Half Year Results Update

ausbiz: All right. Aussie-listed financial services provider Pioneer Credit outdid its half year results, reporting a record EBITDA of $27.3 million. To take us through the numbers, Pioneer's managing director Keith John joins us. Great to talk to you this morning.

Keith: Good morning. Thanks for having me.

ausbiz: All right. So as we've seen with so many companies in this space, it obviously was a challenging period for you, but do you feel as though you're in a strong position right now?

Keith: Yeah, look, we certainly do. I mean, Pioneer was beset by a range of challenges that were brought on by a terminated scheme of arrangement. We managed to pull through that during the half and we refinanced our debt, albeit at a higher cost than we would like, but we preserved shareholder equity and then completed the rest of the half under more normal operating environment. And for us, what that meant was we had very solid top line revenue. Our liquidations are $50 million, they were flat on the corresponding period. We're very, very happy with that under the circumstances, beset, like most businesses, of course, with COVID and other challenges. And we had record EBITDA of 27.3 million for the first half. Normalized, it was about another $5 million more. So a very, very solid operating performance with some good potential in the second half.

ausbiz: So are you looking to refinance that facility later on better terms?

Keith: Yeah, so we've started that process. The best way to think about our facility that we entered into in September last year, really, is like a bridging facility. Obviously, refinancing during the pandemic was very, very expensive and highly dilutionary if you needed to raise capital. For Pioneer, we put in place a facility which didn't require us to raise any more capital, but was obviously at a higher cost. We've started that refinance process now. The existing financiers are obviously well aware of that and supportive of that. We've still got a couple of years to run on our facility, so there's no mad rush, but there's been very good take up from and very good interest from new financiers and the other groups that we've spoken to.

ausbiz: Keith, you put in a number of measures to support your customers during the height of the pandemic, including payment holidays, interest rate deferrals, payment reductions, debt waivers. Can you bring us up to date with that, and how your customers, how they're looking at the moment?

Keith: For sure. So we have a customer base of about 250,000 Australians across a portfolio of about $2 billion, so it's quite a broad retail debt portfolio. In our business, we've always been at the front end of customer service and customer outcomes, and it's one of the reasons why banks prefer to deal with Pioneer over others. In the case of our customers, we've kept in place almost all of the measures that we have that we instigated throughout COVID. We haven't seen a need to bring them back. Mind you, from our customer's perspective, they haven't seen a need to call upon them in the same rate that obviously occurred early on.

So things are going quite well. What we are seeing is with the support that the banks have provided and the government's provided, people are paying down debt, but we're quietly optimistic that that will continue once the end of the stimulus runs off as well towards the end of March.

ausbiz: Yeah, Keith, obviously in recovery mode for your company at the moment then. So then how do you move forward and look to growth in the longer term?

Keith: Yeah, well, we have good solid cash flow, so that's enabling us to invest heavily back into the business. We spent some $17 million in the first half on portfolios of new customers. We expect to increase that to about $20 million at least in the second half. That's all funded from free cash flow. And then clearly, we need to refinance, that process is underway. We expect to be able to get something done this year with that, and that will enable us to continue to grow our business with the extra free cash flow we have and the headroom. Currently, we also have about $30 million of facilities and cash, so there's plenty of additional capacity where we can do any one-off type transactions.

ausbiz: Keith, I'm really interested to get your take on where we're at. Obviously, you're well aware of what's going on in the bond markets at the moment. What sort of outlook do you have, just as far as inflation is concerned, interest rates, we're seeing tremendous heat in the property market, what's your take?

Keith: Yeah, so most of our portfolio, or the very vast majority of our portfolio is retail, so I can't talk too much to the bond markets and what's happening at a corporate level, though, I mean... Well, look, we're encouraged by the amount of money that is in the system and the amount of capacity that's in the system. We are clearly nervous about the amount of debt that is in the system and that's going to have to be repaid over the course of the next couple of decades, and we think that's going to create some unique challenges. So I think while we're all looking out over the next two or three years, and it's nice to think that costs are going to be lower, we're somewhat cautious about what that means over the longer term, and really think that's where investors and where companies should be looking.

ausbiz: Keith, thanks so much for joining us this morning, and thanks for that update.

Keith: Appreciate your time. Thank you.