IVAs contributed £2.1m to the group’s balance sheet in the first half of the year, an annual drop of £3.1m which assisted a fall in pre-tax profits to £0.0m, down from £2.6m in the corresponding period last year.
Fairpoint Group said it plans to reduce its dependency on IVA income by growing other revenue streams, in accordance with a trading update issued in May which anticipated the weakened financial performance.
Chris Moat, chief executive of Fairpoint Group, said the firm’s main focus in the second half of this year will be the pilot and roll out of loanextra.com, its new short-term lending business.
"We are growing our debt management business, largely through acquisition and have now launched our lending business trial which we believe will provide a platform for growth through 2012," Moat said.
The firm has also reduced costs in its IVA division and purchased a small IVA portfolio alongside three other debt management portfolios acquired from smaller providers.
It is also in discussions with HM Revenue and Customs and creditors over a refund of VAT charged on IVA provision, following a landmark high court ruling which declared that VAT should not be charged on IVAs.
Fairpoint Group is expecting this to result in a cash payment in the region of £5m-£9m, which will generate an exceptional gain in revenues and earnings.
At the same time gross profit from debt management plans grew from £1m in the first half of 2010 to £1.5m, and since the half year the group has acquired a further 2,000 cases which it expects will provide further impetus to its financial performance in future.
Fairpoint Group is one of the largest IVA providers, and is the parent firm of brands including Debt Free Direct and moneyextra.com.