I last spoke to Thomas Beregi over the phone on 16th May 2016. He generally answers his own phone (unless he is busy or not around) and is very forthcoming and happy to answer questions from shareholders or prospective shareholders as is the CFO. I speak to him a few times a year and find him to be honest, trustworthy, conservative and able. Here are my notes from the conversation based on
my interpretation of what he said (I have added my understanding based on previous conversations into the notes):
Productivity (in terms of average collections per FTE of collection employees) improving across board in Phillipines, U.S. and Aus. Headcount in Philippines is around 220.
They are not currently expanding at the moment in the Philippines as the site pretty much at full capacity physically so they would either have to move premises or open a second site. Also small balance debt purchases (e.g. Telco debt, etc) have not increased. The Philippines are primarily there to do certain tasks such as collect low balance debt, etc which is uneconomical to do with Australian collectors. However due to the language and cultural differences they are somewhat less effective at collecting higher value debts than Australian collectors (can expand on the reasoning behind this if anyone is interested). Credit Corp will reconsider expansion in the Philippines in future should low balance debt purchases increase or productivity in the Philippines increase sufficiently (it is still rising incrementally). Although this presentation (not on the ASX website)
http://www.slideshare.net/informaoz/matt-angell-credit-corp is a few years old it does show that the expansion in the U.S. and Philippines workforce has been to some extent masking the strongly rising productivity of the Australian workforce. Refer to slide ten in the presentation.
Consumer Lending: 90%+ of volume is for loans in excess of $2000. Car loan volume static at $10 million. Looking at ways to grow Car Loans. Cash loans also hitting growth limits. Google announced they will not accept adwords for payday lending (which they define as loans that are less than 60 days). However google may not actually enforce the announcement. Harder for Credit Corp to obtain new customers as they must be taken from existing micro and payday lenders (as they have to a large extent monetized there existing debtor database and also the micro-lending segment total growth has slowed). Thomas said that the TV ads surprisingly did implant Wallet Wizard in consumer minds, and that even now months after the TV ads have stopped a lot of people are still doing searches on google for "Wallet Wizard" specifically.
Because they withdrew from shorter-term loans and the net returns on longer term products (due to a lower rate/fee being charged) are lower, as a result they are not advertising on TV anymore for now (hence the disappearance of the Wallet Wizard ads). They may revisit TV advertising in future. Customer acquisition strategy is focused on google search and general online advertising and from existing collections database. Also prime lender (large non bank financial plus peer to peer lending referring to them) referral service for declined (application for a loan was not approved) customers which is a relatively new development.
A small pilot product for unsecured business loans up to 6 months is currently being tested. Showing promise so far but it is a risky business and Thomas is not convinced it will become a viable product. Disorganized and risky entrepreneurs tend to take these loans. Wait and see how it goes. Endeck from the U.S. has been operating for 10 years in the unsecured business lending segment in the U.S. and is not profitable yet but has entered Australia. Scottish Pacific which do mainly invoice factoring and discounting may possibly be looking to IPO in Australia.
U.S. business will only expand marginally from current levels (and will be marginally profitable in 12-18 months) unless prices drop 10 – 15%. A 15% drop in U.S. PDL prices would allow a 20% return on equity in that business.
The business will get a further increased bank debt facility (U.S. debt for U.S. business and Australian debt for Australian business to manage currency risk) if growth is strong in all business segments and more capital is needed. Potentially once that is done more equity could be raised from the Australian share-market in a few years if necessary (i.e. growth is strong and bank debt has already increased to its prudent limits). Also if U.S. business becomes big enough in the future a dual/second U.S. listing could be considered.
They currently pay around 1% (variable) interest rate for U.S. debt and 3-4% interest rate for Australian debt (variable).
In 3-5 years if they
may consider consumer lending and PDL purchases in some countries in Europe depending on the growth in the Australian and U.S. businesses.