Collection House Limited (ASX: CLH) shares have risen more than 9% this morning after the company reported double-digit growth in FY19. Here are the key points.
Collection House is one of Australia’s largest debt collection businesses. It purchases debt ledgers (PDL) from a bank, for example, and then collects on the balance. Collection House was founded in 1994 and listed onto the ASX in 2000. Its subsidiary ThinkMe Finance is now a licensed finance broker for the provision of credit.
FY19 Results
Collection House reported revenue growth of 12% to $161.1 million and net profit after tax (NPAT) of $30.7 million, up 18%. Earnings per share (EPS) increased by 16% to 22.3 cents per share.
The NPAT result was approximately 23.4% higher than the Bloomberg analyst estimate of $24.88 million.
Underpinning the revenue growth was 30% growth in the purchased debt ledger (PDL) asset base, with $133 million of PDL acquisitions. The sale of mature payment arrangements also resulted in $25 million of accelerated cash flow.
Collection House Managing Director and CEO Anthony Rivas said the Collection Services and PDL segments both saw challenging trading conditions in FY19 due to a changing regulatory environment for banks and financial services companies.
“We met our guidance, however, the business is still not at the level we expected with Cash Collection initiatives not delivering until late in the period, and the Collection Services division disrupted by external factors,” he said.
The PDL segment saw revenue growth of 25% while Collection Services revenue fell 2%.
Dividends
Collection House declared a fully franked final dividend of 4.1 cps, in line with Bloomberg estimates and bringing the total FY19 dividend to 8.2 cps. This is up 0.4 cents, or around 5%, on FY18 total dividends of 7.8 cps. At a share price of $1.20, this gives Collection House shares a dividend yield of approximately 6.8%.
FY20 Outlook
FY20 PDL cash collections guidance is in the range of $145 million to $155 million, which would be growth of around 16% at the high end. PDL acquisitions are expected to be lower in FY20, although FY19 was described as “exceptional expansion”.
The Collection Services segment has returned to FY18 levels of revenue and profitability after setbacks from the Royal Commission and the Federal election so growth should return in FY20.
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Disclosure: At the time of writing, Max does not own shares in any of the companies mentioned.
