Cabot Credit Management (Cabot), a market leader in European credit management services, today announced the financial results for the three months ending 31st March 2018.
Capital deployment of £50m at consistent returns – £313m LTM purchases
Continued robust UK back book performance (73% of payments from regular payers; average 848k regular payers each month; average monthly payment £25; 90 day break rates flat)
Digital take up ahead of expectations – registered users up 25% vs Q4 ’17
Wescot performing strongly – servicing revenue tripled vs Q1 ’17, now at 22% of total revenue
Underlying margins consistent with 2017 – business mix driving LTM Adj. EBTIDA margin to 64% in line with prior guidance
On track to delivery £6m annual synergies from UK servicing restructure – 1st wave redundancies completed March ‘18
Maintaining balance sheet discipline – leverage lowered to 4.1x (4.2x Q4 ’17)
Acquisition by Encore
Encore (Nasdaq: ECPG) announced on 8th May an agreement to purchase the remaining interest in Cabot held by existing shareholders, including J. C. Flowers and Co, for 5 million shares of Encore common stock and £175.5 million (approximately $238.2 million) which will result in Cabot becoming a wholly owned subsidiary of Encore. In 2013, Encore made an initial investment in Cabot representing an approximate 43 percent ownership interest. Encore’s decision to acquire the remaining interest reflects Cabot’s strong performance since Everest’s initial investment nearly five years ago. Subject to regulatory approvals and other customary closing conditions, the transaction is expected to close within 90 days.
Ken Stannard, Chief Executive Officer, Cabot Credit Management, said: “Cabot Credit Management has again delivered another excellent first quarter performance with Debt Purchase Collections and Servicing performing strongly. Helped by continued strong performance from Wescot, servicing revenue grew by an impressive 196% versus the same quarter last year and is becoming an increasingly important source of revenue. This growth was underpinned by continued discipline in capital deployment, with an additional £50 million deployed in the past quarter helping raise our 120 month ERC by 11% to £2.4bn compared to Q1 ’17.
“The strength and quality of our back book has also been evident across the quarter, with 73% of payments coming from our, on average, 848,000 regular payers and customer breakage in repayment plans continues to remain low. Our balance sheet is also in excellent shape, with our strong operating margins enabling us to maintain our leverage at 4.1x from 4.2x despite record capital deployment over the past year.
“Yesterday our major shareholder Encore announced it had reached an agreement to acquire the remaining interest in Cabot which will result in Cabot becoming a wholly owned subsidiary of Encore. The relationship with Encore has been a great strategic fit for us from the very beginning, so this is a natural next step.
“In particular, becoming part of a large listed entity will provide us access to the capital we need to continue growing the business in a rapidly consolidating sector. I am very excited to be entering a new phase in the history of the company with a partner who understands our business so well, particularly the customer centric values which are not only the right way to do business but also lead to sustained improvements in business performance.
“Encore has already been such an integral part of our company that little will change on a day-to-day basis, other than being able to benefit even more from their scale, experience and financial strength. In partnership with them I look forward to building on our core business in the UK, expanding our operations in Europe, and remaining focused on continuing to deliver for the benefit of all our stakeholders the exceptional growth that has become the norm.