FY23 Financial Results Webinar

00:00:26:11 - 00:00:57:12
Michael Pegum
Good morning and welcome to the Pioneer Credit Limited FY23 Financial Results Presentation Webinar. My name is Michael Pegum JB Advisory Partners. This morning presenting from management will be Mr. Keith John, Managing Director and Chief Financial Officer, Mr. Barry Hartmann. A bit of housekeeping, if you could please use the Q&A panel for questions and we will fill and answer these questions at the end of the formal presentation.

00:00:57:14 - 00:01:01:10
Michael Pegum
I'll pass over to you, Mr. John. And thank you.

00:01:01:12 - 00:01:39:24
Keith John
With thanks, Michael, and thank you, everyone, for joining us today for our FY23 results presentation. In terms of the year, it was a marvelous year for Pioneer with incredible grounds made in terms of the progress returning this business to profitability. Cash collections were up some 24% to a record $132.6 million, a very, very solid number in a market that has had lots of pressures in terms of cost of living and the like.

00:01:40:01 - 00:02:10:14
Keith John
Very solid performance across our business. Pleasingly, we did that in a very cost effective way, EBITDA growing some 42% to $86.1 million. Following on from that, EBIT up over 100% to $31.2 million as we continue to perform right across our business, noting of course that we have high financing costs at the moment, which Barry will talk through in a short while.

00:02:10:16 - 00:02:49:09
Keith John
And finally, a return to profitability following some $33 million of losses last year. A small profit as we promised and delivered for shareholders, setting the path for next year in FY24 and beyond to grow profitability materially. In terms of the actual performance of this market for us and our balance sheet. We invested $59.2 million slightly down on what we expected to invest for the period, but for very, very good reason with very good opportunities coming up for us in FY24.

00:02:49:11 - 00:03:21:16
Keith John
I'll talk through to that in a second. ERC our estimate of remaining collections $567.5 million. This is the amount we expect to recover from our customers based on our performance to date, with the opportunity for us to grow that as we continue to dig into our portfolio and operationalise our data better. We have a performing portfolio of some $456.9 million.

00:03:21:18 - 00:03:58:06
Keith John
These are customers that have committed to paying us over weekly, fortnightly or monthly payments. So really important number and obviously a significant part of our ERC and that asset, both our PA portfolio and ERC is carried on the balance sheet at $304.3 million, a very substantial asset made up of the very best customer types in Australia with no payday loans whatsoever existing in our portfolio.

00:03:58:08 - 00:04:27:12
Keith John
Wanted to take you through a little bit about Pioneer Credit because we've done a remarkable amount of work this year in terms of improving the bench strength of our business and the positioning of our business to ensure that we're going to be successful for a very long time. In terms of pioneer. As you know, we are a specialist debt purchaser that specialises only in acquiring portfolios that we service ourselves.

00:04:27:14 - 00:04:52:20
Keith John
We do not have a contingent debt collection business, so we're not collecting off people for a fee. We own all of the assets that we that we buy, we acquire from major banks and nonfinancial or non-bank lenders. It's a really important distinguishment between us and others. We don't buy utility or telco accounts and we do not buy payday lending.

00:04:52:21 - 00:05:22:08
Keith John
So we focus on the best quality customers in the in the sector. We are the number two player by terms of investment in the Australian marketplace with very strong growth tailwinds and I'll talk to those in a moment as well. Since 2008, we've invested over some 650 million AUD and that gives us an exceptionally strong dataset from which to price our portfolios appropriately to ensure we get a good economic return for our shareholders.

00:05:22:10 - 00:05:47:16
Keith John
But importantly also that we buy the right types of customers so that we can service them in a manner that sustainable for them and that underpins the value proposition of this business. Back to the debt vendors. We currently have an active customer base of some 210,000 customers that we're working with. That represents about $1.9 billion in receivables to Pioneer.

00:05:47:18 - 00:06:16:11
Keith John
And of that, as I said, 457 million of it is already under contract to us and agreed to pay us. And all of these accounts and all of these customers are worked with by over 400 people across Australia, in the Philippines. Our team that have worked exceptionally hard over the course of the last few years and in particular last year to ensure we delivered a great result for shareholders.

00:06:16:13 - 00:06:38:17
Keith John
Today we also announced some changes to our board. It's been really important as we've built the bench strength out of our executive and our leadership teams to position us for the future. That we also do that at a board level. You will notice that our board is very heavily focused now on compliance, on risk and on balance sheet.

