Creditrust says earnings slipped in fourth quarter to $3.4 million

Company cut purchases of credit-card portfolios

Financial services

February 29, 2000|By Bill Atkinson | Bill Atkinson,SUN STAFF

Creditrust Corp. said yesterday that fourth-quarter profit slipped to $3.4 million after it took $2 million in special charges and sharply reduced its purchases of delinquent credit-card portfolios.

The company, which collects and manages delinquent credit-card accounts, also said that it has entered final negotiations for $55 million in additional financing. The financing arrangement is expected to be completed next month, and will allow Creditrust to resume growing by stepping up its purchases of delinquent credit-card portfolios.

"The company remains strong," said Joseph K. Rensin, chairman and chief executive. "With the new financing, we believe the company will be well positioned to execute our business plan for 2000."

The Baltimore-based company said revenue rose 40.8 percent in the three months that ended Dec. 31 to $26.4 million.

The company made 32 cents per diluted share in the fourth quarter that ended Dec. 31, after special charges, compared with 90 cents per diluted share on income of $7.4 million in the corresponding period a year earlier.

Excluding the special charges, Creditrust made $4.7 million, or 44 cents per fully diluted share in its fourth quarter.

Shares of Creditrust fell $1.1875 to $8 after rising $3 a share last week on anticipation that a major announcement regarding its future was in the offing.

Creditrust hired Goldman, Sachs & Co. in December to advise it on finding a partner to buy a portion of the company. The move came several days after Standard & Poor's withdrew Creditrust's "above average" ranking as a credit-card servicer, following disclosure that an employee of the company misdirected $500,000. The money was eventually recovered at no loss to the Creditrust.

Creditrust had planned to release earnings last week, but rescheduled the announcement citing a "potentially favorable material corporate development."

"I think that [a positive announcement] was somewhat overly anticipated," said Derek Derman, an analyst at Wedbush Morgan Securities in Los Angeles. "People were expecting weak results and we got weak results."

Rensin said net income was "less than we would have liked."

Fourth-quarter profit was down from the prior year because Creditrust bought just $16.7 million in credit-card receivables in the fourth quarter, compared with $54 million in the third quarter, the company said.

In addition, expenses more than doubled to $16.7 million in the quarter, compared with $6.2 million in the corresponding period in 1998. Most of the increase was attributed to personnel expenses, which jumped to $11 million in the quarter, up from $4.4 million in the corresponding period in 1998.

In the full year, Creditrust's net income rose 67 percent to $17 million, or $1.67 per diluted share after the special charges, compared with $10.2 million or $1.48 per diluted share in 1998.

Excluding special charges, Creditrust's net income rose 79 percent to $18.3 million, or $1.79 per diluted share, compared with $10.2 million, or $1.48. Revenue was $81 million, more than double the $34.9 million reported in 1998.

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