Credit Corp prepared for a return to growth

Tuesday, 28 Jul 2020

Credit Corp Group Limited released its FY2020 results to the market this morning.

Key points

Credit Corp Group Limited (Credit Corp or the Company) reports:  


  • FY2020 net profit after tax (NPAT) of $15.5 million after accounting for the impairment of purchased debt ledger (PDL) assets and additional provisioning arising from the impact of COVID-19
  • NPAT before these adjustments of $79.6 million - 13 per cent above the prior year
  • The proven ability to operate effectively during COVID-19 isolation and lockdown periods
  • A strong balance sheet comprising of cash and undrawn lines totaling $400 million, together with an outlook for free cash flow of $175 million inFY2021
  • Renewed interest in debt sale from credit issuers and the prospect of increased sale volumes


Steps taken to adapt to the impacts of COVID-19

PDL pricing models and consumer lending criteria have been adjusted to account for persistently high levels of unemployment, in excess of 10 per cent, and a reduction in government support, stimulus measures and private sector forbearance (temporary support) over time. Credit Corp is now pricing PDLs and issuing consumer loans at these adjusted settings.

These settings have been applied to the carrying value of the Company’s financial assets and the net economic benefit of its ongoing purchasing commitments. This has given rise to charges for impairment and provisions in Credit Corp’s FY2020 results, reducing reported NPAT by $64.1 million.

The Company has effectively transitioned to a combination of work-from-home and office-based activity across all locations. This has enabled Credit Corp to adapt to isolation and lockdown periods while maintaining operational capacity and effectiveness. This helped produce NPAT before COVID-19 adjustments of $79.6 million, which was 13 per cent above the prior year.

To meet heightened expectations of conduct Credit Corp has supplemented its leading approach to hardship with additional temporary measures. These have included an interest freeze on all debt purchase accounts, repayment moratoriums and the suspension of legal, repossession and credit reporting activity.

To facilitate continued purchasing and lending over an extended period of uncertainty and prepare for opportunity, Credit Corp has strengthened its balance sheet. Over the second half of FY2020 the

Company generated $110 million in free cash flow, which was supplemented with a $152 million equity raising. Credit Corp is now debt free, with $400 million in cash and undrawn credit lines.

Recent operating experience and outlook


Collections experience over recent months has returned to pre-COVID expectations, with an uncharacteristically high incidence of one-off repayments. The Company does not expect this to continue as temporary support is reduced over time.

While there has been some recovery in lending demand over recent months, the consumer loan book has experienced significant run-off. The Company expects, however, that the loan book will further stabilise as lending demand increases in line with the ongoing withdrawal of temporary support.

Recent discussions with major clients in all jurisdictions show an increased interest in debt sale, with some clients in the United States anticipating growth in sale volumes of up to 80 per cent in 6 to 12 months’ time. While this is positive, for Credit Corp to fully participate, pricing will need to adjust in accordance with the medium-term outlook for collections.

This media release should be read in conjunction with Appendix 4D, Consolidated Interim Financial Statements and results presentation.
To watch the presentation go to: 

WGEA Report 2019/2020

Wednesday, 15 Jul 2020

In accordance with the requirements of the Workplace Gender Equality Act 2012 (Act), on 19 June 2020, Credit Corp lodged its annual public report with the Workplace Gender Equality Agency.

Click here to view the report.

FY2020 Unaudited results update

Monday, 13 Jul 2020

Key points

  • FY2020 net profit after tax (NPAT) of Credit Corp (the Company) is expected to be in the range of $10-15 million after accounting for the impairment of purchased debt ledger (PDL) assets and additional provisioning arising from the impact of the COVID-19 pandemic.
  • NPAT before these adjustments is expected to be in the range of $75-80million.
  • Credit Corp enters FY2021 in a strong position with no net debt and undrawn lines of $375million.


COVID-19 experience and outlook
In the period since the initial implementation of isolation measures across most jurisdictions from late March 2020 the Company’s customers have been less prepared to agree and maintain longer term repayment plans. This initially produced a sharp decline in collections and rising loan book arrears. More recently, an increased willingness to make one-off repayments has brought PDL collections for May and June back to pre-COVID levels and, with the exception of auto and SME pilots, has restored loan book arrears.

This experience is consistent with reported unemployment rates in excess of 10 per cent, after adjusting for changes in workforce participation, and the temporarily offsetting impact of government support, stimulus measures and private sector forbearance (temporary support).

Credit Corp expects persistently elevated levels of unemployment, the impact of which will be more severe for the Company’s credit-impaired customers, who are more exposed to the risk of unemployment for a prolonged period. As temporary support is reduced, PDL collections will fall while loan book arrears will rise.

The Company’s response has been to seek to renegotiate ongoing purchasing arrangements onto more sustainable pricing, better reflecting the outlook for collections from freshly purchased PDLs. In the lending segment, auto and SME pilots have been suspended while lending criteria for the core loan product have been tightened, halving approval rates.

Credit Corp’s approach to assessing the carrying value of its financial assets and the net economic benefit of its ongoing purchasing commitments is consistent with this outlook and response.

View full Media Release here