A NEW debt collection firm focused on a ‘back-to-basics’ strategy has carved out a sizeable share of the Western Australian market.
In the space of 18 months, Adelaide-based National Credit Management has increased its WA revenue from zero to more than $1 million.
Another ‘new’ entrant, Pioneer Credit Management, is also hoping to exploit its focus on ‘traditional’ service standards.
The emergence of National Credit and Pioneer Credit is a reaction against the upheaval in the debt collection industry during the past three years.
During this period, a handful of big firms such as RMG, Collection House and Baycorp Advantage sought to dominate the industry.
It is no coincidence that Stella Napier, who established Nation-al Credit’s WA office, and Keith John, who re-established Pioneer Credit two months ago, had stints at RMG.
The loss-making RMG led the industry shake-up when it merged 22 independent firms across Australia and New Zealand into one stock exchange listed entity in 2000.
The 22 firms included Laurens and Munns, where Ms Napier previously worked, and Pioneer Credit, which Mr John had founded in the early 1990s.
The big firms such as RMG have failed to deliver on their promises, creating opportunities for firms including National and Pioneer.
“The basics of focusing on customer service seem to have been lost along the way,” Ms Napier said.
“It gave us an opportunity to go back to grass roots, to offer old fashioned personal service.”
National Credit now has 14 staff and a client list that includes Bunnings, Central TAFE, Coventry Group, Curtin University and the Department of Agriculture.
Mr John describes Pioneer Credit as a premium niche market provider.
“We opened up because we saw a significant opportunity in a market that wasn’t being serviced,” Mr John said.
He believes Pioneer Credit is the only WA-owned firm that can compete with the big stock market-listed companies.
For investors, the listed companies have mostly delivered bad news, with RMG clearly the worst of the bunch.
Perth-based Repcol, which listed on the stock exchange in May 2002, has disappointed investors by failing to achieve its own prospectus targets.
Repcol forecast 2002 revenue of $20.5 million but the final result was much lower at $14.8 million.
Hartleys analyst Steven Poitrowski said “a lot of senior management time appears to have been consumed on debt ledger acquisitions and other strategic initiatives”.
He expects this focus to adversely affect Repcol’s 2002-03 results but to bear fruit in future years, when revenue and earnings are forecast to grow strongly.
Hartleys expects revenue to grow to $23 million in the current financial year and $40.9 million in 2003-04, with net profit rising to $13.5 million.
National Credit’s strong growth in WA has done little for its share price.
The company recently reported a 21 per cent increase in half-year revenue to $4.5 million and a maiden net profit of $234,000, yet its shares are currently trading near 12-month lows at around 13 cents.
Collection House is the industry heavyweight in Australia, with half-year revenue up 15 per cent to $60.8 million.
Its net profit fell 64 per cent to $2.5 million, however. The company attributed this to various one-off expenses of $5.5 million, including legal recovery costs associated with purchased debt ledgers.
Trans-Tasman operator Baycorp Advantage blamed ‘significant items and amortisation of goodwill’ for its poor half-year result.
It reported a net loss of $11.9 million despite growth in revenue. Receivables management revenue grew by 27 per cent to $28.4 million, or about one third of group revenue.
For RMG, the latest half-year was another period of major restructuring, cost cutting and developing standardised technology platforms.
The company acknowledged it “suffered a loss of some business during its period of restructuring” but added that “recent months have shown solid signs of improvement”.
RMG’s after-tax result was a loss of $2.9 million, and fol-lowed substantial losses in the 2001 and 2002 financial years.
Its shares are currently trading at about 3.5 cents.
p Changing service standards in debt collection.
See Financial Management, page 32.
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