What: Debt collection group Collection House Limited (ASX: CLH) has today recorded its seventh consecutive year of growth, announcing a 20% rise in net profit after tax (NPAT) to $18.7 million, bolstered by a 12% rise in Collection Services revenue. The company has performed very well for shareholders over the last 12 months, with shares up 24% in that time.
So What: As was mentioned in the company's presentation, Collection House has managed to achieve an average 19% compound growth in earnings over the last four years. In FY14 however, the company took a strategic investment focus in order to unlock even greater shareholder returns over the coming years.
To begin with, it increased its human resources by 18%, while it also announced a 50% increase in office floor space to accommodate up to an additional 120 staff members. Meanwhile, it reduced its gearing level from 41% to 39% and invested a record $82.2 million in purchased debt ledgers (PDLs). A further $53 million of PDLs are already committed to under contract for FY15.
Here are some of the other highlights from the result.
- The earnings before interest and tax (EBIT) margin improved from 29% to 30%
- Cash flow ballooned out to $65.9 million, compared to $62.2 million in FY13
- PDL collections increased 10% for the year compared to 2013
- Earnings per share (EPS) rose 8% to 14.7 cents
- A full year, fully franked dividend of 8 cents, compared to 7.2 cents in 2013
With solid growth prospects, the future is looking very bright for Collection House shareholders. The company's Group Chair Mr David Liddy said he expects the company to go "from strength to strength over the next 12 months". The business has a continued focus on investing in PDLs and expanding its collection services.
Now What: Although Collection House's shares are hovering near an all-time high, it is by no means too late for investors to buy a stake. At $2.10, the shares are trading on a P/E ratio of 14.3, while they also offer a fully franked 3.8% dividend yield. Given the company's strong growth prospects, that's nothing to be sneezed at.
