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Cabot sees EBITDA surge towards £250m

Cabot Credit Management’s adjusted EBITDA increased by more than £50m to £247.8m for the full year 2016, its annual results reveal.



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Ken Stannard, chief executive of the European debt purchaser, said the rise has been driven by growth in its debt purchase collections and servicing revenue.

 

The firm’s financials reveal the level of Cabot’s investments last year, its new venture into mortgage servicing and a rise in debt purchase collections. The latter increased 17 percent last year to £358.7m. Servicing revenue also grew 38 percent on 2015.

 

The results also reveal an increase of Cabot’s purchased loan portfolios, from £879.7m in 2015 to £944.6m in 2016. The firm’s 120-month estimated remaining collections (ERC) total increased to £2.1bn from £2.0bn in 2015.

 

Details in the full results also give an indication of where Cabot is heading, in terms of a governance framework and diversification of servicing.

 

Cabot has now implemented a defence structure that mirrors that of the banks; it has implemented a three-line defence model with operational compliance controls and training in the first line, compliance and legal oversight in the second line and independent assurance in the third line.

 

On other regulatory matters, Cabot has appointed Apex Credit Management, Cabot Financial (Europe) and Hillesden Securities as appointed representatives.

 

In terms of diversification, in November 2016 the debt purchaser submitted a variation of permission request, to be able to administer regulated mortgage contracts. This was granted on 26 January 2017.

 

But on its prime operations, Craig Buick, chief financial officer of Cabot, said the UK debt purchase market remains a core market for the company. He said the non-paying portfolio market results in higher returns, with Cabot deploying 55 percent of its UK capital in non-paying portfolios in 2016.

 

More than 50 percent of all capital was deployed in the UK in 2016, the rest was split between Portugal (six percent), France (five percent), Spain (36 percent) and Ireland (1.6 percent).

 

Like its competitors, Cabot has been busy on a domestic and European acquisition trail, and the financials show that is total investments in its direct subsidiary companies was around £186m in 2016. Cabot said the figure represents historic costs, not a “fair value measurement”.

 

In just one example, the initial payment Cabot made for France-based credit management company Nemo, in 2016, was £713,000. Cabot also spent £1.5m on restructuring costs in 2016 and £122,000 on company acquisition costs.

 

Cabot previously bought Gesif, a Spanish debt collection agency, in 2015.

 

On more domestic issues, the debt purchaser also pointed out that a final draft of the proposed pre-action protocol rules for debt claims has been passed for approval in the UK legislative system.

 

It said the new draft will require that a letter before claim informs a consumer of their right to request documentation and for a full statement of account to be included. The precise detail is yet to be made public.

 

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