TIDMARW
RNS Number : 3754P
Arrow Global Group PLC
31 August 2017
31 August 2017
Arrow Global Group PLC
Interim results for the six months to 30 June 2017
Arrow Global Group PLC (the "Company") and its subsidiaries
(together the "Group"), a leading European credit management
services provider, is pleased to announce its results for the six
months ended 30 June 2017 ("H1 2017").
Highlights
Growth
-- Strong organic portfolio purchases up 30.3% to GBP125.1 million (H1 2016: GBP96.0 million)
-- Revenue growth of 47.6% supported by 11.3% increase in core
collections and 98.6% increase in Asset Management income from H1
2016
-- Completion of the acquisition of Zenith Service S.p.A. in Italy
-- Agreed terms to acquire Mars Capital, expanding UK secured
servicing capabilities and entering the Irish market
Operational excellence
-- Overall collections performance at 103% of original
underwriting forecasts, underlining the continued quality of data
and analytics
-- Launch of a group-wide One Arrow programme to support future
growth. This will invest in centres of excellence for our group
capabilities, operational processes and platforms focussed on
enhancing the customer journey and increasing productivity
-- Further investment in legal collection costs enhances the
value of the back book and drives additional ERC
Financial excellence
-- 84 month ERC increased to GBP1,478.5 million (31 December 2016: GBP1,339.1 million).
-- Increase in capital-light Asset Management revenues to 22.8%
of total revenue (H1 2016: 16.9%)
-- Successfully raised EUR400 million senior secured floating
rate notes due 2025, at a coupon of E+2.875%, reducing the Group's
weighted average cost of debt to 3.9% (31 December 2016: 4.9%) and
average debt facility maturity of 6.8 years as at 30 June 2017 (31
December 2016: 5.9 years)
Strong returns
-- Underlying profit after tax up 35.5% to GBP25.8 million (H1 16: GBP19.1 million)
-- Underlying basic earnings per share (EPS) increased 35.8% to 14.8p (H1 2016: 10.9p)
-- Statutory profit after tax down to GBP3.7m (H1 16: GBP16.5m),
reflecting the impact of post-tax costs associated with the
refinancing in March 2017 of GBP22.1 million
-- Underlying LTM Return on Equity (ROE) of 32.8% (H1 2016: 27.4%)
-- Interim dividend of 3.2p per share (H1 2016: 2.7p), up 18.5%
Lee Rochford, Group Chief Executive Officer, commented:
"Arrow has delivered another period of strong, profitable
growth. Revenues grew 47.6% to GBP149.8 million with underlying
profit after tax up 35.5% to GBP25.8 million. Our returns-focused
mindset continues to yield results with underlying Return on Equity
increased to 32.8%. We are pleased to announce an interim dividend
of 3.2p, up 18.5%.
We continue to implement our active diversification strategy.
Our capital-light asset management revenues have approximately
doubled, and our portfolio investments are nicely balanced across
geographies, asset classes and vintages.
Our entry into Italy is progressing well, and, we have announced
today our intention to acquire Mars Capital. This will add
significantly to our UK secured servicing capabilities, and provide
a low-cost strategic entry into Ireland, a new market for the
Group. In H2, we expect to complete the sale of our 15% interest in
MCS Groupe, which will deliver an excellent return to shareholders
and enable us to redeploy capital in faster growing markets.
Our pan-European market position, scale and unique origination
capabilities continue to underpin our outlook for growth. We now
address over EUR1 trillion of market opportunity, with leading
platforms and are investing to ensure Arrow Global has leading
capabilities in the industry.
A strong pipeline in all of our core markets gives us confidence
to meet our earnings expectations for the year and in delivering a
medium-term underlying ROE percentage in the mid-twenties,
high-teen EPS growth and a progressive dividend policy."
Notes:
A glossary of terms can be found on pages 39 to 42.
More details explaining the business can be found in the Annual
Report & Accounts 2016 which is available on the Company's
website at www.arrowglobalir.net
For further information:
+44 (0)161
Arrow Global 242 5885
Lee Rochford, Group
CEO
Robert Memmott, Group
CFO
Anthony Frost, Group
communications
+44 (0)20
Instinctif Partners 7457 2020
Giles Stewart
Rui Videira
Forward looking statements
This document contains statements that constitute
forward-looking statements relating to the business, financial
performance and results of the Group and the industry in which the
Group operates. These statements may be identified by words such as
"expectation", "belief", "estimate", "plan", "target", or
"forecast" and similar expressions or the negative thereof; or by
forward-looking nature of discussions of strategy, plans or
intentions; or by their context. All statements regarding the
future are subject to inherent risks and uncertainties and various
factors could cause actual future results, performance or events to
differ materially from those described or implied in these
statements. Such forward-looking statements are based on numerous
assumptions regarding the Group's present and future business
strategies and the environment in which the Group will operate in
the future. Further, certain forward looking statements are based
upon assumptions of future events which may not prove to be
accurate and neither the Company nor any other person accepts any
responsibility for the accuracy of the opinions expressed in this
document or the underlying assumptions. The forward-looking
statements in this document speak only as at the date of this
presentation and the Company assumes no obligation to update or
provide any additional information in relation to such
forward-looking statements.
Business and financial review of the six months to 30 June
2017
The Group has built on its strong momentum and has continued to
expand its European footprint and client offering across its
attractive markets. This, coupled with our continued drive to
generate a high quality and diversified income, has enabled us to
deliver a strong first-half financial performance.
Key results
30 30 June 30 June 30 June 30 June 30 June
June 2017 2017 2016 2016 2016
2017
GBPm GBPm GBPm GBPm GBPm GBPm
IFRS Adjustments Underlying IFRS Adjustments Underlying
Profit before
tax 4.9 27.4 32.3 20.5 2.7 23.2
Taxation (1.2) (5.3) (6.5) (4.0) (0.1) (4.1)
------ ------------ ----------- -------- ------------ -----------
Profit after
tax 3.7 22.1 25.8 16.5 2.6 19.1
Basic EPS
(p) 2.1 14.8 9.4 10.9
Diluted EPS
(p) 2.1 14.4 9.2 10.6
Closing net
assets 164.0 164.0 158.2 158.2
Average net
assets 159.6 159.6 143.7 143.7
LTM ROE % 8.5 32.8 24.6 27.4
Core collections - 154.5 - 138.8
Adjusted EBITDA - 101.8 - 104.0
Organic purchases
of loan portfolios
and notes - 125.1 - 96.0
Total purchased
loan portfolios
and notes - 901.7 - 692.0
84-month ERC - 1,478.5 - 1,200.0
120-month
ERC - 1,708.8 1,417.2
IFRS, cash metrics and underlying results are important to
understand the key drivers of the business. The additional
information on pages 36 to 38 have been prepared to aid this
understanding, which helps to support the commentary of the
financial review for the period.
Business Model
Our business model provides a compelling proposition in four
distinct ways:
-- High growth - a highly visible runway of significant
long-term growth, underpinned by our unique origination
capabilities, geographic reach and diversified offerings.
-- Operational excellence - a focus on securing the right
outcomes for our customers in an efficient manner, leveraging our
data, scale and track-record to drive competitive advantage.
-- Financial excellence - a rigorous focus on robust
underwriting, selective portfolio bidding and cost management,
geared towards delivering sustainable profitability.
-- Strong returns - a high-return business model, enabling
future growth and capital distribution.
High growth
According to PwC's May 2017 report on the European NPL market,
despite huge transaction volumes, European financial institutions
continue to hold around EUR2.1 trillion of non-core loans, split
broadly equally between performing and non- performing assets.
Against this backdrop, PwC suggest that transactions completed
or in progress in 2017 have already reached over EUR50 billion and
believe that, for third year in a row, transaction volumes could
exceed EUR100 billion in 2017.
In our core markets of the UK, Portugal, the Netherlands, Italy,
and from today, Ireland, outstanding NPLs amounted to approximately
EUR500 billion (end-2016), with an equivalent value of non-core
assets. Banks still need to divest non-performing loans and
non-core assets because of both capital and regulatory
requirements, resulting in long-term structural growth
opportunities for Arrow Global. We have a pan-European footprint
and benefit from diversified asset class capabilities and revenue
sources.
Completion of the Zenith Service acquisition in Italy
On 28 April we completed the acquisition of Zenith Service
S.p.A, a leading master servicing business with operations in Milan
and Rome.
We are pleased with progress since completion. We have committed
to purchasing two small portfolios in Italy for a consideration of
EUR10 million. Both exemplify the rationale for acquiring Zenith
and the opportunities now open to Arrow Global in Italy. One
portfolio was master serviced by Zenith, thereby offering good
visibility into past performance and quality, while the second was
with a long-term partner of Zenith and who has worked regularly
with them.
Moreover, Zenith's core business has benefitted from Arrow
Global's network of institutional fund relationships. Assets under
management are up from cEUR14.8 billion, at the beginning of the
year, to over EUR17 billion as at 30 June 2017.
Mars Capital, UK and Ireland
Today we have also announced the proposed acquisition of Mars
Capital Finance Limited from Oaktree Capital Management ("Oaktree")
for an enterprise value of GBP15.5 million.
The transaction strengthens our asset management capabilities
and reinforces our leading position in the UK, while providing a
strategic entry into Ireland. This is a new market for the Group
that offers a EUR59 billion NPL opportunity with significant debt
purchasing and servicing potential.
Mars Capital provides servicing for mortgages covering 1st / 2nd
lien residential, buy-to-let and SME commercial mortgages, and
provides full-loan lifecycle servicing, from loan origination
support to late stage recoveries, with particular focus on managing
distressed mortgage NPLs.
