Fox Symes looks forward to better outcomes

Debt administrator Fox Symes is the type of company that is expected to do well in difficult and uncertain economic periods. The company manages 54 per cent of all debt agreements in Australia and is largely without serious competition in this market.

For the financial year ending June 2009, FSA reported record demand for its services, but a rise in after-tax profit of 229 per cent to $8.84 million is still a startling result.

Net revenue was up 40 per cent to $50.9 million. FSA's share price has more than doubled in 2009 and closed yesterday at 41.5 cents.

The commission withheld by Fox Symes from creditor repayments exceeds 40 per cent, meaning debt agreements produce relatively low returns for lenders that use this process.

The highly profitable debt agreements were introduced to the Bankruptcy Act in 1996 as an alternative to bankruptcy for low- to middle-income consumers with unmanageable unsecured debt loads.

Changes to the law in 2007 weeded out many of the smaller players, and the cowboys, of this industry and left Fox Symes in a completely dominant position.

Attorney General Robert McClelland's reforms to the Bankruptcy Act now look set to deliver more customers to FSA. McClelland has made it clear he favours debt
agreements over bankruptcy and is moving to increase the income and asset threshold limits for debt agreements by twenty per cent.

At the same time, McClelland has dropped his previous rhetoric about removing the punitive elements of bankruptcy law that date back to the middle ages.

He previously suggested shortening the period of bankruptcy from three years to 12 months or even less, as has already been done in Britain, but that idea has since been dropped.

"Debtor agreements recover about 76 cents in the dollar whereas bankruptcy only recovers about 1.6 cents in the dollar," said McClelland last week. "So it can be a better outcome all round."

Whether debt agreements deliver better outcomes for debtors is debatable, but better outcomes in the future seem assured for Fox Symes.