Pioneer's strategy for growth with Keith John and Andrew Page from Strawman

00;00;11;09 - 00;00;12;08
All right, everyone.

00;00;12;08 - 00;00;13;28
Let's kick it off.

00;00;13;28 - 00;00;18;05
Today, we're speaking to a Pioneer Credit ticker code, PNC.

00;00;18;19 - 00;00;21;08
The CEO, the founder and the largest shareholder, Mr.

00;00;21;08 - 00;00;21;28
Keith John.

00;00;21;28 - 00;00;26;15
Now, I know a lot of you will be familiar with the business and the industry.

00;00;26;15 - 00;00;29;08
We spoke to Credit Corp, I think it was back in April

00;00;29;08 - 00;00;31;21
and there's a lot of parallels here.

00;00;31;21 - 00;00;35;18
If you're new to the business, this is essentially a company that buys

00;00;35;18 - 00;00;35;29
debt.

00;00;35;29 - 00;00;39;10
It'll buy things like aggregated overdue bills from telcos,

00;00;39;10 - 00;00;42;18
utilities, loans that are in arrears from banks.

00;00;43;01 - 00;00;46;01
Because of the status of these debts, you pay less than face value.

00;00;46;09 - 00;00;49;21
And the idea is really to recover more of that than what you pay for it.

00;00;49;22 - 00;00;51;18
So it's very simple to understand.

00;00;51;18 - 00;00;55;11
Of course, it's there's a lot of skill required to sort of do that effectively.

00;00;55;21 - 00;00;59;03
And Pioneer, of course, has been doing it pretty effectively for a while.

00;00;59;04 - 00;01;02;05
They are the second largest of its kind in Australia.

00;01;02;09 - 00;01;05;26
It's also important to understand that

00;01;05;26 - 00;01;08;26
this isn't about sending some heavies around to someone's house with a wrench.

00;01;09;11 - 00;01;11;04
In fact, Pioneer puts a huge emphasis

00;01;11;04 - 00;01;14;09
if you've looked at their materials, certainly on the ethical approach.

00;01;14;17 - 00;01;18;15
So generally you're talking about putting people onto payment plans. This

00;01;19;20 - 00;01;22;24
really helps restore their credit worthiness and ideally a win win

00;01;22;24 - 00;01;27;20
win scenario for those that that are selling the debt in the first place.

00;01;28;05 - 00;01;31;05
And for those that are looking to sort of get back into the black.

00;01;31;07 - 00;01;34;04
From an investor's point of view, let me say at this point in time,

00;01;34;04 - 00;01;36;23
of course, we don't offer advice one way or the other.

00;01;36;23 - 00;01;39;21
But one thing, we had a few members reach out and suggest Pioneer.

00;01;39;21 - 00;01;44;14
It's interesting, the market cap currently around $40 million, $0.35 a share or so,

00;01;45;10 - 00;01;48;19
but the net assets on the books are about $0.60 per share and the company

00;01;48;19 - 00;01;53;02
delivering more than $50 million per year in revenue, at least the last four years.

00;01;53;02 - 00;01;55;23
And are on track for profitability this year.

00;01;55;23 - 00;02;00;02
So it's at a very interesting point in time and we thought which better way to

00;02;00;08 - 00;02;03;22
to understand the opportunity and the potential than speak

00;02;03;22 - 00;02;06;21
to the person who started the business in the first place. So,

00;02;06;22 - 00;02;09;20
Keith, with all of that out of the way, thank you so much for your time today.

00;02;09;20 - 00;02;10;22
A pleasure. Thank you.

00;02;11;23 - 00;02;12;25
So what did I.

00;02;12;25 - 00;02;16;21
That was a very rough and ready description of of what you guys do.

00;02;16;28 - 00;02;19;15
And I said to you before, we'll start right at the beginning.

00;02;19;15 - 00;02;20;12
Yeah.

00;02;20;12 - 00;02;23;16
How would you how would you lay out the business of Pioneer?

00;02;23;16 - 00;02;26;16
And it'll also be interesting to sort of give us a bit of

00;02;27;11 - 00;02;30;05
detail on the journey you've had so far of starting this thing up

00;02;30;05 - 00;02;33;04
and taking it to listing and growing its where it is today.

00;02;33;14 - 00;02;35;15
Sure. And I appreciate the opportunity.

00;02;35;15 - 00;02;38;11
So, Andrew, you write, we buy, we buy

00;02;38;11 - 00;02;41;11
debts, customer accounts, as we call them,

00;02;41;13 - 00;02;43;27
principally off the big banks and the non-bank lenders.

00;02;43;27 - 00;02;48;29
So we and our business, we don't buy telco utility or anything like that.

00;02;48;29 - 00;02;50;04
We don't buy any payday.

00;02;50;04 - 00;02;52;22
So we focus very much on

00;02;53;29 - 00;02;56;22
the best of the impaired credit segment.

00;02;56;22 - 00;03;00;15
And the reason we focus there is because they've got the highest propensity to cure

00;03;00;26 - 00;03;03;05
and they've got the highest,

00;03;03;05 - 00;03;07;16
you know, they've got a strong desire like all Australians, to get ahead.

00;03;07;27 - 00;03;09;17
So we very much like that.

00;03;09;17 - 00;03;13;01
The customers that we can work with and we can actually add value to

00;03;13;12 - 00;03;17;04
to their personal journey that they're on, given that they're in a bit of trouble.

00;03;17;25 - 00;03;21;01
You know, at the point that we buy those accounts

00;03;21;25 - 00;03;25;06
and the reason we exist, Andrew, I think is really important

00;03;25;06 - 00;03;29;02
is because banks are very good at lending money.

00;03;29;02 - 00;03;31;07
It's what they do,

00;03;31;07 - 00;03;33;11
but they're not particularly good and they're not the,

00;03;33;11 - 00;03;36;13
you know, the most efficient use of their resources

00;03;36;23 - 00;03;39;18
is not in working with customers in hardship. So

00;03;39;18 - 00;03;43;13
when these accounts become 180 days old, they sell them to someone like Pioneer.

00;03;44;18 - 00;03;46;27
We're a heavily regulated industry

00;03;46;27 - 00;03;50;24
and we look after these customers very, very well and they recycle

00;03;50;24 - 00;03;54;08
the capital that we pay them back into their new lending operations.

00;03;54;18 - 00;03;56;00
And we work with these customers

00;03;56;00 - 00;03;59;00
over time to give them what they need to get back on track,

00;03;59;28 - 00;04;01;26
as it's a really important part

00;04;01;26 - 00;04;04;26
of the ecosystem

00;04;05;15 - 00;04;08;18
that we occupy

00;04;08;18 - 00;04;11;25
and very much so part of the banking

00;04;11;25 - 00;04;14;25
infrastructure of this country.

00;04;14;26 - 00;04;15;24
Yep. Gotcha.

00;04;15;24 - 00;04;19;27
And just to pick up on something you said there, often as an investor,

00;04;19;27 - 00;04;24;16
you hear about sort of regulation and all that sounds like a scary thing.

00;04;24;16 - 00;04;26;23
Sounds like a risk.

00;04;26;23 - 00;04;29;22
But I think one way to look at it is it's almost that you could

00;04;29;22 - 00;04;32;02
claim there's a regulatory moat there.

00;04;32;02 - 00;04;32;25
For example.

00;04;32;25 - 00;04;36;09
I mean, you've proved this is true, that you can start a business

00;04;36;09 - 00;04;37;12
and play in this space.

00;04;37;12 - 00;04;39;02
But I imagine also that

00;04;39;02 - 00;04;43;00
regulatory reality acts as a barrier to entry for new players.

00;04;43;22 - 00;04;44;27
Yeah, it certainly does.

00;04;44;27 - 00;04;49;18
I think, you know, when I started this particular business

00;04;49;18 - 00;04;54;21
back in 2009, there was limited regulation at that stage.

00;04;55;07 - 00;04;59;17
And I think what happens in environments where there's regulation or limited

00;04;59;17 - 00;05;03;10
regulation is, is where people see the opportunity make profits.

00;05;03;19 - 00;05;06;06
Obviously, people overstepped the mark.

00;05;06;06 - 00;05;08;20
You know, I'm very proud of what we've done at Pioneer.

00;05;08;20 - 00;05;12;26
We've always been well ahead of regulation and over time, regulation,

00;05;13;03 - 00;05;16;03
as it typically does, catches up with the industry.

00;05;16;08 - 00;05;18;01
But Pioneer operates well above that.

00;05;18;01 - 00;05;21;24
And we're really in an environment now whereby I think it's very true

00;05;22;01 - 00;05;25;15
there is this regulatory moat that sits around our business.

00;05;26;15 - 00;05;29;13
We're a better business because of it, frankly.

