NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES OF AMERICA, CANADA, JAPAN OR AUSTRALIA OR ANY OTHER JURISDICTION WHERE TO DO SO MIGHT CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF SUCH JURISDICTION
This announcement is an advertisement for the purposes of the UK Prospectus Rules of the FCA and not a prospectus.
This announcement is not an offer to sell, or a solicitation of an offer to acquire, securities in the United States or in any other jurisdiction, including in or into Australia, Canada or Japan.
Neither this announcement nor anything contained herein shall form the basis of, or be relied upon in connection with, any offer or commitment whatsoever in any jurisdiction.
Investors should not purchase any shares referred to in this announcement other than solely on the basis of information that is contained in the prospectus (the “Prospectus”) expected to be published by Cabot Credit Management Limited (to be renamed Cabot Credit Management PLC prior to publication of the Prospectus) (the “Company”) in due course in connection with the proposed admission of its ordinary shares (the “Shares”) to the premium listing segment of the Official List of the FCA and to trading on the main market for listed securities of London Stock Exchange plc (the “London Stock Exchange”).
Copies of the Prospectus will, following publication, be available for inspection from http://www.cabotcm.com/investors.
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References in this announcement to “Cabot” mean the Company, together with its consolidated subsidiaries and subsidiary undertakings.
20 October 2017
Cabot Credit Management Limited
Announcement of Intention to Float on the London Stock Exchange
Cabot, the UK’s leading credit management services provider, today announces its intention to proceed with an initial public offering (the “IPO” or the “Offer”).
The Company intends to apply for admission of its ordinary shares (“Shares”) to the premium listing segment of the Official List of the Financial Conduct Authority (“FCA”) and to trade on the main market for listed securities of the London Stock Exchange (together “Admission”).
The Offer will comprise an offer of shares to institutional investors.
Cabot is one of the largest credit management services providers in Europe and the market leader in the UK and Ireland2 with total 120-Month ERC of £2.2 billion
Cabot provides a range of credit management services across a broad client base that includes some of the largest credit providers in Europe
Cabot’s primary business relates to the purchase of unsecured consumer debt from financial services institutions, although 37% of our collections for the year ended 31 December 2016 were on behalf of third party clients
Over its 20 year history, Cabot has invested a total of £2.1 billion in acquiring over £21 billion in face value of loan portfolios and has collected a cumulative £2.9 billion from these portfolios as at 30 June 2017
Management believe Cabot is the market leader in the UK and Ireland, where Cabot has built a sustainable competitive advantage.
Cabot is also amongst the leading providers in Spain, France and Portugal
Cabot leverages its data and processing capabilities to enable it to collect more effectively than industry benchmarks in UK financial services debt3
Cabot has a strong financial profile with an Adjusted EBITDA of £247.8 million as of 31 December 2016, which grew by a CAGR of 21% between 2011 and 2016
Its mid-term financial targets include a low- to mid-twenties Return on Equity, a leverage ratio of approximately 3.0 to 4.0x (based on Cabot’s net debt divided by Adjusted EBITDA for the previous 12
month period), and an expected first dividend payment in the first half of 2018 at a 50% pay-out ratio based on underlying profit reflecting the period from the point of Admission to 31 December 2017
Given the strong market opportunities for growth, Cabot is targeting a leverage ratio of 3.75 in the short term (based on its net debt as of and Adjusted EBITDA for the 12 months ended 30 June 2017), after taking into account the effects of estimated proceeds of the Offer and the completion of the acquisition of Wescot Credit Services Limited, which is expected to occur in the fourth quarter of 2017 pending FCA approval
Cabot intends to deliver long-term sustainable growth and strong cash returns by continuing to focus on acquiring and servicing portfolios in the attractive UK market and underpenetrated European geographies.
Its depth and breadth of data assets, proven litigation scorecard and constant willingness to find ways to innovate and meet clients’ needs sets it apart from its peers
Ken Stannard, Chief Executive Officer of Cabot Credit Management Limited said:
“This is a very exciting episode in Cabot’s continued growth and development. Having built strong and entrusted Credit Management Service businesses in the UK and Ireland we are now well into the construction of leading platforms in three new markets.
As one of the largest players in Europe it now feels right to be listing on the London Stock Exchange. We are faced with significant untapped growth potential in each jurisdiction as creditor clients continue to partner with us to improve their own performance.
We have a clear strategy of generating sustainable competitive advantage on the foundation of superior collections effectiveness and outstanding customer treatment. The executive team, with the support of our Board, will continue to work hard to execute this strategy and maintain attractive returns for our shareholders.”
Andy Haste, Independent Chairman Elect of the Board of Cabot Credit Management Limited, said:
“At a time when there is an increased focus on consumer credit, Cabot continues to lead the industry as it works to identify affordable solutions, which help customers with their financial recovery.
I have been impressed by the work that Ken and his team have done in building the business in a responsible and transparent way, focused on delivering fair outcomes and a positive experience for its customers.
Leverage our market expertise
I look forward to supporting the team in that work at what is an important moment in Cabot’s development.”