00:06:38:19 - 00:07:02:06
Keith John
It's clearly the largest opportunity that exists in our business. It's also the largest risk to shareholders. So you need to be sure that we've got the best people sitting around the table to hold management to account and to make the right strategic decisions for the success of this business. Steve Targett is a former executive inside big banks, is the current chair of P&N Bank.

00:07:02:08 - 00:07:35:23
Keith John
Suzan Pervan is a very experienced senior accountant that joins us today. Peter Hall. Formerly the MD of Genworth Insurance and also GE mortgage insurance with an incredible background in risk. And Pauline Gately also joins us today with an extensive investment banking career. We think that these appointments add significantly to our board and add significantly to the strategic direction of this business in the years to come.

00:07:36:00 - 00:08:28:06
Keith John
In terms of my executive. Most have been with me for a long time now, which I'm very pleased with. Sue Symmons, who is my Co Second and General Counsel. Barry Hartnett, Chief Financial Officer who's been with the business for a number of years across a number of disciplines. He'll be talking to you in a moment. Andrea Hoskins, Chief Operating Officer who is responsible for all of our operations, and recently appointed Ian Burnette, who joins us as CIO, to drive through the technological transformation that we've embarked on that we expect will add significantly to our business over the course of the next few years, including driving down our cost to serve, commencing in FY25.

00:08:28:08 - 00:08:58:16
Keith John
Our purpose and our principles. Our purpose is simple. It's to put an end to debt stress and that purpose is very, very important because it talks to how we deal with our consumers. The way that we approach them. And it points to our success. We're not the solution to every problem. But if we can deal with our consumers appropriately, responsibly and a manner that empathetic to them will reduce out their debt stress, that's good for our business.

00:08:58:16 - 00:09:24:02
Keith John
It's good for the consumer, and it's good for our and our vendor partners. We also have three principles against which everyone in our business is measured and against the standard to which we hold ourselves to. One is to act with purpose. The second is to be human, and the third is to choose integrity. We're looking for good people to do good things right across our business.

00:09:24:02 - 00:09:38:02
Keith John
That's what we seek to employ. It's a very high standard, one that we don't always meet, of course, but one that we hold ourselves to that we’re honest to. And we aspire to.

00:09:38:04 - 00:10:05:13
Keith John
In terms of the Australian debt purchase market. There's been lots of discussion about what it looks like, what volumes look like and where the future of it is. I don't subscribe and we don't subscribe to digital being the only solution for recoveries in Australia. And in fact, if you think about the way that the marketing engages with consumers, it tells you quite simply don't deal with digital.

00:10:05:16 - 00:10:39:04
Keith John
You need to speak to people before you hand over your bank details or make payments. The debt purchase sector is here for a very, very long time and at the moment it has exceptionally strong growth winds. They are even more so for pioneer, why? We have a unique servicing approach. We look after consumers incredibly well. This has never been more important than following the Hayne Royal Commission and COVID, where there was an incredible focus on the way consumers are treated to meet their obligations.

00:10:39:04 - 00:11:12:02
Keith John
Pioneer is expert at just that. We're one of only a few scale participants and we've seen that particularly this year in our financial results, where our cash collections have grown 24%. That our EBITDA has grown well over 40%, it's a really good result. We have a market leading reputation, very, very important in terms of the bank and as they want to be dealing with people that are good, people that are going to get good outcomes that protect their brand.

00:11:12:04 - 00:11:36:11
Keith John
Pioneer Does just that. Part of the way we do that is we do not offer further credit to customers. The customers we deal with are already in some sort of financial or debt stress. We don't seek to add to that. We don't add to that at all because we don't advance them extra credit. What we do is work with them to get back on track.

00:11:36:13 - 00:12:03:04
Keith John
And importantly, following on from that point, we do not compete with our vendor partners as the only ASX listed participant and one of the only or the most significant purchasers in the market that does not have a competing product. That's particularly good for our vendor partners and particularly good for our non-bank lenders. They do not want to be selling and they do not want to be partnering with people or groups that compete with them.

00:12:03:06 - 00:12:34:05
Keith John
It makes little sense. That's very, very good for Pioneer, and we're seeing that come through in the number of groups that are dealing with us. 18 last year, six of six of them new to Pioneer. It's a fantastic story with a lot of runway to go in terms of growth and opportunity, in terms of our PDP investment. We invested some $99.5 million in 22 right at the back end.

