Ann: Investor Presentation - Market Update, page-19

I had time on mt hands today, so I had a squizz at Encore Capital's and Intrum's Q1FY21 performance, plus the briefest glance at PRA. I doubt if this post covers anything significant, but I thought I would share the links, and those with a deeper interest can poke around themselves.

Encore had a fairly good Q1FY21 (Jan-March). See https://encorecapital.gcs-web.com/static-files/1212f5b7-e086-42b6-88c9-c72d980dff2f. The good news seems to be that collections are doing well, and investing in technology is producing efficiency. A temporary negative is that purchasing new debtor ledgers is lower than Encore would like. I assume this is mainly due to Covid-related creditor forbearance. The good cash flow reported is the corollary of these two factors. CCP is probably experiencing the same pattern of these things.

Intrum's Q1FY21 presentaton is at https://www.intrum.com/media/11455/intrum-ab-2021-q1-external-presentation.pdf. The Q1 Report is at https://www.intrum.com/media/11453/iab_q1_21_eng.pdf . Because only about half of Intrum's business is PDL-related, it is difficult to compare Intrum to CCP, so I did not try to delve deeply into the reported metrics. Suffice to say that Intrum reported excellent collections in Q1FY20, and that level was repeated in Q1FY21. Intrum's investment in new PDLs was much the same for those two quarters. Intrum's initial Covid-related impairment was fairly modest 636m krona (roughly 636/6 = $106m), but much of it was reversed in later FY20 quarters. Intrum had a very small net PDL value adjustment of 2m krona in Q1FY21, . CCP could reverse some of its PDL impairment, but IMO, Management would choose not to in any meaningful way. Because Management has some leeway to shift value from CCP's balance sheet into the P&L accounts, statutory EPS for FY21 can, and probably is, going to be, close to the most recent guidance.

PRA had a good Q1FY21 – see https://ir.pragroup.com/2021-05-06-PRA-Group-Reports-First-Quarter-2021-Results. It too had a low PDL purchase metric relative to earlier years. As an aside, PRA has a small business in Australia, and the above link reports, “ . . . were awarded our first portfolio, a forward flow, in Australia”. Australian sellers may sell forward flows to PRA to keep CCP on its toes.

I am not as concerned about CCP's PDL-acquisitions metric as some posters are. As at the Jan-March 2020 quarter, CCP had more new PDLs than usual, which is why its PDL impairment (based on fear of poor collections) was large, so adding the CLH PDLs thereto suggests there is enough on which the CCP collections team can focus for a year or three. Also, relative to competitive Australian and NZ PDL buyers, CCP is in a relatively strong position to acquire PDLs in ANZ. Also, in the USA, CCP's relative position has improved from being a minnow to being in the Top-6 PDL buyers, and in the USA, CCP is on all the panels of the significant PDL sellers, except one. If CCP can buy PDLs in FY22 and FY23, all should be well, IMO.