Credit Corp Group Limited (ASX: CCP) shares are under the spotlight today after reporting its FY21 half year result.
Credit Corp is a large debt collector, it also runs the loan business Wallet Wizard.
HY21 report
Credit Corp reported that its HY21 revenue declined by 2% to $188 million.
There was a 1% increase in revenue from the Australian and New Zealand debt buying segment to $113.3 million. The US debt buying segment had a much stronger result, with revenue rising 33% to $37.3 million. However, the Australia and New Zealand lending division revenue fell 26% to $37.4 million.
The profit performances of the divisions were even more varied. ANZ debt buying net profit rose 7% to $27.5 million. US debt buying net profit surged 142% to $8 million. However, the ANZ lending segment suffered a 30% drop of profit to $6.7 million.
Whilst net profit after tax (NPAT) grew by 10% to $42.3 million, profit/earnings per share (EPS) declined by 11%.
Credit Corp said that all segments either met or exceeded expectations. The company said that the Collection House Limited (ASX: CLH) purchase was completed on the last day of the period and will make a strong contribution in the second half of the period.
The company said that while all credit issuers selling prior to COVID-19 had resumed their sale programs purchasing volumes were only now starting to grow as the impact of issuer forbearance dissipated.
Outlook and guidance
Favourable operating performance is expected to continue for the rest of the year. Ongoing investment is likely to remain subdued, but the one-off Collection House book acquisition will drive collections and net profit ahead of any recovery in purchasing conditions.
The company is debt free and is in a position to jump on more one-off opportunities and grow across all segments.
Due to the above and its HY21 result, it upgraded its FY21 guidance. Purchased debt ledger acquisitions guidance is now for a range of $310 million to $330 million, up from a range of $270 million to $330 million.
The net lending volume is now in a range of $5 million to $10 million, up from a range of negative $5 million to positive $5 million.
Net profit after tax (NPAT) guidance is now for a range of $85 million to $90 million, up from a range of $70 million to $85 million.
Finally, EPS guidance has been increased to a range of $1.26 to $1.34, up from $1.04 to $1.26. The mid point of the guidance has risen by 13%.
Summary thoughts
I thought this was a solid result from Credit Corp, considering the world is currently going through a pandemic. It’s doing much better now than it did during the GFC.
Are Credit Corp shares a buy today? It’s still lower than it was a year ago, but it certainly isn’t cheap by historical standards. But we’re in a crazy period of time at the moment.
In the financials space, there are other ASX dividend shares I’d rather buy like Magellan Financial Group Ltd (ASX: MFG).
Instead of Credit Corp, I suggest getting a free Rask account and accessing our full stock reports. Click this link to join for free and access our analyst reports.
