Financial Services

Credit Corp upgrades FY22 guidance on record first-half investment

Tue 01 Feb 22, 10:30am (AEST)
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Key Points

  • Credit Corp steps up debt purchasing investment to sustain its growth trajectory
  • Company is "on track to grow earnings in all segments", upgrades FY22 guidance
  • Increasing use of unsecured credit to drive debt volumes over medium term

Credit Corp (ASX: CCP) is one of few stocks standing tall after the market’s recent selloff, and that tenacity has been reflected in its half-year FY22 results.

Credit Corp has delivered sustained growth, reporting an 8% increase in revenue to $203.9m and 8% growth in net profit to $45.7m. The company also issued an interim dividend of 38 cents per share, up 6% from last year.  

The results came slightly ahead of Commsec estimates, which expected $42.7m in net profit and a 38 cents dividend.

The company's stock rallied 4.6% as the market opened.

Record debt buying to sustain growth 

For the uninitiated, Credit Corp specialises in purchasing past-due consumer and small business debts from financial institutions, telecommunication companies and utility providers across Australia, New Zealand and the US. It then works with customers to agree on affordable and sustainable repayment options.

Credit Corp’s growth was underpinned by $305m of purchased debt, well above the $233m a year ago. 

Earnings breakdown 

Morgans expected flat debt collection growth, with earnings predominantly driven by the company’s lending segment and improved operating margins. 

The result played out in-line with Morgans' expectations, with growth in US market share offset by a contraction in debt supply arising from the pandemic.

Credit Corp expects debt supply to recover strongly over the medium term as consumers increase their use of credit. 

Australia and New Zealand consumer lending demand accelerated in second quarter of FY22, with record monthly loan originations in the month of December.

FY22 outlook 

Credit Corp was very upbeat about its FY22 outlook, saying the company “is on track to growth 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.” 

The company upgraded its purchase debt ledger outlook for FY22 to $300-320m, up from its previous guidance of $280-300m.

Credit Corp reaffirmed its FY22 net profit range of $92-97m. This represents a 4.4% to 10.1% increase compared to FY21.

What brokers think

Brokers have yet to run the ruler against today’s half-year earnings. 

As it stands, consensus views the stock as a Buy with a $35.93 target price (3.9% upside).

Written By

Kerry Sun

Finance Writer & Social Media

Kerry holds a Bachelor of Commerce from Monash University. He is an avid swing trader, focused on technical set ups and breakouts. Outside of writing and trading, Kerry is a big UFC fan, loves poker and training Muay Thai. Connect via LinkedIn or email.

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