00;05;29;13 - 00;05;32;15
You know, it's pushed us in ways

00;05;32;15 - 00;05;35;17
that we might not necessarily contemplated before.

00;05;35;25 - 00;05;41;00
We've always had very, very good intent, but, you know, guidance

00;05;41;00 - 00;05;44;15
by regulators and consumer advocates are a very powerful thing.

00;05;44;29 - 00;05;48;22
And what that means for us now is the big banks

00;05;48;22 - 00;05;51;22
in particular are happy to sell to someone like Pioneer.

00;05;51;26 - 00;05;55;15
They really are only sold to 2 groups, the other one being critical.

00;05;56;24 - 00;05;59;20
And they do that because they know they can trust us

00;05;59;20 - 00;06;03;04
with these consumers to do the right thing and work with them over time.

00;06;03;17 - 00;06;06;07
And whilst it's become an expensive

00;06;06;07 - 00;06;09;07
part of our business in terms of compliance,

00;06;09;09 - 00;06;12;14
it's created that moat around it, which is

00;06;12;14 - 00;06;16;11
very strong now and dare I say it, getting stronger by the day.

00;06;16;23 - 00;06;17;27
I mean on one hand

00;06;17;27 - 00;06;21;28
you'd think from the bank's perspective I will tender this out.

00;06;21;28 - 00;06;25;06
I'll get whoever is going to pay me the most for these debts.

00;06;25;25 - 00;06;27;25
But, you touched on an interesting point there.

00;06;27;25 - 00;06;29;26
I mean, there's a brand impact there as well.

00;06;29;26 - 00;06;32;26
If Westpac was to give it to the literal heavies

00;06;32;26 - 00;06;35;28
who kind of got knock on your door, that, you know,

00;06;35;28 - 00;06;38;13
maybe there's a commercial transaction that's happened with that debt.

00;06;38;13 - 00;06;40;29
But from the customer's viewpoint, that is not a good look.

00;06;40;29 - 00;06;44;21
So I guess I assume that that corporate reputation

00;06;45;03 - 00;06;48;09
weighs heavily in the kind of people that they want to do business with.

00;06;49;00 - 00;06;49;26
Yeah. 100%.

00;06;49;26 - 00;06;54;02
And it's one of the reasons why we don't do payday for example.

00;06;54;02 - 00;06;55;08
I mean I fundamentally

00;06;56;28 - 00;06;57;28
we fundamentally

00;06;57;28 - 00;07;01;00
have an issue with payday as a service

00;07;01;22 - 00;07;05;21
so we don't participate in that end of the sector.

00;07;06;13 - 00;07;10;01
But from a bank's perspective, they give it to us and these consumer

00;07;10;01 - 00;07;14;01
you know, these are all good people, they are You and I

00;07;14;20 - 00;07;17;02
but something's happened along the journey and you know

00;07;17;02 - 00;07;21;09
they're, you know, they're living going about their life.

00;07;21;09 - 00;07;24;17
They're spending on their credit card and their personal loans.

00;07;24;25 - 00;07;28;01
And then one of the you know, sort of the 5 big things happens to them

00;07;28;01 - 00;07;31;21
death, divorce, sickness, might have lost their job.

00;07;31;21 - 00;07;34;01
And sadly, domestic violence.

00;07;34;01 - 00;07;36;24
And, you know, when I say those things,

00;07;36;24 - 00;07;40;26
they're things that strike every person at some point in their life.

00;07;41;09 - 00;07;44;11
And our job is really to work with those customers

00;07;44;11 - 00;07;47;11
through time to what to get them back on track.

00;07;47;11 - 00;07;52;04
And if we do that, well, and we think we do a very, very good job of it.

00;07;52;16 - 00;07;56;05
Those customers will become homeowners and they will become,

00;07;56;14 - 00;07;59;28
you know, future users of credit and they'll reshop back with the bank

00;07;59;28 - 00;08;04;05
that sold the account to us because they had a good experience.

00;08;04;13 - 00;08;05;23
And that's good for our business.

00;08;05;23 - 00;08;07;17
It's good for the customer, it's good for the bank.

00;08;08;29 - 00;08;09;21
One of the

00;08;09;21 - 00;08;12;22
things we learned with talking to the Credit Corp guys,

00;08;12;22 - 00;08;15;29
and I don't mean to constantly draw up the parallels here,

00;08;15;29 - 00;08;20;26
but the way I've outlined the business model is very easy.

00;08;21;01 - 00;08;23;12
We pay this, we collect that.

00;08;23;12 - 00;08;27;17
Of course, the trick of that or the the what's the better word,

00;08;27;17 - 00;08;32;05
the skill in that is actually being able to look at a portfolio of loans

00;08;32;05 - 00;08;36;01
and say, how much can we confidently get back?

00;08;36;14 - 00;08;39;18
So I'm really curious to sort of if you could sort of speak to that.

00;08;39;18 - 00;08;43;03
Where's the secret sauce with Pioneer to be able to sort of

00;08;43;29 - 00;08;46;09
effectively measure that rate of return?

00;08;46;09 - 00;08;50;28
Because without that rate of return, you don't know what you can bid on.

00;08;50;28 - 00;08;53;28
And the risk is if you overbid, then the whole exercise is it

00;08;54;01 - 00;08;56;20
takes a huge amount of capital in it and it generates in a loss.

00;08;56;20 - 00;08;59;02
So how do you guys sort of play that?

00;08;59;02 - 00;09;01;12
Yeah, so there's a few things that feed into that

00;09;02;22 - 00;09;03;10
and I'll

00;09;03;10 - 00;09;06;13
come to what I think is one of the most important parts with

00;09;06;13 - 00;09;10;03
is actually remuneration at the back end to what I'm about to tell you.

00;09;10;03 - 00;09;14;02
So the first is having access to large data sets.

00;09;14;02 - 00;09;18;25
So Pioneer has invested some $700 million Australian over the journey

00;09;19;19 - 00;09;24;13
and bought over 400,000 customers during that time.

00;09;24;25 - 00;09;29;09
And, what we like about the banks who bought most of these customers from is

00;09;29;19 - 00;09;32;10
if you think about our sector with four banks,

00;09;32;10 - 00;09;34;22
they're all the same bar the colour of their jumper.

00;09;34;22 - 00;09;36;18
They all sell exactly the same product

00;09;36;18 - 00;09;39;18
to exactly the same consumer for exactly the same price.

00;09;40;08 - 00;09;43;05
So you get this really neat sort of a homogeneous group

00;09;43;05 - 00;09;45;04
that sort of drops out of the bottom.

00;09;45;04 - 00;09;46;19
Okay, that needs to be worked with.

00;09;46;19 - 00;09;50;02
So we buy something that's predictable and we understand that.

00;09;50;18 - 00;09;52;13
And then we use our analytics

00;09;53;13 - 00;09;56;13
to work out how those customers are going to behave

00;09;56;25 - 00;10;01;20
based upon the data that's provided to us, based upon the recency of payments

00;10;01;20 - 00;10;04;14
that those customers might have made to the banks.

00;10;04;14 - 00;10;08;01
And based upon our experience over time.

00;10;09;09 - 00;10;12;17
And then of course, we need to factor in cost of living,

00;10;13;06 - 00;10;17;02
interest rates, employment or unemployment or underemployment

00;10;17;12 - 00;10;21;11
and all the other things that impact upon the lives of consumers.

00;10;22;23 - 00;10;24;07
So that's really important.

00;10;24;07 - 00;10;25;14
We've got a great team that does that.

00;10;25;14 - 00;10;27;21
We've got a team of about 20 in our analytics team,

00;10;27;21 - 00;10;31;17
not all of them are working on pricing, but part of that is pricing.

00;10;31;17 - 00;10;36;01
And, just like your subscribers that are listening to me today

00;10;36;01 - 00;10;39;26
or listening to us today, you know, you make your money when you buy the account,

00;10;40;13 - 00;10;42;10
like the amount we're going to recover.

00;10;42;10 - 00;10;44;29
We can never recover more than 100 cents on the dollar.

00;10;44;29 - 00;10;46;05
So the upside is capped.

00;10;47;08 - 00;10;48;21
So you need to make sure you buy it.

00;10;48;21 - 00;10;50;03
Well, it's exactly like a stock.

00;10;50;03 - 00;10;51;27
If you buy it well, you’ll make money

00;10;51;27 - 00;10;54;01
Yeah, all things considered.

00;10;54;01 - 00;10;57;08
So that's the first. The other part,

00;10;57;08 - 00;11;01;22
Is the amount of time that we invest in meeting

00;11;01;22 - 00;11;05;04
with the banks and understanding them and what their strategies are and

00;11;05;04 - 00;11;06;00
how they're progressing.

00;11;06;00 - 00;11;09;00
So we invest a lot of time in the relationships

00;11;09;16 - 00;11;10;08
with the banks.

