professional services company Chris Moat, Chief Execu2ve Officer John Gi9ns, Group Finance Director 2

3 Fairpoint a business transformed Chris Moat

4 A quick history Date Milestone 1997 Debt Free Direct established 2002 AIM IPO 2007 Acquisi2on of Clear Start Now market leader in IVAs 2008 Chris Moat appointed CEO Change of name to Fairpoint Group Entered Debt Management Plan market 2009 Business turnaround; dividend reintroduced 2010 Diversifica2on strategy established 2012 Claims Management division established 2014 Enter legal services market with Simpson Millar acquisi2on 2015 Acquisi2on of Colemans legal services firm Group is now opera2ng in: Consumer legal services Debt services including IVAs and Debt Management Plans Claims services 4

5 TransformaNon in numbers H REVENUES H REVENUES CM LS IVA IVA LS DMP DMP CM Legal services revenues: 31% of Group revenues in the year ended 31 December % of Group revenues in the half year ended 30 June % of pro forma Group revenues following the Colemans acquisi2on 5

6 Group mission Poin2ng customers towards be]er solu2ons Debt services agenda Make money go further Legal services agenda Make law accessible

7 Our porqolio of brands 7

8 A growing opportunity. Addressable Market Size IVA market c m p.a. DMP market c. 150m p.a. Consumer legal services c. 10bn p.a. (source: Fairpoint es0mates) Legal Services Claims Services Debt Management IVA Time 8

9 PoinNng customers towards bexer solunons Using a group wide set of values across all of our brands Serving markets not creanng them 9

10 Building the legal services plaqorm Chris Moat

11 A business model for success MarkeNng & DistribuNon Product PorQolio Management PlaQorm capability Marke2ng responsible for new business genera2on A mission to: Make law more accessible & Make money go further Offering a broader range of consumer products A good blend of cash genera2ve products and higher margin, cash consump2ve products Scalable placorms to support growth U2lising organic and acquisi2on ac2vity to develop the placorm 11

12 MarkeNng and distribunon model Enquiry generanon InformaNon gathering Technicians Online First response Debt solu2ons Offline Qualifica2on Claims 3 rd party Packaging Legal 12

13 Product PorQolio Debt SoluNons Claims Services Family Law Personal Law Volume legal services Complex Personal Injury IVA Debt Management PPI Mis- selling Packaged bank accounts Family Immigra2on Care homes Private client Educa2on & community care Motoring offences Employment Road traffic accidents Fixed recoverable costs Conveyancing Serious personal injury Clinical negligence Industrial disease Holiday Monthly contracted fees Con2ngent fees Package pricing plus bespoke and con2ngent Package pricing plus bespoke Fixed and condi2onal fees Portal process and pricing for cost recovery Condi2onal fees Full cost recovery on success Fast cash cycle <1 year Fast cash cycle <1 year Fast cash cycle <1 year Fast cash cycle <1 year Moderate cash cycle 6 months- 2 years Slow cash cycle 2-5 years 13

14 Making law more accessible the ranonale Problem Fear of cost or inability to pay SoluNon Certainty and transparency Fear of lawyers stuffy and unapproachable Access to law Unfulfilled demand / fragmented market New solu2ons for those who previously relied on Legal Aid Online fulfilment where appropriate Launch SM Direct around family, employment, motoring offences others will be added 14

15 Making law more accessible (1) 15

16 Making law more accessible (2) 16

17 PlaQorm capability TradiNonal legal pracnce Our volume personal injury pracnce Old fashioned Limited use of technology Paper intensive Qualified fee earner dependent Limited scale efficiencies Extensive use of IT and workflow management supports paperless working Professional, non- lawyer, management Separate administra2ve func2ons support more efficient use of lawyers 2me 17

18 Legal division shape today Simpson Millar + Colemans Simpson Millar offices 519 employees in 10 offices Pro- forma annual revenues of over 40m Making progress towards hub and spoke model: merged two Manchester offices Liverpool and Sheffield closed increased scale in key geographies Simpson Millar offices Colemans offices (Manchester, Kingston, Acton) Closed offices 18