00:12:34:05 - 00:13:01:18
Keith John
And you've seen what that's done to our cash flows through the course of this year. As we've explained, they're up quite significantly. We invested some $59.2 million during the year, a little under what we had hoped to invest, but that's because we're very careful about the way that we invest our money and your money, which we're the custodians of, of course, and the opportunities that are presenting themselves to us through FY24.

00:13:01:20 - 00:13:29:11
Keith John
We do not participate in payday lending. We've spoken about that. We had 18 new or 18 vendors through the period. We've got a five year agreement with the CBA that doesn't exist for everyone. It carries on now until 2027 and that's a really good thing for our business. From the right hand side, you can see prices have remained relatively steady through the period.

00:13:29:13 - 00:14:04:12
Keith John
The differences in price really just reflecting the presale treatment of our vendor partners and what they do with their customers prior to sale as opposed to competition. And then we walk into FY24 with a really good pipeline in place. $35 million of investment is under contract already. We've got agreements in place with 12 different vendors. There is very significant opportunity ahead for us in terms of our entire portfolio.

00:14:04:14 - 00:14:40:16
Keith John
As I've mentioned, some $1.9 billion of opportunities, which is split into two groups broadly 1.4 billion are customers that we're working with today. These are customers that need time to heal and customers that we're working with that might pay out in full or might become performing, performing part of our performing portfolio. That part of our portfolio, which really does underpin a lot of our cash collections, is some $457 million.

00:14:40:18 - 00:14:52:03
Keith John
It has been growing at an annual rate or cumulative annual rate of 10% over the last five or six years, and we expect to see that continue.

00:14:52:05 - 00:15:30:00
Keith John
Finally, customer outcomes and ESG, we're the only group that reports a Net Promoter Score. The willingness of a consumer to refer us to a friend compared to anyone else in the market. It is an exceptionally valuable way of demonstrating that what we do and the way we differentiate ourselves works with a score of plus 28. It is remarkable achievement and reflective of the way that our people deal right across our business with our consumers and our vendors and all other stakeholders.

00:15:30:02 - 00:16:03:13
Keith John
Of course, ESG is becoming more and more important across all businesses. In terms of pioneer, we've always had a very strong proportion of females that represented or represented across our employee base some 58% female participation in our workforce, and that extends right through our leadership and through to our executive. It's something we're very proud of. It's something that's actually existed since the day we started this business.

00:16:03:15 - 00:16:24:07
Keith John
And it's one of the reasons why we're successful because we have true diversity all captured in our statement belonging, which is about finding people founded good that have the breadth and the ability and the desire to want to contribute.

00:16:24:09 - 00:16:32:15
Keith John
I'll now hand over to Barry Hartnett, Chief Financial Officer, to talk us through financial performance for the year.

00:16:32:17 - 00:17:08:14
Barry Hartnett
Thanks, Keith. Pleasingly, the company delivered a statutory net profit after taxation of 200k for FY23. This represents a $33 million turnaround from the FY22 period total income of 82.7 million, up 52% compared to FY22. Included in this number is other income of 5.3 million, which is mostly remediation payments from vendor partners relating to PDP's.

00:17:08:16 - 00:17:47:22
Barry Hartnett
The operation delivered a 24% increase in cash collections over the period, which is a great result considering employee expenses remained relatively stable, increasing by 4%. Finance expenses reduced by 14% compared to FY22. The all in interest cost of funds increased by about 400 base points following several increases in the cash rate over the period. The cost of the increase to the company in FY23 was approximately 6.6 million.

00:17:47:24 - 00:18:22:16
Barry Hartnett
One of the key focus areas for the company is reducing the cost to service, and this is without compromising our servicing excellence we provide to our customers. The cost to service is the cost incurred excluding financing to generate cash collections from our PDP's. The cost to service reduced from 44% in FY22 to 37% in FY23. And this is in line with our target range of 35 to 37%.

00:18:22:18 - 00:18:38:13
Barry Hartnett
The improvement reflects the operational efficiency and disciplined PDP investment, which drove increased cash collections and a marginal increase to our cost base.

00:18:38:15 - 00:19:04:13
Barry Hartnett
The key call out on the balance sheet is the PDP assets held at amortised cost, the ERC or the expected remaining collections of the asset is approximately 570 million. This is the gross cash flows we expect to collect over the next ten years. The present value of the ERC is just over 304 million, and this is what is carried on our balance sheet.

