Credit Corp says strong earnings growth to continue

Debt collector Credit Corp Group yesterday reported a 25 per cent increase in net profit for the year to June and forecast that earnings could increase by as much as 30 per cent in the current year.

Net profit of $13.5 million was based on a 16 per cent increase in collections, worth $181 million.

Credit Corp chief executive Thomas Beregi said the improved performance came from greater collection efficiency.

Beregi said: "We got more back for the same cost. We measure and track everything. Our collectors review their metrics all the time and we have a very tight supervisory span."

Beregi said the company's policy was to pass some of that efficiency gain on to clients in the form of higher prices for purchased debt ledgers.

Debt ledger acquisition of $65.1 million was up 75 per cent during the year. Despite the increase in debt purchase, free cash flow of $40.5 million allowed the company to cut its debt in half to $42.1 million.

Beregi said: "We run a business with a bit of risk and we deal with blue chips. We want them to know that when we sign a contract for forward funds flow of 180 day charged-of debt we will be there for the long term."

Credit Corp is fairly specialised among debt collectors. Its clients are banks and finance companies - no telcos or utilities. It is a purchaser of debt and does not collect on commission. "That is what works with our collection process," Beregi said.

The provision of personal unsecured credit contracted in 2009, but this year there has been some relaxation in credit standards, with the result that unsecured credit books are growing again.

Beregi said it was too soon to comment on the impact of the National Credit Act but one trend he had observed was the increased number of complaints to external dispute resolution bodies.

"With all the publicity about licensed credit providers having to join an EDR, consumer awareness has increased. Having to deal with the complaints adds to costs."