For Arrow Global (ARW) chief executive Lee Rochford, the looming potential credit crunch facing firms and individuals across Europe is “exactly the kind of situation this company is geared to.” That’s a bullish statement for a company whose own net debt only just fell within the target range to 3.4 times trailing cash profits.
The debt specialist can point to several sources of optimism. One is free cash flow, which remains robust, climbing 13 per cent to £261m. More critical – especially for long-term investors – is the maturity of Arrow’s own borrowings, which means no debt is due until 2024. That buys time to both de-lever and continue the pivot towards managing investments in non-performing loans and unwanted mortgage portfolios on behalf of third parties.
On that front, there has been progress. Arrow raised €838m (£743m) for its initial fund, and continues to target €2bn of funds under management by the end of this year. Mr Rochford is fully confident of clients’ appetite to park their capital with his firm, even accounting for an increasingly uncertain macro-economic outlook.
Opportunities to deploy capital was hardly in short supply in 2019, as investment volumes hit a record £304m. Nonetheless, Numis expects a “material” drop in acquisitions in 2020, as Arrow co-invests with fund clients.
Analysts at JP Morgan expect adjusted earnings per share of 40.7p this year, and 45p in 2021.
| ARROW GLOBAL (ARW) | ||||
| ORD PRICE: | 154p | MARKET VALUE: | £272m | |
| TOUCH: | 154-154.3p | 12-MONTH HIGH: | 307p | LOW: 142p |
| DIVIDEND YIELD: | 8.5% | PE RATIO: | 8 | |
| NET ASSET VALUE: | 112p* | NET DEBT: | £1.2bn | |
| Year to 31 Dec | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2015 | 165 | 39.3 | 18.0 | 7.1 |
| 2016 | 236 | 31.4 | 15.0 | 9.1 |
| 2017 | 319 | 50.6 | 23.0 | 11.3 |
| 2018 | 362 | 40.0 | 17.0 | 12.7 |
| 2019 | 340 | 51.3 | 20.0 | 13.1 |
| % change | -6 | +28 | +18 | +3 |
| Ex-div: | 11 Jun | |||
| Payment: | 17 Jul | |||
| *Includes intangible assets of £306m, or 173p per share. | ||||
