For banks, cleaning up their balance sheets and reducing leverage has become more important than ever following the introduction of more stringent capital requirements. It is against this regulatory backdrop that Arrow Global (ARW) - which buys up distressed debt from mainstream lenders - has prospered. Last year the group grew its adjusted cash profit by more than half to £153m.
Arrow invested £180m in such loan portfolios during the year, with a face value of £1.5bn. This was well in excess of its £68m target replacement rate. The group's total purchased loan portfolio now stands at £586m, up by over a fifth on the previous year, and has a face value of £14.2bn. Arrow Global uses its in-house data systems to track down customers and pursue repayments, before setting up a repayment plan. The group's success in this was demonstrated by an increase of almost half in its core debt collections at £219m.
The group acquired Portuguese loan services Whitestar and Gesphone, as it grew its presence in a country where bank deleveraging is already well advanced. Management's aim is to also expand further into the Netherlands and France.
Analysts at Numis expect adjusted pre-tax profit of £58m in 2016, giving adjusted EPS of 26.4p (from 20p in 2015).
ARROW GLOBAL (ARW) | ||||
|---|---|---|---|---|
| ORD PRICE: | 245.8p | MARKET VALUE: | £429m | |
| TOUCH: | 245.5-247.3p | 12-MONTH HIGH: | 290p | LOW: 196p |
| DIVIDEND YIELD: | 2.9% | PE RATIO: | 14 | |
| NET ASSET VALUE: | 83p** | NET DEBT: | £589m | |
| Year to 31 Dec | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2011* | 50 | 6.2 | 0.5 | nil |
| 2012* | 66 | 12.1 | 7.0 | nil |
| 2013 | 93 | 21.0 | 10.0 | nil |
| 2014 | 111 | 24.1 | 10.0 | 5.1 |
| 2015 | 166 | 39.3 | 18.0 | 7.1 |
| % change | +50 | +63 | +80 | +39 |
Ex-div: 9 Jun Payment: 7 Jul *Prior to flotation **Includes intangible assets of £100m, or 57p a share | ||||