We are also pleased to announce a strategic partnership with
Oaktree, a leading global asset manager with over USD$100 billion
under management. This will see Arrow Global and Oaktree acquire
future UK and Irish portfolios together. The agreement will also
ensure Oaktree assets currently serviced by Mars Capital remain on
the servicing platform for an agreed time.
The transaction is subject to regulatory approval by the
Financial Conduct Authority (FCA) and fulfilment of Central Bank of
Ireland notification obligations. It is expected to complete in
late 2017.
Purchased loan portfolios and loan notes
We acquired debt portfolios with a face value of GBP968.2
million for a purchase price of GBP125.1 million, up 30.3% on H1
2016. Of the purchase price invested, 32.1% related to secured
portfolios and the diversification by geography was: UK 49.8%,
Portugal 28.6%, Netherlands 16.8%, Italy 4.8%. 51.2% of these
trades came from off-market purchases, highlighting the strength
and depth of the institutional and fund relationships we hold in
each of our core markets.
The carrying value of our purchased loan portfolios and loan
notes increased by 12.1% to GBP901.7 million as at 30 June 2017 (31
December 2016: GBP804.1million). The most significant driver for
this was portfolios and loan notes acquired of GBP125.1 million in
the period.
The 120-month expected gross money multiple is 1.9 times for the
current period purchases from the date of purchase.
See note 10 for the full reconciliation of purchased loan
portfolios in the period.
Operational excellence
Enhanced services and Group capabilities
Arrow Global has grown rapidly since its stock market listing in
October 2013. Since then, we have repositioned the business from a
largely UK debt purchaser, in a single asset class, to offering a
range of services that now extends beyond the purchase and
collection of non-performing loans, and includes primary, special
and master servicing of securitised and secured assets, credit data
bureau services, asset management capabilities, real estate
financing and servicing, all backed with local expertise and
leadership.
Our expertise across multiple asset classes, combined with the
depth of our third-party network and ability to co-invest provides
our unique proposition to our diversified client base, which in
turns supports our diversified earnings growth and high
returns.
Investing for growth - One Arrow
Our strategy centres on controlled growth of our balance sheet,
allowing us to maintain our discipline, in terms of the quality of
our underwriting, maintaining returns and within our conservative
leverage ratio requirements.
The combination of our origination strengths, client
relationships and our servicing platforms means that we are well
positioned to take advantage of the potential to grow capital-light
Asset Management revenues. To take advantage of this in a safe,
disciplined and sustainable way, we are investing further in our
core capabilities.
This will see us strengthening Group governance and capabilities
in certain centres of excellence such as Origination, Data &
Analytics, Portfolio Management, Risk Management and our Change
& IT Functions. In addition, we are increasing investment in
our servicing and operating platforms to improve the customer
journey through enhanced digital capabilities, which in turn will
produce improvements in our productivity.
We are planning an investment and restructuring programme
totalling GBP22 million across 2017 and 2018. Approximately GBP10
million will be capital expenditure and the balance will be
reported separately to underlying earnings.
On completion we will have a more scalable, resilient platform
able to support future growth.
Financial excellence
ERC overview
Our 84-month ERC, the expected remaining collections from
portfolios already acquired, has increased by 10.4% from GBP1,339.1
million as at 31 December 2016 to GBP1,478.5 million. The 120-month
ERC increased 10.6% to GBP1,708.8 million (31 December 2016:
GBP1,544.5 million). The increases are due to portfolio purchases,
additional value driven by investment in legal collection activity
and foreign exchange rate movements.
The ERC is underpinned by approximately 600,000 customer
accounts that have paid the Group in the last three months. These
accounts have a current paying face value of GBP1.8 billion,
meaning the Group has 1.2 times coverage of the ERC from existing
customers. As at 30 June 2017, we estimate the amount we would need
to invest in portfolio purchases over the next 12 months to
maintain our current 84-month ERC level is approximately GBP130
million.
Capital-light Asset Management
We have grown Asset Management revenues by 98.6% to GBP34.2m (H1
2016: GBP17.2m). This increase has been driven by the inclusion of
InVesting B.V. ("Vesting") for the full period, along with a small
contribution from Zenith since acquisition.
Funding
On 30 March 2017, the Group issued EUR400 million senior secured
floating rate notes due 2025, at a coupon of E+2.875% (the '2025
Notes').
The proceeds of the 2025 Notes were used to redeem the existing
2021 Notes, pay the early redemption and transaction costs, and
repay drawings under our revolving credit facility (the 'RCF').
The early redemption of the 2021 Notes resulted in finance costs
of GBP27.4 million, of which GBP17.6 million related to the cash
call premium and cancellation of interest rate hedging linked to
the 2021 Notes, with the remaining GBP9.8 million due to a non-cash
write-off of transaction fees in connection with the 2021
Notes.
On 24 February, the Group increased its RCF from GBP180 million
to GBP215 million, and added an additional bank. The RCF has been
extended to 31 March 2022.
As at 30 June 2017, the Group's weighted average cost of debt
has been reduced to 3.9% (31 December 2016: 4.9%) and the weighted
average maturity of the Group's debt is now 6.8 years (H1 2016: 5.2
years) with no facility maturing before March 2022.
As at 30 June 2017, the Group had available cash and RCF
resources of GBP104.9 million.
Core collections
Core collections rose to GBP154.5 million (H1 2016: GBP138.8
million), reflecting the increase in our portfolio asset base. Core
collections in H1 2017 are slightly favourable to our ERC forecast
with good performance in the Netherlands and the UK, partially
offset by collections below expectations in Portugal. Growth in
core collections was impacted as expected by elevated collections
in H1 2016, where we received a high proportion of collections from
recently acquired portfolios.
As at 30 June 2017, we have cumulatively collected 103% of our
original underwriting forecast on a constant exchange rate basis,
reflecting the accuracy of our data driven approach to origination
and underwriting.
Revenue
Total revenue for the period was GBP149.8 million, an increase
of 47.6% (H1 2016: GBP101.5 million). GBP34.2 million of the total
in 2017 was attributable to income from asset management (H1 2016:
GBP17.2 million).
Cost
During the period, we have invested GBP12 million in additional
legal collection costs. This upfront cost supports additional ERC
of the back book. This activity will continue in Q3. This, combined
with a full period of the Vesting acquisition drives an increase in
our cost income ratio to 64.1% (H1 2016: 59.5%).
Profit
The profit attributable to equity shareholders for the period to
30 June 2017 was GBP3.7 million (H1 2016: GBP16.5 million), which
reflects the post tax cost of GBP22.1 million, following the early
redemption of 2021 Notes. The 2021 Notes were redeemed with the
proceeds of the EUR400 million E+ 2.875% 2025 Notes. The material
reduction in coupon resulted in the redemption being earnings
accretive, together with extending the duration of the Group's
funding.
After adjusting for the refinancing cost above, underlying net
income increased by 35.5% from GBP19.1 million in 2016 to GBP25.8
million for H1 2017.
Adjusted EBITDA
Adjusted EBITDA decreased by 2.1% to GBP101.8 million (H1 2016:
GBP104.0 million). Growth in Adjusted EBITDA was impacted by
additional investment in legal collection costs, which will
generate cash flows in future periods. In addition, and as
expected, it was also impacted by elevated collections in H1 2016,
where we received a high proportion of collections from recently
acquired portfolios with low cost to collect, and a higher cost
income ratio reflecting the expansion of the asset management
business and the Vesting acquisition in 2016.
Net assets
Net assets increased to GBP164.0 million during the period (H1
2016: GBP158.3 million), representing the growth in underlying
profitability offset by the impact of costs associated with the
refinancing activity completed in the period.
Net debt
30 June 31 December
2017 2016
GBP000 GBP000
Net debt 929.7 816.0
Secured net debt 882.3 761.9
30 June 30 June
2017 2016
Secured net debt 4.2 times 3.6 times
/ LTM adjusted EBITDA
Secured net debt 4.0 times 3.5 times
/ Pro forma LTM
adjusted EBITDA
Cash interest cover 5.3 times 5.3 times
Secured net debt
/ 84-month ERC 60.3% 58.3%
A glossary of terms can be found on pages 40 to 43.
Net debt increased to GBP929.7 million, driven by organic
portfolio purchases, the acquisition of Zenith, the impact of the
costs associated with refinancing of the 2021 Notes and movements
in foreign exchange rates. These factors have increased the ratio
of secured net debt to LTM Adjusted EBITDA, we expect this ratio to
be within our policy of 3.5-4 times by the end of 2017.
Cash interest cover has remained at 5.3 times; this is expected
to strengthen as the full-year effects of the refinancing activity
are realised. The ratio of net debt to 84-month ERC ratio is
significantly below our financial covenant of 75%.
Strong returns
We have delivered a period of strong, profitable growth.
Underlying profit after tax is up 35.5% to GBP25.8m (H1 16:
GBP19.1m).
We continue to exceed our key financial targets:
-- High-teens underlying basic EPS growth: 35.8% H1 2017
-- Mid-twenties underlying ROE LTM: H1 2017 32.8%
Dividend
In accordance with our progressive dividend policy, the interim
dividend increased by 18.5% to 3.2p per share (Interim 2016: 2.7p),
being 50% of our 2016 final dividend.
MCS Groupe, France
On 25 July MCS Groupe announced that a company controlled by
funds advised by BC Partners, has signed an agreement relating to
its acquisition. Subject to completion of the transaction, our 15%
economic interest in MCS Groupe will end. While the terms of the
transaction remain confidential the sale of MCS is expected to
result in a net gain and cash inflow in H2 for the Group.
Outlook
We continue to see attractive opportunities across our core
markets. Pressure for continued banking reform across Europe is
evident, and we expect to see further sales of NPLs and non-core
assets across our markets, in unsecured, secured, SME and
commercial real estate portfolios, all of which play to the Group's
strengths.
