Credit Corp Group Limited (CCP.AX) Earnings Call Transcript

Welcome to Credit Corp's 2023 Half Year Results Presentation. I am Thomas Beregi, the CEO of Credit Corp. Our objective is leadership of the credit-impaired consumer segment. We define our market as people who've had trouble with credit, most having defaulted on a previous obligation. We operate in very competitive businesses, and 3 competencies are critical to our success. We must have superior analytics and discipline because our business is all about pricing and managing risk. Our operations must be strong to compete. We must be sustainable and compliant to deliver on our promise to our debt sale clients, other stakeholders and the community. This ensures that our business can continue. Applying these competencies, we target to deliver strong earnings growth into the future while producing acceptable returns, which we define as a return on equity of 16% to 18% with a conservative financial structure. We have strong metrics and approaches for each of these competencies across our 3 businesses. Our leadership has earned the confidence of our clients and customers, producing a record level of half year investment. But the way we account for things means that profit for the half was suppressed. We incurred upfront loss provisions and marketing expense from record consumer lending. We also bore the costs of rapidly increased U.S. resourcing, which won't start to convert into collections until the second half. And we experienced continued runoff in our Australian and New Zealand debt buying business. Earnings are expected to recover over the second half. Lending profit should grow from around $4 million in the first half to more than $25 million in the second half as loan volume moderates and we record interest income from the enlarged book. U.S. collections are on track to increase as we bid down the rapid growth in resourcing. The U.S. outlook is for increasingly favorable purchased debt ledger market conditions with strong unsecured credit growth and rising charge-offs. But we purchased more heavily than we expected in the first half, so we'll take a breather and reduce our U.S. outlay over the balance of the year. Our U.S. focus will be on making sure we grow collections and achieve targeted returns. The recurring payers book is growing, and this already points to improvement. Lending is a key driver of growth for Credit Corp. At its current size, the loan book will produce $146 million in annualized revenue. Demand for our Wallet Wizard-branded cash loan product was higher than it's ever been, and arrears and losses remain within expectations. Our core Australia and New Zealand debt buying business remained sound. While we've increased our share, the market has contracted, and there aren't any signs of a short-term recovery. So continued runoff from this segment can be expected. Investment will moderate over the balance of the year, and this will build the financial capacity to secure attractive investment opportunities as they arise. We remain on track for a full year net profit after tax in the range to $90 million to $97 million. We've revised our investment guidance in line with first half performance. Purchased debt ledger outlays are now expected to be in the range of $290 million to $295 million, and net lending is expected to fall within the range of $140 million to $150 million. Thank you.