Credit Corp Group (ASX:CCP) FY18 update & outlook


by Jessica Amir

Credit Corp Group Limited (ASX:CCP) CEO, Thomas Beregi, discusses result highlights, performance in the company's three key business segments, turnaround in its US operations and outlook for the year ahead.

Jessica Amir:
Hi I’m Jessica Amir for the Finance News Network. Joining us now from Credit Corp Group Limited (ASX:CCP) is CEO, Thomas Beregi. Thomas, welcome.

Thomas Beregi: Thank you.

Jessica Amir: First up for investors new to the company. Could you please give us an introduction?

Thomas Beregi: Credit Corp was a company that listed in 2000. Our core business is debt purchasing. So we buy charged-off or defaulted credit cards, personal loans and telephone accounts from major banks and utilities. And what we do is we seek to collect those accounts over a number of years, enough to cover our costs and make a return for our shareholders. We’re also a significant consumer lender here in Australia as well. So we’ve branched into that business and we do our debt purchasing, both in Australia and New Zealand.

Jessica Amir: Turning to the financials now Thomas. What were some of the highlights from FY17?

Thomas Beregi: The key highlight was we grew our profits by 20 per cent, over the prior year. So very strong profit growth. And that marked nine years of consistent profit growth, with a compound average growth recorded of about 28 per cent per annum, over that period. So very strong performance with a very solid return on equity of 24 per cent in 2017, and some really strong highlights in some of our businesses. In particular our lending business doubled its profits to $12 million, so a really strong result and really showing that that business is performing well. And our operation in the US started to breakeven at the end of the year, so it’s now on track for profits.

Jessica Amir: Just honing in now on your key business segments, starting with Australia and New Zealand debt buying. Tell us a little bit more about that?

Thomas Beregi: That’s our biggest business, it accounts for 65 per cent of our profits, bit over 65 per cent. And in that business, we have some really strong metrics. So our asset turnover, the way we convert our debts into cash is among the strongest in the world, probably double the rate of many of our local and international listed competitors. And some of our strongest collection efficiencies have the lowest cost to collect that we see in our industry, so a really strong business where we’ve established great leadership.

Jessica Amir: Now tell us about the broader lending market for Australia and New Zealand?

Thomas Beregi: Our lending business is something we started organically five years ago. We were a pure debt buyer prior to that. And the book has grown really strongly, it’s now a $160 million book and it’s on track to make almost 30 per cent of our earnings, in the years ahead. One of the great things about ourlending business, as everyone knows,financial services and credit markets are under a lot of regulatory scrutiny, our product ticks all the boxes. It’s a really sustainable product, some of the lowest rates in our consumer segment. And I guess as stakeholders and regulators are showing more and more scrutiny over operators, our product is really coming through very strongly and a great consumer proposition. So it’s growing very well.

Jessica Amir: Lastly Thomas, tell us about your US debt buying business?

Thomas Beregi: We started our US debt buying business also about five years ago. And over the last few years, market conditions there have not been great. Prices of charged-off debts have been too high. During that period, we focused on improving the efficiency of our business. Last year we improved our productivity by 20 per cent. And the good news for us now is that market conditions are now far more favourable, and we are accelerating our growth there. We’re buying more heavily and in fact, we’re focusing a lot of our investment in the US now and that will turn a profit in 2018.

Jessica Amir: A more general question now about strategy. What are you focused on and tell us how that’s progressing?

Thomas Beregi: Our focus is on having really strong operational businesses. So we’re always trying to improve what we’re doing, to make sure we stay ahead of the competition. We’ve adopted this strategy of diversifying into different businesses, moving into the US as I’ve discussed. And moving into consumer lending, because we know there are times, particularly in our sort of business, where prices get too high where things get overheated. And that enables us to ensure we can continue to invest in and grow, by withdrawing investment from one area and concentrating it in another. And that is effectively what is happening at the moment.

Right here in Australia at the moment, prices of charged-off debts are pretty high,the market’s a bit overheated. So we’re reducing our purchasing in Australia, we’re increasing it rapidly in the US and we’re also increasing our consumer lending. And that means we can continue to grow our earnings and make great returns in the years to come, whilst not being ill disciplined and comprising returns.

Jessica Amir: Last question now Thomas. What’s your guidance for FY18?

Thomas Beregi: We’re guiding for the profit growth in a range of 12 to 16 per cent. So that’s net profit after tax of $64 million at the top end, so another solid result.

Jessica Amir: Thomas Beregi, thank you so much for the update.

Thomas Beregi: Thank you.


Subscribe to our Daily Newsletter?

Would you like to receive our daily news to your inbox?