FY24 Results and Future Outlook Webinar

00:00:00:21 - 00:00:28:19
Chantelle Hadley
Good morning. My name is Chantelle Hadley, and I'm the Head of Digital and Customer, and part of the senior leadership team at Pioneer. Thank you for joining our FY24 results presentation. I'd also like to introduce our Managing Director, Keith John, and our Chief Financial Officer, Barry Hartnett. We'll be taking you through our results. Please feel free to share any questions that you have in the Q&A box.

00:00:28:19 - 00:00:41:22
Chantelle Hadley
That you can see on your screen and Keith or Barry will answer those at the end of our formal presentation. For now, we will begin with Keith.

00:00:41:24 - 00:00:49:17
Keith John
Thank you, Chantelle, and thank you to everyone for joining us today.

00:00:49:19 - 00:01:29:23
Keith John
In terms of our, results, our highlights for FY24 cash collections up another 9% to $145 million. Our EBITDA presented on a normalised basis, given the refinancing and other costs incurred, this year, which are genuinely one off and not recurring EBITDA, just shy of $100 million, $99.5 million, a 16% increase, and showing the increasing margin that occurs within our business or is occurring within our business, beyond just our normal operating and our collections.

00:01:30:00 - 00:02:07:20
Keith John
EBIT up 13% to $35.3 million. And finally, and pleasingly, a normalised net profit after taxation of $1.2 million. In terms of our portfolio, PDP investments were really pleasing this year. Again, up 58% to $93.7 million. We'll talk about the portfolio a little bit more later in the presentation, but really high quality. Investments right throughout the period.

00:02:07:22 - 00:02:40:00
Keith John
Our ERC, estimated remaining collections, the amount of money we expect to recover from those portfolios that we've invested in over time. $641.7 million. Our PA portfolio down a little bit this year to $441 million. We're very, very pleased with the way that portfolio is performing. And the slight decrease continues this trend of consumers paying down debt strongly. And I'll talk about that in a bit as well.

00:02:40:02 - 00:03:21:01
Keith John
And finally, our PDP asset, $322.9 million. That is up 6%. And it is after we have taken a precautionary impairment of 5% or some $18 million with respect to these accounts. This really is a critical year in the development and the ongoing story of pioneer credit. These results reflect the steps taken to strengthen and position our business for sustained profitability, in particular through the period.

00:03:21:03 - 00:03:53:23
Keith John
Reduce cost of capital by unwinding the expensive funding that we had. Following the settlement of a four year, $272 million senior finance facility. That facility will save us around $8 million this financial year. We've taken a precautionary $17.8 million repairment to shield the company against potential economic deterioration. I'll talk through that in a second. It's a non-cash item.

00:03:54:00 - 00:04:26:06
Keith John
We also recognised another non-cash on $21.4 million of deferred tax assets. I'll talk you through that. That, in particular underscores the confidence in the company's sustained profitability, of course, through the year. We continue with our targeted investment and consistent operational execution. I talked you through just a moment ago, cash collections up 10%, but with the margin widening further, up 16%.

00:04:26:08 - 00:04:56:16
Keith John
We've had a strategic balance sheet reset with net asset improvement and effective liability management. Our funding now exists for four years. It's a long time. It provides a lot of security for our business. And importantly, we are leading the sector in Australia with enhanced performance reporting display, which is today in line with global best practice.

00:04:56:18 - 00:05:28:16
Keith John
With respect to the precautionary impairment we've taken that it's roughly 5% or $17.8 million of our assets and has been applied proportionately across the portfolio. The most logical question, of course, is why do we call it precautionary? Well, the impairment is consistent with economic data and market commentary that indicates consumer financial strength. It's consumer confidence levels are at multi-year lows.

00:05:28:18 - 00:05:39:04
Keith John
Cost of living pressures persist from inflation and there are strong expectations that debt stress will rise.

00:05:39:06 - 00:06:07:18
Keith John
Those things cause us caution, of course, in our portfolio, as we have explained previously, and we continue to see there is no evidence of degradation in the portfolio performance. Cash collections continue in line with expectations. Customer payments remain healthy. Time to the first payment and the percentage of customers paying after three, six, and twelve months. All of those metrics are improving.

