COLLECTION HOUSE KNOCKS ON THE PROFIT DOOR
Written on the 20 August 2015 by Laura Daquino
COLLECTION House (ASX: CLH) has raked in another record profit for the full year, but won't provide any financial guidance for the year ahead due to prevailing market volatility.
The debt collector and receivables manager announced a profit after tax of $22.5 million today, marking the 2015 financial year its eighth consecutive year of earnings growth.
The 20 per cent profit increase has paid a shareholder dividend of 4.7c, taking the full year dividend to 9.1c.
Earnings per share have grown at a compound rate of 13.4 per cent for shareholders over the past five years.
Assessing the company's operations, both collection services revenue and purchased debt ledger (PDL) collections grew by double figures, 10 per cent and 20 per cent respectively.
PDL collections, where delinquent debt is bought at a discount to recover and generate a profit, accounted for $129 million in revenue.
Collection House chairman David Liddy says 'by any measure, this is a strong success story' for what is a 'sturdy and balanced business'.
"We have a robust, sustainable business model which provides access to multiple revenue streams from a diverse service offering," says Liddy.
"We have also continued to pursue opportunities for organic growth while at the same time, minimising risks to the business."
Collection House managing director and CEO Matthew Thomas says recent swings in consumer behaviour correlating to a weak economic backdrop have impacted operations.
Nevertheless, an economic downturn could serve Collection House well, the consequence being a rise in bad debts and a tailwind to businesses in the recovery industry.
While Thomas couldn't go into too much detail about how the business was navigating the changing consumer, he said it was taking a more flexible approach to arrangements with clients and repayment amounts.
"There is some similarity to how we responded in 2008 and 2009 when there were volatile swings in consumer sentiment post-GFC," says Thomas.
"It's difficult when consumer sentiment indicators have been extremely volatile - I don't think anyone can decipher what we saw in sentiment reports in July during the Greek and China crises.
"We haven't given numerical guidance at this point in time because there is a lot of weak consumer sentiment swinging around - we want to see how things travel for next couple of months, we still have a few opportunities to assess, and then update the market when it's practical to do so."
"We remain confident in our business model which limits our dependency on the performance of any single product or market segment, and which provides us with strategic resilience and adaptability," says Thomas.
"Collection House is in a solid position heading into the new financial year and we are confident that despite any prevailing economic conditions we can continue to achieve above market growth and continue to increase shareholder value."