Consumer debt propels Debt Free

By MICHAEL CLARKE
Updated:

 

DEBT advice group Debt Free Direct (DFD) has reported surging profits on the back of the UK's increasingly debt-stricken consumers.

The Aim-listed company said the market for debt advice and services has swelled since the first quarter of 2004 as the housing market has stagnated and interest rates increased.

DFD specialises in taking consumers through the Individual Voluntary Agreement (IVA), where creditors agree to restructure a person's debts in return for guaranteed regular payments, and claims the market for IVAs has grown by 40% over the past year.

Pre-tax profits for the year to 30 April have grown to £1.5m, compared with just £64,000 last year, on the back of a doubling in turnover to £8.4m.

The company said consumers are struggling because the housing market has stagnated and homeowners have less capacity to remortgage and release equity. At the same time, lenders are tightening their criteria, further reducing consumers' capacity to release house equity.

Chief executive Andrew Redmond said: 'The result is that an increasing number of consumers are finding it impossible to sustain the record levels of debt that they have built up over recent years.

'The signs of consumer debt fatigue are there for all to see. We are likely to benefit from this consumer downturn and confidently predict continued organic growth in the year ahead.'

Total employee numbers have grown by 74% to 153 during the year, whilst annual turnover per employee has increased to £82,000, an increase of 15%.

The company said it is confident it will declare a maiden dividend at the end of the current financial year in April 2006.

Shares in the company rose 7½p to 196½ in morning trading. Canny investors who picked up the share in November would have nearly doubled their money on today's price.

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