00;11;10;08 - 00;11;12;29
It's really instructive to how they're thinking and

00;11;12;29 - 00;11;15;25
and where they see consumers and helps us make sure

00;11;15;25 - 00;11;19;01
we consider everything when we cross our portfolios.

00;11;19;12 - 00;11;22;28
Yeah, the last is remuneration.

00;11;24;07 - 00;11;27;07
And the reason I mention this is because,

00;11;27;14 - 00;11;31;21
you know, in many businesses there are short term incentives.

00;11;32;09 - 00;11;35;22
In small financials, almost everyone has a short term incentive.

00;11;35;22 - 00;11;40;05
Pioneer does not. Our staff

00;11;40;05 - 00;11;44;19
or our leadership only get incentivised with long term rights

00;11;45;02 - 00;11;48;05
or long term shares that vest over 3 to 5 years.

00;11;48;17 - 00;11;54;01
So you have to earn them and then you get the actual benefit in 3 to 5 years time.

00;11;54;12 - 00;11;57;14
And that's really important because our team are focused on

00;11;58;06 - 00;12;00;27
the long term outcomes from what we do today.

00;12;02;01 - 00;12;02;10
So it

00;12;02;10 - 00;12;06;03
makes you cautious, makes you think very, very deeply

00;12;06;13 - 00;12;09;08
about how we're investing, because this isn't our money,

00;12;09;08 - 00;12;12;03
of course, this is our collective money.

00;12;12;03 - 00;12;15;06
You know, we're custodians of your subscribers

00;12;15;06 - 00;12;17;25
and all of our other shareholders’ money as we are of my own.

00;12;17;25 - 00;12;20;07
So we take that very seriously.

00;12;20;07 - 00;12;23;28
And it's a really important differentiating

00;12;23;28 - 00;12;27;18
guiding factor about Pioneer one I think is critical

00;12;27;18 - 00;12;30;21
and why we've been successful for such a long period of time.

00;12;31;18 - 00;12;34;18
Just before we got on this call, I do a podcast with Scott Phillips

00;12;34;18 - 00;12;35;20
from The Motley Fool.

00;12;35;20 - 00;12;38;02
I said, I'm speaking to Keith and he goes

00;12;38;02 - 00;12;39;24
Oh, we actually just spoke to him.

00;12;39;24 - 00;12;41;11
Ask him about remuneration.

00;12;41;11 - 00;12;44;14
So you've beat me to the punch and I think it is

00;12;44;25 - 00;12;47;25
worth highlighting there because it is

00;12;48;00 - 00;12;51;15
I mean, the way you lay it out, it sounds really obvious, but it is rare

00;12;51;19 - 00;12;55;23
and you know, Charlie Munger says, show me the incentive and I’ll

00;12;55;23 - 00;12;57;03
show you the outcome, right?

00;12;58;05 - 00;13;01;05
So it's kind of frustrating from a shareholders

00;13;01;05 - 00;13;05;08
point of view that we don't see better structured incentive plans.

00;13;05;08 - 00;13;10;01
I think the media, some sections get very obsessed about the quantum of pay,

00;13;10;10 - 00;13;15;08
but not whether, a more relevant question is how much value was created

00;13;15;08 - 00;13;18;27
for shareholders in in the derivation of that pay,

00;13;18;27 - 00;13;21;27
which I think is a far more subtle but important question.

00;13;21;27 - 00;13;23;17
Yeah, absolutely.

00;13;23;17 - 00;13;23;27
Yeah.

00;13;23;27 - 00;13;26;23
And look, it's, you know, again, it's

00;13;26;23 - 00;13;29;23
I had a great discussion with Scott on this

00;13;30;10 - 00;13;32;15
because it's not a subject

00;13;32;15 - 00;13;35;15
that frankly, many people invest time in

00;13;36;04 - 00;13;37;02
but it's so critical.

00;13;37;02 - 00;13;39;02
You know, we've got

00;13;39;02 - 00;13;40;28
10 or 11 people

00;13;40;28 - 00;13;45;26
that are charged with being part of the executive or leading,

00;13;46;13 - 00;13;48;29
you know, business streams in this business.

00;13;48;29 - 00;13;52;04
And we want to make sure that they're thinking about tomorrow.

00;13;52;04 - 00;13;53;18
You know, anyone can do it for today.

00;13;55;05 - 00;13;56;06
You know, having incentive

00;13;56;06 - 00;14;00;06
for spending money or buying accounts, which some in our sector do that.

00;14;00;06 - 00;14;02;20
That's easy, right? I mean, anyone can spend money.

00;14;02;20 - 00;14;05;18
It's a bit like having an incentive for how many new loans you write.

00;14;05;18 - 00;14;08;29
I'd rather have an incentive for how many new loans get paid in full.

00;14;09;07 - 00;14;11;17
Seems to make more sense to me.

00;14;11;17 - 00;14;15;09
Yes, you might write less loans, but if you get paid back on all of them,

00;14;15;09 - 00;14;17;06
you just happen to make more money.

00;14;17;06 - 00;14;18;29
Yep. Yep.

00;14;18;29 - 00;14;21;17
Yeah.

00;14;21;17 - 00;14;24;02
Well, before we move on from that, what are the KPIs

00;14;24;02 - 00;14;28;23
that that are measured against that granting of shares?

00;14;29;12 - 00;14;30;05
Sure.

00;14;30;05 - 00;14;33;05
So there are 2 gates.

00;14;33;06 - 00;14;34;28
The program runs over four years.

00;14;34;28 - 00;14;36;21
So you get

00;14;38;15 - 00;14;41;15
an award for lack of a better description on day one.

00;14;41;27 - 00;14;45;21
And then there is a measurement every year which is set by the board.

00;14;46;13 - 00;14;48;20
None of them relate to share price or anything like that.

00;14;48;20 - 00;14;51;16
So they relate to earnings

00;14;51;16 - 00;14;52;13
and proper earnings.

00;14;52;13 - 00;14;56;08
So that happens each year if you hit the earnings target.

00;14;56;08 - 00;14;58;00
So let's just say this year

00;14;58;00 - 00;15;02;19
the earnings target is 100, whatever that might be, and you get it.

00;15;03;02 - 00;15;04;29
You hold that and you've got it.

00;15;04;29 - 00;15;07;29
But then in four years time, you must have hit

00;15;08;03 - 00;15;10;23
a return on equity target.

00;15;10;23 - 00;15;15;02
So you still don't get your money for four years.

00;15;15;15 - 00;15;18;15
So if we do something that's highly dilutive to shareholders,

00;15;18;18 - 00;15;21;22
we, as we should, will not get paid.

00;15;22;03 - 00;15;23;19

00;15;23;19 - 00;15;27;11
And if we do something that protects the shareholder equity and grows it,

00;15;27;26 - 00;15;31;00
then of course, to your point, we should get paid.

00;15;31;07 - 00;15;33;12
And if we do it really, really well, it's all equity.

00;15;33;12 - 00;15;37;02
So hopefully there's some, there's some upside in the share price.

00;15;37;02 - 00;15;41;07
It's as they say, it's something that that I wish more companies did.

00;15;42;07 - 00;15;42;27
I'm a little bit

00;15;42;27 - 00;15;46;05
nervous to wade into this next area, not to make you worried at all,

00;15;46;05 - 00;15;49;21
but just because it can be, it can tie you up a little bit.

00;15;50;26 - 00;15;53;26
The accounting for your business

00;15;54;13 - 00;15;57;10
can be something I think that throws a lot of investors.

00;15;57;10 - 00;16;03;03
I had a quick squiz at the recent results and there was this liquidations

00;16;03;03 - 00;16;06;08
and there was a net revenue, there was an EBITDA figure

00;16;06;08 - 00;16;10;16
and then there's this massive loss down there like $33 million or something.

00;16;11;04 - 00;16;13;18
Now the way that I'm sort of

00;16;13;18 - 00;16;17;19
shooting from my understanding here, but I hope you can correct me or confirm that.

00;16;18;06 - 00;16;21;13
But really, when you when you dig into that, that includes

00;16;21;13 - 00;16;24;16
that you just made a huge investment in buying a bunch of ledgers.

00;16;25;03 - 00;16;27;15
And so that's recognised upfront.

00;16;27;15 - 00;16;31;15
Now you're going to be collecting that, no doubt, over a period of years.

00;16;33;23 - 00;16;35;24
But that's what's causing the loss.

00;16;35;24 - 00;16;38;21
And if you didn't make that investment, well, then

00;16;38;21 - 00;16;43;00
your earnings are going to fall off as as the existing assets are collected on.

00;16;43;00 - 00;16;44;20
Am I thinking about that the right way?

00;16;44;20 - 00;16;47;05
Is that is that something investors need to be aware of?

00;16;47;05 - 00;16;48;02
Yeah look, to a degree.

00;16;48;02 - 00;16;51;15
I mean, I certainly need to be aware of it and to a degree.

