Analysis Of Collection House Limited – Debt Collection & Receivable Management

Executive summary

Analysis of Collection House Limited.
 

The company chosen for review is Collection house limited which have been mainly engaged in the business of debt collection service as well as management of receivables throughout the Australasia. Also it has been seen that they purchase debt as required by the subsidiary “Lion finance pity Ltd.  They have separate segment in regard to the collection services which is specifically in respect of the commissions which earned due to providing of various services such as debt collection by them on behalf of client and also the purchase debt ledger segments have been acquired by three groups in regard to the collection of the debt for the clients. In summarising, it can be said that the Collection house limited provide various services like receivable management, debt collection, debt purchasing, collection services credit management services, legal services etc. Collecting hues limited has one of the subsidiary which is “Misstate Credit collect policy ltd. Has been consider as a collection agency  which have been involved in providing state wide coverage as well as collection services in regard to the debt mainly for the consumer debt, council rates, utilities, local authority etc.

The collection House limited have been established in 1992 and listed on ASX in the year 2000. It is also provided that company have approx 11 offices in various countries (Australia, New Zealand, and also the Philippines). There are approx 850 staffs in the mentioned country so as to provide various services (Markets.ft.com. (2016).

Their commitment shows that they provide solution which would help to span the entire credit life cycle, for consumer outcomes and also support barns protection. They have also prepared long term strategy at various levels for diversification at different level such as clients, product, staff diversity etc.

As per the data gathered, it has been observed that Collection House Limited has been building a very strong relationship alone with the major Australian as well as the International banks, insurance houses, corporations, financial Institutions and also with the government and public utilities. Some of the major services are as:

• Receivable Management
• Debt purchase
• Collection of Debt
• Services in regard to the credit management
• Insolvency as well as legal services

Taking into consideration the above and also on the basis of research it has been found that they have properly maintain ethical standard and also the strong culture compliance which have been in accordance with the law and regulations in order to properly govern the business. Also the ongoing success can e taken as a proof for the commitment they are complying like in relation to the debt recovery, our displaced approach for the business as well as strategy and main focus will create value 

Collection House Limited’s Services

Collection house limited being a listed company with ASX code CLH have been operating since 22years and having large staff of 850 people including the experience management staff as well as the executive team management having average experience of approx 10years. 

Collection House limited has been considering as different from its competitor. This is mainly due to the adoption of approach of ethical debt recovery and also due to the adoption of the leading compliance standards. It has been proven that the Collection House limited group has achieved the continuing growth without diminishing the ethical standards and other prescribed laws and regulations (Markets.ft.com. (2016). the main focus of the group is to create value for the customers as well as client relationship. The same has been achieved due to offering of various multi disciplined services such as receivable management, debt collection services and many more. 

Further, it has been observed that the engagements of the group with the client as well as customer is efficient  as well as ethical and have been further enhanced by the use of technologies of industry. This would also support or enable the group to provide effective as well as innovative work so as to assist customer in a better way and for successfully manage the debt recovery process. In the similar way, the group has created much innovative software system which would drive very efficiently as well as productivity and consequently would provide or deliver improved functionality and significant intellectual property to the group. Since the group have been driven by the unwavering commitments for the business conduct which are lawful, respectful, the same has been embedded to add values as well as inspirational goal towards the society.

Collection House Limited has been striving to strive for the excellence by using globally recognized best prevailing practices. Their main goal is as follows:

• To be proved a s the good agency for the choice of client by maintain the strong relationship
• To compliance with the law, regulations and regarded by thru regulators for leading in the path of ethical standards.
• To be proven by the staff as provider of good working environment which will provide value , innovation, accountability as well as team work 

Collection house limited being a listed company with ASX code CLH have been operating since 22years and having large staff of 850 people including the experience management staff as well as the executive team management having average experience of approx 10years. Some of the major services are as:

• Receivable Management
• Debt purchase
• Collection of Debt
• Services in regard to the credit management
• Insolvency as well as legal services  

30th June 2014	30th June 2015	30th June 2014
Assets	$000	$000	% Change
Current assets
Cash and Cash Equivalent	7,222	704	926%
Receivable	10,265	9,574	7%
Purchase debt ledger	57,167	51,669	11%
Other current Assets	1,089	1,044	4%
Total current assets	75,743	62,991	20.24
Non- current assets
Purchase debt ledger	198822	1,82,581	9%
Property, Plant & equipment	5,475	5,436	11%
Intangible Assets	35614	34222	4%
Total non- current assets	2,39,911	2,22,239	7.95
Total Assets	3,15,654	2,85,230	10.67
Liabilities
Current liabilities
Trade and other payables	16,013	13,628	18%
Borrowings	0	323	-100%
Current Tax Liabilities	2,027	7071	-71%
Provision	3,067	2,906	6%
Other financial liabilities	2149	1600	34%
Total current liability	23,256	25,528	-8.90
Non-current liabilities
Borrowings	1,19,000	99,800	19%
Deferred Tax Payable	1,854	1,331	39%
Provision	402	356	13%
Other financial liabilities	477	2226	-79%
Total non –current liabilities	1,21,733	1,03,713	17.37
Total liabilities	1,44,989	1,29,241	12.18
Equity
Share Capital	1,05,307	1,02,285	3%
Reserves	2188	1959	12%
Retained earning	63170	51,745	22%
Total equity	1,70,665	1,55,989	9.41

