Shares in Credit Corp (CCP) took a 70% nose-dive this morning after the debt collection agency announced an earnings downgrade of up to 50% and the resignation of its chairman Christopher Deane.
Credit Corp revised down its earnings before interest, tax, depreciation and amortisation (EBITDA) to a range of $10 million to $12 million.
Last August, the company delivered a net annual profit for 2007 of $19.63 million and forecast a 2008 profit of $24 million, which it downgraded to $17 to $19 million in November.
"A substantial proportion of the company's recent purchases have failed to yield collection revenues in line with expectations,'' the company said in a statement.
""A major contributor to this underperformance has been a forward flow agreement which the company has now taken steps to terminate. However, the impact of these unfavourable purchases will adversely affect the company's near term profitability."
Credit Corp said revenue is expected to increase in the second half of the 2008 financial year, however not at a rate above costs.
This will therefore contribute to declining profitability in the second half until costs are reduced and further revenue growth is achieved.
"An excessive focus on short-term revenue performance has compromised the company's ability to derive anticipated revenues from purchases made in previous years."
The market did not take the news lightly with shares dropping a massive 71%, or $2.84 to $1.15 after the announcement.
The company said it has initiated a strategic review to consider the factors which have significantly affected performance for the 2008 financial year
As a part of the review, the company said it would assess board and management effectiveness.
"An important part of the review will be an independent assessment of the board," the company said.
"Senior management roles will be assessed, if a skill or performance deficiency is identified, appointments will be made to ensure that desired operational outcomes are delivered."
This coincided with the news that chairman Christopher Deane had resigned, effective today.
Mr Deane will remain as a non executive director in the short-term until a replacement appointment is made as part of the strategic review process.
Mr Deane has been Chairman of Credit Corp since listing in 2000.
Mr Richard Thomas has accepted the position of Acting Chairman from today.
Shares in the debt collection company fell by a huge 77.08% or $3.08 to close down below $1 at 91 cents.
