First Day Dealings

RNS Number:8574N
Debtmatters Group PLC
22 June 2005


                             Debtmatters Group plc

                        ("Debtmatters" or the "Company")

                    Placing and Admission to Trading on the
                         Alternative Investment Market

                                   Key Points

   * Debtmatters Group plc, a profitable business that provides permanent
     solutions to consumers in debt via Individual Voluntary Arrangements (IVAs),
     announces that its ordinary shares commence trading on AIM today

   * Debtmatters' Nominated Adviser and Broker is Charles Stanley & Co. Ltd

   * The business has grown rapidly to date with turnover increasing by a
     factor of five between the years ending 31 March 2004 and 31 March 2005

   * In April 2005 the Company processed a record of 129 IVA cases

   * In order to underpin this growth, the Company is raising #3 million
     before expenses via a Placing of 4,615,385 shares at 65p. The Placing was
     twice over-subscribed

   * These funds will be used primarily for marketing Debtmatters' services
     direct to potential clients as well as investment in staff and technology

   * The market for Debtmatters' solutions is significant. In the UK,
     consumer debt has now passed the #1 trillion level and UK credit cards and
     other unsecured loans account for approximately #185 billion

   * Debtmatters provides industry leading service levels in terms of IVA
     processing times and supports its client marketing strategies with
     nationwide home visits

   * The Directors are confident of future prospects and believe that the
     planned investment in marketing will rapidly accelerate growth


Ges Ratcliffe, Chief Executive of Debtmatters, commented,

"Debtmatters addresses a marketplace that is growing rapidly. With UK consumer
debt now over #1 trillion, there are significant opportunities for the Company
to expand our business in assisting indebted consumers. Our fundraising and
admission to AIM will enable us to drive forward our revenue growth and realise
our confidence in Debtmatters' future prospects."


Enquiries:

Ges Ratcliffe                      CEO, Debtmatters Group plc    07971 407 112
Dugald Carlean / Freddy Crossley   Charles Stanley & Co. Ltd     020 7739 8200
Shane Dolan                        Biddicks                      07947 118 383


The Placing

The Placing of 9,230,770 Ordinary Shares at 65 pence per share comprises
4,615,385 Placing Shares being issued by the Company and 4,615,385 Sale Shares
being sold by the Selling Shareholder. The aggregate proceeds of the Placing
will be approximately #3 million before expenses, of which #2.4 million net of
expenses will be receivable by the Company. On Admission the Company will have
24,615,385 Ordinary Shares in issue and a market capitalisation of approximately
#16 million at the Placing Price. The Ordinary Shares have not been listed,
traded or quoted on any regulated or recognised stock market, but application
has been made for Admission of the Enlarged Issued Share Capital of the Company
to trading on AIM and such Admission is expected to occur on 22 June 2005.


PLACING STATISTICS

Placing Price                                                         65 pence
Number of Ordinary Shares in issue prior to the Placing             20,000,000
Number of Placing Shares to be issued                                4,615,385
Number of Sale Shares to be sold                                     4,615,385
Number of Ordinary Shares in issue immediately                      
following Admission                                                 24,615,385
Percentage of Enlarged Share Capital the subject                    
of the Placing                                                    38 per cent.
Market capitalisation of the Company following                     
the Placing at the Placing Price                                   #16,000,000
Net proceeds of the Placing approximately                           #2,400,000


Introduction

Debtmatters is a profitable business that provides permanent solutions to the
existing debt of consumers with debt problems by way of Individual Voluntary
Arrangements ("IVAs"). Revenues principally comprise nominee fees and ongoing
monthly supervisory fees over the term of the IVA, which is typically five
years. Debtmatters does not lend money to its customers.

Debtmatters generates new business via media advertising and direct marketing.
The Company targets consumers and commercial entities that require assistance in
managing their unserviceable debt. The entire process of advising and
administering the IVA from original enquiry to the court registered agreement is
undertaken by Debtmatters.

The Company has industry leading service levels in terms of time taken to
achieve creditor approval, a high level of staff retention, and home visits are
available nationwide to all debtors who request a face to face appointment. The
net proceeds from the placing of Placing Shares will be approximately #2.4
million. This will be used primarily for marketing, advertising, investment in
staff and technology and to augment the Company's working capital requirements.

Business

History

The origins of the Company's business were as a private practice founded by Ges
Ratcliffe in 1994, trading under the name Ratcliffe & Co. providing insolvency
advice based in Bolton. The Company was principally involved in arranging
commercial IVAs. Business activity expanded following the establishment of an in
house direct marketing department targeting small businesses through mailshots.

