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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Arrow Global Group Plc | LSE:ARW | London | Ordinary Share | GB00BDGTXM47 | ORD 1P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 307.00 | 307.00 | 307.50 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMARW
RNS Number : 7128O
Arrow Global Group PLC
09 November 2016
Arrow Global Group PLC
Results for the nine months ended 30 September 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 results for the nine months ended 30 September 2016 ("Q3 2016").
Commenting on today's results, Tom Drury, Group chief executive officer of Arrow Global said:
"Arrow Global continues to expand its European footprint and client offering across attractive markets where the Group is targeting leadership positions. This coupled with a high-quality and diversified investment portfolio, has enabled us to achieve another strong set of results.
"Total revenue for the period increased to GBP164.4 million, up 37.0% compared to the same period last year. Adjusted EBITDA increased 55.5% to GBP161.5 million and underlying net income increased 23.7% to GBP29.1 million. Following the successful integration of our Vesting Finance business, asset management revenues increased to GBP31.0 million (2015: GBP9.2 million).
"During the period, we saw good opportunities to invest and increased organic portfolio loan acquisitions for the year to GBP119.3 million, of which 51% were in mainland Europe. This excludes the Netherlands deal we announced in September that will see us co-invest EUR25 million in underlying loan assets of EUR1.7 billion from RNHB Hypotheekbank, which we expect to complete later in the year.
"In Q3 we achieved a material improvement in our funding, refinancing our GBP220 million bond with a coupon reduction of 2.75%. At the same time we reduced the cost of our revolving credit facility by 100bps and extended the availability to July 2021. As part of these activities we incurred pre-tax, non-recurring finance costs of GBP18.0 million, of which GBP8.7 million is cash. The Group's overall cost of debt is now just 5%.
"As European banks continue to delever, we see a strong pipeline of opportunities, a trend that we expect to persist. Including the anticipated completion of the RNHB Hypotheekbank deal, we have a pipeline of over GBP38 million of portfolio purchases which have already been awarded for the rest of the year.
"Our portfolio purchases year-to-date, the good visibility on our pipeline and the continued strong performance of our enlarged asset management business, continue to lay the foundation for future earnings growth and means we are on track to deliver overall full-year earnings in line with our expectations."
Highlights
-- Total revenue up 37.0% to GBP164.4 million (Q3 2015: GBP120.0 million), driven by core collections up 38.9% to GBP216.1 million (Q3 2015: GBP155.5 million) and income from asset management up 236.6% to GBP31.0 million, leading to an increase in Adjusted EBITDA up 55.5% to GBP161.5 million (Q3 2015: GBP103.9 million)
-- Profit attributable to shareholders of GBP11.5 million (Q3 2015: GBP20.4 million), including GBP17.6 million net non-recurring costs
-- Underlying net income of GBP29.1 million (Q3 2015: GBP23.5 million), representing growth of 23.7%
-- Interim dividend of 2.7p per share (H1 2015: 1.7p)
-- Increased total purchased loan portfolios to GBP696.8 million (31 December 2015: GBP609.8 million) with 120-month ERC up 14.7% to GBP1,404.6 million (31 December 2015: GBP1,224.5 million) and 84-month ERC up 15.7% to GBP1,189.6 million (31 December 2015: GBP1,028.6 million)
-- GBP154.6 million invested during the period, including organic portfolio purchases of GBP119.3 million
-- Net debt GBP766.0 million and Net Debt to LTM Adjusted EBITDA ratio(1) of 3.6x (31 December 2015: 3.8x)
-- Material improvement in our funding, refinancing our GBP220 million fixed rate notes with coupon reduction of 2.75% and extended the maturity of the RCF on a reduced cost basis. As part of these activities we incurred pre-tax, non-recurring finance costs of GBP18.0 million, of which GBP8.7 million is cash
-- Agreed terms to take ownership of an additional specialist servicing capability and enter into a five-year servicing agreement in the Netherlands to acquire the platform and loan book which comes from the real estate financing activities of RNHB Hypotheekbank
09 November 2016
Notes:
(1) Due to transformation changes to the Group brought about by the strategic acquisitions, in order to understand the performance of the Group, underlying measures are disclosed
A glossary of terms can be found on pages 14 to 15
More details explaining the business can be found in the Annual Report & Accounts 2015 which can be found on the Company website at www.arrowglobalir.net
For further information:
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Arrow Global 242 5896
Tom Drury, CEO
Robert Memmott, CFO
Alex Barnett, Corporate
