Cabot’s pre-tax profit falls 64% for H1

The debt purchase and credit management group’s quarterly trading update states that portfolio acquisitions were down 64% in the six months to June, to £41.6m, compared to £116.8m during the same period last year.

The results explained that portfolio purchases remained low during Q2, and that this was a reflection of thin volumes being sold by banks during the quarter. Cabot stated that it will continue to monitor the situation in anticipation of a material increase in charge off once banks stop forbearance across its markets.

Collections were also down as a result of Covid-19, falling by 16% on the same period of 2019 to £198.2m, while underlying profit fell 65%, compared to a year ago, to £15m.

According to Cabot, the Covid-19 impact is seen primarily as a delay in collections rather than an absolute loss of collections. Future collections expectations are broadly aligned with the expectations that were in place at 31 March 2020. A reduced level of collections is expected for at least another quarter of 2020.

Cabot saw a £5m impairment on portfolio investments in the UK over the half year, and a £16.6m impairment on portfolio investments outside the UK.

Collections levels steadily recovered during the second quarter from a nadir in April, and revenue recovered in the three months to June when compared to the same period last year, staying at around £60m.

The results also showed that the adjusted EBITDA margin has remained relatively stable, despite lower collections within the quarter, as costs directly attributable to collection activities have largely reduced in line with collections.

Over the first half of 2020, Cabot has seen lower costs resulting from reduced collections. Cost controls will remain in place and will be monitored closely throughout the course of the second half of the year.

Craig Buick, chief executive officer, Cabot Credit Management, said: “Our balance sheet remains strong as a result of our recent strategy, with significant covenant headroom, available liquidity of £254.6m, no debt maturities before late 2023 and leverage at 3.9x. We remain committed to delivering on our leverage target of 3.0-3.5x, over the medium term."