While we are mindful of the macroeconomic uncertainty prevailing
in the UK, and the squeeze on real incomes, growth remains positive
and unemployment is low. The European economy is showing
encouraging signs of momentum in its economic recovery.
Our underlying assets are underpinned by affordable repayment
plans across a broad range of consumers, where we have historically
seen limited cash flow sensitivity to macroeconomic variables, and
we are not seeing indications of a high-level change of customers'
ability or willingness to pay debts.
The investment in the One Arrow programme will result in a more
scalable, resilient platform able to support future growth.
Our focus for the remainder of 2017 will be on our core themes
of high growth, investments to drive improvements in operational
and financial excellence and delivering strong returns. A strong
pipeline across our geographic footprint gives us confidence in our
ability to meet our earnings expectations for the year, and in
delivering a medium-term underlying ROE percentage in the
mid-twenties, high-teens EPS growth and a progressive dividend
policy.
Principal risks and uncertainties
Sound risk management is at the centre of our day-to-day
activities. It benefits our business by ensuring balanced growth
and stability of earnings while also protecting the sustainability
of our future prospects.
Delivering our strategic priorities relies on the successful
identification, assessment, management and reporting of risk. We
focus on the top risks that impact our business, and also monitor
emerging risks that might affect us in the future.
We operate an Enterprise-Wide Risk Management Framework. The
overall Framework is underpinned by our Risk Appetite Statements
and a suite of policies. Risk is governed by the board, executive
management and various risk committees.
The Group operates a three lines of defence model, with the
internal audit function performed by a combination of Deloitte LLP
and our own Internal Audit functions in our European
subsidiaries.
Our principal risks are categorised as strategic, conduct,
operational and financial. The disclosures below should not be
regarded as a comprehensive list of all the risks and uncertainties
facing the Group, but rather provide a summary of some of the key
areas that could have the biggest impact.
Strategic risk
The risk to earnings arising from changes in the business
environment and from adverse business decisions, improper
implementation of decisions or lack of responsiveness to changes in
the business environment.
The Group's growth strategy is based on the future purchase and
collection of distressed loan portfolios, including as a servicer
for third parties, and development of asset management services
across the geographies in which we operate.
Changes in the competitive, economic, political (including
Brexit) or regulatory environment in the UK or Eurozone could
impact our ability to collect from portfolios, or competitively
purchase and invest in line with our company objectives e.g. as a
result of consolidation within the sector.
Negative attention and news regarding the debt collection
industry and/or the Group's collections activity may impact our
reputation and therefore the Group's ability to acquire portfolios
and customers' willingness to repay the debt that the Group
acquires.
Key mitigating actions
Management monitor the economic, political and regulatory
environments in which we operate to influence future strategy. In
addition, appropriate currency liquidity management and scenario
planning is in place.
Strong relationships have been developed with our creditor
client base and investment funds in order to mitigate the risk of
reduced debt purchase opportunities in the market. The board
regularly carries out reviews of the markets and strategy and
reputational impacts are managed through our governance activities
and by operating in accordance with all regulatory requirements and
jurisdictional industry best practice.
Financial risk includes:
Market risk: the risk of losses in portfolios due to changes in
foreign exchange rates and the level of interest rates,
Funding & Liquidity risk: the risk that the Group is unable
to meet its obligations as they fall due,
Credit risk: the risk to earnings or capital arising when a
customer or counterparty defaults on its contractual obligations,
including failure to perform obligations in a timely manner,
Tax risk: tax compliance risks arise from the complex nature of
tax legislation and practice,
Investment risk: the risk of returns adverse to forecast as a
result of inadequate portfolio purchase analysis and consequent
mispricing therefore affecting ERC.
Key mitigating actions
The Group's overarching financial risk management strategy is
governed by a robust policy framework and is overseen by the
treasury and tax committee, which is a delegated committee from the
board and executive risk committees.
The Group aims to mitigate foreign exchange risk (a market risk)
by matching foreign currency assets with foreign currency
liabilities. The Group manages remaining exposures to foreign
exchange at a Group level principally through the use of forward
contracts. Interest rate risk is managed principally using interest
rate swaps.
Funding and liquidity risk is managed through matching the
maturity of our funding facilities with the maturity of our assets;
forecasting funding requirements, applying appropriate stress
testing and ensuring that we maintain a balanced maturity profile
of debt facilities. We are highly cash generative and aim to
maintain a flexible cost base. Portfolio investment is largely
discretionary and this provides us with a large degree of control
over working capital.
Counterparty credit risk is managed through regular monitoring
of the quality of new and existing counterparties and of our
exposure to each. Counterparty risk with debt sellers is also
mitigated through warranties. Credit risk is principally taken on
through the purchase of customer debt and overseen on a country
basis.
Tax risk is addressed through the use of tax specialists who
advise the Group on its tax compliance obligations, application of
tax legislation, and the transactions and activities undertaken by
the Group.
Investment risk is managed through rigorous due diligence and
controls to consider risks (including operational risks) and
accurately price new investment opportunities. These include
executive review through an investment 'gate' process and in
certain circumstances board approval prior to purchase execution.
Portfolio performance is regularly monitored by senior management
and the board.
Operational risk
The risk of loss resulting from inadequate or failed internal
processes, people and systems, or from external events, including
those relating to legal issues and IT security weaknesses.
Failure to comply with relevant legal and regulatory
requirements through failed internal processes could result in the
suspension or termination of our ability to conduct business, and
could lead to regulatory censure and financial loss.
The Group relies on IT systems for customer and data management
and data analytics. Should these systems experience performance
issues or outage through, for example, cyber attack, our customers
would be impacted, and we could experience financial loss.
There is also a risk of data quality and documentation
deficiencies in purchased portfolios that require remediation
post-purchase. The effectiveness of this remediation activity
potentially affects the enforceability of debt, our future
collections and credit risk or the quality of customer
outcomes.
We choose to outsource the management of some customer accounts
to third party partners who collect on our behalf. We are also
dependent upon third party firms with whom customers engage to
manage their debt or insolvency. Should these third parties
experience sustained business interruption, be subject to takeover
by an unfriendly competitor or fraudulent activity, or fail to
maintain regulatory authorisation, we could suffer financial loss
and/or potential detriment to customers.
Key mitigating actions
Operational risk is managed in line with our operational risk
policy, which sets out the framework and processes for managing
this risk type.
We have a quarterly Risk & Control Self-Assessment ("RCSA")
process to identify and assess key operational and regulatory
risks. Key risk areas are governed by a suite of policies approved
by the board or executives to ensure standards are appropriately
set across the Group.
We employ industry specialists to monitor the latest regulations
and update our internal policies accordingly, and where required,
we take external specialist advice. We also engage in regular
training and assurance activity to ensure compliance with internal
policies.
IT systems are regularly tested, backed up and managed through a
set of quality and security policies, supported by disaster
recovery and business continuity plans.
Due diligence is undertaken on prospective investment purchases
to identify potential data quality and documentation weaknesses
(see investment risk section above). Our Legal team are involved in
all purchases and external legal advice is taken where required,
with contractual terms and warranties used to provide protection
against legacy issues.
We undertake on-going oversight of our suppliers, including
third party partners involved in the collection of payments from
customers. This oversight includes compliance with regulation,
information security and their business continuity arrangements. We
monitor industry consolidation activity and have a diversified
panel of partners to ensure that we are not reliant on any
particular third party servicer.
Conduct risk
The risk of inappropriate strategy, systems, behaviour, or
processes that leads to poor customer outcomes or impacts market
integrity.
We operate in a highly regulated environment, particularly in
the UK and increasingly in other European countries, with any
action that leads to poor customer outcomes or customer detriment
could lead to a breach of regulations, resulting in censure,
financial loss and reputational damage to our brand.
Poor customer outcomes or customer detriment could arise through
the debt collection activities within our in-house operations or
the third-party servicer network of collection agencies, whether we
are collecting debt which we have acquired or on behalf of clients.
We always seek to ensure we adhere to all local best practice
collections approaches.
Key mitigating actions
Conduct risk and Treating Customers Fairly ("TCF") are at the
heart of our business, our purpose being to build better financial
futures. Employees and third parties acting on our behalf receive
mandatory training, including conduct risk, handling vulnerable
customers and complaints, relevant to the local market and our
activities.
We consider customer outcomes when developing our strategy,
systems, policy and processes and ensure that our HR framework and
Company values support appropriate customer outcomes.
We have a rigorous oversight framework, focused on compliance,
independent assurance, performance, and customer outcomes across
both our in-house operations and third party 'partner' network,
with a continuous programme of reporting and reviews.
Governance over conduct risk is provided by the risk committees,
principally through the operational risk committee in the UK and
risk committees in each of our European subsidiaries. These
committees provide oversight of the Group's processes and
procedures, monitoring their effectiveness in fulfilling regulatory
obligations and the management of risk that may result in
non-compliance and/or poor outcomes for customers. Conduct risk
exposures are also managed and monitored against the board's risk
appetite.
Directors' responsibilities statement in respect of the interim
results
We confirm that to the best of our knowledge:
The condensed set of financial statements has been prepared in
accordance with IAS 34 Interim Financial Reporting as adopted by
the EU.
The interim management report includes a fair review of the
information required by:
DTR 4.2.7R of the Disclosure Guidance and Transparency Rules,
being an indication of important events that have occurred during
the first six months of the financial year and their impact on the
condensed set of financial statements; and a description of the
principal risks and uncertainties for the remaining six months of
the year; and
DTR 4.2.8R of the Disclosure Guidance and Transparency Rules,
being related party transactions that have taken place in the first
six months of the current financial year and that have materially
affected the financial position or performance of the entity during
that period; and any changes in the related party transactions
described in the last annual report that could do so.