00;16;51;15 - 00;16;55;10
I mean, what happened in our particular case, Andrew, and why the stock price is

00;16;55;21 - 00;17;01;01
frankly is under NTA was we took some advice from our

00;17;01;01 - 00;17;03;25
then auditors PWC

00;17;03;25 - 00;17;07;12
very topical name at the moment. Back in 2017

00;17;07;12 - 00;17;10;13
with respect to the way that these assets were valued

00;17;11;07 - 00;17;14;19
and they changed their advice on us in 2019.

00;17;15;10 - 00;17;19;18
And that set us on this sort of journey which resulted in us needing

00;17;19;19 - 00;17;23;09
to refinance our debt facility is at the top of COVID,

00;17;23;20 - 00;17;27;15
and we had to pay an exceptionally high price

00;17;28;28 - 00;17;30;05
for the debt that funds

00;17;30;05 - 00;17;33;05
or goes to fund that part of our business.

00;17;33;28 - 00;17;36;02
So there's 2 things you'll see in our numbers.

00;17;36;02 - 00;17;40;09
The first is that top line, which for the 9 months was $100 million.

00;17;40;09 - 00;17;42;27
That's the cash collections in our business.

00;17;42;27 - 00;17;46;25
We actually had $100 million of payments physically coming to the book.

00;17;47;02 - 00;17;48;21
People repaying their loans.

00;17;48;21 - 00;17;50;19
Yeah, correct.

00;17;50;19 - 00;17;53;19
So that was for the 9 months and that's up about

00;17;53;28 - 00;17;56;26
just shy of 50% on the prior corresponding period.

00;17;56;26 - 00;17;57;27
Really good result.

00;17;57;27 - 00;18;01;00
But what we should be doing because we've invested a lot of money

00;18;01;09 - 00;18;04;09
so we need to be getting that money back.

00;18;04;17 - 00;18;07;23
Then we have a line called amortisation,

00;18;07;23 - 00;18;10;23
which is effectively the cost of goods sold line.

00;18;11;21 - 00;18;13;17
Okay, so

00;18;13;17 - 00;18;16;17
not unlike being at a shop, you know, you have a can of soup,

00;18;17;07 - 00;18;20;05
sell it for $2 and it costs you a dollar, you make a buck.

00;18;20;05 - 00;18;23;28
So we have that line and that's what drives our net revenue,

00;18;24;00 - 00;18;28;06
our revenue line that you referred to, and that includes a range of things.

00;18;28;06 - 00;18;31;20
Some of it is impairment from stuff that we buy today that

00;18;32;20 - 00;18;35;24
we might change the valuation or write down the valuation.

00;18;35;24 - 00;18;40;10
for some reason, some of it includes, or most of it is, is that

00;18;40;18 - 00;18;45;04
the decrease in value of our asset because we have recovered it in cash.

00;18;46;17 - 00;18;50;08
And the big impact into our number at the moment is our interest bill.

00;18;50;08 - 00;18;53;25
So we're paying north of 11% for our interest.

00;18;53;25 - 00;18;57;08
It's about 30 odd million dollars in interest a year.

00;18;58;00 - 00;18;59;09
We've got EBITDA this year.

00;18;59;09 - 00;19;03;12
I think we're on track for well over $90 million in EBITDA.

00;19;05;02 - 00;19;08;02
And it's not the best

00;19;08;18 - 00;19;10;23
measure of numbers

00;19;10;23 - 00;19;14;09
in our business, Andrew, because we've got a big amortisation line.

00;19;14;19 - 00;19;18;16
But the reason we publish that number is it shows the cash

00;19;18;16 - 00;19;22;09
generating abilities of this business and the

00;19;22;16 - 00;19;26;14
the amortisation part, the $40 million

00;19;26;14 - 00;19;30;00
up until for the 9 months of charges we actually it's non-cash.

00;19;30;00 - 00;19;32;22
So we reinvest that back into growing our business.

00;19;34;12 - 00;19;36;00
The opportunity in our business

00;19;36;00 - 00;19;39;14
from here is we're back to profitability at a statutory line.

00;19;39;24 - 00;19;42;24
So true profitability this year

00;19;42;28 - 00;19;45;04
and then later on this year we have the opportunity

00;19;45;04 - 00;19;48;04
to refinance and reduce our cost of funds down,

00;19;48;28 - 00;19;51;09
which we expect to come down quite heavily.

00;19;51;09 - 00;19;56;00
And all of that immediately drops to the bottom line.

00;19;56;14 - 00;19;58;25
Yeah. Yeah. Gotcha.

00;19;58;25 - 00;20;01;12
And I suppose that that's also something to be mindful of

00;20;01;12 - 00;20;05;04
in terms of cash flows versus statement of income and stuff as well.

00;20;05;11 - 00;20;08;11
There's going to be features of that in there.

00;20;09;25 - 00;20;15;25
What to some extent, you know, accounting is a dark art, right?

00;20;16;02 - 00;20;20;21
Your best faith kind of expectations is sort of priced in,

00;20;20;21 - 00;20;23;21
but they will get changed from time to time.

00;20;23;21 - 00;20;27;24
How do investors sort of look at that when you see perhaps non-cash impairments

00;20;27;24 - 00;20;29;00
and these kinds of things?

00;20;29;00 - 00;20;32;25
I guess it ultimately just reflects that in that particular asset, you know,

00;20;32;25 - 00;20;35;25
it didn't recover at the rates expected.

00;20;35;28 - 00;20;39;27
But is there going to be in even the most idealistic scenario,

00;20;39;27 - 00;20;42;27
some variation in that from period to period?

00;20;43;01 - 00;20;47;25
Or is it something that should be more uncommon?

00;20;47;26 - 00;20;49;21
II'm trying to sort of get at

00;20;49;21 - 00;20;52;11
that when we see these kinds of things, is this kind of like

00;20;52;11 - 00;20;54;22
well there's always going to be a background of that.

00;20;54;22 - 00;20;57;11
It's done for accounting reasons and that's the reasons for it.

00;20;57;11 - 00;21;00;22
Or is it something that everything going well

00;21;00;22 - 00;21;04;11
should be a more uncommon kind of occurrence?

00;21;04;21 - 00;21;06;25
Yeah, Andrew, it's very much the latter.

00;21;08;06 - 00;21;11;04
Again, a couple of things feed into this, so

00;21;11;04 - 00;21;14;18
firstly, in our case, you know, we've had a couple of years of pretty

00;21;14;18 - 00;21;18;00
significant losses and through that period we took writedowns

00;21;19;09 - 00;21;22;09
as much as anything, dare I say, because we could,

00;21;22;23 - 00;21;25;02
you know, equity markets have been depressed,

00;21;25;02 - 00;21;27;27
our share price was depressed, we weren't going to make a profit anyway.

00;21;27;27 - 00;21;30;27
So we took the opportunity to do that.

00;21;31;28 - 00;21;34;28
What I will say is that in the future, you know,

00;21;35;00 - 00;21;39;13
this is a relatively stable business, clearly

00;21;39;23 - 00;21;43;24
we have portfolios that we don't recover as much as we expected to.

00;21;43;24 - 00;21;46;19
I mean, we're the same as any investor.

00;21;46;19 - 00;21;49;19
We make some decisions better than we make others.

00;21;50;15 - 00;21;53;15
The intent, of course, is to make more better decisions.

00;21;54;05 - 00;21;58;00
But they generally balance out through a journey with the ones that we

00;21;58;00 - 00;21;59;12
we do better than we expected.

00;21;59;12 - 00;22;03;09
So we expect the amortisation to be fairly stable from here,

00;22;03;23 - 00;22;06;13
but it goes to that point again on rem.

00;22;06;13 - 00;22;09;27
You know, if we do something wrong today in our business,

00;22;10;10 - 00;22;13;24
it absolutely comes out in 3 or 4 years time.

00;22;14;24 - 00;22;15;20
Okay.

00;22;15;20 - 00;22;18;29
And that's why our incentivisation doesn't pay out

00;22;19;13 - 00;22;23;11
until that event has passed effectively.

00;22;23;19 - 00;22;27;03
So that, you know, shareholders have the security of knowing that

00;22;27;13 - 00;22;30;25
they're making decisions for the long term value of this business.

00;22;31;09 - 00;22;34;09
And if we get it wrong, management is stuck holding the baby.

00;22;34;09 - 00;22;38;14
You know, we're the ones that that are going to suffer

00;22;38;14 - 00;22;41;14
the largest financial impact.

00;22;41;14 - 00;22;43;07
Obviously, we're not planning on that.

00;22;43;07 - 00;22;47;01
Sure, it's really helpful.

00;22;48;17 - 00;22;53;03
Speaking about the industry more broadly, what tends to drive

00;22;53;03 - 00;22;57;10
the amount of, want of a better term, inventory that that is out there?

