The Credit Corp Group Limited (ASX: CCP) share price has sunk 15% after the debt collector announced its FY23 result.
It has debt-collecting operations in Australia and the US, and a lending division.
FY23 result
Here are some of the highlights of the result:
- Total revenue increased by 15% to $473.4 million
- Net profit after tax (NPAT) declined by 5% to $91.3 million
- Profit / earnings per share (EPS) dropped by 6% to $1.34
- Annual dividend per share down by 5% to $0.70
There was a very varied performance between its three divisions.
ANZ debt buying revenue fell 2% to $224.8 million, while NPAT sank 29% to $39.1 million.
US debt buying revenue went up 7% to $100.8 million, and NPAT declined 21% to $17.1 million.
ANZ lending revenue grew by 58% to $147.8 million, and NPAT soared 70% to $35.1 million.
Interestingly, ANZ lending is now making more revenue and profit than the US debt buying division. It’s almost making as much profit as the ANZ debt buying division.
What happened?
Credit Corp said that there was a continued ‘run-off’ in the core ANZ debt buying business, and costs arising from increased US resourcing.
The company said that delinquency increased part way through the year, but a “prompt collection response and tightened credit settings have ensured that arrears and losses remain within pro-forma levels.”
Credit Corp did say that in the US, conditions remain uncertain and that “collection conditions may have deteriorated as the company experienced increased repayment plan delinquency.”
Purchased debt ledger (PDL) is where Credit Corp buys debt from an organisation and then collects it over time. PDL supply in the ANZ debt-buying market remains “constrained” and the FY24 investment pipeline remains “modest”. It said a further contraction in earnings is expected in FY24.
Outlook for the Credit Corp share price
The company is expecting strong lending segment earnings growth in FY24, and it’s expecting earnings growth in the US.
But, another year of reduced purchasing will “yield a further decline in earnings from the ANZ debt buying segment.”
Net profit after tax is expected to be between $90 million to $100 million in FY24, which the company said would be 4% growth at the mid-point range.
Investment is expected to “moderate” in FY24, which should result in “significant free cash flow and reduced net borrowings.”
Past experience tells me that times of heavy economic pain cause heavy falls for the Credit Corp share price, but it can also rebound strongly over time until the next crash. I’m not sure that today is the best price we’re going to see, so I’d be happy to wait on this one.