Name Function
Jonathan Bloomer Non-executive chairman
Lee Rochford Group chief executive officer
Robert Memmott Group chief financial officer
Iain Cornish Non-executive director and
senior independent director
Lan Tu Non-executive director
Maria LuÃs Albuquerque Non-executive director
Andrew Fisher Non-executive director
The interim results were approved on 31 August 2017 by the board
of directors and are signed on its behalf by:
Robert Memmott Group Chief Financial Officer
Independent Review Report to Arrow Global Group PLC
Conclusion
We have been engaged by the Company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 June 2017 which comprises the consolidated
statement of profit and loss and other comprehensive income,
consolidated statement of financial position, consolidated
statement of changes in equity, consolidated statement of cash
flows and the related explanatory notes 1 to 19.
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
June 2017 is not prepared, in all material respects, in accordance
with IAS 34 Interim Financial Reporting as adopted by the EU and
the Disclosure Guidance and Transparency Rules ("the DTR") of the
UK's Financial Conduct Authority ("the UK FCA").
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity issued by the Auditing Practices Board for use in the
UK. A review of interim financial information consists of making
enquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review
procedures. We read the other information contained in the
half-yearly financial report and consider whether it contains any
apparent misstatements or material inconsistencies with the
information in the condensed set of financial statements.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the DTR of the UK FCA.
As disclosed in note 1, the annual financial statements of the
group are prepared in accordance with International Financial
Reporting Standards as adopted by the EU. The directors are
responsible for preparing the condensed set of financial statements
included in the half-yearly financial report in accordance with IAS
34 as adopted by the EU.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
The purpose of our review work and to whom we owe our
responsibilities
This report is made solely to the Company in accordance with the
terms of our engagement to assist the Company in meeting the
requirements of the DTR of the UK FCA. Our review has been
undertaken so that we might state to the company those matters we
are required to state to it in this report and for no other
purpose. To the fullest extent permitted by law, we do not accept
or assume responsibility to anyone other than the company for our
review work, for this report, or for the conclusions we have
reached.
Richard Gabbertas
for and on behalf of KPMG LLP
1 St Peter's Square
Manchester
M2 3AE
31 August 2017
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE
INCOME
For the period ended 30 June 2017
Unaudited
period Unaudited
ended 30 June 2017 period ended 30 June 2016
GBP000 GBP000
Continuing operations Note
Revenue 4 149,790 101,516
-------------------- ---------------------------
Operating expenses
Collection activity costs (55,105) (30,654)
Other operating expenses 8 (40,924) (27,048)
Acquisition costs - (2,731)
-------------------- ---------------------------
Total operating expenses (96,029) (60,433)
-------------------- ---------------------------
Operating profit 53,761 41,083
-------------------- ---------------------------
Finance income 3 783
Finance costs (22,563) (22,709)
Bond refinancing costs (27,352) -
-------------------- ---------------------------
Total finance costs (49,915) (22,709)
Share of profit in associates 1,072 1,340
-------------------- ---------------------------
Profit before tax 4,921 20,497
-------------------- ---------------------------
Taxation charge 7 (1,190) (3,987)
-------------------- ---------------------------
Profit after tax 3,731 16,510
==================== ===========================
Other comprehensive income:
Foreign exchange translation difference arising on
revaluation of foreign operations 3,168 5,486
Hedging movement 516 (1,408)
-------------------- ---------------------------
Total comprehensive income for the period 7,415 20,588
==================== ===========================
Profit attributable to:
Owners of the Company 3,731 16,498
Non-controlling interest - 12
-------------------- ---------------------------
3,731 16,510
==================== ===========================
Total comprehensive income attributable to:
Owners of the Company 7,415 20,576
Non-controlling interest - 12
-------------------- ---------------------------
7,415 20,588
==================== ===========================
Basic and diluted EPS (GBP) 5 0.02 0.09
==================== ===========================
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 June 2017 Unaudited Audited Unaudited
30 June 31 December 30 June
2017 2016 2016
Assets Notes GBP000 GBP000 GBP000
Non-current assets
Goodwill 9 140,969 128,081 125,359
Other intangible assets 42,774 39,144 42,258
Property, plant and equipment 6,328 3,584 2,655
Investment in associates 9,060 10,371 15,834
Deferred tax asset 4,171 3,692 4,095
---------- ------------- ----------
Total non-current assets 203,302 184,872 190,201
---------- ------------- ----------
Current assets
Cash and cash equivalents 38,375 23,203 20,662
Other receivables 47,230 35,484 44,382
Derivative asset 3,456 - 6,738
Purchased loan portfolios 10 868,261 782,792 691,959
Loan notes 10 33,470 21,315 -
Total current assets 990,792 862,794 763,741
---------- ------------- ----------
Total assets 1,194,094 1,047,666 953,942
========== ============= ==========
Equity
Share capital 1,753 1,744 1,744
Share premium 347,436 347,436 347,436
Retained earnings 86,410 92,327 85,323
Hedging reserve (116) (632) (2,710)
Other reserves (271,671) (273,484) (273,952)
---------- ------------- ----------
Total equity attributable to shareholders 163,812 167,391 157,841
---------- ------------- ----------
Non-controlling interest 187 - 406
---------- ------------- ----------
Total equity 163,999 167,391 158,247
---------- ------------- ----------
Liabilities
Non-current liabilities
Senior secured notes 13 756,858 681,158 668,146
Trade and other payables 11 6,139 - -
Deferred tax liability 16,311 14,859 13,596
Defined benefit liability - 1,721 -
---------- ------------- ----------
Total non-current liabilities 779,308 697,738 681,742
---------- ------------- ----------
Current liabilities
Trade and other payables 11 82,801 76,261 68,912
Current tax liability 2,735 5,469 8,744
Derivative liability 144 1,433 -
Revolving credit facility 13 144,154 74,169 18,914
Bank overdrafts 13 1,318 7,698 8,648
Other borrowings 13 15,609 12,077 -
Senior secured notes 13 4,026 5,430 8,735
---------- ------------- ----------
Total current liabilities 250,787 182,537 113,953
---------- ------------- ----------
Total liabilities 1,030,095 880,275 795,695
---------- ------------- ----------
Total equity and liabilities 1,194,094 1,047,666 953,942
========== ============= ==========
The interim results were approved on 31 August 2017 by the board
of directors and are signed on its behalf by:
Robert Memmott Group Chief Financial Officer
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the period ended 30 June 2017
Own
Ordinary Share Retained Hedging share Translation Merger Non-controlling
shares premium earnings reserve reserve* reserve* reserve* Total interest Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Balance at 1
January 2016 1,744 347,436 76,916 (1,302) (1,936) (541) (276,961) 145,356 - 145,356
Profit for the
period - - 16,498 - - - - 16,498 12 16,510
Exchange
differences - - - - - 5,486 - 5,486 - 5,486
Net fair value
losses cash
flow hedges - - - (1,679) - - - (1,679) - (1,679)
Tax on hedged
items - - - 271 - - - 271 - 271
Total
comprehensive
income for the
period - - 16,498 (1,408) - 5,486 - 20,576 12 20,588
Non-controlling
interest on
acquisition - - - - - - - - 394 394
Settlement of
non-controlling
interest - - - - - - - - - -
Share-based
payments - - 1,324 - - - - 1,324 - 1,324
Dividend paid - - (9,415) - - - - (9,415) - (9,415)
--------- -------- --------- -------- --------- ------------ ---------- --------- ---------------- ---------
Balance at 30
June 2016
(unaudited) 1,744 347,436 85,323 (2,710) (1,936) 4,945 (276,961) 157,841 406 158,247
Profit for the
period - - 9,807 - - - - 9,807 (11) 9,796
Exchange
differences - - - - - 468 - 468 20 488
Net fair value
gains cash flow
hedges - - - 2,506 - - - 2,506 - 2,506
Tax on hedged
items - - - (428) - - - (428) - (428)
Remeasurement of
long term
employee
benefits - - (10) - - - - (10) - (10)
Total
comprehensive
income for the
period - - 9,797 2,078 - 468 - 12,343 9 12,352
Settlement of
non-controlling
interest - - - - - - - - (415) (415)
Share-based
payments - - 1,915 - - - - 1,915 - 1,915
Dividend paid - - (4,708) - - - - (4,708) - (4,708)
--------- -------- --------- -------- --------- ------------ ---------- --------- ---------------- ---------
Balance at 31
December 2016 1,744 347,436 92,327 (632) (1,936) 5,413 (276,961) 167,391 - 167,391
Profit for the
period - - 3,731 - - - - 3,731 - 3,731
Exchange
differences - - - - - 3,168 - 3,168 - 3,168
Net fair value
gains cash flow
hedges - - - 618 - - - 618 - 618
Tax on hedged
items - - - (102) - - - (102) - (102)
Total
comprehensive
income for the
period - - 3,731 516 - 3,168 - 7,415 - 7,415
Non-controlling
interest on
acquisition - - - - - - - - 187 187
Shares issued in
the period 9 - - - - - - 9 - 9
Repurchase of
own shares - - - - (1,355) - - (1,355) - (1,355)
Share-based
payments - - 1,550 - - - - 1,550 - 1,550
Dividend paid - - (11,198) - - - - (11,198) - (11,198)
--------- -------- --------- -------- --------- ------------ ---------- --------- ---------------- ---------
Balance at 30
June
2017(unaudited) 1,753 347,436 86,410 (116) (3,291) 8,581 (276,961) 163,812 187 163,999
========= ======== ========= ======== ========= ============ ========== ========= ================ =========
* Other reserves total GBP271,671,392 deficit (31 December 2016:
GBP273,484,000 deficit, 30 June 2016: GBP273,952,000 deficit)
The translation reserve comprises all foreign currency
differences arising from the translation of the financial
statements of foreign operations.
