It has been a difficult session for Credit Corp Group Limited (ASX: CCP) shares on Thursday.
In morning trade, the $1.2 billion ASX 200 stock is down over 6% to $17.03.
Why is this ASX 200 stock taking a dive?
The debt collector's shares are falling today after investors responded negatively to the release of a half year update.
Management notes that its US operational performance continued during the half and underpinned a 12% increase in US collections. This was despite 24 months of reduced investment and no discernible change in collection conditions.
And while Credit Corp did not add to its purchasing pipeline during the first half, it expects to do so over the coming months. So much so, it anticipates outlaying $150 million in the US over the full year.
It notes that prices remain stable and should produce opportunities to acquire credit card charge offs capable of meeting the company's return criteria.
Consumer loan book profit growth
The ASX 200 stock revealed that rapid consumer loan book growth in the prior year has converted to earnings.
This led to its lending segment net profit after tax increasing 79% over the prior corresponding period to $24.9 million.
However, its lending volumes fell below the prior year as industry data showed that a period of post-COVID re-leveraging had come to an end. Nevertheless, Credit Corp's loan book still grew over the half year. Management believes these dynamics should produce strong segment earnings over the second half and record lending segment profits for FY 2025.
Although the Wallet Wizard fast cash loan product (current interest rate 47.8%!) has driven lending segment earnings to date, management notes that other products are set to contribute to future growth.
It highlights that persistently elevated post-COVID used car prices have caused the ASX 200 stock to restrict auto lending volumes. However, with used car prices now falling, they may shortly reach the level where restrictions can be removed.
Half year profits
The sum of the above is an underlying half year net profit after tax of $44.1 million, which is an increase of 32% year on year.
However, it is run-rating slightly below its reaffirmed full year guidance of $90 million to $100 million, so an even stronger second half will be required to achieve it. This may explain why its shares are falling today.
Also growing strongly during the half was its interim dividend, which more than doubled to 32 cents per share.
