Arrow Global’s Profit Doubles Amid Business Expansion

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Last Thursday, Arrow Global, the European asset manager, revealed that the profit after tax of the company more than doubled this year. It was driven by business expansion.

The profit after tax increased by over 100 percent to £8.5 million during the first half of this year as compared to £3.7 million in the same period during the previous year.

During the six months to the 30th of June 2018, the total income that came from portfolio investments has increased by 8.6 percent to £125.5 million from the £115.6m that was reported in the first half.

The underlying return on equity over the past year amounted to 33.5 percent. It is an increase from the 32.8 percent in the first half of 2017. The earnings per share stood at 4.9p as compared to 2.1p last year.

The total income for the period ended 30 June 2018 amounted to £166.9 million, with £125.5 million generated by the investment business and £59.6 million by the asset management and servicing arm of the company.

The company said that the asset management business is the fastest growing part of the group. It has been strengthened by the acquisition of Zenith, a business services company, in 2017, Mars Capital, a mortgage firm, in November and Parr credit, an Italian loan manager, in March.

The group is expecting to complete the acquisition of Europa Investimenti by the end of the third quarter of 2018, and of Norfin, a Portuguese property investment manager, by the end of this year.

Lee Rochford, the group chief executive officer of Arrow Global, stated: “Momentum at Arrow remains strong. Our broad sourcing capabilities are operating platform have enabled the investment business to continue to achieve consistent returns, with unlevered net internal rate of returns in the mid-teens across a range of asset types.”

He added: “When combined with our capital-light asset management and servicing income, financial performance continues to be highly valued accretive.

He continued: “Since our IPO in 2013, we have grown significantly, establishing a pan-European footprint with market-leading positions across six key geographies.

Rochford says that they believe that they now have the optimal platform to position the company well to generate strong earnings, cash flow, and de-leveraging as they realise the full benefit of this footprint and the investments that they have made to enhance efficiency.

He concluded: “Trading continues to be strong and we remain on track to finish the year in line with market expectations.”

The shares of the company slightly increased to £2.59 in early morning trading on the news, however, it remained to be far below the 2018 peak of £4.35 in January of the group.

Gary Greenwood, an investment analyst at Shore Capital Market, said that the group had “published a good set interim results.”

He stated: “The group has also provided new disclosure on divisional profitability, splitting the business between the investment and asset management and servicing businesses.”

He added: “This highlights that both divisions make a healthy contribution to group profitability prior to deducting costs associated with group functions.

Greenwood concluded: “We believe this data will help investors to better understand the different drivers of the business and allow for a more enlightening sum-of-the-parts valuation to be performed which we believe will help to support a higher valuation.”