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Mike Davies
Giles Stewart
There will be a conference call for investors today at 2pm (UK time). Details of how to register for the call can be found at:
http://www.arrowglobalir.net/files/file/download/id/331
About Arrow Global - for further information please visit the company website: www.arrowglobalir.net
Forward looking statements
This document contains statements that constitute forward-looking statements relating to the business, financial performance and results of the Group and the industry in which the Group operates. These statements may be identified by words such as "expectation", "belief", "estimate", "plan", "target", or "forecast" and similar expressions or the negative thereof; or by forward-looking nature of discussions of strategy, plans or intentions; or by their context. All statements regarding the future are subject to inherent risks and uncertainties and various factors could cause actual future results, performance or events to differ materially from those described or implied in these statements. Such forward-looking statements are based on numerous assumptions regarding the Group's present and future business strategies and the environment in which the Group will operate in the future. Further, certain forward looking statements are based upon assumptions of future events which may not prove to be accurate and neither the Company nor any other person accepts any responsibility for the accuracy of the opinions expressed in this document or the underlying assumptions. The forward-looking statements in this document speak only as at the date of this presentation and the Company assumes no obligation to update or provide any additional information in relation to such forward-looking statements.
Business and financial review of the nine months to 30 September 2016
The Group continues to maintain a focused strategy designed to help it achieve its vision of becoming Europe's leading purchaser and manager of debt. We recently updated our strategic thinking to reflect the size of the Group and the market opportunity we see. Our five core strategic pillars are:
-- To be a leading player in our chosen markets, partnering with both primary financial institutions and leading credit funds
-- To build a diversified risk-weighted investment portfolio delivering strong returns -- To transform the customer journey within our industry and deliver great customer outcomes -- To be the best operators in our markets based on having the best people, technology and data -- To attract and retain the best talent
The acquisition of InVesting B.V. ("Vesting Finance") in May and the subsequent announcement regarding our agreement to co-invest in the assets and servicing capabilities of RNHB Hypotheekbank (September), have seen us enhance our mainland Europe capabilities significantly. Coupled with strong organic portfolio purchases, we continue to grow and diversify our business by geography, asset class and revenue stream.
In the Netherlands, we have already seen significant momentum from the purchase of Vesting Finance and are well advanced in our integration of the business into our wider Group framework and operating model.
Our platform acquisitions over the last 18 months in both the Netherlands and Portugal have grown our origination and servicing capabilities significantly. The balance of portfolio purchases to 30 September 2016 (including the Vesting Finance acquisition) are reflective of this (38% UK, 28% Portugal, 34% Netherlands).
During the period we achieved a material improvement in our funding, refinancing our GBP220 million fixed rate note with a coupon reduction of 2.75%. At the same time we extended the maturity of the RCF on a reduced cost basis. As part of these activities we incurred pre-tax, non-recurring finance costs of GBP18.0 million, of which GBP8.7 million is cash. The Group's overall cost of debt is now just 5%, with no debt facility maturing for almost five years.
Key results
Nine months ended Nine months ended Twelve months ended
As of and period to 30-Sept-16 30-Sept-15 31-Dec-15
GBPm GBPm GBPm
Purchases of loan portfolios 154.6 97.1 180.3
Total purchased loan portfolios 696.8 526.7 586.3*
Core collections 216.1 155.5 218.5
Total revenue 164.4 120.0 165.5
Adjusted EBITDA 161.5 103.9 153.1
Profit before tax 14.2 25.9 39.3
Profit attributable to shareholders 11.5 20.4 31.7
Underlying net income 29.1 23.5 35.4 84-month ERC 1,189.6 954.9 1,028.6 120-month ERC 1,404.6 1,150.8 1,224.5 Net debt 766.0 524.2 588.6 Net assets 152.3 134.6 145.4
*Excluding GBP23.5 million of portfolios due to be resold
A glossary of terms can be found on pages 14 to 15
Purchased loan portfolios
We acquired debt portfolios with a face value of GBP1,166.5 million for a purchase price of GBP154.6 million (including GBP35.3 million from the Vesting Finance acquisition), equating to an average purchase price of 13.3p per GBP1. Of the purchase price invested, 39% related to secured portfolios.