00;22;57;23 - 00;23;01;22
I mean, there's a couple of ways of looking at it, but in one way

00;23;01;22 - 00;23;03;10
it feels a bit countercyclical.

00;23;03;10 - 00;23;05;23
So when no one likes tough economic times,

00;23;05;23 - 00;23;08;23
but from a certain viewpoint is that more stock that's available.

00;23;09;06 - 00;23;11;03
But then on the other hand, is it harder to collect?

00;23;11;03 - 00;23;13;12
So it's it's sort of wheels within wheels there a bit.

00;23;13;12 - 00;23;15;24
Can you can you clarify it out a bit for us?

00;23;15;24 - 00;23;18;06
Yeah, for sure. I mean it is a bit of a misnomer.

00;23;18;06 - 00;23;22;03
People think exactly to your point that in tougher times

00;23;22;03 - 00;23;23;11
it's going to be more dead around.

00;23;23;11 - 00;23;25;24
And that's true to a degree.

00;23;27;08 - 00;23;29;01
But what actually

00;23;29;01 - 00;23;32;00
drives it is the volume of originations.

00;23;32;01 - 00;23;36;14
And if you think about the proliferation of non-bank lenders

00;23;36;14 - 00;23;37;21
over the course of the last four

00;23;37;21 - 00;23;41;06
or 5 or 6 years, you know, the ones that sit below the banks,

00;23;41;20 - 00;23;45;27
they've been lending money at a rate of knots, huge amount

00;23;45;27 - 00;23;50;22
and been taking on more risk than a bank might typically take on.

00;23;51;10 - 00;23;54;18
And that in itself drives inventory volumes.

00;23;55;00 - 00;23;57;00
It doesn't mean that risk is unreasonable.

00;23;57;00 - 00;24;00;03
It just means that that there's more volume that's flowing through.

00;24;00;13 - 00;24;05;10
So that's certainly one. The challenges in our business economically

00;24;06;12 - 00;24;10;23
for, you know, for a shareholder to be aware of really revolve around

00;24;10;23 - 00;24;11;26
not so much interest rates

00;24;11;26 - 00;24;15;03
because the very vast majority of our consumers do not own a home.

00;24;16;12 - 00;24;17;05
It's you know,

00;24;17;05 - 00;24;21;08
it's well over 90% of our consumers don't own a home,

00;24;21;21 - 00;24;26;03
so they're not feeling interest rates in the same way that a home owner does.

00;24;27;01 - 00;24;28;00
But unemployment.

00;24;28;00 - 00;24;32;18
So, you know, unemployment to go from, you know, 3 and a half percent

00;24;32;18 - 00;24;35;29
where it is today are 3.7 to 7 or 8%,

00;24;36;12 - 00;24;40;18
then you're going to see some degradation in performance in our book.

00;24;40;25 - 00;24;42;27
And fortunately that's not forecast, of course.

00;24;42;27 - 00;24;45;27
And we've got this really unique situation at the moment where

00;24;46;11 - 00;24;48;10
where everyone that wants a job has got a job.

00;24;48;10 - 00;24;51;06
It's quite unusual

00;24;51;06 - 00;24;54;06
time in the, you know, in the economic

00;24;54;14 - 00;24;57;14
history of this country where you've got cost of living rises,

00;24;57;14 - 00;25;01;14
interest rate rises, inflation and full employment.

00;25;02;01 - 00;25;05;29
They normally don't all go together, but that's really good for our business.

00;25;06;07 - 00;25;07;06
Okay.

00;25;07;06 - 00;25;10;22
And I mean, inflation's a very hot sort of topic at the moment.

00;25;10;22 - 00;25;13;19
I guess it's sort of 2 questions, just one,

00;25;13;19 - 00;25;16;14
we asked this of Credit Corp, you guys are on the front line.

00;25;16;14 - 00;25;18;04
You know, we read a lot of broad stats.

00;25;18;04 - 00;25;20;06
They're very often dated by the time they're released.

00;25;20;06 - 00;25;24;02
But you're sort of saying it day to day outside of the business, in the industry.

00;25;24;02 - 00;25;27;26
What's the read on the on the general state of the economy

00;25;28;00 - 00;25;28;18
at present?

00;25;29;23 - 00;25;32;15
Yeah, I think, you know, from our perspective,

00;25;32;15 - 00;25;36;13
we're a tad surprised at how resilient the consumers are.

00;25;38;05 - 00;25;41;05
And I think that's true for just about anyone really.

00;25;42;00 - 00;25;46;00
You know, we're only now just seeing commentary in the press from,

00;25;46;01 - 00;25;49;01
you know, from some of the retailers about

00;25;49;29 - 00;25;52;29
depressed purchasing power and what that impact is.

00;25;53;02 - 00;25;56;02
I mean, certainly from our perspective, our customers

00;25;57;01 - 00;26;00;25
are more likely to go on to a payment arrangement by us of over time

00;26;01;08 - 00;26;04;27
currently than they are to pay lump sums, we think that is smart.

00;26;04;27 - 00;26;08;10
You know, save your you know, give yourself a cash

00;26;08;10 - 00;26;11;10
buffer and so forth.

00;26;11;13 - 00;26;15;02
You know, people are definitely concerned.

00;26;15;29 - 00;26;17;22
There's no doubt about that.

00;26;17;22 - 00;26;20;22
But they're focused on

00;26;21;23 - 00;26;23;21
they're focused on reducing the debt.

00;26;23;21 - 00;26;25;07
I think the frustration

00;26;26;11 - 00;26;27;28
that we see

00;26;27;28 - 00;26;30;28
from an economy perspective at least, you hear

00;26;31;08 - 00;26;34;16
there's a lot of experts that are on television talking about,

00;26;35;12 - 00;26;36;24
including the RBA, right.

00;26;36;24 - 00;26;40;03
Where they're talking about what's happening in the general community.

00;26;40;11 - 00;26;44;20
They don't seem to have any touch points with the general community

00;26;44;20 - 00;26;48;25
if they spent some time in the office speaking to our customers

00;26;49;04 - 00;26;52;00
or very real people,

00;26;52;00 - 00;26;56;00
you know, who are doing it tough and who really have cut back.

00;26;56;00 - 00;26;58;24
You know, I went to a

00;26;58;24 - 00;27;03;05
show the other week and were talking to a family, you know,

00;27;03;05 - 00;27;09;10
the lady is a grandmother with some teenage grandchildren.

00;27;09;10 - 00;27;10;22
She was talking about how she can't afford

00;27;10;22 - 00;27;13;22
lamb chops anymore when they come for dinner,

00;27;14;09 - 00;27;15;09

00;27;15;09 - 00;27;17;12
So they can pay their bills and they pay their bills,

00;27;17;12 - 00;27;18;27
but they're not buying lamb chops anymore.

00;27;18;27 - 00;27;22;04
I mean, that seems such a basic thing in a country that's

00;27;22;12 - 00;27;25;12
got all the agriculture that we have that you should be able to afford.

00;27;25;27 - 00;27;28;10
And I think a lot of those things are lost on

00;27;28;10 - 00;27;31;06
so many people that drive the

00;27;31;06 - 00;27;34;29
you know, drive the decisions, the power, this power, our country.

00;27;36;06 - 00;27;37;01
That's a real shame.

00;27;37;01 - 00;27;40;18
But I mean, we've got to we've got an office full of people that

00;27;40;24 - 00;27;42;12
they can the can share those stories.

00;27;42;12 - 00;27;46;19
And you know, they're alert and they’re concerned.

00;27;47;17 - 00;27;50;12
Oh, it's such an interesting rabbit hole that you present there.

00;27;50;12 - 00;27;52;24
I'm going to avoid it a bit. But I couldn't agree more.

00;27;52;24 - 00;27;55;24
I mean, some of the commentary seems to suggest that it's that

00;27;56;17 - 00;27;58;24
fear of society, for want of a better phrase, that sort of

00;27;58;24 - 00;28;00;04
driving the inflation.

00;28;00;04 - 00;28;02;05
But it's really not right.

00;28;02;05 - 00;28;05;15
So there's a lot of bad takes out there.

00;28;08;17 - 00;28;10;25
I guess another

00;28;10;25 - 00;28;13;12
question I wanted to ask you about, I know you've made reference to it

00;28;13;12 - 00;28;16;22
in some recent material, but the importance of technology

00;28;16;22 - 00;28;21;16
for an operation like yours, it is a very actuarial kind of approach.

00;28;22;01 - 00;28;24;18
And then you've got to manage the assets, which are the people that collect

00;28;24;18 - 00;28;28;06
is the phone calls, the databases of clients, etcetera, etcetera.

00;28;28;06 - 00;28;30;15
Can you speak to some of the investments you've made there?

