This morning Credit Corp Group Ltd (ASX: CCP) reported its financial results for the full year ending June 30, 2019. Below is a summary of the results with comparisons to the prior corresponding period.
- Full year net profit after tax $70.3m, up 9%
- Revenue of $324.2m, up 8%
- Full year earnings per share $1.419, compared to $1.351 in prior year
- Total dividends of 72cps, final dividend of 36cps, up 8% on prior year
- Aims for return on equity of 16%-18%
- 16% increase in consumer loan book to $212m
- US segment collections up 69%
- US net profit nearly tripled
- Cash on hand of $22.7m
- Guides for FY 20 purchased debt ledger investment of $220m to $240m
- Guides for FY 20 profit growth of 7% to 10%
- Guides for FY 20 earnings per share of $1.38 – $1.40 (marginally lower on FY 19)
- Guides for FY 20 dividends of 72 cents (flat)
Credit Corp is a debt collection business in that it buys bundles of bad consumer debts off banks, car dealers, or telcos like Telstra Corporation Ltd (ASX: TLS) at a steep discount to face value before attempting to collect it at a profit.
Inputs affecting its profitability include how much the bundles of bad debt cost in the first place (pricing), alongside how successful it is in collecting the debt itself.
More generally it flagged that lower interest rates in Australia have helped consumer demand for credit, but at the same time regulators have demanded tighter prime lending standards or more responsible lending, which in turn means less bad debts may arise at decent pricing over FY 20 for example.
It also has a US purchased debt ledger business that is ticking up in performance, with it describing market conditions there as "favourable".
"We increased our investment in the US by 40% with the addition of new purchasing relationships and we grew headcount strongly during the second half. It is important that we continue to grow our headcount to maximise the present market opportunity" the CEO, Thomas Beregi said.
As such this result looks split along the lines of softer performance for its core Australian business offset by stronger performance at its US business.
Notably the group has also guided for flat EPS growth and dividends in FY 20 in a result that could see the share price come under pressure this morning.