The balance sheet value of our purchased loan portfolios increased by 14.3% to GBP696.8 million as at 30 September 2016 (31 December 2015: GBP609.8 million). Significant drivers for this were total portfolios acquired including costs of GBP156.8 million, net of amortisation GBP83.3 million. See note 1 for the full reconciliation.
ERC overview
Our 84-month ERC - the expected collections from portfolios already acquired - after taking into account movement in foreign exchange rates, has increased by 15.7% from GBP1,028.6 million as at 31 December 2015 to GBP1,189.6 million. The 120-month ERC 14.7% increase to GBP1,404.6 million (31 December 2015: GBP1,224.5 million).
The ERC is underpinned by paying accounts that have a current face value of GBP1.7 billion (31 December 2015: GBP1.5 billion), which represents 1.4 times 84-month ERC cover and 1.2 times 120-month ERC cover (31 December 2015: 1.4 times and 1.2 times accordingly). As at 30 September 2016, we estimate the amount we would need to invest over the next 12 months to maintain our current 120-month ERC level is approximately GBP100 million.
Revenue
Total revenue for the period was GBP164.4 million, an increase of 37.0% from Q3 2015 (GBP120.0 million). GBP22.6 million of the increase reflected the enlarged size of the portfolio assets. GBP21.8 million of the increase was attributable to income from asset management. The latter was due to a full period of results for Whitestar and the acquisition of Vesting Finance in May 2016.
Cash flow
Core collections
Core collections increased to GBP216.1 million (Q3 2015: GBP155.5 million), reflecting the increase in our portfolio asset base. Core collections are in line with our ERC forecast. Strong performance of the 2015 and 2016 vintage has mitigated disruption of collections in Portugal, driven by moving from third party servicers to our in-house operation.
As at 30 September 2016, we have cumulatively collected 102% of our original underwriting forecast on a constant exchange rate basis, reflecting the success of our data driven approach to origination and underwriting.
Collection costs
Reflective of our enlarged business, collections costs increased by 33.7% to GBP51.5 million (Q3 2015: GBP38.6 million).
During the period we completed the rationalisation of our UK panel and the associated migration of the accounts to our in-house operation, delivering the full benefit of the Capquest acquisition synergies.
Adjusted EBITDA increased by GBP57.6 million (55.5%) to GBP161.5 million (Q3 2015: GBP103.9 million).
Profit attributable to shareholders
Profit attributable to equity shareholders decreased 43.8% from GBP20.4 million for the period to 30 September 2015 to GBP11.5 million for the period to 30 September 2016 due to net non-recurring items of GBP17.6 million. Non-recurring items of GBP18.0 million arose on refinancing the GBP220 million fixed rate note and the Group's RCF and GBP3.3 million arose on the strategic corporate acquisitions of Vesting Finance and Redrock Capital Partners, S.A. ("Redrock"). Non-recurring items had a tax impact of GBP3.7 million. The cash impact of the financing and operating expenses non-recurring items in the period was GBP12.0 million.
After taking account of the non-recurring items above, underlying net income increased 23.7% from GBP23.5 million for Q3 2015 to GBP29.1 million for Q3 2016. This was largely driven by increased operational profit of GBP13.7 million and profit from associates of GBP1.1 million, offset by an increase in net underlying finance costs of GBP8.6 million. The latter was largely due to the issuance of EUR230 million floating rate notes which funded the acquisition of Vesting Finance in May 2016 and increasing balance sheet liquidity in the run up to the Brexit vote.
Net assets, funding and net debt
Net assets increased GBP7.0 million during the period, mostly reflecting the retained profit for the period of GBP11.5 million and translation movements of GBP7.8 million, offset by the final 2015 approved dividend and 2016 interim dividend totalling GBP14.1 million.
As at 30 September 2016, we had cash and RCF resources of GBP144.1 million available. Net debt at 30 September 2016 increased by GBP177.4 million to GBP766.0 million (31 December 2015: GBP588.6 million), driven by the acquisitions of Vesting Finance and Redrock and organic portfolio purchases.
All credit ratios remain within policy parameters. The net debt to LTM Adjusted EBITDA ratio has been maintained at 3.6 times. Cash interest cover has improved to 5.4 times (31 December 2015: 4.9 times). Net debt/84-month ERC loan to value ratio is 64.4% (31 December 2015: 57.2%) and the secured loan to value ratio is 62.6% (31 December 2015: 51.8%), which is significantly below our financial covenants of 75%.
