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|Arrow Global Group PLC Interim results for the six months to 30 June 2016|
|Wednesday, 31 August 2016|
Arrow Global Group PLC ((“the Company”) and its subsidiaries (together “the Group”)), a leading European purchaser and manager of debt portfolios, is pleased to announce its interim results for the six months to 30 June 2016 (“H1 2016”).
Commenting on today’s results, Tom Drury, Group chief executive officer of Arrow Global said: “Arrow Global has been pursuing a consistent and proven strategy over many years. This has seen us deliver profitable growth in the UK, while continuing to expand at pace internationally and add capital-light servicing revenues to the business. Today’s numbers for the first half of 2016 are very much consistent with these themes.
“In May, we acquired the Dutch and Belgian business, InVesting, for an enterprise value of €100m, aligned to our strategy of being a leading player in each of our chosen markets.
“During H1, we also invested £96.0 million in organic portfolio acquisitions, of which 43.5% were in mainland Europe. Purchases continued to be in line with target returns, with an expected 120-month gross cash-on-cash multiple for this vintage of 2.0 times.
“With our new acquisition performing well, total revenue for the half increased to £101.5 million, up 32.4% compared to the same period last year, while Adjusted EBITDA increased 60.3% to £105.3 million, and underlying net income by 25.8% to £19.1 million. Over the period, asset management revenues increased to £17.2 million and this business is expected to contribute to circa 25% of group revenues on a run rate basis.
“This strong performance saw us achieve increased underlying basic EPS of 10.9p, up 25.8%, and strong LTM RoE of 27.4%. In line with our dividend policy, today we are confirming an interim dividend of 2.7p.
“While we are mindful of the macroeconomic uncertainty prevailing in the UK and more generally, we remain highly confident that our business has strong foundations. Our underlying assets are underpinned by affordable repayment plans across a broad range of consumers, where we have historically seen limited cash flow sensitivity to macroeconomic variables. At the same time, we also have a number of operating levers that should drive continued performance improvements.
“From a financing perspective, we deliberately increased funding ahead of the UK EU Referendum, successfully issuing a €230 million bond, the funds from which were used to finance the InVesting acquisition and repay outstanding amounts under the RCF. As at the end of June, we had £158 million of undrawn funds in our RCF which provides continued liquidity for further investment. In July we successfully refinanced this RCF on more favourable terms, further reducing the Group’s average cost of debt and extending the average maturity.
“In August, we were delighted to receive our full FCA authorisations, an important milestone for the Group and core to delivering on our strategy. During H1, we also reached the point where all of our core UK panel of servicers received their full FCA authorisation.
“Overall, we see no changes in our opportunity for profitable investment across our business. While we are alert to the macroeconomic uncertainty, we expect full-year earnings to be in line with our expectations and remain confident in our continued growth over the years ahead.”
· Profit before tax up 24.7% to £20.5 million (H1 2015: £16.4 million) leading to a profit attributable to shareholders up 27.5% to £16.5 million (H1 2015: £12.9 million).
· Basic and diluted earnings per share (EPS) of £0.09 (H1 2015: £0.07). Underlying basic and diluted earnings per share (EPS) 1 of £0.11 (H1 2015: £0.09) delivering an LTM underlying return on equity (ROE)1 of 27.4% (31 December 2015: 26.5%)
· Interim dividend of 2.7p per share (H1 2015: 1.7p)
· Total revenue up 32.4% to £101.5 million (H1 2015: £76.7 million), driven by core collections up 38.0% to £138.8 million (H1 2015: £100.6 million) and income from asset management up 292.7% to £17.2 million, leading to an increase in Adjusted EBITDA up 60.3% to £105.3 million (H1 2015: £65.7 million)
· Increased total purchased loan portfolios to £692.0 million (31 December 2015: £609.8 million) with 120-month ERC up 15.7% to £1,417.2 million (31 December 2015: £1,224.5 million) and 84-month ERC up 16.7% to £1,200.0 million (31 December 2015: £1,028.6 million).
· £131.4 million invested during the period, including organic portfolio purchases of £96.0 million
· Acquisition of InVesting B.V. (“InVesting”), a leading consumer debt purchaser and collections provider with operations in the Netherlands and Belgium for an enterprise value of circa €100 million
· Successfully issued €230 million seven-year Floating Rate Notes to finance the InVesting acquisition, repay outstanding amounts under our RCF and provide funds for future investments
· Successfully refinanced £180 million multi-currency RCF with a reduced margin of 2.75%, a reduction of 100bps
· S&P upgrade of the Group’s credit rating to BB- from B+ and the Group’s Notes credit rating from BB- to BB
· Net debt £739.1 million and Net Debt to LTM Adjusted EBITDA ratio of 3.8x (31 December 2015: 3.8x)
· Full Financial Conduct Authority (FCA) authorisation received in August
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