There should be tailwinds for a collections company as interest rates and inflation rise. Although CCR have picked up some big names, revenue has stagnated since the ARMA acquisition and costs are rising. But is it about to turn around?

The August 23 shareholder update touted new clients, win rates etc. Last 4C says that the South African Techub deal has been abandoned saving $500k pa so clearly this is a tech-enabled collections company, rather than an IT company. Note that Techub savings are being Techub "redirecting" to the local business so don't expect to see that on the bottom line. Q4 was a new high watermark for revenue (just).

The recent cap raise and other comments savings mean it's pretty obvious that they don't intend to be cash flow positive in the near future. They raised too much cash and are spending it on growth. Possibly there are more acquisitions in the pipeline.

On the positive, green shoots include:

• Record June revenue of $3.7M (much still be collected as at 4C date)
• New tier-1 clients added in June
• Six tier-1 clients being onboarded and yet to generate revenue
• Active files up 42% YoY and average debt per file up 100%+ YoY

But note how they cherry-pick their comparisons, MoM or YoY, a recent month or whatever looks best. More dollars in the debt leger doesn't automatically translate to profit.

They say nothing about churn or collection rates. I suspect that debtors owing more are less likely to pay. CCR's sweet spot is smaller collections where the cost to phone is high.

May 23 cap raise at 23c has a headline of "Raises $8.5M" but 4C shows $8M and $420k costs. (Are you seeing a pattern here.)

Valuation History

10/11/22 - revised up from 30c to 35c due to the insurance wins announced. Assuming FY23 growth to $50M and 10% PAT with PE of 20, I get $100M MC

17/10/22 revised up to 40c due to positive cash flow in the latest 4C

8/5/23 revised down to 20c due to lack of growth or profit.

14/8/23 revised up to 22c based on green shoots