Credit Corp Group (CCP) is a receivables management company, specialising in debt purchase and debt collection. CCP’s primary business is the acquisition of purchased debt ledgers (PDLs) comprised of distressed debt from Australian and New Zealand credit issuers.
Over the past several years’ the company has made significant investments in technology and resources, which has led to solid infrastructure that is geared to produce sustainable long term performance.
With the infrastructure in place the group has begun to expand into the large US market, where it now employs 30 full-time staff.
CCP enjoyed a solid 1H13, in which underlying net profit rose 12% to $14.6 million. The higher profit came on the back of a 6% increase in underlying revenue.
Over the half, the company grew its PDL collections and fee income to a record $72 million, a 54% increase on the same period in FY12. CCP also reported that the contracted pipeline for purchasing grew to $105 million in the 1H. This is a great result considering that the upper end of the guided range for FY13 was only $70 million.
The group also declared a half year dividend of 20 cents per share, fully franked – a 54% increase on 1H12’s interim dividend. Collections as % of total PDL continues to improve, rising from 71% at the end of FY12 to 72% at the end of December.
The rise in the collection rate highlights the company’s disciplined approach to purchasing, especially in the face of the strong competition from sector peers.
CCP’s US operations, which are only in the second year of operations, grew debt purchasing from $2.2 million as of June 30, 2012 to $4.0 million at the December 31, 2012.
The Australian loan book branded ‘MoneyStart’ also had solid growth over the half, doubling to $12 million in six months to December.
The two most impressive points we took out from CCP’s 1H13 results were the massive increase in PDLs and the company’s disciplined investment approach, which has allowed it to increase its collection rate.
The Australian and US commercial loan books look solid and we expect further growth in the coming six-month period. The group has made specific mention of its plans to grow its US operations through optimisation and technology upgrades, which we believe will show exponential growth given the size of the market.
The group has plenty of room to grow its consumer loan books given its almost unleveraged balance sheet. Overall we were pleased with CCP’s 1H12 result and we expect the company’s current earnings momentum will translate into further share price appreciation.
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