On 29 July 2016, we refinanced our GBP180 million multi-currency RCF, provided by four banks. The new facility has a margin of 2.75%, a reduction of 100bps from the previous facility. The commitment fee has also been reduced by 54bps. The new facility has an extended maturity of 31 July 2021. The cancellation of the previous RCF has resulted in a non-cash pre-tax cost of approximately GBP3 million, relating to writing-off previous transaction fees, this has been treated as a non-recurring item in the Group accounts.
As a reflection of our ability to continue to expand our franchise whilst maintaining our key credit ratios, on 1 August 2016 S&P upgraded the Group's credit rating to BB- from B+ and the Group's Notes credit rating from BB- to BB.
On 1 September 2016, we refinanced our GBP220 million fixed rate note, reducing its coupon from 7.875% to 5.125% decreasing the Group's overall cost of debt to 5%.
Shareholder returns
In accordance with our dividend policy, an interim dividend of 2.7p per share (H1 2015: 1.7p) was paid on 13 October 2016. This dividend has been accrued into our results.
Recent developments
In October, we announced that Robin Phipps would be stepping down from the Board as a non-executive director of the Company with effect from 27 October 2016. Lan Tu replaces Robin Phipps as chair of the remuneration committee.
Outlook
Analysis by PwC suggests there is EUR1 trillion of NPLs held by European banks. The anticipated associated deleveraging will provide a continued availability of loan portfolios.
A November PwC report has identified that EUR74.5 billion of loan portfolios had already transacted across Europe in the nine-months to 30 September 2016 and that a further EUR81.5 billion is already in transit, with the total transacted portfolios for 2016 expected to be around EUR125 billion. This corresponds with our own experience where we have a strong pipeline with over GBP38 million of portfolio purchases already awarded for the rest of the year (including the co-investment of the secured loan portfolio from RNHB Hypotheekbank where the transaction is expected to complete later in 2016).
Our portfolio purchases year-to-date, the good visibility on our pipeline and the continued strong performance of our enlarged asset management business, continue to lay the foundation for future earnings growth and means we are on track to deliver overall full-year earnings in line with our expectations.
Unaudited Consolidated Statement Of Comprehensive Income
For the nine and three months ended 30 September 2016
Unaudited Unaudited Unaudited Unaudited
Nine Nine Three Three
months months months months
ended ended ended ended
30 Sept 30 Sept 30 Sept 30 Sept
2016 2015 2016 2015
GBP000 GBP000 GBP000 GBP000
Continuing operations
Revenue
Income from purchased
loan portfolios 132,783 110,277 49,101 38,112
Profit on portfolio sales 610 503 - 369
---------- ---------- ---------- ----------
Total revenue from portfolios 133,393 110,780 49,101 38,481
Income from asset management 30,967 9,201 13,743 4,815
---------- ---------- ----------
Total revenue 164,360 119,981 62,844 43,296
---------- ---------- ---------- ----------
Operating expenses
Collection activity costs (51,549) (38,554) (20,895) (14,906)
Professional fees and
services (4,985) (2,178) (1,719) (514)
Recurring other operating
expenses (39,469) (24,075) (15,687) (8,481)
-------------------------------- ---------- ---------- ---------- ----------
Non-recurring other operating
expenses (3,260) (3,807) (529) (1,027)
---------- ----------
Total other operating
expenses (42,729) (27,882) (16,216) (9,508)
---------- ---------- ----------
Total operating expenses (99,263) (68,614) (38,830) (24,928)
---------- ---------- ---------- ----------
Operating profit 65,097 51,367 24,014 18,368
---------- ---------- ---------- ----------
Finance income 783 122 - 38
Recurring finance costs (35,513) (26,219) (12,804) (9,105)
-------------------------------- ---------- ---------- ---------- ----------
Non-recurring finance
costs (17,994) - (17,994) -
-------------------------------- ---------- ---------- ---------- ----------
Share of profit in associate 1,779 667 439 200
---------- ---------- ----------
Profit before tax 14,152 25,937 (6,345) 9,501
Recurring taxation charge
on ordinary activities (6,324) (6,268) (2,166) (2,205)
-------------------------------- ---------- ---------- ---------- ----------
