Shares of Credit Corp Group Limited (ASX: CCP) have soared almost 12% today to $9.65, after hitting a high of $9.97 earlier in the session.
Credit Corp is a receivables management group whose core business is buying its customers' debts (normally those that are more than 180 days in arrears). It then attempts to collect on those debts, profiting on the difference.
In the 2015 financial year, the company reported 10% growth in revenue to $191.1 million, as well as 10% growth in net profit after tax (NPAT) to $38.4 million. It also said it had entered the 2016 financial year with "considerable earnings momentum", which was certainly made evident today.
Here's a comparison between the company's previous guidance, and the new guidance provided today:
| Previous Guidance (August 2015) | New guidance | |
| Purchased Debt Ledgers (PDL) Acquisitions | $90 to $120 million | $125 to $145 million |
| Net Lending | $30 to $40 million | Unchanged |
| NPAT | $40 to $42 million | $42 to $44 million |
| Earnings per share (Basic) | 86 to 91 cents per share | 91 to 95 cents per share |
The increase in PDL acquisitions is in direct contrast to rival Collection House Limited (ASX: CLH) which recently flagged it will buy fewer PDLs as a result of less attractive pricing.
Obviously, the more a company pays for PDLs, the more it will need to actually collect to justify that investment. This is something that Credit Corp shareholders should keep an eye on to ensure the company isn't overpaying.
However, the company also increased its guidance for net profit and earnings per share, citing "improved operating metrics" and year-to-date collections growth of 10% compared to the prior corresponding period. The upper end of NPAT guidance would represent growth of 14.6% compared to last year, and is certainly something for investors to get excited about.