One of the largest credit management service providers in Europe, and the market leader in the UK and Ireland
Significant benefits from scale and market leadership experience through a number of economic cycles
Market leader in the UK and Ireland and first large credit management company in the UK to be authorised by the FCA and the first credit management service company in Ireland to be authorised by the Central Bank of Ireland
Strong track record of customer focus and compliance
Strong reputation with clients built upon collections experience over a 20-year period
Significant data assets assist Cabot in identifying the appropriate collection strategy for each customer
Comprehensive end-to-end service offering covering a wide range of asset classes in five European jurisdictions
Industry leader in an attractive UK market with differentiated collections capabilities to deliver enhanced performance across portfolio profiles
The UK is the largest credit management services market in Europe with the highest volume of debt sold per annum
Cabot is the largest4 and one of the most sophisticated players in the UK and is the leader in financial services debt purchases, with 96% of its total UK 120-Month ERC coming from a broad range of UK financial services firms
Proprietary and differentiated data assets, collection experience, customer centric model, compliance focus and litigation capability drives superior collections performance5
Competitive advantage in non-paying portfolios through proprietary litigation scorecard
Competitive advantage in paying portfolios through high interaction call framework
One of the highest customer satisfaction ratings in the financial services sector (4th out of 15 when benchmarked against the firms included in the July 2017 UK Customer Satisfaction Index for the Banks and Building Societies sector) and a lower level of complaints referred to the UK Financial Ombudsman Service (FOS) than selected high street banks
Established participant in the underpenetrated European market with significant growth potential and increasing barriers to entry
Most non-performing debt still managed in-house by credit providers
Increasing regulatory complexity and cost of compliance driving long term trend towards outsourcing to specialist credit management service companies such as Cabot
Higher compliance standards creating higher barriers to entry for credit management providers
Significant growth potential in European markets where propensity to sell debt remains significantly below more established markets such as the UK
Disciplined approach to geographic expansion into new markets with significant growth potential, leveraging successful Ireland experience
Leverage Cabot’s market leadership in the UK and experience gained in growing the Irish business to replicate its success in new markets
Entered the Irish market in 2007 and has since grown to be the market leading credit management firm, with board level relationships with all the major Irish banks
Disciplined approach to expansion through prioritising the building of strong management teams, developing data warehousing and pricing capabilities and developing the operational differentiation required to outperform in local markets
Significant untapped potential in markets including Ireland, Spain, Portugal and France
Cabot’s businesses in Spain, France and Ireland have a long track record with significant accumulated data, providing a basis for growing Cabot’s presence in those markets
Compelling financial profile combining growth, strong returns and resilience
Cabot’s Adjusted EBITDA grew by a CAGR of 21% between 2011 and 2016
Adjusted EBITDA for the year ended 31 December 2016 of £247.8 million with an Adjusted EBITDA Margin of 64.5% increasing to 66.4% for the six months ended 30 June 2017
High revenue visibility from owned assets, with 83% of revenue for the year ended 31 December 2016 generated from assets owned at the beginning of the year
Cabot’s actual collections have over the past few years consistently outperformed historic ERC forecasts; collections for the six months ended 30 June 2017 were 104% above the ERC forecast as at 31 December 2016
Disciplined control of core operating expenses, expected to grow in line with inflation (approximately 2.5%) prior to costs associated with being a public company (approximately £3 million in 2018)
Strong cash flow generation enabled £207 million of new debt portfolio purchases between 30 June 2016 and 30 June 2017 whilst still reducing leverage from 4.6x as of 30 June 2016 to 4.1x as of 30 June 2017
The following are the highlights from Cabot’s audited full year results for the financial years ended 31 December 2015 and 2016 and half year results for the six months ended 30 June 2017, and the unaudited half year results for the six months ended 30 June 2016:
Other Cabot financial Information (unaudited):
Cabot intends to publish its third quarter financial results on or around 3 November 2017.
The Company notes that the third quarter has been strong in terms of purchases.
Details of the Offer
Cabot intends to apply for the Company’s Shares to be admitted to listing on the premium segment of the Official List and admitted to trading on the main market of the London Stock Exchange
Shares in the Offer will be offered to certain institutional investors in the UK and elsewhere outside the United States, and in the United States only to persons reasonably believed to be qualified institutional buyers in reliance on Rule 144A of the US Securities Act of 1933 (the “Securities Act”), or another exemption from, or in a transaction not subject to, the registration requirements of the Securities Act
The Offer is expected to raise gross primary proceeds to the Company of approximately £195 million to be used for general corporate purposes (which may include repayment of outstanding indebtedness)
The Offer will also provide its major shareholders, Encore and certain funds advised by J.C.
Flowers & Co. (together, the “Major Shareholders”), and certain management shareholders with an opportunity to realise a part of their investment, with such management shareholders selling their shares as part of the Offer, and the Major Shareholders receiving an at-IPO dividend payment that will be funded out of further primary proceeds from the offering
The Company, its Major Shareholders and Directors expect to enter into customary lock-up arrangements with respect to their shareholdings for specified periods of time following Admission
Immediately following Admission of the new Shares, it is expected that the Company will have a free float of at least 25% of the issued ordinary share capital of the Company
A further over-allotment option of up to 15% of the Offer size will be made available by the Major Shareholders
Full details of the Offer will be included in the prospectus expected to be published in the coming weeks
Admission is expected to take place in November 2017, and following Admission, the Company will be eligible for inclusion in the FTSE UK indices
In relation to the Offer and Admission, Goldman Sachs International and Morgan Stanley & Co.
