Credit Corp Group FY11 Results

Credit Corp Group (ASX:CCP) reported their FY11 annual results today, and although slightly beating their last management guidance, it was pretty much as expected. Some of the main figures compared to the previous year are detailed below:

They've continued the strong growth trend they've exhibited over the last few years. Of particular strength is their operating cashflow which has allowed the company to internally fund a growing ledger purchasing program, increased dividends as well as pay down debts. In fact, since late 2007 Credit Corp has reduced their debt by over $100m without any capital raising within that period. Net bank debt is now down to $23.8m with very little non-current liabilities on the balance sheet.

For FY11 the company has also opened its offshore operations in the Philippines, expanded into new debt purchasing segments (telco, NZ and insolvency) and made technology improvements within the business.

There's a couple of things to keep aware of. Firstly the ledger amortisation rate appears to be have decreased from the previous year using the rough guide of amortisation divided by collections from 49% to 45.4%. Although this is still historically high and compares well with its competitors, it's something to keep on eye on. If this number drops significantly below 40% in the future (last 5 years: 41.4%, 42.0%, 45.9%, 49.0%, 45.4%) there might be some trouble brewing beneath the covers. Secondly, the company has warned that there's been recent evidence of competitors pricing below CCP's minimum return criteria. In a competitive environment we may see a squeeze in margins and/or a reduction in ledger purchases from the company.

The following are the initial guidance figures provided on FY12 by management:

The numbers appears pretty unspectacular, but note that these are just initial numbers and the company has a habit of doing multiple upgrades before the final result. The actual PDL acquisition and EPS numbers for this year ended up being 54% and 17% above the upper bound range of their forecast this time last year.

Market reacted well to the report pushing the share price up 3% to $4.40 on close.