Trading Statement

Fairpoint Group PLC
17 January 2008


17 January 2008


                              FAIRPOINT GROUP PLC

                                 TRADING UPDATE


Fairpoint Group plc ('Fairpoint' or 'the group'), a leading provider of advice
and solutions to financially stressed consumers, today releases a trading update
ahead of its preliminary results announcement, which will be made on 26 February
2008.


In overview

•   Fairpoint's lead volumes and lead acquisition costs both improved 
    significantly in the final quarter of 2007. As a result, the group's
    market share of IVAs reached 28% in the final quarter of 2007.

•   Lead volumes have increased significantly in January (as expected) and 
    are being delivered at substantially lower costs than the same period 
    last year, in line with our October experience.

•   The business continues to progress with operational improvements and 
    further cost reductions have been achieved.

•   The macro economic climate continues to be favourable to the group and the 
    impact of the credit crunch is expected to lead to an increase in the 
    number of financially stressed consumers who will need our assistance.
    Mortgage and credit card rates remain high and some 700,000 consumers 
    are due to come out of fixed rate deals over the next 6 months and will 
    face sharply increased mortgage costs. For over-indebted consumers, static 
    or falling house prices will reduce the ability to pay off unsecured debt 
    periodically by releasing equity from their houses.

•   A recent KPMG report forecast 130,000 borrowers entering into IVAs or 
    bankruptcies in 2008, a rise of 19% over last year. We also expect 2008
    to be a record year for the numbers seeking debt advice from the group.

•   The Board is confident in its outlook for the financial year 2008



Trading performance

•   Fairpoint's lead volumes and lead acquisition costs both improved 
    significantly in the final quarter of 2007. January has started positively 
    with lead volumes increasing as expected and cost per lead in line with 
    expectations.

•   Contribution per lead was supported by strong conversion rates particularly
    within the IVA business, although the positive volume benefits were offset 
    by lower fee levels. Lower agreed IVA fee levels are now coming through
    and there is some evidence of lower realisations, which may be the flip 
    side of the higher volumes and consumer pressure currently being felt.

•   Whilst our mortgage and loan business has been impacted by the credit 
    crunch which slowed trading in November and December, the business remains
    strongly profitable and is expected to grow with our lead volumes.

•   We continue to exercise strong cost control, with monthly overheads falling
    and the integration of Clear Start remaining on track to complete in quarter
    two, delivering anticipated synergies of £2 million in 2008.

•   Our strategic review is now complete and in addition to the cost savings 
    previously announced the group has decided to cease all new business 
    activity in Debt Free Direct Australia and dispose of the residual back
    book. The decision maximises shareholder value sooner rather than later, 
    given higher returns on investment available in the UK. Whilst the 
    Australian business was making good progress it would have remained cash 
    negative throughout 2008 and would not have generated significant profit 
    for several years. The disposal is expected to lead to an impairment charge
    of £500,000 in the results to 31st December 2007.


Funding

•   The group has secured a five year revolving credit facility from its 
    bankers, the Royal Bank of Scotland. The facility of £16 million will be 
    used to replace existing funding and provide additional funds to enable the
    group to pursue opportunities that may arise in a rapidly changing market.

There will be an analyst presentation to discuss the preliminary results at
9.30am on 26th February 2008 at Financial Dynamics, Holborn Gate, 26 Southampton
Buildings, London WC2A 1PB. Those analysts wishing to attend are asked to
contact Yasmeen Amorese at Financial Dynamics on [phone] or at
[e-mail].


Enquiries:


Fairpoint Group plc

Andrew Redmond, Chief Executive Officer                          0845 296 0100
Andrew Heath, Finance Director Designate                         0845 296 0200


Numis Securities
Chris Wilkinson                                                  020 7260 1000
Lee Aston


Financial Dynamics
Ed Gascoigne-Pees                                                020 7269 7132
Nick Henderson                                                   020 7269 7114



Notes

At Fairpoint we develop and operate consumer financial services businesses.

We select markets or opportunities which show certain characteristics:

  • Growing and sustainable consumer demand.
  • Caused by deep-rooted market, regulatory or economic factors.
  • Where innovation and effective channel execution can give sustainable
    differentiation.

As such our customers tend to be going through a period of life to which the
mass financial services market is unable to provide a solution.

We make it our business to understand our customers in depth, to help them
through their short term circumstances, and to continue that relationship, if
they so choose, into the future. The solutions offered range from basic advice,
such as simply destroying credit cards and curbing unnecessary expenditure, to
the following solutions:

  • consolidation loan
  • re-mortgage
  • informal arrangement
  • individual voluntary arrangement (IVA)
  • bankruptcy

Fairpoint always seeks (unlike many of its competitors who sell specific
products) to systematically and impartially deliver the best advice to the
consumer and recommend them the most appropriate solution.

Over the last few years we have been very much focused on the over-indebted
market in the UK. Debt Free Direct has pioneered the debt advice and solutions
industry and is a clear leader in the provision of IVAs, while Clear Start's
impartial approach has appealed to a new segment of consumers, and has helped to
take the relationships with the banks into a new era.

Our main objectives are to:

  • introduce to our existing customer base a further range of 'most wanted'
    financial products and solutions;
  • continue to increase our market share, in particular as the market goes
    through a phase of consolidation;
  • address the new growth market of cases where customers are over-extended
    on debt that is secured against their property.

In the meantime we will continue to explore opportunities in markets that fit
our investment criteria.


Fairpoint is based in Chorley, Lancashire, and was admitted to AIM in December
2002.


                      This information is provided by RNS
            The company news service from the London Stock Exchange