19 Results Financial analysis Results 2015 John John Gi9ns Gi9ns

20 IntroducNon & Overview Reported and adjusted revenues and profits have increased significantly compared to the first half of 2014 Fairpoint is now reshaped into a broadly based professional services group: Legal Services is now the largest single business segment represen2ng 49% of total revenue in the period (2014: 8%) On a pro forma basis, Legal Services now represents 62% of Group revenues Managing IVA and debt management for margin and cash genera2on in challenging market condi2ons Strong balance sheet, cash genera2on and new enlarged long term bank facili2es provide a placorm for further growth Increased dividend reflec2ng strong profit and cash performance and confidence in the future Well placed for strong performance in second half of

21 Income statement highlights m H H Revenue Gross profit Adjusted profit before tax Profit before tax Adjusted basic EPS 7.38p 6.20p Revenues up 64%, driven by acquisi2on in legal services Adjusted profit before tax up by 21% to 4.1m (H1 2014: 3.4m): Adjusted for amor2sa2on of acquired intangible assets of 2.3m (H1 2014: 1.1m), unwinding of discount on con2ngent considera2on of 0.4m (H1 2014: nil) and excep2onal charges of nil (H1 2014: 1.2m) Finance costs of 0.7m (H1 2014: 0.2m), including unwinding of discount on con2ngent considera2on of 0.4m (H1 2014: nil) Effec2ve tax rate on adjusted PBT of 20.3% (H1 2014: 21.5%) Adjusted basic EPS of 7.38p (H1 2014: 6.20p), up by 19% Interim dividend of 2.45p, up by 7% 21

22 Balance sheet m 30 Jun '15 31 Dec '14 30 Jun '14 Property, plant & equipment Goodwill Other intangible assets Trade receivables & amounts recoverable on IVA Total non- current assets Trade receivables & amounts recoverable on IVA Other current assets Unbilled income Cash Total assets Equity & reserves Non- current financial liabilities Contingent and deferred consideration Deferred tax Total non- current liabilities Net working capital reduced to 24.2m (H1 2014: 25.0m, FY 2014: 24.9m) Legal services work- in- progress days of 101 (H1 2014: 96, FY 2014: 104) Majority of con2ngent and deferred considera2on relates to Simpson Millar Trade and other payables Contingent and deferred consideration Current financial liabilities Corporation tax Total current liabilities Total equity and liabilities

23 Cash flow m H H Opera2ng Opera2ng pre excep2onals Inves2ng (0.7) (9.3) Financing (4.0) 10.1 Opera2ng includes: Strong cash genera2on, par2cularly from debt ac2vi2es Opera2ng cash flow conversion 128% (H1 2014: 108%) Reduc2on in tax payments of 0.2m Inves2ng includes: 0.6m of mostly infrastructure investment 0.2m of deferred considera2on rela2ng to earlier acquisi2ons Financing includes: 1.8m dividends paid (H1 2014: 1.6m) 23

24 Cash posinon and facilines m 30 June 31 Dec 30 June Principal bank debt 2015 (7.8) 2014 (10.0) 2014 (11.7) Cash Net debt (5.2) (7.6) (7.1) Reduc2on in net debt during the period reflects strong opera2ng cash genera2on 5m extension to banking facility signed with AIB in August 2015 taking total facility to 25m, comprising 17m revolving credit facility and an 8m term loan Facility extends to May 2019 New facility supports acquisi2on of Colemans and provides long term financing to underpin the Group s growth and acquisi2on strategy Debt to EBITDA ra2o 0.45x as at 30 June 2015 Net debt immediately following Colemans acquisi2on of 13.2m 24

25 Track record revenues / adjusted PBT 25

26 Track record earnings / dividends per share 26

27 Summary and quesnons Chris Moat

28 Investment Summary Par2cipa2on in highly specialised markets with a]rac2ve margins, low capital intensity and strong cash genera2on A resilient business model for professional services: Access to customers Balanced product porcolio Placorm capability in target markets Growing strongly through legal services both organically and through acquisi2on, offse9ng headwinds in tradi2onal debt markets Strong financial posi2on with new enlarged long term bank facili2es to fund further growth A]rac2ve and growing dividend Growing momentum and confidence Strong H1 with benefit of recent acquisinon to flow through H2 28

29 Appendix

30 Shareholders Name Number of ordinary shares % of issued share capital Miton Asset Management 11,165, % Hargreave Hale & Co. 8,742, % Ashcourt Rowan Asset Management 2,549, % Henderson Global Investors 2,112, % Invesco Advisers Inc 1,852, % Schroders Investment Management 1,721, % Hargreaves Lansdown 1,491, % Simpson Millar LLP 1,415, % 30

