Debt Collectors results - more of the same

All,

Arrow and Cabot have today released interesting and bland results respectively.

-> Arrow is still FCF flat before paying any interest.

-> Including the new ABL facility, Arrow now have ~ £220m of liquidity headroom, which should be sufficient for the foreseeable future (primarily to pay for its interest bill).

-> Cabot manage to pay for at least over half their interest bill. 

Arrow:

- Collections were well above last year’s level, but notably at significantly higher amortised cost - thus less profitable than last year. Thus Operating profit (not the worst metric for Arrow) was higher, at £28m vs £22m last year.

- Cash production was however hampered relatively to last year, as the company did not benefit from the same £35m WC inflow, registering a £9m outflow instead.

- (As a result?), the company has bought fewer assets this quarter - in fact “only” 1.33x its replacement rate. Note that the concept of replacement rate is becoming ever more difficult to grasp at a company that has diversified as much as Arrow.

- CapEx was half of Q118 at £-8m.

- This left FCF flat.

- Net leverage was lower on favourable FX movements by ~£25m, as were Portfolio Investments. The company chose to return £32m of cash to pay down the RCF and other borrowings. 

- Following March cut-off, Arrow entered into a new ABL facility of £100m on UK diversified receivables paying 3.1%, which will be 2 years revolving followed by 3 years amortising. This is smaller, but looks more stable and attractive than what Lowell have. But in much the same way, it layers the bonds.

On Cabot:

- No spectacular movements.

- Invested at 2x Replacement Rate (which, just like Lowell’s does not include intra year investments).

- FCF generative with £11m. 

- That did not pay for its £32m of interest charges (although at this rate Cabot pay for approx. half their interest charge). 

- Thus raised another net £12m in financing and paid for the remaining £8m in cash.

- Cabot is left with liquidity of £105m, which - similar to Arrow - should last for some time (primarily pay for half its interest bill). 

Wolfgang