The merger reserve represents the reserve generated upon
consolidation of the Group following the Group reconstruction as
part of the IPO where Arrow Global became the parent Company.
The own share reserve comprises the cost of the Company's
ordinary shares held by the Group. At 30 June 2017 the Group held
303,614 ordinary shares of 1p each, held in an employee benefit
trust. This represents less than 0.1% of the Company share capital
at 30 June 2017.
The hedging reserve comprises the net cumulative fair value
adjustments on the derivative contracts used in the Group's hedging
activities which are deemed to be effective.
CONSOLIDATED STATEMENT OF CASH FLOWS
For the period ended 30 June 2017
Unaudited period ended Unaudited period ended
30 June 2017 30 June 2016
Note GBP000 GBP000
Net cash used in operating activities 16 (43,767) (10,037)
Investing activities
Purchase of property, plant and equipment (361) (1,598)
Purchase of intangible assets (4,981) (3,453)
Dividends received from associates 2,737 -
Proceeds from disposal of intangible assets 8 -
Investment in associates - (1,305)
Acquisition of subsidiary, net of cash acquired (4,102) (62,465)
Acquisition of subsidiary, deferred consideration (8,888) (16,068)
Net cash used in investing activities (15,587) (84,889)
----------------------- -----------------------
Financing activities
Proceeds/ (Repayment) from additional loans 63,344 (53,000)
Proceeds from senior notes (net of fees) 340,580 175,153
Redemption of senior notes (290,867) -
Early redemption of senior notes costs (17,631) -
Repayment of interest on senior notes (17,886) (15,266)
Proceeds of loan notes - 938
Other interest paid (1,428) (2,227)
Bank interest received 3 89
Repurchase of own shares (1,355) -
Issued share capital 9 -
Settlement of deferred consideration interest (608) (594)
----------------------- -----------------------
Net cash flow generated by financing activities 74,161 105,093
----------------------- -----------------------
Net increase in cash and cash equivalents 14,807 10,167
----------------------- -----------------------
Cash and cash equivalents at beginning of period 23,203 10,183
Effect of exchange rates on cash and cash equivalents 365 312
----------------------- -----------------------
Cash and cash equivalents at end of period 38,375 20,662
======================= =======================
Notes
1. Statutory Information
Arrow Global Group PLC (the "Company") is a company incorporated
in England and Wales. The condensed consolidated financial
statements of the Company as at and for the six months ended 30
June 2017 comprises the Company and its subsidiaries (the "Group").
The Group's principal activity is to identify, acquire and manage
secured and unsecured defaulted loan portfolios from financial
institutions, such as banks and credit card companies, as well as
retail chains, student loans, motor credit, telecommunication firms
and utility companies. In addition, the Group enters into
contractual servicing agreements with other third parties to
collect the receivables, to administer and disburse the proceeds of
the receivables.
This condensed set of consolidated interim financial statements
has been prepared in accordance with IAS 34 Interim Financial
Reporting as adopted by the EU. They do not include all of the
information required for full annual financial statements, and
should be read in conjunction with the consolidated financial
statements of the Group as at and for the year ended 31 December
2016.
The annual financial statements of the Group are prepared in
accordance with IFRS as adopted for use in the EU, and therefore
comply with Article 4 of the EU IFRS Regulation. As required by the
Disclosure Guidance and Transparency Rules of the Financial Conduct
Authority, the interim financial statements have been prepared
applying the accounting policies and presentation that were applied
in the preparation of the Company's published consolidated annual
report for the year ended 31 December 2016.
The consolidated financial statements of the Group as at and for
the year ended 31 December 2016 are available upon request from the
Company's registered office at Belvedere, 12 Booth Street,
Manchester, M2 4AW or online at www.arrowglobalir.net.
The comparative figures for the financial year ended 31 December
2016 are not the Company's statutory accounts for that financial
year. Those accounts have been reported on by the Company's auditor
and delivered to the registrar of companies. The report of the
auditor:
(i) was unqualified
(ii) did not include a reference to any matters to which the
auditor drew attention by way of emphasis without qualifying their
report, and
(iii) did not contain a statement under section 498 (2) or (3)
of the Companies Act 2006. The interim financial statements of the
Group have been prepared under the historical cost convention other
than the fair value of derivative contracts and the amortised cost
value of portfolio assets. The accounting policies are the same as
those given in the annual report and accounts for the period ended
31 December 2016.
The June 2017 statements were approved by the board of directors
on 31 August 2017.
Going concern
After making appropriate enquires, the directors have a
reasonable expectation that the Company and the Group will be able
to continue in operational existence for the foreseeable future,
owing to the fact that forecasts show sufficient resources are
available throughout the period under review. Thus, they continue
to adopt the going concern basis of accounting in preparing the
interim results.
2. Adoption of new standards
The following new standards and interpretations are mandatory
for the year beginning 1 January 2017:
-- Disclosure initiative (amendments to IAS 7)
This standard and interpretations is not deemed to have a
material impact on the results of the Group.
3. Accounting policies, critical accounting judgements and estimates
In applying the Group's accounting policies, the directors are
required to make judgements, estimates and assumptions about the
carrying amounts of assets and liabilities that are not readily
apparent from other sources. The estimates and associated
assumptions are based on historical experience and other factors
that are considered to be relevant. Actual results may differ from
these estimates.
In preparing the interim financial statements, the accounting
policies, areas of judgement, estimation and assumption were the
same as those applied in the consolidated financial statements of
the Group as at and for the year ended 31 December 2016. In
particular, significant judgement is required in the use of
estimates and assumptions in the valuation of the portfolio and
loan note assets.
4. Revenue
Period Period
ended ended
30 June 30 June
2017 2016
GBP000 GBP000
Income from purchased
loan portfolios 112,564 83,682
Profit on portfolio sales 368 610
Income from loan notes 495 -
Fair value gain on loan 2,159 -
notes
--------- ---------
Total revenue from portfolios
and loan notes 115,586 84,292
Income from asset management 34,204 17,224
Revenue 149,790 101,516
--------- ---------
5. Earnings per share
Period Ended Period Ended
30 June 30 June
2017 2016
GBP000 GBP000
Basic/diluted earnings per share
Underlying profit for the period attributable to equity shareholders 25,818 19,058
Profit for the period attributable to equity shareholders 3,731 16,498
Weighted average ordinary shares 174,550 174,047
Potential exercise of share options 4,157 4,453
------------- -------------
Weighted average ordinary shares (diluted) 178,707 178,500
------------- -------------
Underlying basic and diluted earnings per share (GBP) 0.15 0.11
------------- -------------
Basic earnings per share (GBP) 0.02 0.09
------------- -------------
Underlying diluted earnings per share (GBP) 0.14 0.11
------------- -------------
Diluted earnings per share (GBP) 0.02 0.09
------------- -------------
6. Dividend
A dividend of GBP11,197,633 has been accrued in these interim
results, being the 2016 final dividend of 6.4p per share approved
by the shareholders at the 2017 AGM.
The 2017 interim dividend will be 3.2p per share (Interim 2016:
2.7p), being 50% of the 2016 final dividend, in accordance with our
policy. The dividend is payable on 3 October 2017 to shareholders
who are on the register as at 8 September 2017. The ex-dividend
date is 7 September 2017. The interim dividend has not been
recognised as a liability in these financial statements.
7. Tax
The Group's effective consolidated tax rate for the six months
ended 30 June 2017 was 24.2% (30 June 2016: 19.45%). The current
period effective rate tax is reflective of the applicable corporate
tax rate for the full financial year.
The tax impact on the refinancing of bonds cost was GBP5.3
million. Adjusting for the impact of this the tax rate on
underlying profit was 20.0% (30 June 2016: 17.9%).
8. Other operating expenses
Other operating expenses have been arrived at after charging/
(crediting):
Period Ended Period Ended
30 June 30 June
2017 2016
GBP000 GBP000
Foreign exchange (gains)/ losses (656) 594
Depreciation and amortisation 5,433 3,564
Share based payments 1,550 1,324
============= =============
9. Goodwill
Cost GBP000
At 30 June 2016 127,668
Goodwill on acquisition of subsidiary 951
Exchange rate differences 1,771
--------
At 31 December 2016 130,390
Goodwill on acquisition of subsidiary 10,098
Exchange rate differences 2,790
--------
At 30 June 2017 143,278
--------
Impairment:
At 30 June 2016, 31 December 2016 and 30 June 2017 2,309
--------
NBV:
At 30 June 2017 140,969
========
At 31 December 2016 128,081
========
At 30 June 2016 125,359
========
The goodwill on acquisition of subsidiaries in 2017 arose from
the acquisition of Zenith. For more details see note 15.
The goodwill on acquisition of subsidiaries in 2016 arose from
the confirmation of the InVesting B.V defined benefit liability
fair value in the second half of 2016.
10. Financial assets
Purchased loan portfolios
The Group recognises income from purchased loan portfolios in
accordance with IAS 39.
The movements in purchased loan portfolios were as follows:
Period Ended Year Ended Period Ended
30 June 31 December 30 June
2017 2016 2016
GBP000 GBP000 GBP000
As at the period brought forward 782,792 609,793 609,793
Portfolios acquired during the period 115,964 224,640 98,347
Purchased loan notes resold - (23,519) (23,519)
Portfolios acquired through acquisition of subsidiaries - 35,343 35,343
Collections in the period (154,015) (285,960) (138,839)
Income from purchased loan portfolios 112,564 188,914 83,682
Exchange gain on purchased loan portfolios 11,062 32,880 26,542
Profit on disposal of purchased loan portfolios 368 701 610
Purchase price adjustment relating to prior year (474) - -
As at the period end 868,261 782,792 691,959
============= ============= =============
The estimated future cash flows generated by portfolios are the
key estimates/judgments in these financial statements. Flexing the
expected future gross cash flows by -1/+1% would impact the closing
carrying value of the purchased loan portfolios as at 30 June 2017
by GBP8,139,000 (31 December 2016: GBP7,044,000, 30 June 2016:
GBP6,665,000).
