Debt-buying giant PRA Group reported a strong 42.4% profit jump to $58.1 million for the quarter ended March 31. Revenue gained a healthy 26.4% to $245.2 million from $193.9 million in the same quarter a year ago, although the gain actually was a tick behind the 29% growth those following the stock had hoped to see.
Cash collections for the Norfolk, Va.-based company were up 28%, nearing the $400 million mark. The company's collection business actually led the way, gaining 18% in the Americas segment. The insolvency division saw a drop in revenue, down more than a fifth since 2014's first quarter. PRA Group gathers about four-fifths of its revenue from the Western Hemisphere. European business remained stagnant this quarter."We are very pleased with the strong start to 2015. Our investment levels continue to be high, setting a record of $139 million in core portfolios in the Americas," said Steve Fredrickson, chairman, president and CEO. "PRA Group also produced another record by collecting almost $400 million during the period. This quarter produced the type of results we look to deliver and we will work hard to continue this momentum through the year.
PRA Group's success was supported by a high return on average equity of 30%, which is particularly enviable in the current low-rate environment.
PRA Groups key growth strategy involves investing in receivables. The company had strong gains to start the year with its first quarter investing activity, spending more than $138 million in acquiring assets in its core Americas business and another $48 million on other assets both domestically and in Europe. In total, PRA Group invested nearly 40% more money this quarter than it did a year ago. PRA Groups next challenge is the likelihood of rising interest rates and the subsequent impact on long-term financing costs. Also, if the competition picks up for collection assets, the company could ultimately lack the leverage to pass any higher financing costs to sellers, which would curb the companys growth in a threatening rate climate.