Lowell Group, a UK leader in consumer debt purchase and recovery, today announced consolidated interim financial results for the second quarter ended 29 February 2012.

“Lowell Group delivered strong second quarter results, in line with management expectations,” said James Cornell, Lowell Group’s chief executive officer. “We showed an 8% increase in collections and adjusted EBITDA and a 52% increase in portfolio purchases compared to the same period last year.

“It was a record breaking quarter, with our highest month of collections being February 2012 with £11.2 million and our highest month of portfolio purchases being December 2011 with £14.9 million.

“Furthermore we continued our strong collections performance into the third quarter with another record in monthly collections in March 2012.

“Our continued strong performance is the direct result of the hard work, dedication and considerable skills of the entire Lowell Group team.

“Looking forward, we see a continued increase in activity within the UK debt purchase market with particularly strong momentum in financial services. We are also continuing to make progress in entering new sectors in a careful, calculated manner.

“And, having successfully placed a £200 million high yield bond in March this year, we have established a solid long term financial base on which to continue to grow and develop the business.”

 

Q2 2012 highlights

Collections in the quarter were £31.7 million, a quarterly record and an 8% increase on the £29.5 million in the corresponding period last year.

Portfolio purchases in the quarter were £21.3 million, a 52% increase on the £14.1 million in the corresponding period last year

Overall servicing costs were £9.3 million, in line with management expectations and reflecting the volume and type of portfolios purchased.

Estimated remaining collections (ERC) were £355.4 million at the end of the quarter, up 15% from £310.0 million as of 28 February 2011. ERC increased further to £363.3 million as of 31 March 2012.

Cash-flow before debt and tax servicing for the quarter was £23.0 million, a conversion rate of 102% of adjusted EBITDA, maintaining the business’s continued strong cash-flow conversion performance.

Unlevered net return on portfolios purchased remained stable at 25.1% overall for the quarter. New portfolios (less than six months old) are performing at 112% of projections underlying their pricing assumptions, highlighting our continued pricing discipline.

To further cement our commitment to compliance, during the quarter we appointed Sara de Tute to join the executive board in the newly created role of legal and compliance director. Sara is the current president of the Credit Services Association and joined us in May 2012.

Teleconference

At 3.00 pm on Thursday, 17 May, Lowell Group’s CEO James Cornell and CFO Phil Screeton will hold an audio conference presentation on the company’s Q2 performance.

To access this audio conference, participants will need to register in advance at https://eventreg1.conferencing.com/webportal3/reg.html?Acc=555477&Conf=183415. They will then be allocated the conference call number, a participant user pin, conference pin and instructions on how to join the conference call.

Ends

 

Editor’s notes

Non-UK GAAP financial measures

We have included certain non-UK GAAP financial measures in this quarterly report, including estimated remaining collections (“ERC”), Adjusted EBITDA, Unlevered Net IRR, Net Debt and certain other financial measures and ratios. Non-UK GAAP financial measures are derived on the basis of methodologies other than UK GAAP.

We present ERC because it represents our expected gross cash proceeds of the purchased debt portfolios recorded on our balance sheet (the “Purchased Assets”) over an 84-month period. ERC is calculated as of a point in time assuming no additional purchases are made. We currently record the value of Purchased Assets on our balance sheet as the net present value of ERC, after applying a 25% servicing cost ratio and a 15% annual discount rate, both such percentages determined by management in discussion with our auditors. ERC is a metric that is also often used by other companies in our industry. We present ERC because it represents our best estimate of the undiscounted cash value of our Purchased Assets at any point in time, which is an important supplemental measure for our board of directors and management to assess our performance, and underscores the cash generation capacity of the assets backing our business. In addition, the instruments governing our indebtedness use ERC to measure our compliance with certain covenants and, in certain circumstances, our ability to incur indebtedness. ERC is a projection, calculated by our proprietary analytical models, which utilize historical portfolio collection performance data and assumptions about future collection rates, and we cannot guarantee that we will achieve such collections. ERC, as computed by us, may not be comparable to similar metrics used by other companies in our industry. Our computation of ERC could in the future differ from the collection forecasts used to compute and record Purchased Assets on our balance sheet.

We present Adjusted EBITDA because we believe it may enhance an investor’s understanding of our profitability and cash flow generation that could be used to service or pay down debt, pay income taxes, purchase new debt portfolios and for other uses, and because it is frequently used by securities analysts, investors and other interested parties in the evaluation of companies generally. In addition to ERC, our board of directors and management also use Adjusted EBITDA to assess our performance. Adjusted EBITDA is not a measure calculated in accordance with UK GAAP and our use of the term Adjusted EBITDA may vary from others in our industry. For a reconciliation of Adjusted EBITDA to operating profit, see the “Key Reconciliations and Definitions” section of this document.

We present Unlevered Net IRR because it represents the internal rate of return for a particular portfolio or group of portfolios after servicing costs as of a certain date. Our board of directors and management use Unlevered Net IRR to measure our return on the total capital invested in our debt portfolios. In order to calculate Unlevered Net IRR, we take the actual collections received on a portfolio up to the date it is measured, less servicing costs, plus forecast collections up to 84 months from the date of purchase of each portfolio, less the estimated servicing cost of such portfolio over the same period, less the total amount paid for the portfolio. Our Unlevered Net IRR on a portfolio or group of portfolios could change from the date it is measured if we over-perform or under-perform against the forecast collections included in our computations. We typically present Unlevered Net IRR for the aggregate portfolios purchased over a period, such as a vintage (i.e., the year of purchase) or since inception, or for a sector (i.e., financial services). Unlevered Net IRR, as computed by us, may not be comparable to similar metrics used by other companies in our industry.

We present Net Debt because we believe it may enhance an investor’s understanding of the underlying cash generation of our business when compared to the growth in our asset base. Net Debt should not be considered an alternative to the “creditors: amounts falling due within one year” or “creditors: amounts falling due after more than one year” items on our consolidated balance sheet reported under UK GAAP.

ERC, Adjusted EBITDA, Unlevered Net IRR, Net Debt and all the other non-UK GAAP measures presented herein have important limitations as analytical tools and you should not consider them in isolation or as substitutes for analysis of our results as reported under UK GAAP.

 

Lowell Group plans to publish its Q2 2012 interim results on the investment section of the Lowell Group website at 8.00am BST on Thursday 17th May 2012. Access is by request via the following link:

/index.php/investors

TELECONFERENCE – In addition, at 3.00pm on Thursday 17th May, Lowell Group’s CEO James Cornell and CFO Phil Screeton plan to hold an audio conference presentation on the company’s Q2 performance.

To access this audio conference, participants will need to register in advance at:

https://eventreg1.conferencing.com/webportal3/reg.html?Acc=555477&Conf=183415

They will then be allocated the conference call number, a participant user pin, conference pin and instructions on how to join the conference call.

For further information contact: Carol Wright, Head of Communications, Lowell Group. Tel. 0113 2856570, E-mail: carol.wright@lowellgroup.co.uk, Mobile 07814 430330

For further press information contact: Steve Clark at Source Marketing Communications. Tel: 0113 380 1644, E-mail: steve@sourcemc.co.uk, Mobile: 07951 536236