Shares in Credit Corp Group were sold off yesterday after it undershot market forecasts for 2018-19 and produced (like GUD) a less than convincing outlook forecast for the current 2019-20 year.
The shares ended down 6.1% at $24.80 after announcing full-year earnings per share of 141.9 cents, lower than guidance of between 144 cents and 146 cents.
Net after-tax profit for 2018-19 came in slightly higher than forecast, at $70.3 million.
Total dividend for the year is 72 cents a share with the final of 36 cents a share up 8% on a year. The company sees no growth in dividends for 2019-20, a real giveaway about how confident the board is about the coming year.
Credit Corp is a debt collection business in that it buys bundles of bad consumer debts off banks, car dealers, or telcos. Falling interest rates should be bad news for it because they reduce the financial pain for consumers, as do financial buy now pay later companies such as Afterpay Touch.
The company warned that lower interest rates in Australia have helped consumer demand for credit and tighter lending conditions by banks and others mean fewer bad debts.
Perhaps that’s why the company forecast that 2019-20’s post-tax profit will be between $75 million and $77 million, with earnings per share down to between 138 cents and 140 cents thanks to shares being issued during a recent capital raising.
CEO Thomas Beregi says Credit Corp’s Wallet Wizard business has grown new customer lending by 18 percent “because we have the cheapest and most sustainable product in our segment of the market”.
He expects to see increased earnings from the United States, which will push profit up as much as 10% for 2019-20. “The company retains significant debt headroom and will invest as opportunities arise,” he added.
It has purchased a US debt ledger business that is improving, with it describing market conditions there as “favourable”.
“We increased our investment in the US by 40% with the addition of new purchasing relationships and we grew headcount strongly during the second half. It is important that we continue to grow our headcount to maximise the present market opportunity” CEO, Thomas Beregi said yesterday.
Analysts say the company will be looking to the US to provide the earnings and revenue growth in 2019-20 while the Australian operation sees a softer performance
