Credit Corp Group Limited (CCP.AX) Q2 FY2026 Earnings Call Transcript & Summary

Welcome to Credit Corp's 2026 Half Year Results Presentation. I'm Thomas Beregi, the CEO of Credit Corp. Our objective is to lead in the credit impaired consumer segment. We work with consumers who've had trouble with credit, most having defaulted on a previous obligation. To succeed, we aim to stay ahead in 3 key areas. We operate at the risky end of the consumer credit spectrum, which requires well-developed analytics and the discipline to apply it objectively. Our customers require specialized approaches which creates complexity and demand strong operations. We are more likely to encounter people in hardship or suffering from a vulnerability. So we have to be very responsible and compliant to deliver on our promise to our debt sale clients, other stakeholders and the community. Applying these competencies, we target to deliver strong earnings growth into the future while producing acceptable returns, which we define as a return on equity of 16% with a conservative capital structure. We have great metrics and approaches for each of these competencies across our 3 businesses. Our focus has delivered strong investment over the first half with both our loan book and purchased debt ledger book recording growth over the prior year. But our first half net profit after tax was flat against the prior year at $44.1 million. This is because when we grow our assets, particularly in our lending business, we incur upfront loss provisioning and marketing costs and the returns on the additional investment are only realized over time in the form of interest income. The investment will translate into strong growth over the second half. Earnings are projected to rise from $44.1 million in the first half to $61 million in the second half. The expanded loan book will generate more interest income, and there will be seasonal reductions in marketing and provisioning costs. And the enlarged purchased debt ledger book will produce additional collections and earnings over the second half. All of this will bring full year net profit after tax to the range of $100 million and $110 million, which represents growth of 6% to 17% over the prior year. Our U.S. business has continued to improve with increased productivity helping to lift segment earnings by 63% to $11.7 million and improved performance has ensured continued investment. Our full year committed U.S. purchasing pipeline now stands at $157 million with a number of opportunities available to grow this to within the range of $160 million to $180 million. Refreshed marketing and strong operations have produced a 14% increase in total lending volume to a half year record, growing the loan book to almost $500 million. The Australia and New Zealand debt buying business also ended the half in a strong position. While this business suffered from disruptions to forward flow purchasing arrangements during the half, much of this was remedied with the receipt of backlog files in December, and we were successful in securing a number of one-off purchases, including a large credit card runoff book in January just this year. Our committed purchasing pipeline for Australia now stands at $120 million with opportunities to grow from there. Our capital position remains strong with net borrowings still at just 32% of our financial assets, leaving us with undrawn credit lines and the ability to expand our access to finance to fund any opportunities which may arise. One such opportunity is the acquisition of Humm Group Limited. The status of this is that we are presently working towards gaining access to due diligence information. We consider Humm to be complementary to our plans to grow in consumer lending. Presently, all our consumer lending is distributed directly through advertised channels while Humm has an established retail network for distribution at the point of sale. We've commenced building a business in the U.K., while Humm already has an established and extensively profitable platform in that market. We don't undertake any commercial lending while Humm has a large and high-quality commercial leasing business, which we would seek to grow. We also think there will be some synergies which can be released on combining aspects of Humm and the Credit Corp business. While we're keen to acquire Humm, the outcome remains very uncertain. And in the event that there's no transaction, we still have a strong organic growth agenda capable of delivering substantial value. So just to wrap up with our outlook. While all aspects of our guidance remain unchanged from that issued at the start of the year, we now expect an increased proportion of our purchased debt ledger investment to be in Australia with a smaller component in the U.S. The ability to manage our investment in response to changing circumstances generates -- demonstrates one of the benefits of operating across multiple markets. As I mentioned earlier, we're still looking at net profit after tax of $100 million to $110 million being growth in the range of 6% to 17%. Thank you.