00;28;30;15 - 00;28;34;01
And I guess what foundation does that provide for

00;28;34;01 - 00;28;37;28
the next leg of growth? Is the CapEx on that kind of,

00;28;38;14 - 00;28;40;20
I know with IT the CapEx never stops.

00;28;40;20 - 00;28;45;04
But in terms of the big bites, have they been taken?

00;28;46;03 - 00;28;46;11
Yeah.

00;28;46;11 - 00;28;49;26
Well, look, we've made huge investment in recent times.

00;28;49;26 - 00;28;52;26
I mean, like everyone, the investment in cyber is

00;28;53;28 - 00;28;56;28
front of mind and that sort of increased

00;28;57;00 - 00;28;59;29
quite substantially in recent times.

00;29;00;11 - 00;29;03;04
Most of our investment has been around compliance

00;29;03;04 - 00;29;06;25
and regulatory type drivers.

00;29;06;25 - 00;29;11;21
So, you know, as I mentioned earlier, we're a heavily regulated business.

00;29;11;21 - 00;29;14;25
You know, there are rules around how many times you can call someone

00;29;14;25 - 00;29;17;25
what time of the day you can call someone,

00;29;18;00 - 00;29;19;24
you know, how you can communicate with them,

00;29;19;24 - 00;29;21;25
what you're allowed to tell them, when and so forth.

00;29;21;25 - 00;29;23;13
So that all needs to be managed.

00;29;23;13 - 00;29;26;05
So that's all managed very, very well by us.

00;29;26;05 - 00;29;28;00
I mean, I think the future for our business

00;29;28;00 - 00;29;31;22
is customers share with us an incredible amount of information.

00;29;32;03 - 00;29;34;01
So, you know, at the beginning of this conversation,

00;29;34;01 - 00;29;37;01
I said that, you know, there was sort of five key drivers

00;29;37;12 - 00;29;41;05
of why people get into debt or why they might end up with us.

00;29;41;05 - 00;29;43;06
And, you know, if I'll give you an example,

00;29;44;18 - 00;29;47;18
you know, people ring us and say, my son's got asthma.

00;29;47;19 - 00;29;50;19
You know, he's a chronic asthmatic and I don't know where to turn to on

00;29;50;25 - 00;29;51;18
and so forth.

00;29;51;18 - 00;29;54;16
You know, we have Medicare and we have all of these great systems of support.

00;29;54;16 - 00;29;57;16
But people are actually, you know, they need help

00;29;57;16 - 00;29;58;17
working through these things.

00;29;58;17 - 00;30;03;01
And one of the future parts of this business, in addition to managing

00;30;03;01 - 00;30;08;17
customer accounts, is how can we solve those problems for our customers?

00;30;09;26 - 00;30;10;23
How can we solve them?

00;30;10;23 - 00;30;14;19
So they share all of this information with us, but the can we use that

00;30;14;19 - 00;30;18;12
information and solve a problem for them along the way?

00;30;18;12 - 00;30;23;17
And that's a really exciting opportunity for us. To help drive that

00;30;23;17 - 00;30;27;08
we're currently undergoing a a core system replacement.

00;30;27;08 - 00;30;30;13
So replacing the core system

00;30;30;13 - 00;30;33;14
that that underpins our data

00;30;34;12 - 00;30;37;12
so that it's enterprise grade and certainly,

00;30;37;23 - 00;30;41;20
you know, at a world standard and that actually starts

00;30;42;16 - 00;30;44;01
we've been working on that for about a year

00;30;44;01 - 00;30;47;06
now and it's the implementation that starts in early July.

00;30;47;27 - 00;30;50;27
So that's when it's well costed and

00;30;51;03 - 00;30;54;24
and planned out for in our business we think that will add

00;30;55;28 - 00;30;57;26
a level of

00;30;57;26 - 00;31;00;28
of maturity and a level of

00;31;01;25 - 00;31;04;29
greater granularity in the way we’ll be able to deal with data

00;31;05;08 - 00;31;08;08
so that we can service consumers better than we might have,

00;31;08;12 - 00;31;10;03
you know, we might be currently.

00;31;10;03 - 00;31;13;02
Yeah. Yeah.

00;31;13;02 - 00;31;16;00
But it's a long term, you know, you understand this,

00;31;16;00 - 00;31;17;10
I mean it's a long term game.

00;31;17;10 - 00;31;20;00
You know, data is

00;31;20;00 - 00;31;23;00
data takes a lot of time to collate

00;31;24;03 - 00;31;26;26
meaningful data and then it takes a lot of time to understand it.

00;31;26;26 - 00;31;29;26
And then, of course, the way we use that data,

00;31;30;05 - 00;31;33;05
we have to be incredibly respectful

00;31;33;21 - 00;31;35;05
of the way we use that data.

00;31;35;05 - 00;31;38;27
You know, there's no point me talking to Andrew Page

00;31;38;27 - 00;31;41;27
about something that he doesn't want me to talk to him about

00;31;42;15 - 00;31;44;11
and understanding how to connect with Andrew

00;31;44;11 - 00;31;47;10
and build a relationship with him and solve

00;31;47;11 - 00;31;49;22
the problem that he might not necessarily

00;31;49;22 - 00;31;53;16
have thought about me as the problem solver in the first place is

00;31;53;29 - 00;31;58;16
is something that we're learning to do for the future of our business.

00;31;58;27 - 00;32;00;29
Is that another source of edge,

00;32;02;03 - 00;32;04;25
in the sense that, you know,

00;32;04;25 - 00;32;07;23
the insights gained from that sort of data, what works,

00;32;07;23 - 00;32;10;27
what doesn't, the life circumstances of people

00;32;10;27 - 00;32;14;03
does that enable you, at least in theory, to a

00;32;15;07 - 00;32;18;04
to more effectively assess recovery rates and pricing

00;32;18;04 - 00;32;19;23
and all of that kind of stuff?

00;32;19;23 - 00;32;24;14
Yeah, it absolutely all goes into the goes into the mix.

00;32;24;14 - 00;32;27;12
There's no doubt about that.

00;32;27;12 - 00;32;29;26
You know, I think

00;32;29;26 - 00;32;32;07
the bit, and it's an iterative process right.

00;32;32;07 - 00;32;36;17
So we're getting better at it every single day

00;32;37;17 - 00;32;39;27
and we're already very, very good at it.

00;32;39;27 - 00;32;43;19
But if we can do a couple of things in our business,

00;32;43;19 - 00;32;46;20
if I can work out the better time to provide service to you, to

00;32;46;20 - 00;32;50;00
contact you, that means my business is more efficient,

00;32;50;00 - 00;32;51;22
I've got less compliance risk.

00;32;51;22 - 00;32;53;11
Yeah, that's good for my business.

00;32;53;11 - 00;32;57;07
That's good for you because I'm servicing you at the appropriate time.

00;32;57;07 - 00;32;59;26
So that's a very big piece of work for us.

00;32;59;26 - 00;33;01;17
The other part is,

00;33;01;17 - 00;33;05;22
you know, we have a portfolio of about $2 billion in receivables

00;33;06;08 - 00;33;09;17
and there's a reasonable portion of those, about 40% of those will

00;33;09;17 - 00;33;10;14
never make a payment.

00;33;11;22 - 00;33;12;29
It's a big number.

00;33;12;29 - 00;33;16;14
But if I can work out how to connect with those people

00;33;16;24 - 00;33;20;22
and reach into that 40%, reduce it from 40 to 39 or 38,

00;33;21;04 - 00;33;24;26
that's a very, very material number that's going to flow back into the P&L

00;33;24;26 - 00;33;26;04
on the balance sheet of this business.

00;33;26;04 - 00;33;30;03
So, you know, they’re two of the big things that we're working on all the time.

00;33;30;13 - 00;33;32;28
Yeah, fascinating.

00;33;32;28 - 00;33;35;03
One of the other

00;33;35;03 - 00;33;38;05
conundrums, not the right word, but this is a business that

00;33;39;07 - 00;33;43;20
as you get larger, you are going to need more and more capital.

00;33;43;20 - 00;33;45;01
It's a capital hungry business.

00;33;45;01 - 00;33;48;26
You've got to lay it out upfront and then collect on it later.

00;33;49;28 - 00;33;53;27
I'm just wondering if you could throw a few words towards that aspect of it

00;33;53;27 - 00;33;57;03
and just the general thoughts you have with sort of capital management

00;33;57;03 - 00;33;59;19
and the rest of it. Like, you know, there is

00;34;01;04 - 00;34;02;14
it Collection House or someone.

00;34;02;14 - 00;34;04;05
I mean, others have got themselves in trouble.

00;34;04;05 - 00;34;05;02
If I look at this,

00;34;05;02 - 00;34;07;23
I'm going to buy all of that and then I can't manage it effectively.

00;34;07;23 - 00;34;11;00
And then it just things can unwind very, very, very quickly.

