The Credit Corp Group Limited (ASX: CCP) share price will be on watch today after giving investors an update.
What was in Credit Corp’s update?
Credit Corp said that it maintains continued leadership in the credit-impaired consumer segment and it has delivered a return to the pre-COVID-19 profit growth trajectory despite challenging debt buying market conditions.
Then the company gave some insights into those conditions.
There has been a temporary reduction in market sale volumes. Sales volumes are below pre-COVID-19 levels by approximately 50% in both Australia & New Zealand and the US.
What are the drivers of this? Credit Corp explained there has been a 20.7% reduction in credit card balances in Australia and a 11.2% reducing in revolving card balances in the US. This was due to stimulus, forbearance and constrained spending options. The forbearance is delaying charge off.
Is there good news?
Credit Corp said that there are early indications of a recovery in sales volumes. A major Australian bank forward flow volume was up by 50% on a run-rate in April. There has also been a “strong” US credit growth rebound.
The debt collecting business said that it’s seeing strong outcomes in the US where it’s a comparatively smaller part of the market (it’s the sixth largest). In Australia and New Zealand it’s sustaining its market share. In FY21 its purchasing guidance is $310 million to $330 million. That’s up from the initial guidance of $120 million to $180 million. At the end of March 2021, it had contracted $290 million of debt purchases.
Lending guidance has increased too. Net lending guidance has increased from a range of $5 million to $10 million, to a range of $10 million to $20 million.
In FY21 it’s expecting to generate net profit after tax (NPAT) of between $85 to $90 million. That translates to a range of earnings per share (EPS) of $1.26 to $1.34.
Summary thoughts on the Credit Corp share price
Credit Corp’s share price has almost doubled at the pre-open level, over the last year. It has recovered well. There’s a lot of volatility with debt buyers. The best time to buy seems to be when there’s a recession. Credit Corp may be able to create decent returns from here, particularly with the US operations.
I’ve got my focus on other ASX growth shares with global potential right now though, after this strong recovery.
