21st Jan 2021 12:17
(Alliance News) - Arrow Global Group PLC on Thursday said it plans to resume dividend payments sooner than expected after an "encouraging final quarter".
Shares in Arrow were up 12% at 213.10 pence in London at midday.
The Manchester-based company buys debt from banks, credit card companies and telecommunications businesses. It reported "an encouraging final quarter of 2020 with improved prospects for 2021 trading".
In its fourth quarter "strong balance sheet cash collections performance and profitability" persisted, with collections in the fourth quarter of 2020 more than twice its forecasts at the half-year point.
Revenue from Third-party Asset Management and Servicing remained strong, helped by a record 26 new contract wins for 2020. The company also beat its fourth-quarter target deployment of its EUR1.7 billion Arrow Credit Opportunities 1 fund.
At the end of 2020, Arrow Credit Opportunities 1 investment vehicles has invested around 28% of committed capital before recycled capital. The company's total 2020 balances sheet investment amounted to GB110 million.
Before it can begin raising Arrow Credit Opportunities 2, Arrow Credit Opportunities 1 needs to be 70% committed to investment including recycled capital.
Arrow forecasts that its December 31 leverage will be 5.1 times, much better than was forecast when the company renegotiated its revolving credit facility covenant in August 2020, and Arrow said its "strong current trading" lends increased confidence that the firm will shrink leverage to around 4 times by 2021 end.
Near the middle of 2021, leverage is forecast to peak with "the negative impact of H1 2020 COVID-19 lockdowns on collections" to remain in Arrow's trailing twelve month secured net debt to adjusted earnings before interest, tax, depreciation, and amortisation leverage calculation.
Given its expected 2021 leverage reduction, Arrow is expecting to resume dividend payments sooner than originally planned and pay a final dividend for 2021.
Chief Executive Lee Rochford said: "Arrow expects to have traded ahead of management expectations in Q4 2020, building on the strong return to profitability registered in Q3. Accelerated deployment of the Arrow Credit Opportunities 1 fund demonstrates the increasing market opportunity presented by the deep economic dislocation currently being experienced across our European markets. Our investment pipeline moving into 2021 is very promising and early indications are that available returns are continuing to increase.
"Continued strong trading in the first weeks of 2021 means that we are increasingly confident of reducing leverage significantly by the end of the year. As a result, the group now expects to be in a position to resume dividend payments ahead of plan at year-end 2021."
By Anna Farley; [email protected]
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