Cleardebt to de-list from AIM as profits sink on reduced margins

published 7 March 2013

Shares in Cleardebt Group lost over 60 per cent of their value on Thursday after announcing plans to cancel its admission on AIM on the back of a disappointing set of half year results.

Hit by a reducation in individual voluntary arrangements (IVAs), pre-tax profit for the second half of 2012 fell 73% from £0.45m to £0.12m, on revenues of £4.66m, which were up two per cent compared to £4.55m the prior year.

Gross margins for the period were reduced substantially to 41% (2011: 53%), reflecting increased marketing costs and high sales focused payroll costs spread over poor levels of new business in the period.

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New IVAs in the period declined to 689 (2011: 833), largely due to the fact that referrals from OFT-compliant lead sources are proving harder to come by as many are increasingly restricted to fewer legitimate data sources, driving prices up in some cases but mainly reducing the volumes of referrals. The group said it is continuing to expand its compliant referral base and look for new referral sources.

More positively, cash at the period end stood at £1.41m, compared to £0.46m at June 30th.

Chief Executive Officer David Mond said: "This was a disappointing and difficult half-year borne out by a continuation of the general trend of falling personal insolvency numbers in the UK over recent quarters. We have felt the effect of this with poor volumes of new IVAs passed in the period although we have increased the numbers of clients under debt management.

"We are however expecting increased fee income derived from mis-sold payment protection insurance claims as claims for our clients in an IVA are submitted and proceeds are received into the IVAs. ClearCash is making progress on its new platform with its enhanced product offering proving more attractive to consumers."

The group also said that it can no longer justify the costs associated with its AIM listing.

"We have been unable to obtain funding from the AIM markets for some time now and we see no prospect of doing so in the near future due to our low market capitalisation and our business sector and continue to rely on funding from our main shareholder in order to make acquisitions and finance the business," it said.

"We intend to put in place a matched bargain facility for shareholders who wish to buy or sell the Group's shares once we have delisted."

The share price fell 62.50% to 0.30p by 13:37.