00:19:04:15 - 00:19:42:22
Barry Hartnett
The increase in the PDP asset over the period is based on the quality investment in PDP's in late FY22 and throughout FY23. Also, the stability and the cash contribution of our payment arrangement book and the continued performance of older vintages. Cash and cash equivalents of 8.4 million at 30 June 23. The FY22 number includes drawdown of funds for assets contracted in June 22, but only settled in July 23.

00:19:42:24 - 00:20:16:11
Barry Hartnett
The impact of this payment can also be seen in the trade and other payables movement year on year. The company has a deferred tax assets of about $25 million, which is not yet recognised. Net assets of 67 million inclusive of this DTA. The total borrowings are to 266.5 million and the primary objective of the company this year is to reduce the cost of funds and sort out the borrowing.

00:20:16:13 - 00:20:44:19
Barry Hartnett
In terms of financing activity, Pioneer has commenced a process to reduce the cost of funds. Advisors have been appointed and are working with our team for the past couple of months. We are now in market. We expect to complete the transaction on a materially lower rate in FY24. The current cost of funds does not reflect the quality, discipline and operational performance of this company.

00:20:44:21 - 00:21:35:00
Barry Hartnett
The sensitivity table on the left hand side highlights the variance in interest expense based on a range of interest rates ranging from 7 to 10%. All else being equal and assuming a reduction of the cost of funds in the range of 7 to 9% in FY23 would have reduced the interest expense by 7 to $12 million. This obviously would provide additional cash flow to fund the increased PDP investment, strengthen the balance sheet and reduce LVR and provide us with the opportunity to fund future M&A activity or one off transactions.

00:21:35:02 - 00:22:20:02
Barry Hartnett
The increase in the cash collections and receivables to $139 million in FY23. This provides substantial funding opportunity to reinvest into PDP's. The FY23 PDP investment outflow of 81.5 million includes 20.5 million for assets contracted in June and settled in July 23. This was. This has resulted in a net cash outflow of 14.7 million for the period. 7.4 million was drawn from the senior debt facility over this period.

00:22:20:04 - 00:22:48:06
Barry Hartnett
Significant investment in the last 12 months has shifted the cash collections profile to earlier vintages. The graph on the left hand side, you can see that in FY23, a 44% contribution from vintage, less than one year old. Pleasingly, the cash collections from greater than two year vintage continues to increase. It's up 24% on a FY21 to 52.7 million.

00:22:48:08 - 00:23:03:04
Barry Hartnett
This demonstrates the quality of the PDP assets and clearly shows there's still value in those older assets.

00:23:03:06 - 00:23:33:19
Keith John
Thank you, Barry. Finally, through to our outlook for FY24, what can you, our shareholders expect to receive from this company through the period? Firstly, continued industry focus from regulators. This is a very, very good thing for Pioneer. It's why we've been successful to date as the pressure from regulators continues to be pushed down through banks and through the ombudsman on to operators like us.

00:23:33:19 - 00:24:04:15
Keith John
It's good for Pioneer. It is. Increasingly we're increasing the market that exists around our business. We've made very, very heavy investment into the leadership of that part of our business this year and into the programs that work towards making our compliance and governance even better than it has was before. This underpins, in part, our good operations and also our vendor partnership opportunities.

00:24:04:17 - 00:24:36:08
Keith John
Strong tailwinds for PDP. We've guided towards $60 million of investment this year. We already have 58% of that under contract. We do believe there are significantly more opportunities in the market for us. But like everything, it is about timing and making sure we take those opportunities at the right time for the right return for our shareholders. The very significant difference between us and many others is we do not have short term incentives.

00:24:36:08 - 00:25:13:06
Keith John
We're not motivated by what happens in the short term. We're about long term sustainable growth and long term sustainability of our business, and we'll take those opportunities at the right time with the right partners. As I said, we have agreements in place with 12 vendors at the moment. We expect that to continue and expand through the year. We have our five year agreement with the CBA and of course I've mentioned the very significant number of opportunities that exist in the market from the non-bank lenders because we do not compete with them.

00:25:13:08 - 00:25:36:22
Keith John
They like that. It's good for their business and that's good for our business. The biggest focus from a finance perspective, of course, is reducing the cost of funds. As Barry mentioned, this is a business that has very high cost of funds at the moment bought along by the circumstances of the last few years. We have clearly demonstrated that we are well through that.

