28th Aug 2014 09:23
LONDON (Alliance News) - Arrow Global Group PLC Thursday reported a 21% increase in pretax profit as it reported its first interim results following its initial public offering last October.
The group also said it will pay a maiden interim dividend of 1.7 pence.
In a statement, the European debt purchaser and manager said it made a GBP13.6 million pretax profit in the six months ended June 30, compared with GBP11.2 million in the corresponding period last year.
Revenue increased to GBP51.6 million from GBP48.3 million, driven by a 17% increase in income from purchased loan portfolios to GBP50.0 million and a 64% increase in income from asset management to GBP1.2 million. The costs of making collections rose by 9.2% to GBP15.6 million, with Arrow Global reporting an improvement in the collection cost ratio to 22.6% from 22.9%.
Core collections increased to GBP69.3 million from GBP62.5 million, due to the increase in Arrow Global's portfolio asset base. The company said that collections continue to perform in line with expectations and at the end of June were cumulatively 102% of its original underwriting forecast. Over the first six months of the year, three-quarters of cash collections came from regular small payments, with an average monthly payment of GBP23. Arrow Global said that this reflects its "focus on working with customers to create long term sustainable repayment plans."
Meanwhile, the group's earnings were weakened by a GBP2.4 million non-recurring charge due to a decision to settle a disagreement with UK tax authorities over the value-added tax implications of business activities performed in Guernsey prior to the group's restructuring in January 2013.
"HMRC has concluded its review and disagreed with our technical analysis. HMRC have raised an assessment for VAT but confirmed no penalties will be levied as they have confirmed that the group acted reasonably," Arrow said in a statement.
The decision to settle was made after Arrow Global considered that the "time, costs and uncertainties" of appealing the HMRC decision at a tax tribunal, as well as that the issue has no impact on future profitability.
Overall charges for non-recurring items, which included GBP870,000 of IPO costs, crept up to GBP3.4 million from GBP3.3 million.
Looking to the future, Arrow Global said that the regulatory environment is set to continue to tighten, which it said will result in debt purchase markets entering a period of increasing consolidation.
"We expect this will lead to the emergence of a core group of industry leaders. We continue to assess a number of opportunities in European geographies with favourable market dynamics and we also have good visibility of a strong pipeline in the UK," Arrow Global said.
"Unsecured consumer credit is continuing to grow following a period of stagnation during the recession, and the propensity of banks to sell is expected to increase in response to accounting and regulatory changes. We remain committed to pursuing a strategy to diversify our investments by both asset class and geography," the group added.
Arrow Global said it remains on track to deliver overall results in line with its expectations for the full year.
Arrow Global shares were off 3.3% at 238.75 pence Thursday morning.
By Samuel Agini; [email protected]; @samuelagini
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