00:06:07:20 - 00:06:42:18
Keith John
The average payment across our payment arrangement portfolio some 37,000 customers and $441 million in receivable have improved 2.3% over the last three years. So in this environment where there is negative data, negative commentary, our portfolio continues to perform remarkably well and consumers continue to prioritise paying down their debt. The unemployment rate is higher, of course, but the population remains generally fully employed.

00:06:42:19 - 00:07:19:23
Keith John
And that supports our cash collections. So we've taken this precautionary impairment because we have conflicting data. Economic data and market commentary. That's negative. And a portfolio where the metrics are positive. But by taking this now, we believe we will shield ourselves from anything in the future should the situation deteriorate the economy and importantly at no stage will any impairment reversal be included in the calculation of impact hurdles for management incentives.

00:07:20:00 - 00:07:55:14
Keith John
So if this gets written back, it will not be included in the consideration of hurdles for management with respect to our deferred tax asset, $21.4 million recognised at the end of the financial year with another 14.6 million to be recognised at a later date. I'll take you through this carefully, because it is incredibly important to understand how a DTA is recognised, why it is recognised, and what it says about our business.

00:07:55:16 - 00:08:40:02
Keith John
The recognition of this DTA is prudent, and it's based on our current three year forecasts. The board will continue to assess those forecasts and then assess the recognition of additional DTA in the future. The standard in particular 112 of the Australian Accounting Standards says in particular, a deferred tax asset is recognised for the carry forward of unused tax losses to the extent that it is probable the future taxable profit will be available against which they can be used.

00:08:40:04 - 00:09:11:20
Keith John
As regards to the criteria, the board has now considered, it satisfied that it is probable the entity will have taxable profits to use those losses, and the tax losses have resulted from identifiable causes which are unlikely to occur. The board has determined there is now convincing evidence of sufficient future taxable profits in the forecast period to utilise the recognised DTA.

00:09:11:22 - 00:10:03:09
Keith John
And as I said, at the end of each year, as we roll forward our forecasts, we will then consider how appropriate it is to start booking the balance. Importantly, again, at no stage will any recognition of tax assets in the future be factored into the calculation of NPAT hurdles for management incentives. So our commitment to shareholders is that management incentives will only be awarded on the achievement of a statutory net profit after taxation of at least $18 million in FY26, without these non-cash items being considered.

00:10:03:11 - 00:10:14:07
Keith John
I'll now hand you over to Barry Hartnett, Chief Financial Officer, to walk you through our financial statements.

00:10:14:09 - 00:10:47:06
Barry Hartnett
Thanks, Keith. In FY24, the company's pleased to report normalised net profit after taxation of $1.2 million. Keith has already highlighted some of the significant costs and adjustments to the results this financial year. This is illustrated by the graph on the right hand side of the slide, showing a bridge from net loss before taxation of $31.4 million to a normalised net profit after tax of 1.2 million.

00:10:47:08 - 00:11:23:22
Barry Hartnett
The key movements include the recognition of the deferred tax asset of $21.4 million. The recognition highlights to shareholders that sufficient future taxable profits are probable in future periods, and further demonstrates, demonstrated by the guidance that we will provide to market today. The extinguishment or acceleration of costs relating to the oil facility is approximately $2.2 million. There's $6 million in relation to new senior finance facility.

00:11:23:24 - 00:11:47:22
Barry Hartnett
And again, the company's preference was to expense as much as possible upfront to position us well. For FY25. Other significant one off costs are of approximately 2.9 million, and the result of that is a normalised NPAT of $1.2 million.

00:11:47:24 - 00:12:32:16
Barry Hartnett
On the balance sheet. The company has assets of $322.9 million. This is net of the precautionary impairment mentioned earlier by Keith. The company's borrowings of 286 million for the period. This relates to the old financing facility. The financial close of the new senior finance facility occurred in July 24, and that's a 272.5 million syndicated facility. The initial drawdown of that was 222.5 million, and there's 50 million of gross, transferred to funding.

