00:00:00:01 - 00:00:25:11
News because Pioneer Credit posted record cash collections to the half and sees positive business conditions in the period ahead. To talk about this now, I am very happy to welcome the CEO of the company there Keith John. Keith, thank you so much for your time today. It's really wonderful to have your company. Big set of results. Can you take us through the drivers there?
00:00:26:14 - 00:00:51:00
Yeah. Appreciate that Kyle. Thanks so much. Look, we've been talking about what was coming for our sector and in particular for our business for a couple of periods. Now, going back to late FY22, we invested some hundred million dollars into new purchased debt portfolios, which is the substance of our business. And that was a record for us at the time.
00:00:51:06 - 00:01:20:10
And we're now starting to see the returns from those portfolios come through to our business. So in the first half, a record cash collections up 40% on the prior period, the $68 million, record EBITDA of $45 million and an EBIT of $13 million. We're very, very pleased with that and pleased with the manner in which we did it, which was in a very cost efficient way with our expenses actually down on period, on period.
00:01:21:03 - 00:01:31:08
Now I'm confident I've got this number right, a 98% jump in income and your forecasting this year that you will move into profitability for FY 23?
00:01:32:13 - 00:02:01:24
We sure will. Look, we've had a range of challenges over the last couple of years. We're well through those now. As you correctly said, 98% improvement in the bottom line, very small loss for the first half. We’ll be profitable again in 23 for the full year. But importantly, we have the ability to refinance and materially decrease the cost of funds the way by rail funding later this year.
00:02:02:15 - 00:02:14:19
We're progressing those discussions. We're very, very sure we'll settle those later this year and that will all immediately drop to the bottom line and continue to contribute in a more meaningful way.
00:02:15:17 - 00:02:32:16
Would it be fair to say too there’s some upside risk here just because of the macroeconomic conditions? Obviously, rates going up and household finances sometimes, at least in my experience over the last few months, becomes a little tighter. Obviously a solid thing for the business going ahead.
00:02:34:00 - 00:03:01:11
Yeah, look, I mean, we purchased portfolios of credit cards and personal loans, principally out of the big banks and the second tier lenders but we don't buy anything to do with payday or the lower performing type credit. So our books are very, very clean. What protects us from this unique environment we’re in at the moment is the very vast majority of our consumers are not exposed to the housing market, so they're not suffering from the higher interest rates.
00:03:02:01 - 00:03:23:10
They, of course, do feel cost of living pressures. That's driving defaults, as we've seen come through now from the banks, which they're all forecasting to increase. But offsetting that in our business, two things really. One is we've got very high employment and that's expected to continue for some time. And that's good for the people being able to meet their commitments.
00:03:23:21 - 00:03:44:22
And the other is the reason why banks and light companies choose to sell to us in this manner in which we deal with consumers. Our default rate on outperforming loans, we've got about $460 million of a performing loan book is about 3.3%. It’s because we set up sustainable arrangements with our consumers. That's good for them and good for our business.
00:03:44:22 - 00:03:54:15
We're not about maximising everything at every mark. We're about making sure we've got a sustainable business. And that's the way that we maximise outcomes for our shareholders.
00:03:55:10 - 00:04:17:16
So all things being equal and fingers crossed is always going to be a good a full year 23. Strategically speaking, with this really strong momentum when it comes to profitability or assume being in a position that's far more, well, cash flow supportive, if you want to use that phrase, what's the strategic initiatives going forward for the business when you look out across a longer time frame?
00:04:19:02 - 00:04:42:03
Yeah, thank you. Look, I mean, operationally, we're performing very, very well. During the half, we hit our goal on our cost to service, which is the amount its costs us to operate in our business, we reduced that from almost 50% down to 35% or 34% in the period. And that's the level that it will stay at from here. Our business is focused on a couple of things.
00:04:42:14 - 00:05:09:23
One is to take advantage of the unique environment that we're in, in terms of the relationships we have in increasing the portfolios we buy. The second is to decrease the cost of funds in our business. We expect to do that, as I said, later this year, and that will materially improve our bottom line and its immediate. And the third is to continue our investment in data and analytics.
00:05:10:16 - 00:05:37:23
We've got a very, very strong team in that regard. We have some 400,000 consumer records in our business and using that to make sure that we can service our consumers better. And by that, what I mean is whilst really we need to get paid, it's the manner in which we get paid that's very, very important. So making sure that if I'm talking to you, Kyle, for example, I'm contacting you at a time that's good for you and at a period in your life that's good for you.
00:05:38:04 - 00:05:57:03
What we don't want to be doing in our business is we manage customers in hardship, is talking to people when they might have lost their job or they might be experiencing a set of life circumstances that aren’t good for them. So this business is very focused on making sure we're dealing with and contacting consumers at the right time.
00:05:57:12 - 00:06:07:21
And so the three big sort of strategic things that we will continue to drive not just record cash collections, which are very, very important, but profitability of our business.