News Column

Arrow Global Plans Maiden Dividend As It Swings To Quarterly Profit

May 22, 2014

Samuel Agini

LONDON (Alliance News) - Debt purchaser Arrow Global Group PLC Thursday said it swung to a first-quarter pretax profit, boosted by higher revenue and considerably lower exceptional expenses, while it announced plans for a maiden interim dividend.

Arrow Global completed an initial public offering in October 2013. The group was established in 2005 as the European subsidiary of Arrow Financial Services, a US debt purchaser acquired by Sallie Mae in 2004. In 2009, the holding company was bought by the RBS Special Opportunities Fund.

In a statement, Arrow Global, which buys customer accounts from retail banks, credit card and telecommunications companies, said it made a GBP3.5 million pretax profit in the three months ended March 31, compared with a GBP796,000 pretax loss in the corresponding quarter a year earlier. Revenue increased by GBP1.1 million to GBP23.1 million, due mainly to a rise in income from purchased loan portfolios offset by there being no repeat of last year's portfolio write-up. Operating expenses increased by GBP2.3 million to GBP11.2 million, due to higher collection costs and

Despite the resulting fall in operating profit, exceptional items fell to GBP3.0 million from GBP8.8 million, meaning a pretax profit was achieved. The exceptional costs were largely related to a settlement of a tax dispute with UK tax authorities relating to business activities prior to the company's restructuring in 2013.

Arrow Global said it intends to announce a maiden interim dividend with its half-year results, citing its highly cash generative business. Net cash flow from operating activities before purchases of loan portfolios and loan notes increased to GBP17.4 million, from GBP8.9 million, due to an increase in collections.

"We continue to anticipate a normal weighting of portfolio purchases to the second half of the year and overall we remain on track to deliver results in line with our expectations," Chief Executive Tom Drury said in a statement.

Chief Financial Officer Robert Memmott told Alliance News that Arrow Global has a good pipeline in its core UK markets, as well as in Portugal, where it also operates.

"All of the mainstream creditors, be that banks, credit card companies and some of the retail telecoms companies, are divesting non-performing debt portfolios which enables them to recycle capital. They have the confidence to resell to Arrow Global based on our strong compliance track record and treating the customer fairly," Memmott said.

European banks have been cleaning up their balance sheets as they meet new capital requirements set by domestic and international regulators. Their efforts to sell assets, such as loan portfolios, have created opportunities for debt managers, such as Arrow Global.

Memmott told Alliance News that there are several ways Arrow Global can get non-performing loans performing again.

"Firstly, we don't charge any interest or any fees. What we look to do is use our proprietary data and analytics capability to understand customers' circumstances and repair broken data the banks have. We can then agree affordable repayment plans," Memmott said.

Data held by banks or other credit companies can degrade over time, sometimes because of problems within their technology systems, but also due to customers moving house or even changing their telephone numbers.

Memmott also welcomed changes that made the Financial Conduct Authority responsible for regulating the UK's consumer credit industry at the beginning of April.

"The reason why it's a good thing is that it aligns regulation across the industry such that you don't have different regulators for banks and debt purchase companies," Memmott said.

Arrow Global itself has been granted interim permissions by the FCA, with its transition to the regulator's regime "well-progressed."

Arrow Global shares were Thursday quoted at 226.00 pence, up 3.7%.

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Source: Alliance News

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