00:12:32:18 - 00:13:01:14
Barry Hartnett
You can see the term of the expiring is July 28th. So it gives us, good leeway with a significant reduction in cost of funds. The reduction is likely to save us, in the vicinity of $8 million in FY25. In December 23, Nomura provided funding of $24.5 million through an SPV, for two discrete portfolio acquisitions.

00:13:01:16 - 00:13:21:24
Barry Hartnett
The pay down of this portfolio is ahead of schedule. Over $9 million has been paid out so far, and the SPV is expected to be fully paid off for the end of the financial year.

00:13:22:01 - 00:13:49:19
Keith John
Thanks Barry. So I'm going to take us through, a little bit about Pioneer and then get into the portfolio metrics. And of course, the parts that we want to know about, in particular the future of Pioneer and, and really what the outlook is for those new to the Pioneer story we’re debt recovery specialists that acquire and service, retail purchase debt portfolios.

00:13:49:21 - 00:14:25:19
Keith John
These are portfolios that we acquire from banks and financial institutions and major non-bank lenders, and they are held on balance sheet for our benefit. We do not do third party work. We're a leader in the Australian PDP market that has an emerging or near duopoly, situation, now. Since 2008, we've invested over $739 million in PDP’s, across 5.8 billion in receivables and 760,000 customer accounts.

00:14:25:21 - 00:14:55:11
Keith John
This data is incredibly powerful, not just in how we operationalise our business, but in how we underwrite that business that we purchase. I'll talk to you that about that in a moment. And the confidence it gives us to underwrite and to make investments that are meaningful and beneficial for shareholders. We have a current customer base of 220,000 customers, about 2 billion in receivables.

00:14:55:13 - 00:15:26:22
Keith John
And as I've mentioned before, of that 2 billion, 441 million are already under payment arrangement. These are customers that are paying us on a weekly, fortnightly or monthly basis. And as I mentioned at the start of this presentation, they are customers that are paying us more than they have in the past three years and more quickly than they have. And finally, and most importantly, are our people across Australia, in the Philippines, they're founded in good.

00:15:26:24 - 00:15:40:02
Keith John
They have a strong social conscience, and this is incredibly valued. And it's why our debt vendors choose to deal with us.

00:15:40:04 - 00:16:14:05
Keith John
In terms of our growth opportunities, there are now high barriers to entry in this sector. Particularly if you want to be a partner with the major banks. The standards around cyber, around IT, around data security, in addition to customer treatment, are increasing all the time. Our market position is incredibly strong. We're one of few scale participants with access to funding to take advantage of both returning vendors and new to market entrants.

00:16:14:07 - 00:16:56:15
Keith John
We hold a market leading reputation. Vendors choose to sell to us for our differentiated, customer first servicing approach and a strong compliance record. We have a unique servicing approach. We work with our customers to understand their situation and to get mutually beneficial outcomes. And importantly, a massive differentiator from us and others. We do not offer further credit. The groups that are choosing to sell to Pioneer have a strong preference, a strong preference to not sell to people that compete with them.

00:16:56:17 - 00:17:23:14
Keith John
Pioneer does not do that. And in particular, it does not buy payday loans and it does not sell payday loans. In terms of growth opportunities. There are numerous there are a broad range of performing portfolios available to purchase. We expect this trend to continue, and we did some of that during the period, as we've announced late last year.

00:17:23:16 - 00:17:57:12
Keith John
There are warehouse sales where debt that has built up over the years is coming to market now for sale. There are alternative portfolios that are coming to sale, including insolvency and mortgage shortfalls. Pioneer has an incredibly strong franchise in mortgage shortfalls. We are the largest participant in that sector by a considerable margin, and there are entire portfolio acquisitions and M&A.

00:17:57:14 - 00:18:21:15
Keith John
You'll be familiar with some of the press about some competitors that is in the market. It is an opportunity for us. And of course, we have an economy which supports our investment and a macro environment that continues to support the performance of our customers, where everyone has a job.

00:18:21:17 - 00:18:36:12
Keith John
In terms of PDP investment. We've changed this slide now. We've previously provided you with the price that we've paid, which has been consistent for many, many years.