00:25:36:24 - 00:26:04:04
Keith John
We have clearly demonstrated that this is a business that operates remarkably well and the opportunity is now to reduce those funds materially, The cost of funds materially. We've had exceptionally good engagement with lenders up to date we’ve appointed advisors, and that process is well underway and expected to settle in FY24. We continue to focus on realising the operating leverage in this business.

00:26:04:10 - 00:26:37:06
Keith John
You saw that our cash collections were up 24% and our EBITDA, our margin was up near enough double that. It's a very, very good result and we continue to focus on that. We've got our new core system being implemented through the course of this year, which we expect to benefit us in 25 and beyond. And there are a range of other data and other opportunities that exist for us to reduce our cost to operate, given our increased buying power and increased scale, which we hope to implement during the year.

00:26:37:08 - 00:27:00:21
Keith John
And then finally, increased profitability, a material uplift as expected through the course of FY24, and we will keep shareholders updated on that as we go through the course of the year. That concludes the formal part of the presentation. I'll now hand you back to Michael.

00:27:00:23 - 00:27:29:05
Michael Pegum
Thanks, Keith. I've got a few questions that have rolled through. The first two sort of talk to the same question, which is could you please elaborate? It might be a question for Barry actually. Could you please elaborate on the uptick in other income? There's 4.8 million in remediation payments made by Pioneers vendors. Just what, if you can provide some colour around that? and the drivers around them?

00:27:29:07 - 00:27:33:09
Keith John
Sure I'll pass that to Barry.

00:27:33:11 - 00:28:12:23
Barry Hartnett
Thank you. So over the course of the year, we've had a number of remediation programs with our vendor partners. Effectively, over this period, we've had to place a number of accounts on hold as the vendor works to sort out any challenges they have with respect to that remediation and customer base. What we have received over this period is compensation or payments to reflect placing those customers on hold.

00:28:13:00 - 00:28:42:00
Michael Pegum
Thanks, Barry, for that. Another question most likely for Keith, is the expected PDP purchase for FY24 quite conservative, given the economic backdrop at the moment? And obviously on the refi, the debt refinance for target and to the end of this year, will that obviously have a material impact?

00:28:42:02 - 00:29:16:10
Keith John
Thanks, Michael. Yes. Look, I believe the investment guidance is conservative. There are a lot of opportunities in the market at the moment. Like I said, for us, we need to just make sure that not only are we taking the right opportunity, but that we can operationalise them in the appropriate manner. So we're working through that. I think over the course of the last year, I've explained that I expect that this business will be doing somewhere between $100 and $150 million a year in investment from next financial year.

00:29:16:12 - 00:29:46:12
Keith John
But there's certainly big opportunity for us to increase that this financial year as well. That's well underway and we're working very hard to make that to make that happen. In terms of the cost of funds, yes, we do anticipate that that's going to have a very material impact on our profitability and on our on just our general costs through FY24 and then obviously fully in FY25 and beyond.

00:29:46:14 - 00:29:58:09
Keith John
It's a critical part of returning this business to the profitability that it's capable of generating and getting back to paying dividends for shareholders.

00:29:58:11 - 00:30:08:05
Michael Pegum
Thanks for that. Another question is how will your IT upgrade impact your collections?

00:30:08:07 - 00:30:43:19
Keith John
Thanks, Michael. So what we're doing is we're replacing our core system or our system of record. The majority of systems in Australia, in our industry are somewhat legacy sitting on antiquated technology. We've made the decision and the investment into a enterprise grade system that's being used across banks and the largest purchasers in the world. We expect that will give us greater flexibility in the terms of the way and ease of using data and being able to analyse that data.

00:30:43:21 - 00:31:07:21
Keith John
It'll also cut down significantly the amount of work that our people need to do in navigating the systems that we have currently. So we expect that it will give us the ability to provide a quicker, more seamless and better service to customers and also reflect in the current compliance environment. It's a lot more dynamic than it has been in the past.

00:31:07:23 - 00:31:35:23
Keith John
And the installation of this new system will the implementation of this new system will enable us to move more quickly and to have more technological solutions to the compliance regime that we operate in, rather than having so many manual things in place to deal with that at the moment, which is more customary across our industry.

00:31:36:00 - 00:32:08:02
Michael Pegum
Thank you for that. A question in relation to the debt refi around the debt restructure flagged for later this year, you highlighted the reduction in the interest rates of debt to circa 7 to 9% would reduce the interest expense by approximately 7 to 12 million. Are you expecting, based on current debt negotiations to date, get that cost to those levels?