Tax on non-recurring items 3,660 771 3,489 208
-------------------------------- ---------- ---------- ---------- ----------
Taxation charge on ordinary
activities (2,664) (5,497) 1,323 (1,997)
---------- ---------- ---------- ----------
Profit/ (loss) for the
period 11,488 20,440 (5,022) 7,504
========== ========== ========== ==========
Other comprehensive income:
FX translation difference
arising on revaluation
of foreign operations 7,800 (83) 2,314 224
Hedging movement (576) (272) 832 (556)
---------- ---------- ---------- ----------
Total comprehensive income
for the period attributable 18,712 20,085 (1,876) 7,172
========== ========== ========== ==========
Profit/ (loss) attributable
to:
Owners of the company 11,457 20,440 (5,041) 7,504
Non-controlling interest 31 - 19 -
---------- ---------- ---------- ----------
11,488 20,440 (5,022) 7,504
========== ========== ========== ==========
Total comprehensive income/
(loss) attributable to:
Owners of the company 18,681 20,085 (1,895) 7,172
Non-controlling interest 31 - 19 -
---------- ---------- ---------- ----------
18,712 20,085 (1,876) 7,172
========== ========== ========== ==========
Underlying net income 29,051 23,476 9,993 8,323
========== ========== ========== ==========
Unaudited Consolidated Balance Sheet
As at 30 September 2016
Unaudited 31 December Unaudited
30 September 2015 30 September 2015
2016
Assets Notes GBP000 GBP000 GBP000
Non-current assets
Goodwill 128,150 79,490 79,141
Intangible assets 41,289 20,643 20,432
Property, plant & equipment 3,860 3,649 2,777
Loan notes 1 - 862 1,131
Investments in associates 16,787 12,158 11,582
Deferred tax asset 3,337 639 472
-------------- ------------ -------------------
Total non-current assets 193,423 117,441 115,535
-------------- ------------ -------------------
Current assets
Cash and cash equivalents 22,432 10,183 28,476
Other receivables 48,871 34,781 22,536
Derivative asset 7,006 - 1,281
Purchased loan portfolios 1 696,809 609,793 526,715
Total current assets 775,118 654,757 579,008
-------------- ------------ -------------------
Total assets 968,541 772,198 694,543
============== ============ ===================
Equity
Share capital 1,744 1,744 1,744
Share premium 347,436 347,436 347,436
Retained earnings 76,238 76,916 65,239
Hedging reserve (1,878) (1,302) (959)
Other reserves (271,638) (279,438) (278,850)
Total equity attributable to shareholders 151,902 145,356 134,610
-------------- ------------ -------------------
Non-controlling interest 425 - -
-------------- ------------ -------------------
Total equity 152,327 145,356 134,610
-------------- ------------ -------------------
Liabilities
Non-current liabilities
Senior secured notes 2 687,172 447,545 448,744
Trade and other payables - 7,648 7,802
Deferred tax liability 13,655 4,396 4,019
-------------- ------------ -------------------
Total non-current liabilities 700,827 459,589 460,565
-------------- ------------ -------------------
Current liabilities
Trade and other payables 53,113 83,906 52,247
Current tax liability 4,986 3,755 3,650
Derivative liability - 1,281 858
Revolving credit facility 2 41,385 71,479 40,160
Senior secured notes 2 2,577 6,832 2,453
Bank overdrafts 13,326 - -
-------------- ------------ -------------------
Total current liabilities 115,387 167,253 99,368
-------------- ------------ -------------------
Total liabilities 816,214 626,842 559,933
-------------- ------------ -------------------
Total equity and liabilities 968,541 772,198 694,543
============== ============ ===================
Unaudited Consolidated Statement Of Changes In Equity
For the nine months ended 30 September 2016
Own
Ordinary Share Retained Hedging share Translation Merger Non-controlling
shares premium earnings reserve reserve* reserve* reserve* Total interest Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Balance at 1
January 2015 1,744 347,436 51,479 (687) (562) (575) (276,961) 121,874 - 121,874
Profit for the
period - - 20,440 - - - - 20,440 - 20,440
Exchange
differences - - - - - (83) - (83) - (83)
Net fair value
gains cash flow
hedges - - - (326) - - - (326) - (326)
Tax on hedged
items - - - 54 - - - 54 - 54)
--------- -------- --------- -------- --------- ------------ ---------- --------- ---------------- ---------
Total
comprehensive
income for the
period - - 20,440 (272) - (83) - 20,085 - 20,085
Share-based