00:18:36:14 - 00:19:03:22
Keith John
What we've presented instead today is a very important graph that shows you our investment. Clearly. You need to know that, but also our cash collections and how that is performed in periods across investment. And what you will note in particular is from FY18, where we had strong investment of 84 million, down to only 31 million in FY21.

00:19:03:24 - 00:19:42:12
Keith John
Our cash collections were relatively stable at $100 million. That's a remarkable result. But it also evidences clearly the strength of our performance of our operating capabilities and how this business continues to, extract value from the breadth of the vintages on which it's purchased. As I mentioned, historical investment of $739 million across some 760,000 accounts, extensive data for underwriting and no payday or SACC loans.

00:19:42:14 - 00:20:09:12
Keith John
I just talked you through the cash collections, FY18 to 21 inclusive $100 million consistently on materially lower investment. We're now investing more, and you can see how strong our cash collections have grown. There's an estimated market size of $400 million this year, and Pioneer invested just 94 last year. So only about 25% of the market.

00:20:09:14 - 00:20:46:17
Keith John
We've got a strong opportunity to grow share. Our ERC or PDP investment replacement rate, how much do we need to invest just to replace what we have to keep our business in check and consistent? Assuming a 2.4 times money multiple, it's $56 million. We already have in place $61 million of investment for this year. It is the strongest start to a financial year in six years.

00:20:46:19 - 00:21:05:20
Keith John
It's incredible investment. It's very good investment from very well trusted vendor partners with excellent returns for us and excellent outcomes for them that part above 56 million. That's growth. That's our future.

00:21:05:22 - 00:21:49:13
Keith John
And as I just said, $61 million of investment in place across 13 vendors. In terms of our returns, for years, the market had asked for money multiples consistent with what is, published in the Northern hemisphere. In prior times, 18,19,17 Pioneer operated in a much more competitive market, and it was much smaller. We didn't have the scale that we have today, and it was very easy for competitors to read into what we were doing by publishing the information that we are today.

00:21:49:15 - 00:22:21:12
Keith John
We now have scale. We now operate in a different market, and we are now leading the way in publishing the information that gives you the insight into how we underwrite and how we operationalise our business, so that you can make an even more informed decision about your investment in Pioneer. We believe these performance metrics speak for themselves. So to take you through underwriting is the forecast set up portfolio acquisition.

00:22:21:14 - 00:22:29:14
Keith John
The money multiple is the gross multiple return on the capital that we invest.

00:22:29:16 - 00:23:04:02
Keith John
The single largest impact on the money multiple is the product mix. Credit cards, for example, have a multiple of somewhere between 2.2 and 2.4 times. Insolvency accounts have a multiple of 1.4 to 1.6 times. So when people talk about their asset turnover in this industry, it is a ridiculous metric. Unless you tell people what you're investing in.

00:23:04:04 - 00:23:30:20
Keith John
If my money multiple is 1.1 times because I recover everything inside six months. You should expect my business to turn over or my assets, to turn over quickly. But if you're investing in long term sustainable assets that are making multiples of your investment, it's going to take some time to extract all of that value. That's what Pioneer does.

00:23:30:22 - 00:23:45:24
Keith John
It's what's given us our strength, allowed us to get through the last few years, when many didn't think we would. And it's what's going to make this business incredibly successful from here.

00:23:46:01 - 00:24:28:10
Keith John
Historically, we outperform underwriting for four key reasons. Consistent, disciplined investment. The quality of the accounts that we buy again, no payday, no low quality accounts. Our operational capabilities and an executive and a leadership that are appropriately incentivised to get returns for shareholders over the medium to long term. In addition to the money model, of course, we need to make sure that we recover that money and get the value from it.

00:24:28:10 - 00:24:53:16
Keith John
In a reasonable time frame. We have an investment delegation from our board that requires a net internal rate of return of at least 15%. And I'm pleased to tell you that every vintage has exceeded that return since we commenced.

00:24:53:18 - 00:25:24:00
Keith John
In terms of our portfolio, what we've presented with you on the left hand side is our investment over the last three years. So you can see exactly where we're investing our money, and you can see what that looks like from a concentration perspective. In FY24, we dealt with some 20 unique individual parties. And over the course of the last three years, 30 different parties.

