Ann: Credit Corp Group FY13 Results Presentation , page-2

re: Ann: Credit Corp Group FY13 Results Prese... Hi

These results were pretty much in line with my expectations. The key elements being the dividend of 17 cents, which was within my range of 15-17c and the upper end guidance for 2014 profit growth, which is 10%. However I am wondering whether management have once again been conservative in their profit projections. In particular I am wondering whether they are being conservative with regards to the profit contribution that will come from the consumer lending business.

I have just done some rough figures on this. The balance lent at the end of June 2013 was $19m. In July they lent $3.5m. Allowing for repayments from existing borrowers this gives them an estimated balance of $22m at the end of July. If this business increases the size of the book by a lower figure of say $2m per month for the rest of the year then the loan book will have a year-end balance of approx $43m.

As far as I can tell CCP charge 40% interest on these loans. Gross interest earned over the next 12 months will therefore be about $13m (2013 year approx $5m). Assuming half of this income goes in costs, this would leave a NPBT of $7.5m. Deduct $2m for tax and this business generates a net profit of around $5.5m. My estimate for 2012-13 is about $1.5m. That means the marginal contribution from this business alone in 2014 will about $4m.

The top end NPAT guidance figure for next year is $33m which is $3.1m above last year’s underlying figure. My figure of $4m from consumer lending alone is greater than the whole of their upper end projection.

All a bit rough I know!! But even so, am expecting some healthy revisions to the new guidance as the year rolls along.

K