00;34;11;14 - 00;34;14;09
So there's a real discipline

00;34;14;09 - 00;34;17;19
in actually saying, no, well, we're not going to buy that

00;34;17;25 - 00;34;21;21
because the numbers just don't make sense or yes, we might be able to make it make sense.

00;34;21;21 - 00;34;25;16
But the access to capital that we have over here at the moment,

00;34;25;16 - 00;34;27;09
theres factors to consider with all of that, it's

00;34;27;09 - 00;34;30;23
just it's a bit of a juggling game and just core to the skill.

00;34;30;23 - 00;34;32;12
It strikes me as to what you do.

00;34;32;12 - 00;34;35;17
So can you talk about that, I guess your general thoughts

00;34;35;17 - 00;34;40;15
on capital management and how they apply to Pioneer specifically?

00;34;41;00 - 00;34;41;20
Yeah.

00;34;41;20 - 00;34;45;19
So we I mean, the way that the Australian market

00;34;46;18 - 00;34;47;12
typically looks

00;34;47;12 - 00;34;50;26
at our business is like an LVR, a Loan Value Ratio

00;34;50;26 - 00;34;55;15
not too dissimilar to a house. Ours was at about 65%.

00;34;55;15 - 00;34;58;21
So 60 to 65% funded by debt

00;34;58;21 - 00;35;01;23
and the other 35 to 40% funded by equity

00;35;02;09 - 00;35;04;21
debt gave us a very large buffer

00;35;04;21 - 00;35;09;03
when we went through the challenges of 2020 and 2021.

00;35;09;12 - 00;35;10;21
We used up a fair bit of that

00;35;10;21 - 00;35;16;03
buffer and it now sits at about 80% LVR, now against international peers

00;35;16;03 - 00;35;19;02
that's actually below average,

00;35;19;20 - 00;35;21;07
but it is critical to have a buffer

00;35;21;07 - 00;35;24;07
and over time we will now seek to reduce that buffer

00;35;24;26 - 00;35;28;00
and we expect to do that through the generation of profits

00;35;28;22 - 00;35;32;13
over the next couple of years.

00;35;33;03 - 00;35;37;23
And that's really important in terms of how we invest.

00;35;39;04 - 00;35;40;03
Again, we

00;35;40;03 - 00;35;44;10
have you know, we've got 5 people in the room for our investment committee,

00;35;44;10 - 00;35;47;10
so we have an independent and board of directors.

00;35;48;08 - 00;35;50;11
There is an investment delegation

00;35;50;11 - 00;35;54;21
down to the executive and there are 5 of us that sit on that.

00;35;55;11 - 00;35;58;11
We're all incentivised in the same way, but our vesting

00;35;58;22 - 00;36;01;01
is at different periods of time.

00;36;01;01 - 00;36;06;09
Okay, so the CFO, who conceivably is the most conservative person,

00;36;06;09 - 00;36;10;03
he gets the bulk of his vesting last.

00;36;10;03 - 00;36;13;15
The Chief Operating Officer who's responsible for operationalising this business,

00;36;14;00 - 00;36;16;19
she gets the bulk of hers first.

00;36;16;19 - 00;36;19;16
And I'm the umpire, for lack of a better description,

00;36;19;16 - 00;36;20;22
I sit in the middle.

00;36;20;22 - 00;36;23;22
But the way that we work in our business

00;36;24;00 - 00;36;26;19
is if it falls into delegation,

00;36;26;19 - 00;36;31;01
you need a unanimous position before we proceed with any investment.

00;36;31;14 - 00;36;35;29
And there's never a doubt. One person says no, we don't do it.

00;36;39;08 - 00;36;40;07
And it's critical.

00;36;40;07 - 00;36;45;18
And again, that goes back to, if it's not a good investment,

00;36;45;18 - 00;36;49;20
we simply don't do it because we're not incentivised to do it.

00;36;50;00 - 00;36;52;15
We're incentivised to make sure we make smart investments.

00;36;52;15 - 00;36;54;07
I'll give you a very

00;36;54;07 - 00;36;55;27
quick example, if you don't mind.

00;36;55;27 - 00;37;00;10
We've guided the market to $60 million of investment

00;37;00;10 - 00;37;03;10
this year, $61 million in investment this year.

00;37;04;05 - 00;37;07;09
And typically our investment kind of runs at a run rate

00;37;08;10 - 00;37;11;12
to the end of November.

00;37;11;17 - 00;37;13;13
So for the five months at the end of November,

00;37;13;13 - 00;37;16;13
we had invested only $10 million.

00;37;18;27 - 00;37;20;12
And the reason we invested only

00;37;20;12 - 00;37;24;05
$10 million was because we didn't like the returns that we were seeing.

00;37;24;07 - 00;37;28;06
Number one, in some things, others we didn't mind the returns,

00;37;28;14 - 00;37;30;06
but we knew there were better days.

00;37;31;04 - 00;37;32;17
And they came in December and

00;37;32;17 - 00;37;35;17
we invested $32 million in December.

00;37;37;07 - 00;37;39;03
But the impact on

00;37;39;03 - 00;37;42;03
the business is you have these short term

00;37;42;29 - 00;37;44;07
revenue impacts, right?

00;37;44;07 - 00;37;48;19
Because I didn't have as much new debt in the business for those five months.

00;37;48;25 - 00;37;50;10

00;37;50;10 - 00;37;53;05
but, you know, our business is big enough and it's strong

00;37;53;05 - 00;37;56;05
enough and robust enough to be able to sustain that

00;37;57;02 - 00;38;00;05
so that you can go and invest when it's most appropriate.

00;38;00;17 - 00;38;02;22
And that's what we seek to do.

00;38;02;22 - 00;38;05;24
So I think it's really important for investors to understand.

00;38;05;24 - 00;38;10;14
I mean, too often we look at these very artificial time periods.

00;38;10;14 - 00;38;11;17
It's, you know, time

00;38;11;17 - 00;38;15;14
it takes for the Earth to go around the Sun and for some businesses,

00;38;16;01 - 00;38;19;13
you’re a supermarket or something like that, you know, it's as good as any

00;38;19;13 - 00;38;21;18
and there's going to be a lot of similarities.

00;38;21;18 - 00;38;23;21
But this is a business like a lot of others.

00;38;23;21 - 00;38;25;29
I think it's underappreciated where,

00;38;25;29 - 00;38;28;06
you know, the opportunities are either there or it isn't.

00;38;28;06 - 00;38;31;06
And doing something for the sake of doing something or meeting a budget or

00;38;31;06 - 00;38;35;01
whatever is just, it just is really counterproductive.

00;38;35;12 - 00;38;37;20
And there are a lot of downside consequences.

00;38;37;20 - 00;38;40;01
All that is that's something you feel you need to sort of

00;38;41;26 - 00;38;44;15
well, try to communicate with investors

00;38;44;15 - 00;38;48;15
to sort of say whatever reason, lumpiness is seen as a bad thing.

00;38;48;15 - 00;38;53;01
And I can get why, because we love that regularity and consistency with things.

00;38;53;16 - 00;38;56;04
But I guess if you wanted to sort of broaden that lens through

00;38;56;04 - 00;38;59;00
which you're looking and say, let's look over an economic cycle

00;38;59;00 - 00;39;02;13
3 or 4 or 5 years sort of a period,

00;39;02;28 - 00;39;06;11
then you sort of say to investors that, look, it will be a little bit lumpy

00;39;06;19 - 00;39;08;05
A - because of the inventory that's out there

00;39;08;05 - 00;39;11;29
B - because of our read of the land. C - because of access to capital

00;39;11;29 - 00;39;14;02
and considerations like that.

00;39;14;02 - 00;39;16;13
But our purpose here isn't to try and sort of predict exactly

00;39;16;13 - 00;39;18;18
what's going to happen in the next 12 months and do this.

00;39;18;18 - 00;39;21;18
But it's more about sort of saying, here's our capital,

00;39;21;25 - 00;39;25;07
is the opportunities to deploy it when it makes sense, will do it.

00;39;25;10 - 00;39;27;02
When it doesn't, we won't.

00;39;27;02 - 00;39;29;26
Or is that oversimplifying it? No, no, it's

00;39;31;05 - 00;39;34;05
you know, that's exactly the way we look at it.

00;39;34;12 - 00;39;35;22
And we do have those discussions.

00;39;35;22 - 00;39;38;22
And there are some investors that simply don't like that as an answer.

00;39;38;23 - 00;39;42;22
And if that's the case, then frankly, they should invest their money elsewhere.

00;39;43;19 - 00;39;46;19
You know, where

00;39;46;26 - 00;39;48;21
you know, if you

00;39;48;21 - 00;39;52;27
if you don't invest the capital wisely, clearly you're going to tear it up.

00;39;52;27 - 00;39;54;26
Right. You can't get it back.