00:25:24:02 - 00:25:59:01
Keith John
We have excluded the one off investments in Balbec, Panthera and Max Recoveries, predominantly groups or portfolios that were exiting the market. We have excluded them from there. So you can see the genuine go forward investment by vendor. On the right hand side. You can see our ERC how that's broken up 39% of our estimated remaining collections will come from credit cards, 42% from personal loans.

00:25:59:03 - 00:26:34:15
Keith John
Exactly what you'd expect to see from a business that has told you exactly what it invested 10% is coming from insolvency. You'll note that we bought the Max Recovery portfolio last year of insolvency accounts. These are customers that tick away, they’re very, very safe investment for us with a very attractive yield. And in the particular case of that portfolio, it was a party, an international party exiting the market that chose to partner with Pioneer 6% for mortgage.

00:26:34:15 - 00:26:48:13
Keith John
And I explained to you before, we've got the largest majority in that sector in Australia by a long way. We're very, very proud of that.

00:26:48:15 - 00:27:32:19
Keith John
Alignment to shareholders. Nothing is more important in small financials than a management team and an executive that is aligned to you. We are investing your capital. We understand that. We respect that. And everything about our business is aligned to getting you a great financial outcome. That means we need to have a great operating environment, a very strong compliance program, excellent discipline in the way that we invest, and a strong commitment to delivering on all of the things that drive value into this business.

00:27:32:21 - 00:28:02:10
Keith John
As you can see, my family, are 12% of the register. Other board and management, another 2%. And then we've got a range of other substantial shareholders that have joined us over the course of the last year, which we're very, very pleased about. They're tough investors. They've asked the tough questions and they've got confidence in the future of this business in particular.

00:28:02:12 - 00:28:28:20
Keith John
What I think people like about our business, what I think separates us, and it's always been the case. There are no short term incentives for any leader or executive in this business. There never has been and there never will be. We have a long term incentive plan that requires the achievement of targets, like the FY23 to FY25.

00:28:28:22 - 00:29:11:24
Keith John
Each individual year and for those years that it's met, they only vest if we hit a statutory net profit after taxation of at least $18 million for FY26 for next financial year. Now that target was set three years ago. It was very ambitious at the time. We have every confidence that we will deliver on that and we expect to deliver on it well, given the significant investment and the significant improvements that this business has made over the last couple of years.

00:29:12:01 - 00:29:18:16
Keith John
In terms of our outlook.

00:29:18:18 - 00:29:54:16
Keith John
Five key things to call out here. Firstly, strong tailwinds for PDP opportunities. There are near-term opportunities from competitors exiting. There is a significant supply of PDP. We have both the cash generation and should it be required, the additional growth funding to enable us to make very serious investments this year, $61 million of investment already under contract. There is a continued industry regulatory focus.

00:29:54:18 - 00:30:23:23
Keith John
This regulatory focus is building a moat around our business. It's expensive. We've made the investment over numbers of years. And it's incredibly valuable. The way that that's protecting this business and protecting the franchise and enabling us to access opportunities that smaller competitors can't. The operating leverage, you've seen it continue to open. We expect that to continue even more.

00:30:24:00 - 00:30:59:10
Keith John
CRM replacement is progressing. We've talked about that in the past and expected to deliver efficiencies from 2025, and data improvement and cost out opportunities continue to exist for us with our scale. You have a tested and experienced management team. Extensive experience across the sector. It's a founder led business with very strong alignment to shareholders. And as I mentioned before, management incentives that vest on the achievement of a statutory net profit after taxation of at least $18 million next year.

00:30:59:12 - 00:31:20:00
Keith John
And I'm pleased today to put out an initial guidance for FY25 PDP investment of at least $80 million this financial year, and I statutory net profit after taxation of at least $9 million.

00:31:20:02 - 00:31:49:23
Keith John
Finally, is our bridge to our FY26 target. We've been asked previously how do you get there? Will you get that? We are supremely confident that we will get there. This bridge shows you what demonstrates to you how we think about our business and what we expect. We've just given you the guidance of $9 million for this financial year.

