The firm said profits for the current financial year would be “substantially lower than market expectations” after a 15.5 per cent annual decline in personal insolvencies led to an eight per cent fall in Individual Voluntary Arrangements (IVAs), a key offering of the firm.
In a trading statement Fairpoint Group added that it now expected a year-on-year decline of 11.5 per cent in the IVA market, more than previously forecast.
Meanwhile the firm also warned that a fall in unemployment rates over the last two months would lead to a drop in personal insolvency statistics in the next two quarters of 2011.
As a result the management team of Fairpoint Group is taking mitigating actions which include reining in its non-viable marketing expenditure, reducing the Group’s cost base and growing the firm’s Financial Services business.
Despite the warning, the firm remained optimistic over its growth potential next year.
A statement accompanying the profit warning said: “We expect a strong recovery next year despite the prevailing market conditions. This is further supported by a significantly reduced dependence on IVAs as the benefits of our diversification strategy lead to an expected doubling of our non-IVA income streams in 2012.”