00:32:08:04 - 00:32:20:00
Michael Pegum
Also, is your assumption embedded in the that the market rates, the bank bill swap rates falls or remains unchanged?

00:32:20:02 - 00:32:48:16
Keith John
Certainly where we expect to get to it, certainly to where we've been guided to by those that we've spoken to in the market and also by the advisory group that we're using to assist us with that. And there are a broad range of assumptions that are captured in there that it does not include any sort of change or downward downward change in terms of the cost of funds over the overnight cash rate.

00:32:48:18 - 00:33:15:20
Keith John
I should highlight, Michael, for shareholders and for people listening to this webcast, we previously just prior to COVID had an all in cost of funds of about four and a half percent or in the low fours. So, you know, this is a business that's been funded at that level in the past. You know, the opportunity for us to bring it down now is very real, and that'll make a very material business a difference to our business in the future.

00:33:15:22 - 00:33:40:06
Keith John
And of course, it remains an ongoing part of the work that Barry and his team are doing about managing our cost of funds down. But it would as we move to that at the moment, we also move to a funding structure that is more flexible than the one that's existed for the last few years, and that gives us the opportunity to continue to eat into that cost in the years to come.

00:33:40:08 - 00:34:25:06
Michael Pegum
Thank you. Further question in relation to cash flows on the operating cash flow expectations in FY24, given 20 million, given the -20 million in FY23 seems aligned with the additional 20.5 million of PDP’s paid in July 22, plus the impact of reducing accounts payable over eight for 23 from 28.7 to 6.1. So can you give us some sort of expectations around the operating cash flow in FY24?

00:34:25:08 - 00:35:01:21
Keith John
Well, we certainly expect to grow our EBITDA and obviously, that will fund very significantly the PDP investment we expect to make. If we invest materially over $60 million, then clearly we're going to need to draw down some. There's many, many opportunities and ample opportunities for us to do that, including right now, as I said through this presentation it’s about making sure that if we do that, we do it at the right time into the right assets and for the right purposes.

00:35:01:23 - 00:35:23:10
Keith John
You know, growth for growth sake doesn't make any sense. Growth because we're making money, we're profitable and It's adding to the value of this business is what we're focused on and we're well funded to do that. We certainly generate very significant cash flows to do that, and we expect to do that through the period.

00:35:23:12 - 00:35:47:05
Michael Pegum
Keith, A question in relation to M&A activity in on that probably comes with the demise of Collection House and parts of that business going to some of your peers. What's the view in relation to M&A activity and do you see on a go forward basis any opportunities in the market?

00:35:47:07 - 00:36:11:03
Keith John
Yeah, there's quite a number of opportunities, Michael. I think for us there's a few things that need to happen for us to participate in that. The first is, you know, we don't believe our share price reflects or even closely reflects the value of this business. So we need to see some appreciation in that and some currency come back into our equity before we could before we could participate.

00:36:11:05 - 00:36:39:10
Keith John
The other part, of course, is our cost of funds. You know, it's difficult with a cost of funds in the teens to be to be participating in M&A. But as we get that down, then that opens up for us in the future. You know, the benefit the Pioneer has got is it's got exceptionally good relationships with most everyone in our sector and they want to be dealing with us and they want to be where they're looking to sell out.

00:36:39:10 - 00:36:59:15
Keith John
They want to be selling to us. We can do that in a manner that's respectful for them. We can do that in a manner that's very, very good for our business and our shareholders as well. No one's in a mad rush, but when we get there, it will be an opportunity for us that we look forward to participating in.

00:36:59:17 - 00:37:20:16
Michael Pegum
Thanks, Keith. A question in relation to sources of funding in the FY23 year can you expand just on the detail of the sources where there's a 5.3 million reduction in the finance expense in FY23.

00:37:20:18 - 00:37:26:08
Keith John
Might just pass you over to Barry for that.

00:37:26:10 - 00:38:09:03
Barry Hartnett
No problem. The reduction in the finance expenses over the year is predominantly down to the cost of funds moving from one financier to another. In FY22, there's a bit of noise around transaction costs and extinguishments from a previous facility. So that's inflating the FY22 side. But there's a reduction from one period to the next. And the challenge has been the increase in the 400 bips, as we discussed, which is added 6.6 million at the start of the year.