payments - - 2,210 - - - - 2,210 - 2,210
Repurchase of
own shares - - - - (669) - - (669) - (669)
Dividend paid - - (8,890) - - - - (8,890) - (8,890)
--------- -------- --------- -------- --------- ------------ ---------- --------- ---------------- ---------
Balance at 30
September 2015
(unaudited) 1,744 347,436 65,239 (959) (1,231) (658) (276,961) 134,610 - 134,610
Profit for the
period - - 11,309 - - - - 11,309 - 11,309
Exchange
differences - - - - - 117 - 117 - 117
Net fair value
gains/(losses)
cash flow
hedges - - - (403) - - - (403) - (1,086)
Tax on hedged
items - - - 60 - - - 60 - 60
--------- -------- --------- -------- --------- ------------ ---------- --------- ---------------- ---------
Total
comprehensive
income for the
period - - 11,309 (343) - 117 - 11,083 - 11,083
Share-based
payments - - 367 - - - - 367 - 1,307
Repurchase of
own shares - - - - (705) - - (705) - (705)
Dividend paid - - 1 - - - - 1 - 1
--------- -------- --------- -------- --------- ------------ ---------- --------- ---------------- ---------
Balance at 31
December 2015 1,744 347,436 76,916 (1,302) (1,936) (541) (276,961) 145,356 - 145,356
Profit for the
period - - 11,457 - - - - 11,457 31 11,488
Exchange
differences - - - - - 7,800 - 7,800 - 7,800
Net fair value
gains/(losses)
cash flow
hedges - - - (625) - - - (625) - (625)
Tax on hedged
items - - - 49 - - - 49 - 49
--------- -------- --------- -------- --------- ------------ ---------- --------- ---------------- ---------
Total
comprehensive
income for the
period - - 11,457 (576) - 7,800 - 18,681 31 18,712
Non-controlling
interest on
acquisition - - - - - - - - 394 394
Share-based
payments - - 1,988 - - - - 1,988 - 1,988
Dividend paid
and proposed - - (14,123) - - - - (14,123) - (14,123)
--------- -------- --------- -------- --------- ------------ ---------- --------- ---------------- ---------
Balance at 30
September 2016
(unaudited) 1,744 347,436 76,238 (1,878) (1,936) 7,259 (276,961) 151,902 425 152,327
========= ======== ========= ======== ========= ============ ========== ========= ================ =========
*Other reserves total GBP271,638,000 deficit (December 2015: GBP279,438,000 deficit; September 2015: GBP278,850,000 deficit)
Translation reserve
The translation reserve comprises all foreign currency differences arising from the translation of the financial statements of foreign operations.
Merger reserve
The merger reserve represents the reserve generated upon consolidation of the Group following the Group reconstruction as part of the IPO where Arrow Global became the parent Company.
Own share reserve
The own share reserve comprises the cost of the Company's ordinary shares held by the Group.
Unaudited Consolidated Statement of Cash Flows
For the nine months ended 30 September 2016
Nine months ended Nine months ended
30 September 30 September
2016 2015
GBP000 GBP000
Net cash flows from operating activities before purchases of loan
portfolios and loan notes 124,118 101,849
Purchases of purchased loan portfolios (119,303) (94,395)
Net cash generated by/ used in operating activities 4,815 7,454
Net cash used in investing activities (86,623) (43,367)
Net cash flows generated by financing activities 93,885 49,493
------------------ ------------------
Net increase in cash and cash equivalents 12,077 13,580
Cash and cash equivalents at beginning of period 10,183 14,542
Effect of exchange rates on cash and cash equivalents 172 354
------------------ ------------------
Cash and cash equivalents at end of period 22,432 28,476
------------------ ------------------
Notes
1. Financial assets
Nine months ended Year Ended Nine months ended
30 September 31 December 30 September
2016 2015 2015
GBP000 GBP000 GBP000
Non Current:
Purchased loan portfolios 537,641 464,996 415,633
Loan notes - 862 1,131
------------------ -------------- ------------------
537,641 465,858 416,764
------------------ -------------- ------------------
Current:
Purchased loan portfolios 159,168 121,278 111,082
Purchased loan portfolios (resold)/ due to be resold - 23,519 -
Total 696,809 610,655 527,846
================== ============== ==================
Purchased loan portfolios
The Group recognises income from purchased loan portfolios in accordance with IAS 39. At 30 September 2016, the carrying amount of the purchased loan portfolio asset was GBP696,809,000 (31 December 2015: GBP609,793,000; 30 September 2015: GBP526,715,000).
