Underlying profits grew 17 per cent at Arrow Global (ARW) last year, despite a dip in underlying return on equity from 26.5 per cent to 26.1 per cent. The company buys up distressed loan portfolios from mainstream lenders and uses its complex data system to increase returns from non-payers.
The system allows the group to concentrate on ensuring people only pay back what they can afford. This is important because it helps create a working relationship with debtors to create a sustainable income stream from repayments. Around three-quarters of cash collections came from regular small payments, which in the UK averaged £24 a month.
Arrow bought £138m-worth of loan portfolios during the year, but these had a face value of £1.3bn. This pushed up the estimated rental collection from the portfolio by £247m to £897m, based on a total loan book with a face value of £12.7bn.
Further investments included the acquisition of Capquest, the UK's fifth largest debt buyer, for £153m. The deal is attractive for two reasons: first, Capquest has a back book of estimated collections worth £224m; and, second, it has an in-house collection system, whereas Arrow has been using third-party collectors. As a result, Arrow expects cost synergies of around £6.5m on full integration.
Analysts at Numis are forecasting pre-tax profits of £41.6m for 2015 and EPS of 20.3p (from £24.1m and 17p in 2014).
| ARROW GLOBAL (ARW) | ||||
|---|---|---|---|---|
| ORD PRICE: | 248p | MARKET VALUE: | £433m | |
| TOUCH: | 246.5-248p | 12-MONTH HIGH: | 270p | LOW: 207p |
| DIVIDEND YIELD: | 2.1% | PE RATIO: | 25 | |
| NET ASSET VALUE: | 70p** | NET DEBT: | £440m | |
| Year to 31 Dec | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2010* | 20 | -2.0 | -0.2 | nil |
| 2011* | 50 | 6.2 | 0.5 | nil |
| 2012* | 66 | 12.1 | 7.0 | nil |
| 2013 | 93 | 21.0 | 10.0 | nil |
| 2014 | 109 | 24.1 | 10.0 | 5.1 |
| % change | +17 | +15 | - | - |
Ex-div: 11 Jun Payment: 9 Jul *Prior to flotation **Includes intangible assets of £59m, or 34p a share | ||||