In 2002 it was recognised that in order to grow the business substantially it
was necessary to diversify into a larger market place. The opportunity to
provide IVAs to over indebted consumers was a natural progression as within the
Company there already existed knowledge of the voluntary arrangement procedure
and of direct marketing techniques which could be adapted to a new market.
Furthermore, a change in insolvency legislation, which became effective in
January 2003, removed the need for a debtor to apply to a County Court for an
interim order before undertaking an IVA. An interim order is an order of the
County Court protecting debtors from creditor recovery action (such as
bankruptcy) whilst the proposal for an IVA is being considered. This change has
simplified the process of establishing voluntary arrangements in cases where
protection is not needed, significantly speeding up the processing time for an
IVA.

The Company began trading as Debtmatters Limited in 2003 focusing on domestic
IVAs and currently operates out of an office in Bolton with a total staff of 49.

Business

An IVA is a legally binding agreement between a debtor and his unsecured
creditors whereby the debtor pays an agreed amount into a trust account which is
supervised by an Insolvency Practitioner ("IP"). IVAs were introduced by the
government as part of the Insolvency Act 1986, to assist debtors in offering an
alternative to bankruptcy. The creditors benefit from a higher return than if
the debtor filed for bankruptcy. A qualified IP is appointed to establish and
supervise an arrangement between debtor and creditors.

Debtmatters has two main income streams. A nominee fee is charged for setting up
the arrangement, which has historically been approximately #1,750, and
thereafter an ongoing monthly supervisory fee of approximately #42 per month is
paid, typically over a five year period.

The contributions made by debtors are paid into individual trust accounts. The
Company's fees of approximately #4,250 per domestic IVA are recovered from the
trust account. Only after the recovery of these fees does the Company make
annual distributions to the creditors.

The key business driver for generating new IVAs is advertising by way of radio
and newspapers. Experienced staff assess the suitability of a debtor for an IVA.
If suitable, the debtor is given the option to have a home visit by a consultant
to discuss the debtor's circumstances in more detail.

Where an IVA is recommended, a proposal is drafted and, after this has been
signed by the debtor, a meeting of the creditors is called. Once the proposal is
approved by more than 75 per cent. of all creditors who choose to vote at the
meeting, the County Court and the DTI are notified. Debtmatters currently employ
two IPs with a third employee currently undertaking the professional exams. The
Company intends to appoint an additional IP within the current financial year.
The Directors believe that the current capacity of two IPs gives the Company the
ability to arrange approximately 250 new IVAs per month. Among the domestic IVAs
that the Group has undertaken to date, only 5 per cent. have defaulted by the
end of year one.

Marketing

Debtmatters utilises both local radio and national newspaper advertising.
Debtmatters also generates business through its website, referrals and
mailshots. The website provides details of the Company and contact information.
The referrals to Debtmatters are typically from third party debt management
companies. DCL's marketing is usually done using mailshots. The marketing and
advertising spend is a significant cost for the Company, accounting for #583,000
in the year to 31 March 2005 (of which #279,000 was the advertising spend on
domestic IVAs).

The Board will continue to appraise means of obtaining new business including
television advertising. The effectiveness of all advertising and marketing will
be closely monitored to ensure the correct audience is being targeted. Local
radio advertising will be rolled out on a national basis over the next 12
months.

IVA Criteria and Details

In order for a case to be considered suitable by Debtmatters for an IVA the
debtor will typically meet the following criteria:

* Debts greater than #15,000

* 2 or more creditors

* Disposable income over #200 per month, assets to release or a 3rd party to
  contribute into the arrangement

If these criteria are met, the Company will explore all available debt solutions
and recommend an IVA where appropriate.

However, if any of these criteria cannot be met, the Company is unlikely to
recommend an IVA. In these circumstances the Company may recommend an
alternative solution for the debtor which would typically be debt management or
debt counselling via a charitable organisation.

Advantages of an IVA to a debtor:

   * Avoids bankruptcy
Besides the stigma associated with bankruptcy, there is the added possibility of
a debtor having their assets removed or being excluded from their profession.

   * Reduces amount payable, including interest
As part of the IVA, the creditors usually reduce the total outstanding amount
that is payable including interest, typically by 50 per cent. of the original
debt.

   * Legally binding
An IVA is a court and DTI registered agreement between a debtor and his
creditors.

   * Conclusive debt solution
An IVA provides a debtor with a permanent solution to his existing debt problem

   * Protection from creditor recovery action
Once the IVA proposal is approved by more than 75 per cent. of creditors who
choose to vote, it is binding on all creditors

Advantages of an IVA to a creditor:

   * Increased debt recovery
IVAs generally provide better returns than would be available in bankruptcy

   * The costs of administering an IVA are generally lower than in bankruptcy

   * All creditors are treated equally

Information on the Market

During 2004 the UK passed the #1 trillion level of consumer debt, at which time
consumer debt in the UK was increasing at a rate of approximately #1 million
every 4 minutes.

Currently in the UK, credit cards and other unsecured loans account for
approximately #185 billion (#115 billion in 2000). With the recent UK interest
rate rises, a slowing of the UK property market and household indebtedness now
approximately 140 per cent. of aggregate income, 42 per cent. of unsecured
debtors reported repayment problems in the Bank of England's December 2004
quarterly report.