Loan notes
30 June 31 December 30 June
2017 2016 2016
GBP000 GBP000 GBP000
Loan notes 9,300 - -
Loan notes at fair value 24,170 21,315 -
-------- ------------ --------
33,470 21,315 -
-------- ------------ --------
11. Trade and other payables
Current 30 June 31 December 30 June
2017 2016 2016
GBP000 GBP000 GBP000
Trade payables 15,262 13,536 8,910
Deferred consideration on acquisition of subsidiary 6,421 9,230 28,942
Deferred consideration on purchased loan portfolios 15,000 26,171 -
Taxation and social security 1,055 121 197
Other liabilities and accruals 45,063 27,203 30,863
-------- ------------ --------
82,801 76,261 68,912
======== ============ ========
Non-current
Deferred consideration on purchased loan portfolios 5,101 - -
Deferred employee benefits 1,038 - -
------
6,139 - -
======
The directors consider that the carrying amounts of the current
trade and other payables approximate to their fair value on the
basis that the balances are short term in nature. The non-current
deferred consideration has also been calculated at fair value.
Zenith
The employees in the Zenith business are part of a statutory
indemnity scheme, compulsory by Law, that entitles them to deferred
pay, typically at the end of their employment, the 'Trattamento di
fine rapport' (TFR). A liability is recognised to reflect that the
indemnity will be paid in the future when the employees leave
employment. As at 30 June 2017 the estimated liability is
EUR580,000 (GBP510,000) and is included within non-current trade
and other payables on the statement of financial position. The
liability is calculated by an independent expert through an
actuarial valuation, the key assumptions used are detailed
below:
30 June
2017
Discount rate 1.6%
Annual inflation rate 1.0%
Wage inflation 3.0%
Probability of leaving employment for reasons other than retirement (employees aged 18-60) 15.0% per annum
12. Related party transactions
Key management, defined as permanent members of the executive
committee, received the following compensation during the
period.
30 June 31 December 30 June
2017 2016 2016
Remuneration GBP000 GBP000 GBP000
Salaries and performance related bonus 3,107 4,080 2,894
Pension-related benefits 120 184 89
3,227 4,264 2,983
======== ============ ========
Executive committee members in the period 11 members (2016: 8
members).
During the period there were no related party transactions other
than discussed above.
13. Borrowings and Facilities
30 June 31 December 30 June
2017 2016 2016
Secured borrowing at amortised cost GBP000 GBP000 GBP000
Senior secured notes (net of transaction fees of GBP16,620,000, 31 December
2016: GBP20,562,000,
30 June 2016: GBP23,316,000) 756,858 681,158 668,146
Revolving credit facility (net of transaction fees of GBP3,001,000, 31
December 2016: GBP2,756,000,
30 June 2016: GBP3,086,000) 144,154 74,169 18,914
Senior secured notes interest 4,026 5,430 8,735
Bank overdrafts 1,318 7,698 8,648
Other borrowings 15,609 12,077 -
-------- ------------ --------
921,965 780,532 704,443
======== ============ ========
Total borrowings
Amount due for settlement within 12 months 165,107 87,297 36,297
Amount due for settlement after 12 months 756,858 693,235 668,146
-------- ------------ --------
921,965 780,532 704,443
======== ============ ========
Senior secured notes
On 30 March 2017, the Group issued EUR400 million senior secured
floating rate notes due 2025 (the '2025 Notes') at a coupon of
EURIBOR +2.875% per anum with EURIBOR being not less than 0%.
Interest is paid quarterly in arrears. The 2025 Notes can be
redeemed in full or in part on or after 1 April 2019 at the Group's
option. Prior to 1 April 2019 the Group may redeem, at its option,
some or all of the 2025 Notes at a redemption price equal to 100%
of the principal amount thereof, plus accrued and unpaid interest,
if any, plus an applicable make-whole premium.
The proceeds from the 2025 Notes were used to redeem the
existing 2021 Notes, pay the early redemption and transaction fees
payable in respect of the 2021 Notes and repay drawings under the
RCF.
On 24 February 2017 the commitments under the RCF were increased
from GBP180 million to GBP215 million. Upon redemption of the 2021
Notes on 30 March 2017, the maturity of the facility was extended
to 31 March 2022.
14. Defined benefit liability
During the period Vesting Finance has agreed on a compensation
plan for employees for the change of their defined benefit pension
scheme into a defined contribution scheme. The change has become
effective during the reporting period and has been processed as a
settlement, resulting in the derecognition of the defined benefit
obligation from the balance sheet, 30 June 2017 GBP nil (31
December 2016: GBP1,721,000, 30 June 2016: GBP nil).
15. Acquisitions of subsidiary undertakings
Zenith Service S.p.A
On 28 April 2017, the Group acquired 100% of the ordinary share
capital of Zenith Service S.p.A. ("Zenith"). Zenith has a similar
principal activity as the Group and is a leading master servicer in
the Italian structured finance market, and provider of various
structuring and securitisation services.
The Group paid cash consideration of EUR11,327,000
(GBP9,630,208) together with deferred consideration of EUR7,551,200
(GBP6,420,139). Deferred consideration is payable on the one year
anniversary of the transaction and has been included at its fair
value leading to an overall consideration of EUR18,588,000
(GBP15,803,000).
Effect of the acquisition
The acquisition had the following effect on the Group's assets
and liabilities:
Total
GBP000
Intangible assets 2,517
Property, plant and equipment 3,088
Deferred tax asset 811
Cash and cash equivalents 4,556
Other receivables 3,888
Trade and other payables (7,519)
Deferred tax liability (672)
Current tax liability (777)
5,892
--------
Minority interest (187)
--------
5,705
Goodwill on acquisition 10,098
15,803
--------
Consideration:
Cash 9,630
Deferred consideration 6,173
--------
15,803
========
Cash impact of acquisition in the period:
Cash consideration 9,630
Cash and cash equivalents acquired (4,556)
--------
5,074
--------
An intangible asset of EUR2,872,000 (GBP2,442,000) has been
recognised at acquisition, being the fair value after appropriate
discounting, of expected cash flows arising from contractual
customer relationships.
Goodwill of EUR11,876,000 (GBP10,098,000) was created as a
result of this acquisition. The primary reasons for the acquisition
was to enter the Italian market via the acquisition of an existing
well established company, and to create scale and servicing
capabilities across multiple asset classes.
Trade and other payables in the acquired entity include a
finance lease liability of EUR2,134,000 (GBP1,815,000) in relation
to a property.
In the period from acquisition to 30 June 2017, Zenith
contributed revenue of GBP2,076,000 and profit of GBP249,000 to the
consolidated results for the period. If the acquisition had
occurred on 1 January 2017, Group total revenue would have been an
estimated GBP153,673,000 and profit after tax would have been an
estimated GBP2,514,000.
The minority interest, relating to a non-controlling interest in
Zenith's subsidiary, Structured Finance Management - Italy S.r.l
(SFM) was recorded as the non-controlling party's proportionate
interest in the fair value of the identifiable assets of SFM at the
acquisition date.
Hefesto
On 31 March 2017, the Group acquired 100% of the ordinary share
capital of Hefesto STC. Hefesto is a regulated Portuguese special
purpose vehicle for the securitisation of loans and receivables.
Whitestar acts as servicer and administrator of Hefesto. The Group
paid cash consideration of EUR743,000 (GBP636,000) which was equal
to the fair value of the net assets acquired. The assets and
liabilities acquired comprised EUR1,880,000 (GBP1,608,000) of cash,
EUR1,181,000 (GBP1,010,000) of trade and other liabilities and
EUR44,000 (GBP38,000) of other receivables. These figures are after
fair value adjustments totaling EUR66,000 (GBP56,000).
16. Notes to the cash flow statement
Period ended Period ended
30 June 30 June
2017 2016
Cash flows from operating activities GBP000 GBP000
Profit before tax 4,921 20,497
Adjusted for:
Collections in the period* 154,475 138,839
Income from purchased loan portfolios* (112,564) (83,682)
Income from loan notes* (495) -
Profit on disposal of purchased loan portfolios (368) (610)
Share of profit from associates (1,072) (1,340)
Amortisation of legal acquisition fees on portfolios and finance costs 11,383 2,604
Depreciation and amortisation 5,433 3,564
Interest payable 38,529 19,322
Fair value gain on loan notes (2,159) -
Foreign exchange (gains)/losses (656) 282
Share-based payment expenses 1,550 1,324
------------- -------------
Operating cash flows before movement in working capital 98,977 100,800
(Increase)/ decrease in other receivables (6,916) 1,535
Decrease in trade and other payables (7,268) (16,100)
Cash generated by operations 84,793 86,235
------------- -------------
Income taxes and overseas taxation paid (3,805) (308)
------------- -------------
Net cash flow from operating activities before purchases of loan portfolios and loan
notes 80,988 85,927
Purchases of purchased loan portfolios (124,755) (95,964)
Net cash used in operating activities (43,767) (10,037)
------------- -------------
*Amortisation is the net of collections in the period and income
from purchased loan portfolios and loan notes
17. Share based payments
The following awards were made in 2017.
Share incentive plan scheme (SIP)
In 2017, the Group offered to all UK employees the opportunity
to participate in the SIP, where the Company gives the
participating employees one matching share for each partnership
share acquired on behalf of the employee using the participating
employees' gross salaries. The shares vest at the end of three
years on a rolling basis as they are purchased, with employees
required to stay in employment to receive the shares.
