The Credit Corp Group Limited (ASX: CCP) share price is rising after the debt collector delivered a strong result in FY21.
Credit Corp’s FY21 result
The company said that despite challenging market conditions, all of its segments beat full year expectations and finished the year with significant investment momentum for sustained earnings growth.
Credit Corp said that there was an 11% increase in net profit after tax (NPAT) over FY20, to $88.1 million. Within that, there was a strong US segment result, with NPAT doubling to $17.7 million.
The Australia and New Zealand collections were within 4% of FY20’s stimulus-induced result. This was achieved with limited organic purchasing as a consequence of reduced purchased debt ledger (PDL) supply arising from the temporary impact of COVID stimulus and forbearance on charge off volumes.
The acquisition of the Collection House Ltd (ASX: CLH) PDL book contributed to the collection result and helped produce lifts in segment productivity and earnings of 9% and 11%, respectively.
In total, Credit Corp said that it saw a near record PDL investment outlay of $293 million.
There was record second half gross lending volume of $105 million.
Credit Corp’s board decided to pay a final dividend of $0.36 per share.
Credit Corp revealed that it has a record committed starting PDL investment pipeline of $150 million.
Charge off volumes are growing across all markets according to the company and it’s expecting further opportunities to grow purchasing over the course of the year.
The organic PDL investment, together with the ongoing impact of the Collection House PDL acquisition is expected to produce solid earnings growth of 8% at the top end of its guidance range – the NPAT guidance range is between $85 million to $95 million.
FY22 PDL acquisitions are expected to be $200 million to $240 million, with net lending volumes of between $45 million to $55 million.
Profit/earnings per share (EPS) is expected to be between $1.26 to $1.41.
Summary thoughts on the Credit Corp share price
If Credit Corp achieves its minimum guidance it’s valued at 23 times the estimated earnings for FY22. It’s 21 times estimated earnings if it hits the top end of the guidance.
That’s not a bad price I suppose, but debt collectors like Credit Corp can be really volatile. I don’t think this is the best time to buy shares – it’s after a crash where strong value seems to appear.