00:00:00:00 - 00:00:19:20
Okay, well, let's move on, shall we? Well, we're going to see if without reporting season coverage. And Pioneer Credit has swung back into the black after $30 million lost the prior year. Looking ahead, the company has guided to a material improvement in net profit after tax over the new fiscal year. So for more, I'm pleased to say, we're joined by managing director Keith John live via Skype.
00:00:19:22 - 00:00:45:08
Great to see you. Thank you so much for your time. So we've got the latest set of results here, obviously, from from the business. How would you describe the business's performance over the period? Thanks, Karl. Nice to be with you today. Look, we're obviously very happy with with the performance of the business of turning around a $33 million loss last year is is is significant and no mean feat.
00:00:45:08 - 00:01:17:02
It really reflects a huge contribution by our 400 staff across Australia, in the Philippines, but also a market that's really ideally placed for Pioneer, one that we've position for for a number of years and one that, you know, we're starting to see the benefits come through now for shareholders. For a pretty solid FY 24. I mean, as far as the future tailwinds go for the business, I mean, what sort of expect it to power that growth and obviously, you know, beyond next year as well?
00:01:17:04 - 00:01:42:12
Yeah, sure. So there's a couple of things that are key for us. One is the supply of PDP. So we buy debt portfolios principally off the banks and the non-bank lenders, and we work with those customers over time to to get them back paying again. So the supplier that's really critical, Pioneer is very well placed because we don't compete with the non-bank lenders, in particular with lending products.
00:01:42:14 - 00:02:04:18
So they prefer to deal with someone like Pioneer. We've got the reputation, the balance sheet to do that. And the second really key driver of profitability, in particular in FY 24 and 25, is the opportunity for us to reduce our funding costs. We've got very high funding costs at the moment. There is sort of a hangover from from the COVID years.
00:02:04:20 - 00:02:31:07
We have the opportunity to reduce those materially later this calendar year. That process is started and we expect to see that drop through to the bottom line very, very quickly, commencing in 24 with a full contribution in in 25 and beyond. When we're talking about the purchasing of debt portfolio acquisitions, I mean, how is that looking at the moment in terms of having the sufficient funding to be able to continue to do that?
00:02:31:09 - 00:02:59:00
Yeah, look, we're very well funded up. Our EBIT last year was some $86 million. It's a very significant number. So we fund the vast majority of our purchasing our investment out of free cash flow. We also have facilities available to top that up where there are sort of outsized opportunities available to us. So we're well positioned to take advantage of the market and to to buy what we want to be buying.
00:02:59:02 - 00:03:20:08
And it's a very good market for us. You know, there's there's a lot of debt portfolios around, as I mentioned, the non-bank lenders in particular want to be dealing with Pioneer because we're aligned to them. We don't have a competing product like others in the market and and we've got relationships with three of the four big banks that are selling currently.
00:03:20:08 - 00:03:47:18
So we're buying up all of those, which is good for us. We're in a really nice spot with with plenty of cash flow, which we expect to continue to grow in 24 as well. What about just in terms of maybe some of the drivers of some as the cyclical strength in the business? We've been talking a long time about this sort of well, I guess this assumption that will see a pickup in sort of credit defaults and things like that because of higher interest rates and just financial stress across the board.
00:03:47:20 - 00:04:13:01
How is that playing out for the business at the moment? Because I think a lot of people have been striked by the resilience of households, at least up until this point. Yeah, households have been very resilient. I mean, I think it's a a factor of firstly, you know, we have a fully employed population. It's it's quite unique. There is a little bit of noise now of course, with the with the unemployed unemployment rate ticking up a little bit.
00:04:13:05 - 00:04:37:00
But, you know, the banks in Australia are exceptionally good at lending the right amount of money to people. And what that means is it won't in itself stop you from getting into trouble if there is some other sort of life event. Death, divorce, sickness, the sort of things that derail consumers. But you won't get into trouble simply because you overspend.
00:04:37:02 - 00:04:57:07
And that means that people have the ability to heal and they have the ability to recover really, really quickly. And we're seeing that in our portfolios at the moment. The consumer is very resilient. There is a lot of pain. Of course there is. And and we're conscious of that. And we we see that every day with the consumers we're dealing with.
00:04:57:09 - 00:05:27:19
But it's where their discretionary spend is pulling back to meet their financial commitments. So we're very conscious of that. We're very conscious of the part that we play in the in the financial life of our consumers. But if we continue to work with them like we have been, then, then we'll get good outcomes for all of us. Just a final question and just on the competitive landscape going forward, as I understand it well, it's increasingly competitive out there and perhaps the market might not be growing at the same rate as it did in the past.
00:05:27:21 - 00:05:52:15
I mean, how do you see Pioneer Credit positioned within your marketplace, especially, again, as well? We potentially see somewhat of, if I may phrase it in this way, sort of consolidation in the industry. Of course, consolidation in our industry has been driven by a range of factors. One is access to capital and balance sheet strength, and that's caused some to consolidate and leave the market.
00:05:52:17 - 00:06:20:14
Others other parties or another driver is compliance, governance and the way people service portfolios. So Pioneer is very, very strong on both of those things. From our perspective, the market's very buoyant. There are very many opportunities for us to participate in. I think as much as anything less competition obviously helps that, but our alignment to the non-bank sector in particular is very, very good.
00:06:20:14 - 00:06:48:21
So we're working with them. We support their brands, we understand their consumers. We can help them get through this, this position by managing. The more challenging parts of their portfolio in a way that's good for everyone and that frees up their capital to continue to grow. So, you know, we're well placed in the in the sector to participate to to be a source of capital for the non-banks in particular, but also for the banks.
00:06:48:23 - 00:06:52:24
And then, of course, to to look after those consumers really well.