The company employs about 480 people. In the last six months they took on 100 new employees which seems like quite a lot.
That is an increase of up to 26% in size.
They maintain that this expansion has led to an increase in costs due to the hiring of labour and the buying of infrastructure.
Here is what the broker says
"Despite the substantial uplift in recruitment, management maintains it has
not resorted to hiring lower quality staff.
It has continued its approach of hiring from outside the collection industry.
The logic is that training up new staff adds value to its operations and gives
CCP a competitive advantage.
However, the downside to this is that extra effort is required to train up
these people with little collection experience. This appears to have given
CCP some growing pains. In particular, the growth in specific call centres
was not managed optimally.
For example, the Parramatta call centre was launched in January 2007.
Management admits that it hired too many new recruits to work in that site,
such that the ratio of experienced to new staff was abnormally low at about
1:10.
The problem has been recognised, and the newer call centre in Logan QLD
being set up now will have a ratio closer to 1:2."
So a bit better management might be what is needed.
They also mention a change in the kind of debt they are purchasing.
The important thing as far as I can see is the return on equity.
Even with the profit down grade the company is returning well over 20%.
Here are the figures.
Return on Equity
(06) 33.8% (07) 29.7% (08) 24.0% (09) 24.1% (10) 23.7%
The payout ratio is about 50%.
This means that for the 50% that is retained there will be a return of around 24%.
From an investment point of view the company still looks attractive.
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