International plc are acting as Joint Global Co-ordinators, Joint Bookrunners and Joint Sponsors
Jefferies International Limited and Numis Securities Limited are acting as Joint Bookrunners and Lazard & Co., Limited is acting as Financial Adviser to the Company
Notes to the Editor:
Cabot Credit Management (www.cabotcm.com)
Cabot is one of the largest credit management services providers in Europe and the market leader in the UK and Ireland (based on 120 month estimated remaining collections as of 31 December 2016).
Cabot provides a range of credit management services across a broad client base that includes some of the largest credit providers in Europe. These services include debt servicing offerings such as early stage collections, business process outsourcing, contingent collections, trace services and litigation activities.
Cabot has credit management experience across a range of both credit providers (including consumer finance, telecommunications companies, retailers, utilities companies and government agencies) and asset classes (including secured consumer debt, small and medium sized enterprise debt, and high value accounts).
Between Cabot’s inception in 1998 and 30 June 2017, it has invested a combined total of £2.1 billion in the acquisition of over £21 billion in face value of purchased loan portfolios and has received £2.9 billion in cumulative collections from purchased loan portfolios.
As at 30 June 2017, Cabot’s 120 month estimated remaining collections was £2.2 billion, and Cabot’s 180 month estimated remaining collections was £2.5 billion.
With 20 years of debt purchase and debt servicing experience, Cabot was one of the first companies to engage in the credit management services market in the United Kingdom.
In March 2016, Cabot became the first large credit management service company in the United Kingdom to be authorised by the FCA, and in May 2017 Cabot became the first credit management service company in Ireland to be authorised by the Central Bank of Ireland.
Customer service and regulatory compliance are at the core of Cabot’s business and culture and are implemented through its collections strategy.
Cabot seeks to treat its customers fairly and offer affordable payment solutions, often through long term payment plans. Cabot has customer satisfaction scores in excess of the UK Customer Satisfaction Index banking and building society benchmarks and many leading high street banks included in such index, and Cabot believes that it has one of the lowest rates of complaints in the debt collection industry referred to the UK Financial Ombudsman Service.
Cabot has won numerous industry accolades, including a 2017 UK Customer Satisfaction Award from the Institute of Customer Service, the CCR Credit Excellence Awards 2016 for Compliance and the Credit Today Award 2016 for Treating Customers Fairly.
Cabot’s stated vision is to be “The Best at What We Do” – and the Directors believe Cabot has a strong and deliverable strategy to execute.
Cabot prides itself on being the leading credit management services company in both the UK and Ireland, and strongly believes that this position is underpinned by operational excellence built on years of experience that exceed all other large players in these markets currently.
Its depth and breadth of data assets, leading scorecard abilities and constant willingness to find ways to innovate and meet clients’ needs further allow it to differentiate itself from peers.
Initial Public Offering (IPO) Process
Most fundamentally, however, the interests of customers are at the heart of the business which is reflected in its mission of “Financial Recovery - Helping Each and Every Customer”. The Directors believe that this combination of operational excellence, customer-centric approach and well-considered growth outside of its home market allows them to meet their vision and drive long-term sustainable growth in the business.
Maintain market leadership in the UK and Ireland, delivering superior returns
Preserve Cabot’s market leading position in the UK and Ireland by maintaining its high level of collections performance and compliance
Invest in new innovations such as in digital channels to maintain its reputation for customer service and compliance, and continuing to develop its leading data, scorecard and litigation capabilities
Continue to focus on financial institutions where Cabot has a competitive advantage, and where the financial institutions market provides significant growth potential
Increase the acquisition of deeper data (more data points per individual rather than more individuals) and focus on management of that data
Continue to invest in behavioural science, which is expected to assist in maintaining and enhancing Cabot’s collections performance
As of and for the year ended December 31,
As of and for the six months ended June 30,
(£ in millions)
Collections on purchased loan portfolios
Income from portfolio investments
As of and for the year ended December 31,
As of and for the six months ended June 30,
(£ in millions)
Adjusted EBITDA margin (%)
Cabot Credit Management Ltd.
Kenneth Stannard, Chief Executive Officer
Craig Buick, Chief Financial Officer
Becky Cimelli, Public Relations Manager
+44 (0) 344 556 0263
Goldman Sachs International
(Joint Global Co-ordinator and Joint Bookrunner)
James A Kelly
+44 (0) 20 7774 1000
(Joint Global Co-ordinator and Joint Bookrunner)
+44 (0) 20 7425 8000
Jefferies International Limited
+44 (0) 20 7029 8000
Numis Securities Limited
+44 (0) 20 7260 1000
Lazard & Co., Limited
(Financial Adviser to the Company)
+44 (0) 20 7187 2000
(PR Adviser to the Company)
+44 (0) 20 7404 5959