Arrow Global has revealed pre-tax losses of £114.8m for 2020 - a fall of more than 300% from its 2019 profits - according to a full-year report that shows the impact of a write-down in its estimated remaining collections.
The debt purchaser’s results explain that the loss was driven by “a non-cash impairment” from an estimated remaining collections (ERC) asset write-down, taken during the middle of 2020. Presentation slides on the results also show £100.4m of impairment losses last year, compared to just £12.7m in 2019.
Arrow also saw overall cash collections drop marginally to £339m from £442m in 2019, though it reported a “strong performance in collections” towards the end of last year, with the total at 125% of revised 84-month ERC in H2.
The report added that the economic outlook is more positive than the original forecasts used to inform the write-down in its ERC figure, but Arrow said it expects economic dislocation to present “increased investment and asset servicing opportunities”.
Arrow’s 84-month ERC figure has now dropped to £1.56bn from £1.82bn at the end of 2019. Some 63% of the ERC relates to unsecured debt, the remainder is secured. Around 36% of these collections will come from UK accounts, 28% from Portugal and the rest from a mix of Italy, Ireland and Holland.
Cash purchases fell to £161m in 2020, from £253m in 2019. This year, the business expects to deploy between £150m and £200m of balance sheet capital. Capital allocation will focus on “investment returns and deleveraging”, the financials state. Arrow also plans to resume dividend payments earlier than originally planned, with a final dividend in respect of year-end 2021.
NPL fund management
In its pan-European NPL fund management business, Arrow now has €4.3bn of funds under management, (up from €3.7bn in 2019). The report stated that 35% of its Arrow Credit Opportunities 1 (ACO 1) fund will have been deployed or committed by February 2021.
The business has also seen momentum in its asset management and servicing business, with third-party income growing nearly three percent to £97m, and 26 new third-party contract wins in 2020, plus six more so far in 2021.
Lee Rochford, group chief executive officer, said: “Despite the disruption from Covid-19, the group performed resiliently in 2020. Decisive management action taken early in the year ensured the maintenance of strong liquidity levels and the business registered a clear return to profitability in H2 2020, following the non-cash impairment in H1 2020 relating to the ERC asset write-down.”
He added: “2020 was a year when Arrow remained true to its purpose and values and ensured we put colleagues and customers first. Arrow’s rapid ability to ensure that 100% of our staff were working fully operationally from home, combined with our customer treatment, has been a notable driver of our record third-party servicing contract wins.”