Moat: transformational year
Fairpoint Group plc – which last year bought two law firms – said today that its financial success in 2014 has laid the foundations for further acquisitions.
The AIM-listed business, which hitherto focused on ‘debt solutions’, acquired national consumer law firm Simpson Millar last June, and followed it with a deal for niche family practice Foster & Partners.
The company has stated from the start that further deals were on the agenda, and chief executive Chris Moat told the stock exchange that this would allow it to “deploy its core skill of applying process to professional services”.
He said: “During 2014 we have established a significant legal services platform and the full year benefit of this activity will provide an important growth stimulus for 2015. In addition, we expect to continue to pursue acquisition opportunities, with particular focus on the legal services market.”
Investors were told that with net debt as at 31 December 2014 of £7.6m (£4.7m as at 28 February 2015) and a £20m financing facility, “the group is in a strong position to finance its strategy of investment and diversification both organically and by acquisition”.
For the year to 31 December 2014, Fairpoint’s revenue increased 35% to £38.3m, with adjusted profit before tax up 15% to £9.3m. The six and a half months of selling legal services delivered £12m of that revenue and £1.6m of the profit.
Fairpoint’s accounting policy for its legal business states that “services provided to clients, which at the balance sheet date have not been billed, are recognised as legal services revenue. Legal services revenue is included at cost plus attributable overheads, after provision has been made for any foreseeable losses when the outcome of the matter can be assessed with reasonable certainty.
“In respect of contingent matters, where the group’s right to consideration does not arise until the occurrence of a critical event outside the group’s control, revenue and costs are only recognised to the extent the costs are recoverable.”
Mr Moat said 2014 was “a transformational year for Fairpoint”. He continued: “The full-year benefit of this activity will provide an important growth stimulus for 2015 and has already provided a strong start to the year.”
Repeating comments he made when announcing the company’s half year results last September, Mr Moat said the changes wrought by the Legal Services Act were “encouraging industry consolidation and present a unique opportunity to create more competitive consumer offerings”.
Simpson Millar was acquired for an initial consideration of £6.1m cash and £2m in shares, with further consideration of up to £6m based on the financial performance of Simpson Millar for the two 12-month periods ending June 2015 and June 2016. Fosters, based in Bristol, was acquired for a deferred consideration of £400,000.
Those shares were issued at an effective price of 141p; Fairpoint’s share price has been falling over the last year and at the time of writing was at 125p, up nearly 5% on the results.
