Debt management specialist Debts.co.uk is buying consumer loans and mortgage broker Relax Finance for £3 million in paper and cash.

Headed by chief executive officer Paul Carter, acquisitive Debts.co.uk (which paid  £1.25 million in February for Glasgow-based PB Recovery) is paying £1.2 million cash for Relax, a private company that has grown fast since its launch in 2005. An additional £1.5 million is being paid in new shares and £300,000 in unsecured loan notes. Relax chief executive Ian Guy and director Carl Kroger have joined the board of the enlarged company, which is to be renamed Relax Group, as chief operating officer and sales and marketing director respectively.

The deal leaves Relax chief executive Ian Guy with 5.5 per cent of the enlarged group and is intended to combine Hertfordshire-based Debts.co.uk’s strengths as a provider of solutions to over-indebted individuals with Relax’s quickly established skills as a ‘leading broker and quality provider in the industry’. AIM-quoted Debts.co.uk argues that the enlarged Relax Group will be able to expand its market by providing a wider range of advice and solutions and, ‘importantly’, over longer periods of time, which should allow for refinancing if clients’ financial circumstances change during the process of their debt management or individual voluntary arrangement (IVA) programmes.

While Debts.co.uk lifted pre-tax profits 62 per cent to £3.4 million in the year to last July on nearly doubled turnover of £11.6 million, Relax made £426,000 on £7.5 million turnover in the year to April this year, which compares with the £100,000 pre-tax profit on £994,000 turnover it made in its first eight months of operation to April 2006.

Debts.co.uk’s depressed shares, highlighted by Growth Company Investor in April at 35p, have now reached 42p, valuing the company at £11.4 million. That remains a fraction of their 219.5p 2006 high and they could rally further if the Relax deal looks like bearing fruit.

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