Credit Corp Shares Plummet Impairment Hits US Ledger Book and FY2024 Guidance Adjusted

Credit Corp Group Limited (ASX: CCP), a leading debt purchase and collections company, witnessed a sharp decline in its shares today due to an anticipated impairment in the carrying value of its US Purchased Debt Ledger (PDL) assets.

The Impairment Impact Estimated to Reduce NPAT by AU$45 Million

The impairment is expected to be reflected in the financial statements for the period ending December 31, 2023, and is estimated to represent approximately 14% of the carrying value of US PDL assets, as reported in the company's June 30, 2023 accounts. This impairment is projected to result in a one-off reduction in net profit after tax (NPAT) of AU$45 million.

Deteriorating Collection Conditions Persisting Challenges in US Repayment Plans

The impairment is primarily a consequence of deteriorating collection conditions in the United States. Credit Corp reported increased delinquency in US repayment plans in the final quarter of FY2023, and these conditions persisted into the first quarter of FY2024. Consequently, the medium-term outlook for collections on the company's US PDL assets, particularly those acquired in FY2022 and FY2023, has been reassessed.

Revised FY2024 Guidance Amidst Market Challenges

In addition to the impairment charge, Credit Corp also revised its FY2024 guidance. Although the company experienced year-on-year US collections growth of 10% in July and August 2023, performance flattened in September 2023. Projecting this recent performance across the rest of the year has led to a reduction in the guidance for US segment NPAT by AU$10 million.

CEO's Perspective Remaining Optimistic Amidst Challenges

CEO Thomas Beregi highlighted that despite the challenges, reduced market pricing should still support the viability of continued purchasing. "Prices at which the FY2024 US investment pipeline has been secured should deliver Credit Corp’s target return in present conditions," he stated.

Preparing for the AGM Revised Guidance for FY2024

As Credit Corp prepares for its Annual General Meeting on October 24, 2023, the company has issued revised guidance for FY2024, signaling changes in PDL acquisitions, net lending volumes, NPAT ex-impairment, NPAT statutory, and EPS. The market will be keenly watching Credit Corp's performance and management strategy as it navigates through these challenges.

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