Shares in Credit Corp bounced strongly at the open yesterday as investors enthusiastically greeted what was a solid interim result, higher dividend and upbeat outlook.
The shares hit a peak of $36.255 an hour and a bit into the session before they started a long retracement which saw them end the day still up 2.8% at $34.86.
That was a bit of a comedown from the very positive initial reaction.
The company said that it lifted revenue 8% in the six months to December, 31C to $203.9 million, driven by solid revenue growth across both its Australia and NZ (ANZ) business and US debt buying businesses and its local lending business.
The US business was the star and seems to be where the growth anticipated this year, will be found.
That saw net profit after tax also grow 8% to $45.7 million. The star of the show here was its US debt buying business which reported a 31% increase in profit to $8 million.
This was supported by a 5% lift in ANZ debt buying profit, which offset a 7% reduction in ANZ lending profits.
Earnings were much higher than market forecasts around $42.7 million, which helped boost the share price early in the session.
In light of this positive form, the Credit Corp board lifted interim dividend 6% to a fully franked 38 cents per share for a payout ratio of a still conservative 56%.
CEO Thomas Beregi said in Tuesday’s release that the recently completed Radio Rentals acquisition would sustain collections over the second half in advance of a recovery in organic purchasing.
“Credit Corp enjoys strong purchasing relationships and is well-positioned as unsecured credit balances recover and charge-offs normalise,” he said.
He said that in the US, Credit Corp has grown its market share to offset a contraction in PDL supply arising from the pandemic.
“The Company has secured a full year pipeline of more than $150 million. The outlook is for a strong recovery in PDL supply over the medium term as US consumers rapidly increase their use of unsecured credit.”
“Acquisition of the Radio Rentals business assets has accelerated our plans to enter the sale of goods by instalment market and adds to the suite of lending pilots already underway. All pilots utilise Credit Corp’s leading technology platform including fast online decisioning and superior collections,” he added.
Credit Corp reaffirmed its profit and net lending guidance for FY 2022. It continues to expect a net profit of $92 million to $97 million and net lending volumes of $45 million to $55 million.
But the company upgraded its purchase debt ledger (PDL) acquisitions guidance by $20 million to the range of $300 million to $320 million.
Directors said the company is on track to grow earnings in all segments after record first-half investment.
“Credit Corp remains debt free with undrawn credit lines intact for any one-off opportunities and continued investment growth as market conditions allow.”
