Following the Lowell Q1 2020 results announcement we interviewed John Pears, UK Managing Director, to get his views on the Q1 results, COVID-19 and what the next 6 months may bring.
How would you describe your first quarter results?
What we saw was a quarter that continued the momentum of 2019: one of resilience and strength. In the UK, the first three months was about us doing what we always do: serving our clients and customers well.
What were the highlights of the first quarter for you?
Firstly, it is the fact that we have continued to see growth in three of our key metrics – Cash Income, Cash EBITDA and Estimated Remaining Collections. This shows that we have the right fundamentals in place to drive the business forward.
Secondly, I'm impressed and appreciative of the team and the way they have dealt with the crisis. Not only have we been able to mobilise and get everybody working from home in a very short space of time, we've done that while maintaining customer service levels. To give that some context our customer satisfaction score has been in the mid-90s percentage-wise throughout quarter one and held up into April at 96%.
What steps have you taken to mitigate the operational effects of COVID-19 on Lowell?
Our priority has been the safety and wellbeing of our colleagues; by protecting them and ensuring they had the ability to work safely at home we've been able to support our clients and our customers. In doing that we worked closely with the regulator to ensure that we met all appropriate guidelines and, as I mentioned, were able to deliver a level of service that is at least equal to that which we have when we've been in the office.
For customers, two things have helped us: the launch of our newly enhanced customer website and leading the industry with our six enhanced customer commitments. Having a very clear message of how we would help, and the facilities to make that process as easy as possible, certainly benefitted both our customers and us.
In addition, we have been directly engaged with central government, the collections industry and the free debt advice sector to both understand the situation from their perspectives and to be part of the conversation to influence policy decisions and ensure the best outcomes for all.
Portfolio acquisitions were down, was this a result of COVID-19?
No, this isn’t down to COVID-19 specifically. There’s often fluctuation in acquisitions quarter on quarter and this can, as it is in this case, be simply down to timing.
How has COVID-19 affected Lowell in April and May?
We have seen a reduction in collections, and we will see this impact our Quarter 2 numbers, but it is not perhaps as much as we may have expected. A significant element of that reduction is due to the decision we took not to take any litigation action, and the lower number of new plans being set up following the changes to our engagement strategies.
What we are seeing though, is resilience in existing payment plans which is testament to the way we approach mutually agreed affordable payments. Lower collections, we firmly believe, are delayed payments rather than lost payments.
What is the outlook for portfolio acquisitions? Will you be cutting back on purchasing portfolios?
As a business, we have strong cash flow and good liquidity and those are essential to us navigating the economic impacts of this crisis. So, you will understand that managing costs, including portfolio acquisitions, is a key focus for us so that we maintain good liquidity. At the end of the quarter our liquidity sat at around £250 million (for the Group) which is in excess of our ERC replacement rate.
Again, I think it's fair to say that there's been greater focus during the first quarter and into quarter 2, on forward flow arrangements, and where deals offer value to both us and our clients, we will continue to purchase portfolios.
But we are also mindful that supply is currently suppressed and that more deals will come to market as we return to some sort of post-crisis normal. One thing that we learned from the period after the 2008 - 2010 financial crisis, was that there was an appetite for deals when they came to market and the supply increased. However, a lack of liquidity prevented businesses from taking those opportunities, so again you can understand why managing liquidity is key for us.
Overall what's your outlook for Lowell for the next six months?
We expect to see the impact of COVID-19 in our half year numbers, but there are still too many unknowns, so it would be wrong to speculate beyond that. But what we have shown is that we have the right fundamentals in place; we have good financial strength, and time and time again Lowell has shown its ability to deal with change and ultimately be better for it. So, I'm confident that we will come through this crisis, be able to take advantage of the opportunities presented to us, and continue to grow our business in the right way.