The movements in purchased loan portfolio assets were as follows:
Nine months ended Year Ended Nine months ended
30 September 31 December 30 September
2016 2015 2015
GBP000 GBP000 GBP000
As at the period brought forward 609,793 477,513 477,513
Portfolios acquired during the period * 121,414 177,716 94,395
Purchased loan portfolios to be resold (23,519) 23,519 -
Portfolios acquired through acquisition of a subsidiary 35,343 3,970 3,970
Collections in the period (216,051) (218,515) (155,490)
Income from purchased loan portfolios 132,783 150,238 110,277
Exchange gain/ (loss) on purchased loan portfolios 36,436 (5,151) (4,453)
Profit on disposal of purchased loan portfolios 610 503 503
As at the period end 696,809 609,793 526,715
================== ============== ==================
* inclusive of capitalised portfolio expenditure of GBP2,111,000 (31 December 2015: GBP1,406,000, 30 September 2015: GBP1,228,000)
2. Borrowings
30 September 31 December 30 September
2016 2015 2015
Secured borrowing at amortised cost GBP000 GBP000 GBP000
Senior secured notes (net of transaction fees of GBP21,202,000,
December 2015: GBP19,286,000;
30 September 2015: GBP19,643,000) 687,172 447,545 448,744
Revolving credit facility (net of transaction fees of GBP3,615,000,
December 2015 GBP3,521,000;
30 September 2015: GBP3,840,000) 41,385 71,479 40,160
Senior secured notes interest 2,577 6,832 2,453
Bank overdrafts 13,326 - -
------------- ------------ -------------
744,460 525,856 491,357
============= ============ =============
Total borrowings
Amount due for settlement within 12 months 57,288 78,311 42,613
============= ============ =============
Amount due for settlement after 12 months 687,172 447,545 448,744
============= ============ =============
3. Non-recurring items
30 September 30 September
2016 2015
GBP000 GBP000
Other operating expenses 3,260 -
Finance costs 17,994 2,780
Total non-recurring items 21,254 2,780
============= =============
Non-recurring items include items that, by virtue of their size and nature (i.e. outside of the normal operating activities of the Group), are not considered to be representative of the on going performance of the Group.
Other operating expenses
In the period to 30 September 2016, GBP3.3 million of costs were incurred relating to the completion of two strategic entity acquisitions, Vesting Finance in the Netherlands and Redrock in Portugal.
In the period to 30 June 2015, GBP1.4 million of costs were incurred relating to the completion of two strategic Portuguese entity acquisitions, Gesphone and Whitestar, GBP0.9 million due to share option charges in relation to the IPO and GBP0.5 million due to Capquest integration, moving from an outsourced model to a partially insourced model.
Finance costs
In the period to 30 September 2016, GBP18.0 million of non-recurring costs were incurred in relation to refinancing the Group's RCF and 2020 Senior Secured Notes. Upon cancellation of the Group's existing RCF, GBP3.0 million of non-recurring costs were incurred in relation to writing off previous transaction fees. Upon redemption of the Group's 2020 Senior Secured Notes, GBP15.0 million of non-recurring costs were incurred, of which GBP8.7 million was a cash cost related to the call premium and GBP6.3 million was a non-cash cost related to the write-off of transaction fees.
Total non-recurring items had an associate tax impact of GBP3,660,000 (30 September 2015: GBP771,000).
