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Arrow Global to assess new debt purchase sectors    
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By: Alex Cardno

Source: credittoday.co.uk

Debt buyer Arrow Global will consider new market sectors and European countries to purchase debt in this year on the back of strong results in 2013.

The firm’s chief executive, Tom Drury, told Credit Today that Arrow Global was considering markets such as car finance and different geographies in Europe as possible areas of expansion.

He said these areas would be considered alongside sectors such as student loans and second lien mortgages, where the business already has a presence beyond its core financial services core market.

It follows a 73% rise in pre-tax profits after exceptional items for the debt buyer in 2013, as it reported its first set of annual results following its successful stock market flotation in October last year.

Arrow Global saw pre-tax profits hit £20.9m after exceptional items for the year ending 2013, up from £12.1m the year before. This followed growth in core collections and Earnings before Interest, Tax, Depreciation and Amortisation (EBITDA), a key accounting measure used by debt buyers.

Arrow Global saw core collections increase by 44.1% to £127.8m in 2013, up from £88.7m the previous year. Meanwhile, adjusted EBITDA rose to £89.6m from £61.9m, a 44.7% increase.

Drury acknowledged the challenge of managing growth as a debt buyer under shareholder and public scrutiny, but rejected suggestions that being a stock market company piled pressure on Arrow Global to keep purchasing portfolios.

“The challenge is to manage growth with the investments we make and moving into different asset classes and geographies is a part of that,” he said.

“It is not a particularly new challenge, more a dynamic of the type of business we are. There is no risk of ‘having to buy’; we are transparent so there isn’t that pressure. We expect to grow and are capable of growing in a disciplined way.

The firm’s estimated remaining collections (ERC), a key measure used by bond investors, were up 18% to £650.3m as of 31 December last year, from £551.3m in 2012.

Meanwhile its underlying return on equity (ROE) – a key measure for shareholders – stood at 26.5%, with profit for the year attributable to equity shareholders hitting £15.1m, from £9.4m the previous year.

Acknowledging the results, Drury hailed a “transformational year” for the company ahead of the change to the new regulator in April, something he said would be beneficial to the debt purchase industry.

“With industry regulation set to migrate to the FCA on 1 April, we should see greater consistency for customers as buyers join creditors in the same regulatory regime,” he said.

“Our expectation remains that we will grow purchases at or in excess of UK market growth. We expect the timing of these purchases to have a normal weighting towards the second half of the year.”

Arrow Global purchased debt portfolios with a face value of £1.3bn during 2013 for a purchase price of £101.3m. The company said 76% of the purchasing investment was underpinned by paying accounts.

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