00:38:09:03 - 00:38:19:00
Barry Hartnett
We would have expected a higher reduction in that finance expense line.

00:38:19:02 - 00:38:22:19
Michael Pegum
Thanks, Barry.

00:38:22:21 - 00:38:36:17
Michael Pegum
A question about the competitive landscape for PDP purchases at the moment. Is there any significant competition out there in the market?

00:38:36:19 - 00:39:09:05
Keith John
There's always competition, of course, and Pioneer, like anyone else, doesn't have it their own way. But we think we're ideally placed. People are looking to protect their brands. And if we look at the non-bank lending segment for a moment, you know, very heavily built on speed of transacting and built on their brand. So they want to be partnering with groups that respect that and they want to be partnering groups that do not compete with them.

00:39:09:05 - 00:39:26:15
Keith John
So a lot of our growth is coming from there. And of course, that's where a lot of the growth in the market is. You know, that part of the market in particular has grown because it's taken a lot of what would have traditionally been new to bank customers. It's taken a lot of that over the last few years.

00:39:26:17 - 00:39:51:09
Keith John
They're also the customer segments that generally have higher challenges in times of in times of pressure. And that's what we're seeing now. So it's a very, very good segment for us to work with. You know, we've got a very good relationship with the non-bank lenders. There's plenty of opportunity there for us. We can't frankly, take all of the opportunities that are there for us, so we don't capture them all.

00:39:51:11 - 00:40:18:04
Keith John
And there are, of course, some groups that that, you know, I prefer to sell for a higher price rather than focus on consumer outcomes that always be the case. But certainly from our perspective, there is a very significant opportunity there. There is less competition because there are less competitors in the market and all of those things line up very, very well for Pioneer, for 24 and of course for 25, 26 and beyond.

00:40:18:06 - 00:40:37:06
Michael Pegum
Thanks, Keith. That's a good segway into the next question, actually around the consolidation market, questions coming through for the next 12 months. If you're expecting cheaper debt sale rates in pricing on the PDP ledger?

00:40:37:08 - 00:41:02:19
Keith John
Yeah, because we don't traditionally compete in in debt sales from a transactional perspective. And by that, what I mean, Michael, is our business is built on long term sustainable relationships. So we are buying portfolios at a consistent level. If you look at the big banks, the non-banks of course, are a little bit different to that and they've got different credit quality.

00:41:02:21 - 00:41:29:10
Keith John
So it's about getting consistent long term returns. So we don't experience the hikes in price that have been seen in the past. Likewise, if those prices were to drop, we wouldn't experience those because we we're always at a sustainable, sustainable level. I should say most of the pressure in pricing has been in the telco utility sector, which is very competitive, which we don't which we don't participate in.

00:41:29:12 - 00:41:53:07
Keith John
But look, we've had we've had exceptional returns over the course of the last couple of years in particular, we're outperforming our underwriting. We're happy with that. Obviously, we need that to continue. Some of that's down to pricing, some of that's down to exceptionally good operating, you know, led by Andrea Hoskins and her team. So we're pretty happy with where it all sits at the moment.

00:41:53:07 - 00:41:59:18
Keith John
We're very happy with the with the returns that we're getting.

00:41:59:20 - 00:42:38:09
Michael Pegum
Right. Thanks, Keith. I might just pause there for a moment, see whether we've got any more questions come through. Albeit we have a statement, not a question that says well done to the team at Pioneer for the solid progress to 30 June and welcome to the new board members. Seems a happy investor out there. Ok so if there are any further questions for management, please don't hesitate in forwarding these via email

00:42:38:11 - 00:42:51:22
Michael Pegum
to investor_realtions@pioneercredit.com.au. I’ll now pass back to you Keith for any closing comments.

00:42:51:24 - 00:43:17:15
Keith John
Thank you, Michael, and thank you to everyone for joining us today. Look, we're at a very potent juncture and a very exciting juncture. Return to profitability is a great achievement, I think, for this business over the course of the last year, particularly with that cost of funds. As we bring that down, you can expect to see material uplift in performance at all the important lines across this business through 24 and 25 and beyond.

00:43:17:17 - 00:43:25:03
Keith John
We look forward to delivering for shareholders and I look forward to talking to you all again soon, thank you very much.

00:43:25:05 - 00:43:29:20
Michael Pegum
Thank you, Keith. And thank you, Barry. And thank you for joining us.