The Department of Trade and Industry ('DTI') reported that in 2004 the number
of personal insolvencies including bankruptcies and voluntary arrangements rose
31 per cent. to 46,650 (not seasonally adjusted) compared to the previous year.

The DTI also reported there were 13,229 individual insolvencies in the first
quarter of 2005, up 2 per cent. from the 13,020 cases in England and Wales in
the fourth quarter of 2004 on a seasonally adjusted basis. Of the 13,229
individual insolvencies in the first quarter of 2005; 3,139 were IVAs, up 40 per
cent. on the previous year. The fourth quarter of 2004 saw an increase of 8 per
cent. on the previous quarter of individual insolvencies and an increase of 35
per cent. on the same period in 2003. This was made up of 3,206 IVAs, an
increase of 13 per cent. on the previous quarter and an increase of 57 per cent.
on the corresponding quarter of the previous year.

The Consumer Credit Counselling Service is a registered charity whose purpose is
to assist people who are in financial difficulties. Of individual enquiries in
December 2004, call numbers had increased by 77 per cent. on the same month in
2003 and calls were up by 40 per cent. during the year.

Current Trading and Future Prospects

During the calendar month of April 2005, Debtmatters achieved record levels of
IVAs, reaching 129 cases which represents approximately 7 per cent. of the IVA
market.

The Debtmatters businesses have been profitable for the last two years. Turnover
has increased in excess of five times between the years ending 31 March 2004 and
31 March 2005. The Directors believe that the planned advertising and marketing
spend increase will have a significant impact on turnover.

Extract from the Pro Forma Profit and Loss Statement for the Group to 31 March:

                                                   2004                   2005
                                                      #                      #
Turnover                                        493,773              2,445,311
Operating Profit                                 20,330                539,489
Profit after taxation                             8,596                370,774

Reasons for the Placing

The net proceeds of the Placing of Placing Shares available to the Group after
the expenses of the Placing and Admission will be #2.4 million which will be
used for marketing, advertising, investment in staff and technology and to
augment the Group's existing working capital facilities.

Ongoing development of the Company's technological infrastructure will be
carried out, thereby enhancing operating efficiencies and increasing the rate at
which cases are processed.

The Company has an experienced management team and skilled workforce, many of
whom have worked for the Debtmatters businesses for a number of years. The
Directors believe that Admission will help the Company attract and retain key
employees through the grant of share options.

Directors

The Board comprises three Directors, details of whom are set out below.

Noel Guilford, aged 52, Non-executive Chairman

Noel is a Chartered Accountant with 25 years experience in corporate finance, 16
of these as a partner with Deloitte & Touche and Baker Tilly. In 2002 Noel set
up Guilford Consulting to provide advice on strategy and finance to North West
based SMEs. He is the Chairman of the North West Region of the Institute of
Directors.

Ges Ratcliffe, aged 39, Chief Executive

Ges graduated from UMIST in 1987 with a BSc in Management Sciences. He joined
Arthur Andersen in 1987 and qualified as a chartered accountant in 1990.
Following this, he joined Leonard Curtis and Partners and moved to Latham
Crossley & Davies in 1993. In 1994 he set up Ratcliffe & Co Insolvency
Practitioners before founding Debtmatters Limited in 2003.

Christine Jarvis, aged 44, Finance Director

Christine is a Chartered Accountant. She was Financial Controller at Burns
Anderson Recruitment plc from 1987 to 1991 and Broadway Incentives, a subsidiary
of Bemrose plc, between 1996 and 1999. She joined the Group in 2001 as Financial
Controller and, latterly, Company Secretary, a role she retains with her duties
as Finance Director.

Key Management and Employees

The Group has a low staff turnover and high levels of morale and motivation.
Staff have been recruited through press advertising, consultants, introductions
from other members of staff and from companies in the same industry. The Group
has recently achieved the Investors In People accreditation.

Additional management details:

Mark Prideaux, aged 42, commercial director

Mark joined in December 2003. He is a Chartered Accountant and qualified in 1989
with Touche Ross in Manchester. He has since worked at Hacker Young, Beaver and
Struthers, Kay Johnson Gee and Cranfields, specialising for the last ten years
in insolvency and forensic work.

Michael Shirley, aged 38, operations director

Michael joined in January 2002. He formerly worked for Natwest Bank and then
Lathams, where he had a significant role establishing operations and procedures
in the early stage development of the IVA department that became Debt Free
Direct Group plc.

James Dean, aged 38, marketing director

James Dean joined in October 2004. Prior to that James ran his own direct
marketing company which acted as an outsourced marketing facility for Debt Free
Direct Group plc as it became established and provided work to it.



                      This information is provided by RNS
            The company news service from the London Stock Exchange

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