Melbourne-based fintech Credit Clear has announced its plans to forge ahead with its plans for a $15 million initial public offering (IPO). The decision was taken as the novel Coronavirus pandemic fuels demand for technologies for the speedy recovery of unpaid bills.
Credit Clear’s $15 million IPO
Credit Clear is requesting investors to dig deep to fund its IPO and share market listing, which is estimated to value the company at about six times its historical revenue. The company is chaired by former Tyro Payments (ASX: TYR) and National Australia Bank (ASX: NAB) executive Gerd Schenkel. It is also backed by rich-listers Paul Little and Alex Waislitz. The IPO is expecting to issue 42.8 million shares at an offer price of $0.35 per share. This would imply a $79 million market capitalisation and a $64 million enterprise value.
For the 2020 financial year, the company recorded $11.2 million revenue on a proforma basis. This was up from $10.3 million in the previous corresponding period. Credit Clear expects to clear $18 million revenue in the calendar year 2020. This will be backed by a surge in demand for its services after call centres handling debt recovery in southeast Asia closed due to the pandemic. The funds raised from the IPO will enable Credit Clear to accelerate the development of its proprietary technology platform. The platform is designed to collect receivables using digital communication and billing systems. The debt recovery firm intends to hit the ASX boards later this month. It will use the ticker ‘CCR’.
Pandemic Struggles Answered by Credit Clear
According to Credit Clear founder Lewis Romano, the timing is right for a market listing. His belief is fueled by the number of consumers worldwide who are struggling to meet their financial commitments since the pandemic struck. Companies have been seeking alternative means of chasing customers for unpaid bills after debt recovery call centres in the Philippines closed earlier this year. Romano said that it has had an instant effect on their business. He is optimistic about having a greater focus on debt collection as everyone moves into life post-COVID lockdown. He stated that the pandemic has not delayed, deferred or stalled their ambitions and they intend to be listed fairly soon.
Additionally, Mr Romano cited that unemployment rates directly impacted demand for debt recovery services. People who have lost their jobs or can’t find work realize they can’t pay what they owe as they lack sufficient income. The Australian Bureau of Statistics research showcased the national unemployment rate in June 2020 at a 22-year high of 7.4% . At present, around 992,300 people are out of work. The government’s July economic and fiscal update states that this rate is only expected to increase by the end of the year. There is also an anticipated peak of around 9.25% in the December quarter. Romano signalled that a higher national unemployment rate means weaker economic conditions. This often contributes to increased debt and hence, provides an opportunity for the industry to expand.
Credit Clear’s Acquisitions
Credit Clear acquired the full-service debt recovery agency called Credit Solutions in December 2019. The company had been utilizing its platform to service debt collection contracts with several Top 50 Australian companies. The acquisition was funded thanks to a private $9 million capital raising. It gave the merged group the ability to collect earliest-stage debts through to more delinquent debts. According to Romano, the acquisition rationale was clear as Credit Solutions has over 800 clients across state and local governments, utilities, telecommunications and consumer finance sectors.
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 Australian Bureau of Statistics (ABS) (2020) “Employment, hours worked and unemployment rise in June” [Online] Available from: https://www.abs.gov.au/media-centre/media-releases/employment-hours-worked-and-unemployment-rise-june [Accessed October 2020]