Collection agency Credit Corp’s debt ledger ballooned to record highs of $136.8 million in fiscal 2013 as big retail banks and utility companies outsourced receivables management as part of cost-cutting measures.
The trend to outsource debt collection has created space for new players. But as overall growth in the $1 billion industry stalls, the contest to take market share from rivals is heating up.
Fast-growing Collection House bought $52.3 million worth of debt ledgers in the 2012-13 financial year, and plans to buy between $60 million and $70 million more in the next 12 months.
The Brisbane-based company’s full-year profits rose 23 per cent to $15.6 million, and it is forecasting between $17 million to $18 million for fiscal 2014.
Both Credit Corp and Collection House collect outstanding accounts of corporate customers, including the big four banks and a range of insurance, utilities, telecommunications companies and government agencies.
Credit Corp chief executive Thomas Beregi reckons the volume of debt sold by creditors will be static in the next few years and the amount outstanding on credit cards is also expected to be flat.
If he’s right, this leaves little room for organic growth in domestic debt collection and will also affect profit margins.
Prices for debt have escalated dramatically in the past few years, resulting in diminishing returns.
“The challenge for the industry is to ensure the price [paid for] debt and returns is appropriate,” Mr Beregi said.
“It will be interesting to see how participants go and whether they maintain discipline or succumb to temptation to keep buying without focusing on whether they’re profitable purchases.”
