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Credit Corp share price lower despite strong first half result

The Credit Corp Group Limited (ASX: CCP) share price has dropped lower in morning trade on Tuesday.

At the time of writing the debt collector’s shares are down 2% to $32.33 following the release of its half year results.

How did Credit Corp perform in the first half?

Credit Corp was a solid performer during the first half of FY 2020.

For the six months ended December 31, the company reported a 13% increase in its consumer loan book to $230 million.

Combined with a very strong performance by its U.S. business and profit growth across all segments, this led to Credit Corp reporting a 15% increase in first half net profit after tax to $38.6 million.

In respect to its U.S. businesses, management revealed that its U.S. debt buying businesses each delivered first half net profit after tax growth of more than 20%. As a result, the U.S. debt buying segment remains on track for full year profit growth of 45% to 65%.

The company’s local operations also performed very well. The ANZ debt buying segment produced both record collections and net profit after tax. This was due to strong results from its existing business, complemented by the positive performance of the acquired Baycorp assets.

Another positive was that Credit Corp grew its purchased debt ledger (PDL) market share late in the first half. This brings its pipeline of contracted Australian/New Zealand purchasing within the previous full year guidance range.

Finally, the company’s Wallet Wizard offering continues to grow in popularity despite the meteoric rise of Afterpay Ltd (ASX: APT) and Zip Co Ltd (ASX: Z1P).

The company’s CEO, Thomas Beregi, advised: “We have followed up last year’s unexpectedly strong growth in new customer volume with another 8% more new customer volume growth. Wallet Wizard is now well-known as the most sustainable product in its segment and the absence of any ongoing fees means that it can be cheaper than many prime credit card offerings.”

Outlook.

Credit Corp has reaffirmed its previously upgraded guidance of net profit after tax of $81 million to $83 million. This represents year on year growth of 15% to 18%.

And following an increased PDL investment pipeline in both Australia/New Zealand and the US, management has tightened its PDL investment guidance range to $310 million to $320 million. This is up from $300 million to $320 million previously.

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James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of AFTERPAY T FPO and ZIPCOLTD FPO. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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