PROFIT COLLECTION

Written on the 3 August 2010

PROFIT COLLECTION

COLLECTION House Limited (CLH) has recorded a 21 per cent profit boost to $8.9 million for FY10, with expectations to lift debt purchases substantially in FY11.

Outgoing CEO Tony Aveling (pictured) will finish his tenure at the end of this month with a positive outlook for the debt management company.

“I feel that my job is done. I am pleased to be handing over to Matt Thomas who, under the guidance of a very experienced board, will I’m sure be an outstanding successor,” he says.

“The major contributor to increased profitability should be the strong forward flow pipeline which will allow us to drive more revenue through a relatively fixed cost base.”

Collection House plans to lift debt purchases to somewhere between $37 million and $47 million FY11, up from $29 million last year.

“We have meaningful forward flow arrangements with four or five of the major vendors and purchased books from three major telecommunications companies,” says Aveling.

“This reflects the strength of our brand and business relationships and demonstrated record of recovering in line with expectations.”

The move to boost debt purchasing is in contrast to subdued buying activity last year, due to ‘unrealistically high’ prices.

“For much of the year, market prices for debt were unrealistically high, some clients delivered less quality revenue following a reduction in loan originations and resulting placement volumes, and (Federal) Government stimulatory measures had largely ceased,” says Aveling.

“To offset this, we successfully grew quality long-term revenues and lowered the risk profile of the business by building our Purchase Debt Arrangement Book by 21 per cent. We exercised restraint with debt purchasing, increased our productivity, controlled costs, and also sought new revenue opportunities.”

The company will increase annual dividends by 18 per cent on the back of the profit surge, with a tick from the banks as far as debt arrangements are concerned.

“The previous two-year $75 million facility, with a temporary increase to $85 million, has been replaced with a three-year $85 million facility. This new, longer-term arrangement is essentially at the same price and delivers an implicit improvement in our risk grading.”

This year the company plans to restructure its senior executive positions, while Aveling forecasts increased productivity and new business gains to start flowing from CLH’s core systems redevelopment.

Shares are trading at 0.75c.


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