00:31:50:00 - 00:32:14:19
Keith John
In the next financial year, in FY26, we expect operational expenses to expand by $3.3 million, reflecting a broad range of things that need to occur in our business, including growing our headcount. There will be additional interest savings of $2 million. There are cost savings. I talked about that just previously in terms of our scale of $1 million.

00:32:14:21 - 00:32:51:09
Keith John
There are efficiency gains significant to be had through our business, $1.9 million. And then, of course, with all of the investment that we've made and the investment we continue to make. I explained previously, $56 million holds us steady in terms of investment. We've already advised that we expect investment this year to be $80 million. That's growth. And we expect that net revenue growth to contribute $7.5 million to get us above that FY26 hurdle over the course of the journey.

00:32:51:11 - 00:33:07:02
Keith John
We expect to be able to update you further on this. With that, I thank you. I welcome your questions and, and look forward to answering them. 
 

00:33:07:02 - 00:33:25:17
Chantelle Hadley
Thanks, Keith. We do have quite a few questions that have come in. The first one is for you. You must be pleased with how you've pulled through this period. How’s the motivation of your executive and leadership now to deliver on the FY26 management target?

00:33:25:19 - 00:33:50:24
Keith John
Thank you. Thank you for the question. Look, we have an executive and a management team that not only they're incredibly motivated, but they're an incredibly proud group of people. We've done the hard work, and I think I've said in my press release in my comments today to now's a great time to be a Pioneer.

00:33:51:01 - 00:34:14:10
Keith John
We're into the future. We've got great funding, great cash flow, incredible opportunities. Now's the fun time. So the motivations high, the interest is high. The excitement is high and the energy levels are higher than ever. So, we're, you know, we're very, very committed. Of course, we need to deliver this year. We've just got it to $9 million.

00:34:14:12 - 00:34:28:21
Keith John
You know, I and the management team are not people that are happy just hitting targets. We want to be beating them. And, and we're working very hard to do that first and then to make sure that we obviously fulfill our commitment and our promise.

00:34:28:21 - 00:34:37:10
Chantelle Hadley
For FY26. Another one, you've recognised 21.4 million for the deferred tax asset.

00:34:37:12 - 00:34:42:11
Chantelle Hadley
When can we expect the balance to be recognised?

00:34:42:13 - 00:35:17:10
Keith John
For sure. So the way the recognition happens is that the board assesses our forecast period and says what's reasonable to be usable during that period. And they've determined that $21.4 million is reasonable as the periods go on, the end of next year. Those forecasts roll forward, our expectations roll forward, and the board will make an assessment, at that time as about how much it starts booking.

00:35:17:12 - 00:35:43:22
Keith John
So we expect that to occur, at 25 or 26. Importantly, it's about what it says about today. The board, which the auditors have signed off on, are now very, very confident about the profitability of this, of this business, about the future, this business, about what it says about FY25, about FY26, about FY27.

00:35:43:24 - 00:35:57:11
Chantelle Hadley
There has been a lot of press about Panthera recently. And you bought a large CBA book off them. Are you now looking at buying the rest of that business?

00:35:57:13 - 00:36:23:00
Keith John
So look, we look at everything clearly. I'm not necessarily sure, that that's a business that we, that we want. And frankly, you know, and I'm talking about the entirety of that business. And frankly, we've got an incredible range of opportunities that sit in front of us, an incredible amount of work to do. You know, we're not, sitting here going $9 million.

00:36:23:00 - 00:36:51:04
Keith John
Next year's great or 18 the year after is great. We want to be a significantly larger business, printing significantly larger profits because we're significantly better business. So will we, continue to, look at portfolios? Yes. I don't think we're, we're in the space to be looking at, an entire business proposition in the terms of that business.

00:36:51:06 - 00:37:05:18
Keith John
That doesn't rule out M&A elsewhere, but it’d need to be aligned to who we are as a business, the product types that we, that we specialise in and be genuinely capable of adding value.

00:37:05:20 - 00:37:12:06
Chantelle Hadley
When do you think the company will be able to pay a dividend?

