Why the Credit Corp (ASX:CCP) share price is surging 10% higher

The Credit Corp Group Limited (ASX: CCP) share price is surging higher today. This comes after the company released its half-year results for the 2021 period.

In early morning trade, shares in the debt collector are swapping hands for $32.68, up 10.93%.

Let’s take a look and see the company’s latest announcement and what that means for the Credit Corp share price.

How did Credit Corp perform for H1 FY21?

Sending the Credit Corp share price higher, the company highlighted robust trading conditions which either met or exceeded key targets.

For the period ending 31 December, 2020, Credit Corp delivered total group revenue of $188 million, reflecting a 2% decline on the prior corresponding period (pcp).

In its largest market, Australia/New Zealand debt buying stayed relatively steady with $113.3 million recorded. The 1% increase remained in line with the previous year. Credit Corp noted that its collections reduced over the December quarter due to reduced COVID-19 stimulus packages from the Commonwealth government.

The United States debt buying segment recorded the strongest gains, rising to $37.3 million, up 33%. This was attributed to improvements in operations and elevated purchases of debt ledgers in the last few years.

In addition, Australia/New Zealand lending dropped to $37.4 million, down 26%. This is because new customer approval rates and loan amounts were affected by the economic downturn. However, the company noted that in the last quarter, applications have exceeded the prior year. Thus, it expects lending revenue to return to growth in the second-half of FY21.

Overall, net profit after tax (NPAT) came to $42.3 million, a 10% jump over the comparable period.

Credit Corp revealed that it has a healthy cash balance of $400 million and remains debt free to capture any potential opportunities that may accelerate growth.

The board declared a fully-franked dividend of 36 cents per share to be paid to eligible shareholders on 12 March, 2021.

What did management say?

Credit Corp CEO, Mr. Thomas Beregi, commented on the purchase of the debt ledger from Collection House, saying:

The Collection House purchase will enable us to maintain our operational scale and grow collections while ongoing purchasing volumes recover.

Furthermore, Mr. Beregi went on to talk about the resilience of its United States market, adding:

While COVID-19 has produced tight purchasing conditions, our US business is very competitive and can grow NPAT rapidly when conditions ease.

Outlook and guidance for Credit Corp

Looking ahead, Credit Corp believes that its continued performance will run into the remaining second-half of the 2021 financial year. It noted that the recent investment in Collections House will drive strong revenue generation more than the recovery to pre-COVID levels.

In light of the above, the company upgraded its guidance for the FY21 period.

Credit Corp anticipates purchase debt ledger (PDL) acquisitions to come around $310 million to $330 million. Previously, its forecasts estimated PDL to fall between $270 million to $330 million.

NPAT is also looking to surge with the company predicting guidance of $85 million to $90 million. Last month, Credit Corp projected NPAT to be between $70 million and $85 million.

More reading

• 5 things to watch on the ASX 200 on Tuesday
• 5 things to watch on the ASX 200 next week
• ASX 200 rises 1.5%
• Credit Corp (ASX:CCP) share price up 1% but Collection House (ASX:CLH) crashes 66% lower

Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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