Credit Corp (ASX:CCP) share price up 5% after smashing first half profit expectations

Credit Corp had a stronger than expected half…

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Key points

  • Credit Corp has delivered solid revenue and profit growth during the first half
  • The company's profit has beaten the market's expectations
  • Guidance for FY 2022 has been reaffirmed

The Credit Corp Group Limited (ASX: CCP) share price is storming higher following the release of its first half results.

At the time of writing, the debt collection company's shares are up 5% to $35.68.

Credit Corp share price higher after solid first half growth

  • First half revenue up 8% to $203.9 million
  • Net profit after tax up 8% to $45.7 million
  • Earnings per share of 67.7 cents
  • Fully franked interim dividend of 38 cents per share
  • FY 2022 profit guidance reaffirmed

What happened during the first half?

For the six months ended 31 December, Credit Corp delivered an 8% increase in revenue to $203.9 million. This was driven by solid revenue growth across both its ANZ and US debt buying businesses and its ANZ lending business.

The company advised that while market volume remains subdued, organic purchasing continues to recover. In fact, it reached its highest level since the start of the pandemic during the half.

On the bottom line, the company's net profit after tax also grew 8% to $45.7 million. The star of the show here was its US debt buying business which reported a 31% increase in profit to $8 million. This was supported by a 5% lift in ANZ debt buying profit, which offset a 7% reduction in ANZ lending profits.

According to CommSec, the market was expecting a first half profit of $42.7 million, which the company has easily outperformed. This may explain why the Credit Corp share price is charging higher today.

In light of this positive form, the Credit Corp board elected to increase its interim dividend by 6% to a fully franked 38 cents per share. This represents a payout ratio of approximately 56%.

Management commentary

Credit Corp's CEO, Thomas Beregi, was pleased with the half and notes that the company is well-placed for the future thanks to recent acquisitions.

He said: "Credit Corp enjoys strong purchasing relationships and is well-positioned as unsecured credit balances recover and charge-offs normalise."

"Acquisition of the Radio Rentals business assets has accelerated our plans to enter the sale of goods by instalment market and adds to the suite of lending pilots already underway. All pilots utilise Credit Corp's leading technology platform including fast online decisioning and superior collections," he added.

Outlook

Credit Corp has reaffirmed its profit and net lending guidance for FY 2022. It continues to expect a net profit of $92 million to $97 million and net lending volumes of $45 million to $55 million.

Management has, however, upgraded its purchase debt ledger (PDL) acquisitions guidance by $20 million to the range of $300 million to $320 million.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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