Credit Corp Group Limited (CCP.AX) Earnings Call Transcript & Summary

Welcome to Credit Corp's 2022 First Half Results Presentation. I am Thomas Beregi, the CEO of Credit Corp. Our objective is leadership of the credit-impaired consumer segment. We define our market as people who've had having defaulted on a previous credit obligation. We operate in very competitive businesses, and 3 competencies are critical to our success: We must have superior analytics and discipline because our business is all about pricing and managing risk. Our operations must be strong to compete. We must be sustainable and compliant to deliver on our promise to our debt sale clients, other stakeholders and the community. This ensures that our business can continue. Applying these competencies, we target to deliver strong earnings growth into the future while producing acceptable returns, a return on equity of 16% to 18% with a conservative financial structure. We have strong metrics and approaches for each of these competencies across our 3 businesses. Our leadership has delivered sustained growth and returns over a long period and a solid start to the current year. First half earnings were up 8% over the same period in the prior year. Revenue grew across each of our segments. Record levels of investment will support continued growth. During the half, we concluded the Radio Rentals acquisition, stepped up our purchasing in the U.S. and achieved a strong lending recovery late in the period. Despite the record outlay, we still retain considerable capital for further investment. Credit Corp is debt-free and holds undrawn credit lines of $312 million. This means we can secure a large one-off purchases while increasing ongoing purchasing as leisure supply recovers. Our debt buying operations continued to perform well. The collection house and Radio Rentals book acquisitions drove solid collections growth in the core Australian and New Zealand business. In the U.S., we managed to record favorable collections growth despite tight labor market conditions affecting our ability to expand operational capacity. Strong operations have meant we can continue to price competitively, building our contracted purchasing pipeline to $293 million for the year, putting us on track for record purchasing in challenging market conditions. In the U.S., increased purchasing has driven segment earnings growth of 31%. We managed to offset high purchased debt ledger supply by growing our share from existing clients while winning some new relationships. The outlook for U.S. purchased debt ledger supply is now improving. The data shows that consumers are rebuilding their unsecured indebtedness rapidly. This should flow into rising charge-offs and ledger sales. And with strong collection efficiency and effectiveness metrics, Credit Corp is in a great position to continue to grow U.S. purchasing as supply recovers. Lending volume accelerated over the December quarter. rebuilding the loan book to $200 million. While this has suppressed first half lending profit, the second half result will benefit from a higher starting book. We continue to work on developing additional sources of growth. Our U.S. consumer lending pilot has now issued over $1 million in loans and will be expanded over the second half. Auto lending and buy now, pay later pilots are on track, and we are now close to finalizing our plans for the ongoing operations of the recently acquired Radio Rentals business. We expect to deliver another strong result in 2022. Our purchased debt ledger investment outlook has been upgraded to an outlay of between $300 million and $320 million. net lending should be between $45 million and $55 million, and net profit after tax is expected to be in the range from $92 million to $97 million. Thank you.