The Arrow Global Group (LSE: ARW) share price has exploded following the release of pre-close financials. The credit manager was last 12% higher in Thursday trading at 208p per share. This is the UK share’s most expensive level since March 2020.
Arrow Global didn’t just confirm that trading has remained very strong in recent months. It suggested it could begin doling out dividends sooner than it had been expecting too.
Arrow’s trading continues to impress
Today, Arrow Global said it had reported “an encouraging final quarter of 2020 with improved prospects for 2021 trading.” It also said it expects to have traded beyond expectations in the October-December period, building on the return to profitability it had enjoyed in quarter three.
Putting meat on the bone, Arrow said it had “continued to see strong balance sheet cash collections performance and profitability” in the October to December quarter. It said fourth-quarter collections came in at 111% of its half-year estimated remaining collections estimates.
Third-party Asset Management and Servicing revenues had also remained “resilient”, it said. This was helped by a record 26 new contract wins the UK share racked up in 2020, it noted.
On top of this, the credit giant exceeded its fourth quarter target deployment of the €1.7bn Arrow Credit Opportunities 1 fund. The investment vehicles which make up the fund had invested (prior to recycled capital) approximately 28% of their committed capital. The fund is designed to let the business invest in credit opportunities all over Europe.
Dividends to return in 2021
Arrow Global chief executive Lee Rochford went on to say that “continued strong trading in the first weeks of 2021 means that we are increasingly confident of reducing leverage significantly by the end of the year.”
As a result, Arrow said it should start paying dividends again earlier than expected at the end of 2021.
The business scrapped its final dividend for 2020 back in April as the Covid-19 crisis developed. It said that the “prudent” decision was made to protect it against any possible pandemic-related disruption. Arrow decided not to pay an interim dividend back in August either as reduced collections would push leverage higher. Then, it warned it would focus capital allocation “on deleveraging and capturing the opportunity arising from post-crisis investments.”
Arrow today predicted leverage of 5.1 times at the end of 2020. This is “considerable better” than it had been expecting when the business renegotiated its revolving credit facility back in August, it said.
The UK share added that leverage will peak around the middle of 2021 “as the negative impact of H1 2020 Covid-19 lockdowns on collections remain in the Group’s trailing twelve month secured net debt to adjusted EBITDA leverage calculation.”
However, it also said leverage should drop to approximately 4 times by the end of the year. This reading would be “significantly better than the covenant requirement,” it noted.