31 Board biographies Chief ExecuNve Officer Chris Moat Chris has been CEO of the Group since May 2008 and has guided the company from a single product insolvency business to the diversified professional services business it is now. He has a wealth of experience from highly successful retail- focused, marke2ng led financial services businesses. Before joining Fairpoint, Chris held a variety of general management roles including Managing Director of Direct Line, UKI Partnerships, and directorships with Churchill Insurance and Green Flag. Chris s previous roles also include Director of Lending at GUS Home Shopping and Head of Consumer Direct at GE Capital Bank. Finance Director & Company Secretary John Gijns John is a graduate of the London School of Economics and qualified as a Chartered Accountant with Arthur Andersen. He has over 17 years of experience as a Finance Director in the public markets, with growing service businesses including Spring Group plc, Vertex Data Science Limited and Begbies Traynor Group plc. John is also a Non- Execu2ve Director and chairs the audit commi]ee of the Electricity North West group of companies, the regulated electricity distribu2on business for the North West of England. Appointed 1 October

32 Revenue bridge* m H IVA Debt Management Claims Management Legal Services H * Subject to rounding 32

33 Adjusted profit bridge m H IVA Debt Management Claims Management Legal Services H

34 Segment summary revenue IVA 1 ( m) DMP ( m) Claims Management ( m) Legal Services ( m) H1 14 H1 15 H1 14 H1 15 H1 14 H1 15 H1 14 H new cases (H1 2014: 1,464) Average gross fee per new case 3,036 (H1 2014: 3,458) 16,889 fee paying cases under management (H1 2014: 18,717) 20,730 cases under management (H1 2014: 21,422) Focus has been on customer service to exis2ng clients and new regula2on ac2vity No acquisi2ons made in period Claims levels from exis2ng IVA clients reaching maturity Claims from DMP porcolio being developed Full six month revenue contribu2on (two weeks previous period) Further acquisi2on of Colemans in August 2015 complements range of legal services offered 1 Includes unwind of discount on IVA revenue of 0.9m (H1 2014: 1.3m) less bad debt charge of 0.4m (H1 2014: 0.6m) 34

35 Segment summary adjusted PBT 1.3 IVA ( m) 1.0 DMP ( m) Claims Management ( m) Legal Services ( m) H1 14 H1 15 H1 14 H1 15 H1 14 H1 15 H1 14 H1 15 Focus on cost control has ensured margins are broadly maintained despite reduced revenues Margins broadly flat during period Regulatory changes expected to increase cost base Emphasis con2nuing to switch from IVA to DMP client claims New products in development Good margin progress Group infrastructure developed for significant growth 35

36 OperaNonal efficiency 14.1% MarkeNng (% of revenue) Other direct costs (% of revenue) 36.1% 44.7% 5.0% H H H H Con2nued focus on cost efficient marke2ng and cost control Overall direct costs fallen to 49.7% of revenue (H1 2014: 50.2%) 36

37 Growing momentum via acquisinon Colemans acquired in August 2015 A class leading placorm in volume personal injury, conveyancing and travel law Acquisi2on is complimentary to the range of services provided by Simpson Millar Ini2al considera2on is underpinned by a strong case load Future con2ngent considera2ons expected to be self financing 200 employees in 3 loca2ons 37

38 Colemans deal Headings Acquisi2on date Ini2al considera2on Con2ngent considera2on Colemans financial performance Year ended 30 April 2015, unaudited Terms 14 th August m, of which 1m se]led in 132p 7m, of which 50% se]led in 132p Payable in two annual tranches in 2016 and 2017 Dependent on financial performance to June 2017 Revenue m Adjusted EBITDA - 2.5m 38

39 Financial trends Segmental trends: Legal services: 20 week contribu2on from Colemans and posi2ve outlook IVA segment: expected to remain challenging with focus on margin and cash DMP segment: expect slight margin erosion as a result of increased compliance costs Claims management: con2nuing modest posi2ve contribu2on 8.0m ini2al cash considera2on for Colemans paid in August 2015, together with issue of 755k new shares Colemans acquisi2on and integra2on costs of 1.0m an2cipated in H2 1.5m first year con2ngent considera2on for Simpson Millar expected in Q3 2015, together with issue of 1,064k new shares 2015 full year effec2ve tax rate expected be 20-21% Interim dividend of 1.1m payable in October

40 2015 Half Year results