Long-term incentive plan (LTIP)
In 2017, nil cost share options and conditional awards were
granted to eligible employees based on a maximum of 150% of base
salary. The LTIP awards vest at the end of three years, subject to
the achievement of performance conditions. On the same date, UK tax
qualifying options were granted as part of the LTIP awards ("CSOP
options"). Each CSOP option is subject to the same performance
targets as apply to the nil cost option part of the awards.
If a CSOP Option is exercised at a gain, the number of shares
that may be delivered under the above associated nil-cost option
under the LTIP will be reduced at exercise by the same value to
ensure that the total pre-tax value of the original LTIP award
delivered to the participant is not increased by the grant of the
CSOP Option.
The vesting criteria are in line with Note 28 in the Annual
Report & Accounts 2016.
Restricted share award and deferred bonus share awards
A restricted share award was made in March 2017, which vest on
31 March 2019. A deferred share bonus award was made in March 2017,
which vests on 31 March 2020. All are subject to continuity of
employment.
Grant information for the period
The terms and conditions of the grants during the period are as
follows:
Method Number Vesting Contractual
of settlement of instruments period life of options
accounting
--------------------- --------------- ---------------- --------- -----------------
Grant date/employees
entitled
Equity settled Equity 1,430,117 3 years 31 March 2020
award - LTIP
Equity settled Equity 74,052 3 years 31 March 2020
award - LTIP
Equity settled Equity 202,312 2 years 31 March 2019
award - restricted
Equity settled Equity 32,488 3 years May - June
award - SIP rolling 2020
Equity settled Equity 65,374 3 years 31 March 2020
award - Deferred
--------------------- --------------- ---------------- --------- -----------------
The weighted average fair value of options granted during the
period was GBP3.20. The majority of options granted to date are nil
cost options.
The fair value of equity settled share based payments has been
estimated as at date of grant using the Black Scholes model.
The inputs to the models used to determine the valuations fell
within the following ranges.
30 June
2017
--------------------------------------- -------------
SIP
Expected life of options (years) 3
Share prices at date of grant GBP3.46
LTIP, restricted and deferred awards
Expected life of options (years) 2 and
3
Share prices at date of grant GBP3.46
and GBP4.06
Expected share price volatility 30.72%
(%) and 31.09%
Risk free interest rate (%) 0.24%
---------------------------------------- -------------
The total expenses recognised for the period
arising from the above share-based payments
are as follows:
30 June
2017
GBP000
Equity settled share based payment
expense spread across vesting period 1,550
Total equity settled share based
payment expense recognised in the
statement of comprehensive income 1,550
---------------------------------------- -------------
The basis of measures used to measure executive remuneration can
be seen in the Annual Report & Accounts 2016 on the Company
website at www.arrowglobalir.net.
18. Financial instruments
Fair value estimation
The fair values of financial assets and financial liabilities
that are traded in active markets are based on quoted market prices
or dealer price quotations. For all other financial instruments,
the Group determines fair values using other valuation
techniques.
For financial instruments that trade infrequently and have
little price transparency, fair value is less objective, and
requires varying degrees of judgment depending on liquidity,
concentration, uncertainty of market factors, pricing assumptions
and other risks affecting the specific instrument.
Valuation models
The Group measures fair values using the following fair value
hierarchy, which reflects the significance of the inputs used in
making the measurements.
Financial instruments measured at fair value - fair value
hierarchy
The following table analyses financial instruments measured at
fair value at the reporting date, by the level in the fair value
hierarchy into which the fair value measurement is categorised. The
amounts are based on the values recognised in the balance
sheet.
30 June 30 June
Level 2 2017 31 December 2016 2016
GBP000 GBP000 GBP000
Derivative assets:
Foreign currency contracts 3,456 - 9,003
Derivative liabilities:
Foreign currency contracts - (187) -
Interest rate swaps (144) (1,246) (2,265)
Level 3
Loan notes 24,170 21,315 -
There have been no transfers in or out of Level 2 in the
period.
The fair value of derivative financial instruments has been
calculated by discounting expected future cash flows using interest
rate yield curves and forward foreign exchange rates prevailing at
30 June 2017.
The fair value of loan notes has been calculated using a
discounted cash flow model. The three main influencing factors in
calculating this are:
(i) estimated future cash flows, derived from management forecasts
(ii) the application of an appropriate exit multiple
(iii) discounting using a rate appropriate to the investment and
the anticipated rate of return
Financial instruments not measured at fair value - fair value
hierarchy
The following table analyses financial instruments not measured
at fair value at the reporting date, by the level in the fair value
hierarchy into which the measurement is categorised. The amounts
are based on the values recognised in the balance sheet. All of the
Group's financial instruments not measured at fair value fall into
hierarchy level 3.
Level 3 30 31 December 2016 30
June June
2017 2016
GBP000 GBP000 GBP000
Assets
Purchased loan portfolios 868,261 782,792 691,959
Loan notes 9,300 - -
-------- ----------------- --------
Total assets 877,561 782,792 691,959
======== ================= ========
There have been no transfers in or out of Level 3 in the
period.
A reconciliation of the opening to closing balances for the
period of the purchased loan portfolios can be seen in note 10.
19. Post balance sheet events
On 25 July MCS Groupe announced that a company controlled by
funds advised by BC Partners, has signed an agreement relating to
its acquisition. Subject to completion of the transaction, our 15%
economic interest in MCS Groupe will end. While the terms of the
transaction remain confidential the sale of MCS is expected to
result in a net gain and cash inflow in H2 for the Group.
Today we have also announced the proposed acquisition of Mars
Capital Finance Limited for an enterprise value of GBP15.5 million.
The transaction is subject to regulatory approval by the FCA and
notification to the Central Bank of Ireland and is expected to
complete in late 2017.
Additional Information
UNDERLYING PROFIT
For the period ended 30 June 2017
Unaudited
Unaudited period ended
period ended 30 June 2017 30 June 2016
GBP000 GBP000
Continuing operations
Revenue 149,790 101,516
--------------------------- --------------
Operating expenses
Collection activity costs (55,105) (30,654)
Other operating expenses (40,924) (27,048)
--------------------------- --------------
Total operating expenses (96,029) (57,702)
--------------------------- --------------
Operating profit 53,761 43,814
--------------------------- --------------
Finance income 3 783
Finance costs (22,563) (22,709)
Share of profit in associates 1,072 1,340
--------------------------- --------------
Underlying profit before tax 32,273 23,228
Taxation charge on underlying activities (6,455) (4,158)
--------------------------- --------------
Underlying profit after tax 25,818 19,070
Non-controlling interest - (12)
--------------------------- --------------
Underlying profit attributable to owners of the company 25,818 19,058
Underlying Basic EPS (p) 14.8 10.9
=========================== ==============
Underlying tax rate 20.0% 17.9%
Reconciliation between IFRS profit and Underlying profit:
30 June 30 30 30 30 30
2017 June June June June June
2017 2017 2016 2016 2016
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Profit Tax Profit Profit Tax Profit
before after before after
tax tax tax tax
IFRS Profit 4,921 (1,190) 3,731 20,497 (3,987) 16,510
Adjustments:
Bond refinancing
costs 27,352 (5,265) 22,087 - - -
Acquisition
costs - - - 2,731 (171) 2,560
Underlying
profit 32,273 (6,455) 25,818 23,228 (4,158) 19,070
Adjusting items are those items that by virtue of their size,
nature or incidence (ie outside the normal operating activities of
the group) are not considered to be representative of the ongoing
performance of the Group and these items are excluded from
underlying profit. Underlying profit after tax is considered to be
a key measure in understanding the Group's ongoing financial
performance.
Additional Information
Loan Portfolios
We provide a reconciliation between IFRS and cash measures. The
table below looks at the movement in our purchased loan portfolios
and loan notes compared to the movements in the ERC, the gross cash
value of the portfolio before it is discounted to present value for
inclusion in the IFRS results.
Further detail of how we assess performance through IFRS and
cash measures can be seen in the strategic report of the Annual
Report & Accounts 2016 on the Company website at
www.arrowglobalir.net.
Movement in purchased loan portfolios and loan notes under IFRS
and cash ERC
1 Portfolios (including loan notes) acquired in the period are
added to the statement of financial position carrying value of
purchased loan portfolios and loan notes at their initial purchase
price. This includes GBP162,000 of capitalised portfolio
expenditure. The undiscounted forecast of estimated remaining
collections is included in the ERC.
2 Collections made in the period are deducted from both the IFRS
carrying value of purchased loan portfolios and ERC.
3 Income on purchased loan portfolio is calculated with
reference to the effective interest rate (EIR) of the portfolio.
This income is recognised after taking account of new portfolios
and loan notes, collections, discounted impact of the updated ERC
forecast, disposals and any FX impacts.
4 The ERC roll forward and reforecast reflects management's
updated estimation of future collections. It takes account of
updated information on specific portfolios and loan notes, the
latest exchange rate (forecasts) and rolls forward the 84-month
forecast collection period.
5 Under IFRS, the carrying value of purchased loan portfolios
and loan notes includes 84-months of discounted cash flow. As is
customary for the industry we also report a 120-month ERC.
6 This is the gain recognised in the period in relation to the
value of notes held at fair value through profit and loss.
