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Credit Corp continues to deliver growth

Receivables management company (also known as a debt collection accompany) Credit Corp (ASX: CCP) has announced a pleasing set of full-year results.

The firm, which specialises in debt purchase and debt collection services and counts Collection House (ASX: CLH) as a major competitor, has posted an 11% increase in underlying revenues to $138 million and a 12% increase in underlying net profit after tax and earnings per share to $29.9 million and 65.2 cents per share (cps) respectively.

Dividends for the year were increased by a massive 28% on the prior year to 37 cps, with a final dividend of 17 cps declared.

Growth initiatives

In recent times Credit Corp has undertaken two growth initiatives which management provided further detail on.

In early 2013 Credit Corp opened an operational site in the US and began purchasing debt ledgers. The company stated in the announcement that “operational performance at this site has improved over the course of the year as practices and systems have been adapted. Recent results are in line with pre-purchase pro-forma requirements.” Management must be pretty pleased with the US division’s performance and outlook as they also announced that a second operational site would open shortly.

Balancing this positive news however was management’s advice that debt purchasing conditions had become very challenging in the US, with regulatory activity temporarily reducing the supply of charged-off debts from credit issuers.

Credit Corp has also seen good growth in its consumer lending business MoneyStart. MoneyStart provides loans to customers with impaired credit records, much like Cash Converters (ASX: CCV) does, and now holds a loan book of $19 million.

Guidance

Although it is obviously only early into the current financial year 2014, management provided guidance for full year NPAT $31 to $33 million, EPS of 67 to 71 cps and a full year dividend of 34 to 37 cps.

Valuation

The market liked what it saw in the results announcement with the shares heading nearly 2% higher to $9.68 yesterday. Based on the mid-point of management’s guidance for financial year 2014, this places Credit Corp on a price-to-earnings ratio of 14 times and a dividend yield of 3.7%.

Foolish takeaway

With good growth prospects both domestically and the USA and available at an undemanding price, Credit Corp is certainly one for investors’ watchlists.

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Motley Fool contributor Tim McArthur owns shares in Credit Corp and Collection House.

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