The Credit Corp (ASX: CCP) share price is up more than 4% so far with the company holding its annual general meeting (AGM) today.
Credit Corp is Australia’s largest debt buyer, called purchased debt ledgers (PDL), and collector. The company purchases past-due consumer and small business debts from major banks, finance companies, telecommunication companies and utility providers in Australia, New Zealand and the USA. It has been operating for over 25 years and also runs the ‘Wallet Wizard’ short term lending brand.
Credit Corp’s AGM Update
The debt collector maintained its FY20 net profit growth guidance of 15% to 18%.
Based on this guidance, the company is expecting purchased debt ledger (PDL) acquisitions of $300 million to $320 million, net lending of $60 million to $65 million, net profit after tax of $81 million to $83 million and profit / earnings per share (EPS) of 149 to 151 cents.
Based on that guidance, Credit Corp is valued at around 22 times the estimated earnings for this year.
Management also said that the Baycorp acquisition is on track with business case financial outcomes on track to be achieved. Annualised cost savings of $11 million have been achieved. Both Australia and New Zealand agency operations are now profitable with additional New Zealand purchasing opportunities secured.
Despite last year’s strong growth, Credit Corp has experienced total settlement growth of 14% and new customer settlements growth of 6% so far in FY20. Auto volumes are up over 72%.
US Market
Credit Corp believes the US debt buying market remains a substantial opportunity with favourable market conditions, there are no signs of pricing pressure despite growing competitor purchasing and there is continued growth in unsecured credit and charge-off rates.
Its Salt Lake City site is now at capacity with around 400 people, so a second office near Seattle was opened in October with a capacity of 300 people.
The US investment run rate reflects more than AU$100 million of annualised purchased. In the year to date, purchasing of $29 million is 39% higher than the prior corresponding period.
Management think US earnings will grow by more than 50% in FY20 despite the large recruitment and the new office opening, with more profit growth expected in FY21.
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