Additional Information
Adjusted EBITDA
Period ended Period ended
30 June 2017 30 June 2016
Reconciliation of net cash flow to adjusted EBITDA GBP000 GBP000
Net cash flow used in operating activities (43,767) (10,037)
Purchases of loan portfolios 115,964 95,964
Purchase of loan notes 9,265 -
Purchase price adjustment relating to prior year (474) -
Income taxes paid 3,805 308
Working capital adjustments 14,184 14,565
Share of profits in associates 2,735 -
Amortisation of acquisition fees 137 139
Effect of exchange rates on cash and cash equivalents - 312
Non-recurring items - 2,731
------------- -------------
Adjusted EBITDA 101,849 103,982
------------- -------------
Reconciliation of core collections to adjusted EBITDA GBP000 GBP000
Income from loan portfolios and loan notes 113,059 83,682
Portfolio amortisation 41,416 55,157
------------- -------------
Core collections (includes proceeds from disposal of purchased loan portfolios) 154,475 138,839
------------- -------------
Other income 34,204 17,224
Operating expenses (96,029) (60,433)
Depreciation and amortisation 5,433 3,564
Foreign exchange (gains)/losses (656) 594
Amortisation of acquisition fees 137 139
Share based payments 1,550 1,324
Share of profit in associates 2,735 -
Non-recurring items - 2,731
------------- -------------
Adjusted EBITDA 101,849 103,982
------------- -------------
Reconciliation of adjusted EBITDA to cash result GBP000 GBP000
Adjusted EBITDA 101,849 103,982
Cash interest (19,061) (19,773)
Income taxes and overseas taxation paid (3,805) (308)
Purchase of property, plant and equipment (361) (1,598)
Purchase of intangible assets (4,981) (3,453)
Replacement rate (60,000) (45,000)
------------- -------------
Cash result 13,641 33,850
------------- -------------
Glossary
'Adjusted EBITDA'means profit before interest, tax,
depreciation, amortisation, foreign exchange gains or losses and
non-recurring items. 'Adjusted EBITDA ratio' means the ratio of
Adjusted EBITDA to core collections.
'Adjusting items' are those items that by virtue of their size,
nature or incidence (ie outside the normal operating activities of
the Group) are not considered to be representative of the ongoing
performance of the Group and are therefore excluded from underlying
profit after tax.
'Average net assets' is calculated as the average quarterly net
assets from H1 2016 to H1 2017 as shown in the quarterly and half
yearly statements. In comparative periods this was calculated as
the average annual net assets.
'Cash interest cover' represents interest on senior secured
notes, utilisation and non-utilisation RCF fees to Adjusted
EBITDA.
'Cash result' represents current cash generation on a
sustainable basis and is calculated as Adjusted EBITDA less cash
interest, income taxes and overseas taxation paid, purchase of
property, plant and equipment, purchase of intangible assets and
average replacement rate.
'Collection activity costs' represents the direct costs of
collections related to the Group's purchased loan portfolios, such
as commissions paid to third party outsourced providers, credit
bureau data costs and legal costs associated with collections.
"Core collections" or "core cash collections" mean cash
collections on the Group's existing portfolios and loan notes
including ordinary course portfolio sales and put backs. The
breakdown of core collections for the periods ended 30 June 2017
and 30 June 2016 is as follows: -
Period Period
ended ended
30 June 30 June
2017 2016
GBP000 GBP000
Collections from purchased
loan portfolios 154,015 138,839
Collections from loan 460 -
notes
Core collections 154,475 138,839
========== ==========
'Cost-to-collect ratio' is the ratio of collection activity
costs to core collections.
'Creditors' means financial institutions or other initial credit
providers to consumers, certain of which entities choose to sell
paying accounts or non-paying accounts receivables related thereto
to debt purchasers (such as the Group).
'Customers' means consumers whose unsecured loan obligation is
owed to the Group as a result of a portfolio purchase made by the
Group.
'EBITDA' means earnings before interest, taxation, depreciation
and amortisation.
Glossary (continued)
'EIR' means effective interest rate (which is based on the loan
portfolio's gross internal rate of return) calculated using the
loan portfolio purchase price and forecast 84-month gross ERC at
the date of purchase. On acquisition, there is a short period that
is required to determine the EIR, due to the complexity of the
portfolios acquired.
'EPS' means earning per share
'84-Month ERC' and '120-Month ERC' (together 'Gross ERC'), mean
the Group's estimated remaining collections on purchased loan
portfolios over an 84-month or 120-month period, respectively,
representing the expected future core collections on purchased loan
portfolios over an 84-month or 120-month period (calculated at the
end of each month, based on the Group's proprietary ERC forecasting
model, as amended from time to time).
'Existing Portfolios' or 'purchased loan portfolios' are on the
Group's balance sheet and represent all debt portfolios that the
Group owns at the relevant point in time.
'Diluted EPS' means the earnings per share whereby the number of
shares is adjusted for the effects of potential dilutive ordinary
shares, options and LTIP's.
'FCA' means Financial Conduct Authority.
'FVTPL' - Financial instruments designated at fair value with
all gains or losses being recognised in the profit or loss.
'Gross money multiple' Gross money multiple means core
collections to date plus the 84-month gross ERC or 120-month gross
ERC, as applicable, all divided by the purchase price for each
portfolio, excluding REO purchases and purchase price adjustments
relating to asset management fees.
'IFRS' means EU endorsed international financial reporting
standards.
'Income from asset management' includes commission income, debt
collection, due diligence, real estate management and advisory
fees.
'IPO' means initial public offering.
'Lending Code' means the voluntary code of practice issued by
the Lending Standards Board and describes minimum standards of good
practice for banks, building societies, credit card providers and
their agents.
'Loan to Value ratio' or 'LTV ratio' represents the ratio of
84-month ERC to net debt.
'LTIP' means the Arrow Global long-term incentive plan.
'LTM' means Last Twelve Months and is calculated by the addition
of the consolidated financial data for the year ended 31 December
2016 and the consolidated interim financial data for H1 2017, and
the subtraction of the consolidated interim financial data for H1
2016.
Glossary (continued)
'LTM Pro Forma Adjusted EBITDA' means 'LTM Adjusted EBITDA'
inclusive of full twelve months impacts of acquisitions that
occurred within the last twelve months and exclusive of any items
deemed non-recurring within the last twelve months to give a twelve
months pro forma Adjusted EBITDA operating level at the reported
date.
'Net debt' means the sum of the outstanding principal amount of
the senior secured notes, interest thereon, amounts outstanding
under the revolving credit facility and deferred consideration
payable in relation to the acquisition of loan portfolios, less
cash and cash equivalents. Net debt is presented because it
indicates the level of debt after taking out of the Group's assets
that can be used to pay down outstanding borrowings, and because it
is a component of the maintenance covenants in the revolving credit
facility. The breakdown of net debt for the period ended 30 June
2017 is as follows:
30 June 31 Dec
2017 2016
GBP000 GBP000
Cash and cash equivalents (38,375) (23,203)
Senior secured notes (pre transaction fees net off) 773,478 701,720
Revolving credit facility (pre transaction fees net off) 147,155 76,925
Secured bank overdrafts - 6,419
Secured net debt 882,258 761,861
Deferred consideration 26,522 35,401
Senior secured notes interest 4,026 5,430
Bank overdrafts 1,318 1,279
Other borrowings 15,609 12,077
Net debt 929,733 816,048
--------- ---------
'Off market' means those loan portfolios that were not acquired
through a process involving a competitive bid or an auction like
process.
'Organic purchases of loan portfolios' means those purchased
through the ordinary course of business, not through acquisition.
The breakdown of organic purchases for the period is as
follows:
30 30
June June
2017 2016
Portfolios acquired during the period 115,964 98,347
Purchases of loan notes 9,265 -
Capitalised portfolio expenditure (162) (2,383)
-------- --------
Organic purchases of loan portfolio
and loan notes 125,067 95,964
-------- --------
'Paying Account' means an account that has shown at least one
payment over the last three months.
'Purchased loan portfolios' see 'existing portfolios'.
'Putback' means an account that is to be sold back to or
replaced by the original creditor.
'Purchases of loan portfolios resold/ to be resold' relates to a
portfolio of assets, which has been acquired at the period end, and
will shortly be resold to an investment partner. These are
separately disclosed from other purchased loan portfolios, as an
investment partner is intending to complete their acquisition from
us.
'RCF' means revolving credit facility.
Glossary (continued)
'Replacement rate' means the level of purchases needed during
the subsequent year to maintain the current level of ERC.
'ROE' means the return on equity as calculated by taking profit
after tax divided by the average equity attributable to
shareholders. Average equity attributable is calculated as the
average quarterly equity from H1 2016 to H1 2017 as shown in the
quarterly and half yearly statements. In the comparative period
this is calculated as the average annual equity attributable.
'Secured loan to value' or 'secured LTV ratio' represents the
ratio of 84-month ERC to Secured Net Debt.
'Secured Net Debt' means the sum of the outstanding principal
amount of the senior secured notes, amounts outstanding under the
revolving credit facility, less cash and cash equivalents. Secured
Net Debt is presented because it indicates the level of secured
debt after taking out the Group's assets that can be used to pay
down outstanding secured borrowings, and because it is a component
of the incurrence tests in the senior secured notes. The breakdown
of secured net debt for the period ended 30 June 2017 is shown in
Net Debt above.
'SIP' means the Arrow Global all-employee share incentive
plan.
'Underlying basic EPS' represents earnings per share based on
underlying profit after tax, excluding any dilution of shares.
'Underlying profit after tax' means profit for the period after
tax adjusted for the post-tax effect of adjusting items. The Group
presents underlying profit after tax because it excludes the effect
of adjusting items which are not considered representative of the
Group's ongoing performance, (and the related tax on such items) on
the Group's profit or loss for a period.
'Underlying return on equity' represents the ratio of underlying
profit for the period attributable to equity shareholders to
average shareholder equity post restructure.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR ZFLBXDVFEBBL
(END) Dow Jones Newswires
August 31, 2017 02:01 ET (06:01 GMT)
Arrow Global (LSE:ARW)
Historical Stock Chart
From Apr 2024 to May 2024
Arrow Global (LSE:ARW)
Historical Stock Chart
From May 2023 to May 2024