00:37:12:06 - 00:37:14:18
Keith John
I think we need to deliver on our commitments first.

00:37:14:24 - 00:37:46:22
Keith John
Certainly something we can revisit in FY26. You know, we'll need to balance that against, you know, what's most prudent? The paydown of debt and decreasing the leverage, which we expect to happen over time. But we want to be doing that. The returns that we can get from portfolios, you know, if we can continue to invest at the rates of return that we have, then that might be more prudent than, paying out money as dividends.

00:37:46:22 - 00:37:57:06
Keith John
But the board will make that assessment. Management will make its recommendations. Once we deliver on our commitments to, shareholders.

00:37:57:08 - 00:38:06:15
Chantelle Hadley
What do the consulting costs relate to? And have they been paid in FY24, or will the cash outflow be in FY25?

00:38:06:17 - 00:38:12:12
Keith John
I might pass that over to Barry and let Barry address.

00:38:12:14 - 00:38:41:21
Barry Hartnett
Thanks, Keith. So the costs directly relate to the refinancing of the senior facility and the, medium term notes. The majority of it cost, has been paid out in FY24. A portion will be netted off against proceeds from or has been netted off against proceeds in FY25, but vast majority is in FY24.

00:38:41:23 - 00:38:53:03
Chantelle Hadley
And Barry, do you expect cash collections to be higher in FY25? And if you can't specifically say, can you talk to some factors that will drive collections higher?

00:38:53:05 - 00:39:07:19
Barry Hartnett
Yeah. So look we do expect it to be to be higher in FY 25. We have guided or we have kind of guidance today. So the expectation is that the revenue and operational line does increase.

00:39:07:21 - 00:39:42:13
Barry Hartnett
I think the key factors are the supply of portfolios in the market. We've post-Covid moved from a, a transitionary kind of phase where large lumpy portfolios were available in market that's now kind of transitioned back to, forward flow contracts and the majority of vendors recommencing sales. We have a huge proportion of our FY25 spend currently contracted.

00:39:42:15 - 00:39:49:23
Barry Hartnett
So we do expect that to drive, the increase in cash collections.

00:39:50:00 - 00:39:55:12
Chantelle Hadley
How is the new CRM project going?

00:39:55:14 - 00:39:58:20
Barry Hartnett
Keith do you want to address that one?

00:39:58:22 - 00:40:22:20
Keith John
For sure. Thank you. Yeah. Look, the CRM projects going incredibly well. It's an important project. You know, it's a years long, program of work which we've spoken about, where we're looking forward to, deploying it in 25 and, and starting to realize the operational efficiencies that we expect to come from that.

00:40:22:22 - 00:40:47:12
Keith John
We have not forecast those as yet. But certainly, once we start to understand exactly what they look like and, and what we can really extract from that program of work, it also is important around, enabling us to improve our compliance regime. Then we'll start to, start to bring those into our numbers.

00:40:47:12 - 00:40:55:20
Keith John
But for the time being, we're very, very happy with the progress of it. And, and looking forward to, to getting it into the business.

00:40:55:22 - 00:41:03:17
Chantelle Hadley
This is another one for you, Keith. Can you provide an update on the status of the proceedings against PWC?

00:41:03:19 - 00:41:11:10
Keith John
Thank you. Look very, very difficult to talk about. Court cases, obviously.

00:41:11:12 - 00:41:48:06
Keith John
Suffice to say, we have, provided a broad range of evidence. Now, as part of the proceedings, we expect, some procedural items to be run through, later in this year, which will hopefully push us towards, the first formal mediation. Beyond that, it's a little difficult to say other than the fact that, you know, our lawyers and our counsel, are very comfortable with our position.

00:41:48:08 - 00:41:57:04
Keith John
And, you know, we're pushing hard to make sure we get a successful outcome for shareholders.

00:41:57:04 - 00:42:01:19
Chantelle Hadley
Are all four major banks now selling debt, Keith?

00:42:01:21 - 00:42:20:16
Keith John
There's still one to go. So, we expect them to come back in the current financial year. And, we've certainly been in discussions, with that bank. We're looking forward to, to them reentering the market.