(Amounts in $ 000)
Particulars	2015	2014	% increase or -decrease
Total current assets	75,743.00	62,991.00	0.20
Total non-current assets	2,39,911.00	2,22,239.00	0.08
Total current liabilities	23,256.00	25,528.00	-0.09
Total non-current liabilities	1,21,733.00	1,03,713.00	0.17
Total stockholder’s equity	1,70,665.00	1,55,989.00	0.09

On the basis of above table, it has been clear that 

• There is increase in the current assets by 20 %, which is mainly due to increase in cash comparison to the last year. This show good performance of the company. On the other hand increase in the non- current assets by 8% positively shows good performance in part of the company (Accounting tools, 2015).
• Increase in the current liability by 9 5 is mainly due to requirement to make enhanced provision as well as increase in other financial liability. This increase would not have any negative impact on the performance of the company.
• Noncurrent liability increase by 17% clearly implies that some liability have been increased which  are not expected to be released within 12 months such as borrowing, defer tax liability, increase in the provision.
• In the stated case, increase in the equity is due to issue of shares and also there is increase in the retained earnings and also in the reserves. All these increase shows positive performance

In the nutshell, it can be stated that financial position of the company on the basis of balance sheet shows positive performance of the company but simultaneously there is requirement to reduce the financial liabilities Review of the income statement:

1. The total operating revenues of the company are $ 126043000
2. The Cost of goods sold of the company are $Nil
3. The total expenses before taxes of the company are $ 31892000
4. The non-operating gains and losses of the company are $0
5. The earning per share of the company is $17.20 

(Amounts in $ 000)
Particulars	30th June 2015	30th June 2014	% increase or -decrease
Total operating revenues	1,26,043.00	1,07,337.00	0.17
Cost of goods sold
Total expenses (before taxes)	31,892.00	26,960.00	0.18
Any non-operating (or extraordinary) gains and losses	–	–
Earnings per common share	17.20	14.70	0.17

On the basis of above table,

• There is increase in the revenue by 17% and on the other hand there is also increase in the expenses by 18%. This is not a positive sign because even though the revenue has been increased in the year 2015 but simultaneously expenditure has been increase with a percentage higher than the increase in the revenue. Hence it I advisable that company should took a way and step must be taken to increase the revenue in a way that there is also cost cutting.

In the nutshell, company must focus to reduce the expenses i.e. cost cutting must be adopted. Also, the Company must adopt certain marketing strategy in a way that revenue would be increase 

Review of the statement of cash flows:

1. The net cash inflow from operating activities of the company are $ 77669000
2. The net cash inflow from the financing activities of the company are $4637000
3. The net cash inflow from the investing activities of the company are $- 75362000
4. The net increase in the cash during the year of the company are $ 6980000

(Amounts in $ 000)
Particulars	2015	2014	% increase or -decrease
Net  cash inflow from operating activities	77,669.00	65,971.00	0.18
Net cash inflow from financing activities	4,637.00	17,612.00	-0.74
Net cash inflow from investing activities	-75,362.00	-85,639.00	-0.12
Net increase in cash during the year	6,980.00	-2,056.00	-4.39

• Increase in the operating cash inflow by 18 % specified that thief increase due to increase in the operating revenue i.e. day to day activities. This shoe positive performance.
• There is decrease in the financing cash flow by 74%. Causes for the decrease are fewer amounts received from the borrowing in comparison to the last year, dividend paid is higher than the last year and also it has been clear that there are some buy back of high amount since the receipt form equity shares and other equity securities are very lower than the last year i.e. 2014.
• Decrease in the investing activities may be due purchase of assets which represent high cash outflow… this is not a sign of good performance

In the nutshell, Collection House limited must keep view in regard to the financing as well as investing activities in addition to the operating activities. Step must be taken in a way that they are able to enhance the cash flow during the period of business and consequently the same could be increased which is consider as one of the important factor while making investment decision by the investors. 

Review of the stockholders equity:

(Amounts in $ 000)
Particulars	2015	2014	% increase or -decrease
Issued capital	1,05,307.00	1,02,285.00	0.03
Reserves	2,188.00	1,959.00	0.12
Retained earnings	63,170.00	51,745.00	0.22

There is increase in the issue capital by 3 % which is due to issue of shares. Also increase in the reserves as well as retained earning shows good performance of the company. 

In the nutshell, it can be stated that increase reserves as well retained earnings is a sign of good performance and measures must be taken to continue the same. 

Conclusion

On the basis of analysis it can clearly stated that business activities have been hinder growth ante hand and on the other hand there is sign positive improvement. Steps must be taken to make strategy improve revenue and must focus to decrease the cost since the % increase in revenue is less than the % increase in expenses. However, as per the balance sheet, financial position of the company is good since there is increase in the Assets whether current assets, non-current Assets and also there is decrease in the current liability. There is increase in the issue capital by 3 % which is due to issue of shares. Also increase in the reserves as well as retained earning shows good performance of the company. In the nutshell, it can be stated that increase reserves as well retained earnings is a sign of good performance and measures must be taken to continue the same. 

References

Markets.ft.com. (2016). Collection House Ltd, CLH:ASX profile – FT.com.

Readyratios.com, ‘Financial Analysis and Accounting Book of Reference: Statement of Financial Position | IFRS Statements | IFRS Reports | Readyratios.Com’. Nap. 2015. Web. 22 May 2016.

AccountingCoach.com. (2016). What is a noncurrent asset? | AccountingCoach.