Glossary
"Adjusted EBITDA" means profit for the year attributable to equity shareholders before interest, tax, depreciation, amortisation, foreign exchange gains or losses and non-recurring items. The adjusted EBITDA reconciliations for the periods ended 30 September 2016 and 30 September 2015 are shown below:
Nine months ended Nine months ended
30 September 30 September
2016 2015
Reconciliation of Net Cash Flow to EBITDA GBP000 GBP000
Net cash flow generated by operating activities 4,815 7,454
Purchases of loan portfolios 119,303 94,395
Income taxes paid 2,495 5,550
Working capital adjustments 29,444 (7,258)
Amortisation of acquisition fees 207 208
Foreign exchange losses 172 354
Share of profit in associates 1,779 667
Non-recurring items 3,260 2,503
Adjusted EBITDA 161,475 103,873
------------------ ------------------
Reconciliation of Core Collections to EBITDA GBP000 GBP000
Income from loan portfolios 132,783 110,277
Portfolio amortisation 83,268 45,213
Core collections 216,051 155,490
------------------ ------------------
Other income 30,967 9,201
Operating expenses (99,263) (68,628)
Depreciation and amortisation 6,099 2,930
Foreign exchange losses/ (gains) 387 (707)
Amortisation of acquisition fees 207 208
Share-based payments 1,988 905
Share of profit in associate 1,779 667
Non-recurring items 3,260 3,807
Adjusted EBITDA 161,475 103,873
------------------ ------------------
Reconciliation of Operating Profit to EBITDA GBP000 GBP000
Profit for the period 11,488 20,440
Underlying finance income and costs 34,730 26,083
Taxation charge on ordinary activities 2,664 5,497
Share of profit in associate (1,779) (667)
Non-recurring finance costs 17,994 -
------------------ ------------------
Operating profit 65,097 51,353
------------------ ------------------
Portfolio amortisation 83,268 45,213
Profit on disposal of purchased loan portfolios (610) (503)
Depreciation and amortisation 6,099 2,930
Foreign exchange losses/ (gains) 387 (707)
Amortisation of acquisition fees 207 208
Share-based payments 1,988 905
Share of profit in associate 1,779 667
Non-recurring operating expenses 3,260 3,807
Adjusted EBITDA 161,475 103,878
------------------ ------------------
"Collection activity costs" represents the direct costs of external collections related to the Group's purchased loan portfolios, such as commissions paid to third party outsourced providers, credit bureau data costs and legal costs associated with collections
"Core collections" or "core cash collections" mean cash collections on the Group's existing portfolios including ordinary course portfolio sales and put backs
Glossary (Continued)
"EBITDA" means earnings before interest, taxation, depreciation and amortisation
"84-month ERC" and "120-month ERC" (together "gross ERC"), mean the Group's estimated remaining collections on purchased loan portfolios over an 84-month or 120-month period, respectively, representing the expected future core collections on purchased loan portfolios over an 84-month or 120-month period (calculated at the end of each month, based on the Group's proprietary ERC forecasting model, as amended from time to time)
"Existing portfolios" or "purchased loan portfolios" are on the Group's balance sheet and represent all debt portfolios that the Group owns at the relevant point in time
"Gross cash-on-cash multiple" means core collections to date plus the 84-month gross ERC or 120-month gross ERC, as applicable, all divided by the purchase price for each portfolio
"Net debt" means the sum of the senior secured notes excluding transaction fees, interest thereon, and amounts outstanding under the RCF, less cash and cash equivalents. Net debt is presented because it indicates the level of debt after taking out of the Group's assets that can be used to pay down outstanding borrowings, and because it is a component of the maintenance covenants in the RCF. The breakdown of net debt for 30 September 2016 and 31 December 2015 is as follows:
30 September 31 December
2016 2015
GBP000 GBP000
Cash and cash equivalents (22,432) (10,813)
Senior secured notes (pre transaction fees net off) 708,374 446,832
Senior secured notes interest 2,577 6,832
Revolving credit facility (pre transaction fees net off) 45,000 75,000
Bank overdrafts 13,326 -
Deferred consideration 19,157 50,149
Net debt 766,002 588,630
============= ============
"PCB" means the Proprietary Collections Bureau, a data matching tool designed by Arrow Global
and Experian
"Purchased loan portfolios" see "existing portfolios"
"Purchased loan portfolios to be resold" relates to a portfolio of assets, which has been acquired at the year end, and will shortly be re sold to an investment partner. These are separately disclosed from other loan portfolios, as an investment partner is intending to complete their acquisition from us
"RCF" means revolving credit facility
"Underlying net income" means profit for the year attributable to equity shareholders adjusted for the post-tax effect of non-recurring items. The Group presents underlying net income because it excludes the effect of non-recurring items (and the related tax on such items) on the Group's profit or loss for a year and forms the basis of its dividend policy
This information is provided by RNS
The company news service from the London Stock Exchange
END
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November 09, 2016 02:01 ET (07:01 GMT)
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