00:42:20:18 - 00:42:27:05
Chantelle Hadley
And businesses are leaving the market. So how are vendors managing this?

00:42:27:07 - 00:42:51:03
Keith John
Yeah. A range of ways, I mean, I think the, you know, the, I think I think the, the main driver in, in, in the way vendors are managing this is really about building closer relationships with groups like pioneer. So I if I point towards, you know, CBA a couple of years ago now, but entered a five year agreement with, with Pioneer, that was the first of its kind.

00:42:51:03 - 00:43:19:05
Keith John
I think we're going to see more of those things. We obviously like them builds, build security around our business, around our deal flow. And, the other side is, you know, the banks are getting closer and closer and closer to us. So, their management style is to, is to have longer term agreements and get close to the groups that increases the moat around this business.

00:43:19:07 - 00:43:39:20
Keith John
So we think these are good things. We don't take it for granted. We worked really hard to make sure that our relationships are solid and to make sure that people understand that we're investing in those relationships as much as it, about us buying off them, you know, is a very strong investment.

00:43:39:21 - 00:43:44:24
Keith John
We think it we think it serves us well.

00:43:45:01 - 00:43:52:08
Chantelle Hadley
One for Keith. What is the sweet spot for your business?

00:43:52:10 - 00:44:22:01
Keith John
I don’t know it feels pretty close. It's a great market. There's not a lot of competition. Consumers fully employed. We've got funding. We've got exceptional free cash flow. This environment is as good as I've seen it in, in my years in this, in this business. And again, just like our vendors, I mean, I think the most important thing is not to take these things for granted.

00:44:22:03 - 00:44:52:08
Keith John
It's not, to make assumptions and, and make easy choices. You know, remaining incredibly disciplined, working exceptionally hard, having incredible integrity are important parts to make sure that we, we capture appropriately the opportunity that's there for us now. We think with evidence that over the last couple of years, we're really looking forward to, to delivering on the next couple of years.

00:44:52:10 - 00:45:05:07
Chantelle Hadley
I have another one for Keith. What are the upside levers, in order to get to the FY26 target profit?

00:45:05:09 - 00:45:34:07
Keith John
Thanks, Chantelle. Look, we've laid out the slide there. I mean, there's, you know, there's some cost savings, some interest savings and so forth. There's significant growth that is available to, to us, what we should be extracting out of the portfolios that we've acquired, we expect to do that. Look, we think and we would expect that we're going to do better than that.

00:45:34:08 - 00:45:55:19
Keith John
You know, like I said, that target was set a couple of years ago. The market has improved and continue to improve. For us. You know, we're an ambitious business. You should expect that we're going to, to work really, really hard to make sure we extract as much as possible, for all shareholders.

00:45:55:21 - 00:45:57:16
Chantelle Hadley
I have a question for Barry.

00:45:57:18 - 00:46:06:08
Chantelle Hadley
How do IRR’s look on recently purchased ledgers compared to previous years?

00:46:06:10 - 00:46:30:15
Barry Hartnett
Yeah. So the performance on the most recent vintages, are performing historically. I think you'll see that from a money multiple perspective in the slide. That Keith walked through a bit earlier. But also from a IRR perspective, they're performing. I think there's a couple of key factors in terms of why I think the competitive landscape is obviously positive for Pioneer at the moment.

00:46:30:15 - 00:46:52:23
Barry Hartnett
So we're able to secure, deals that we want to buy. We're extremely disciplined in terms of how we invest our money. And then there's the operational capability and capacity we have work those portfolio. So I think that's evolved over the last couple of years. And we're starting to see better, better returns. And we expect that to continue.

00:46:53:00 - 00:47:18:09
Chantelle Hadley
Okay we've reached the end of our question time slot. So thank you so much, Keith and Barry, for the presentation and the responses. If anyone has any further questions, please send us an email. It's investor_relations@pioneercredit.com.au and you can also keep up to date with all of our latest news if you're following Pioneer Credit Limited on LinkedIn.

00:47:18:11 - 00:47:23:07
Chantelle Hadley
So thank you all for joining today.