00;39;54;26 - 00;39;56;08
You can't make back what's gone.

00;39;56;08 - 00;39;58;26
So we're very protective of that

00;39;58;26 - 00;40;02;28
and making sure we invest at the right time is critical.

00;40;02;28 - 00;40;06;11
If we didn't have the $32 million of opportunity in December

00;40;06;21 - 00;40;11;27
and it came in January, we would have explained to our shareholders, look,

00;40;12;06 - 00;40;15;23
we were only able to invest, you know, 10 or $12 million in the first 6 months.

00;40;16;05 - 00;40;19;15
We still expect to do $61 million

00;40;19;20 - 00;40;21;04
and this is why.

00;40;22;02 - 00;40;23;20
And, you

00;40;23;20 - 00;40;26;20
know, it takes a long time to build credibility around your

00;40;27;18 - 00;40;31;10
around your intention, around your your integrity, around those things

00;40;32;15 - 00;40;35;04
but you'll never do it if you don't start.

00;40;35;04 - 00;40;37;22
And if you don't, you don't always behave that way.

00;40;37;22 - 00;40;40;22
And I think we've proven time and again that we do.

00;40;41;05 - 00;40;43;24
Yeah. Yeah. Fantastic.

00;40;43;24 - 00;40;46;18
The other thing that investors always want to know is sort of growth.

00;40;46;18 - 00;40;48;15
And you know, when we try and sort of thumbsuck

00;40;48;15 - 00;40;51;21
and look out to the horizon, there are things like market share,

00;40;51;22 - 00;40;57;14
you know, who else is sort of out there? Is this a story of increased market share?

00;40;57;14 - 00;41;02;14
Is this a story of increasing operational efficiency and margins?

00;41;02;28 - 00;41;07;10
Is it a story of branching into 2 different segments?

00;41;07;10 - 00;41;10;08
You said you're very focused on the banks and I know there's certain areas

00;41;10;08 - 00;41;12;18
you're not going to go, but there are other areas you could go

00;41;12;18 - 00;41;15;25
not just within the financial space, but geographically

00;41;16;07 - 00;41;19;18
when we're sort of looking out over a meaningful period of time, five,

00;41;19;18 - 00;41;23;14
ten years plus, is it the case where it's sort of like, no, we know our nation,

00;41;23;17 - 00;41;26;03
this is where we're happy to play, there's good opportunities here.

00;41;26;03 - 00;41;27;13
This is it for now.

00;41;27;13 - 00;41;30;23
Or are you open to sort of other sort of growth avenues?

00;41;31;18 - 00;41;34;18
Yeah, look, I think for us very much is

00;41;34;28 - 00;41;38;15
we've got to stick to our lane for a period of time.

00;41;38;15 - 00;41;41;08
yet we do want to reduce the leverage and we don't want to do that

00;41;41;08 - 00;41;43;10
and we won't do that through simply rising equity.

00;41;43;10 - 00;41;46;01
That's not the best use of

00;41;47;10 - 00;41;50;02
of, you know, it's not in the best interests of shareholders.

00;41;50;02 - 00;41;53;13
So generating the cash to bring it down

00;41;53;17 - 00;41;56;16
modestly over time is important.

00;41;57;27 - 00;42;00;07
The other, you know, the other part of

00;42;00;07 - 00;42;03;07
that is there is a huge growth opportunity in front of us.

00;42;03;13 - 00;42;04;17
There are less competitors.

00;42;04;17 - 00;42;06;27
You've mentioned Collection House which has gone broke

00;42;06;27 - 00;42;10;17
and there's been a range of others that have either gone broke,

00;42;10;17 - 00;42;14;13
got out of the industry in recent, is been locked out of the industry

00;42;14;13 - 00;42;15;23
through behaviour and so forth.

00;42;15;23 - 00;42;18;23
So, there's a very big growth opportunity for us.

00;42;18;27 - 00;42;23;06
I mean, last year we invested $100 million, most of the back end this year, 60.

00;42;23;14 - 00;42;25;22
Maybe there's a little risk to the upside on that.

00;42;25;22 - 00;42;29;22
But if your Run Rate at we're investing about 80, 85 million bucks a year,

00;42;31;11 - 00;42;34;28
we think we can grow that to you know, to the mid hundreds

00;42;34;28 - 00;42;40;25
so about 150 a year on a repeatable basis over the sort of next 3 to 4 years

00;42;41;09 - 00;42;45;03
and that's the first target for us.

00;42;45;15 - 00;42;49;03
And that's a that's a pretty long runway of opportunity

00;42;49;29 - 00;42;52;29
that we expect to be able to grow into.

00;42;53;16 - 00;42;56;15
In addition to that, there's all these sort of tailwinds.

00;42;56;15 - 00;42;59;25
I mean, one of the, you mentioned technology before,

00;42;59;25 - 00;43;03;29
and there are a range of groups that are selling technology

00;43;03;29 - 00;43;07;29
solutions to debt collection and so forth, but at it’s heart,

00;43;09;13 - 00;43;11;19
we're told

00;43;11;19 - 00;43;15;01
don't respond to text messages and don't respond to emails,

00;43;16;01 - 00;43;19;14
people want to talk to humans, they want a connection.

00;43;19;14 - 00;43;24;11
They might deal afterwards by using technology, but they need to be heard.

00;43;25;15 - 00;43;26;04
And it's one of the

00;43;26;04 - 00;43;29;04
reasons why our business will continue to be

00;43;29;04 - 00;43;32;04
successful and why this industry will continue to grow.

00;43;32;18 - 00;43;35;23
The other parties, and I started my life

00;43;35;23 - 00;43;39;12
as a contingent debt collector where I was doing Fee For Service type work.

00;43;39;12 - 00;43;41;25
So I know this part of the business very, very well.

00;43;41;25 - 00;43;44;29
But, you know, the government has now mandated

00;43;44;29 - 00;43;47;29
that they will not use Fee For Service debt collectors

00;43;48;06 - 00;43;51;06
who earn a commission, from the 30th of June.

00;43;52;03 - 00;43;55;03
And I think it's going to be a

00;43;55;11 - 00;43;58;11
a continuing theme,

00;43;58;13 - 00;44;02;04
because if you sell an account to someone like Pioneer, we're heavily regulated,

00;44;02;19 - 00;44;06;03
whereas the debt collection sector is not heavily regulated.

00;44;06;03 - 00;44;07;29
So there's a lot more security around what happens.

00;44;07;29 - 00;44;11;25
So we're looking at a great opportunity that sits in front of us

00;44;12;06 - 00;44;15;06
and very much for us, it's stick to your lane,

00;44;15;14 - 00;44;19;22
keep going where you're going and you know, sort of head down, bum up

00;44;19;22 - 00;44;24;18
and if you if you do that, well, you'll wake up in in 3 or 4

00;44;24;18 - 00;44;27;10
or five years time and we're going to have a share price

00;44;27;10 - 00;44;30;00
that's many, many multiples of where we are now

00;44;30;00 - 00;44;33;17
and a business that's throwing lots of money back to shareholders

00;44;33;17 - 00;44;36;18
and paying good dividends as we actually had in the past.

00;44;37;01 - 00;44;37;22
Oh, fantastic.

00;44;37;22 - 00;44;39;26
Actually, I was going to ask you about dividends and

00;44;39;26 - 00;44;40;28
that's another real

00;44;43;02 - 00;44;45;00
difficult one, I imagine, for the board,

00;44;45;00 - 00;44;48;13
because again, shareholders love regular payments.

00;44;48;13 - 00;44;51;11
But you know, why are you paying cash out?

00;44;51;11 - 00;44;54;13
Maybe you're at a point in time where there's just lots of really

00;44;54;13 - 00;44;57;13
great investment opportunities around,

00;44;57;13 - 00;45;00;26
I'm sorry, I should have researched this, but do you have a set

00;45;00;26 - 00;45;04;04
dividend policy and how do you sort of balance those competing priorities?

00;45;04;18 - 00;45;08;11
Yeah, we have had a set policy.

00;45;08;11 - 00;45;11;11
I mean, we haven't paid a dividend for a couple of years now,

00;45;11;28 - 00;45;15;02
but we paid out 50% of after-tax profits as a dividend.

00;45;16;24 - 00;45;19;13
It was an appropriate amount

00;45;19;13 - 00;45;22;22
given the cost of funds that we had at the time were very low and so forth.

00;45;24;04 - 00;45;24;22
It's hard to

00;45;24;22 - 00;45;28;06
imagine that over the next sort of, you know,

00;45;28;16 - 00;45;31;12
that the forward looking period that you can see the next sort of 3

00;45;31;12 - 00;45;34;17
to 4 or 5 years, it's hard to imagine that we would be

00;45;35;19 - 00;45;38;19
paying out anything greater than 50%,

00;45;39;23 - 00;45;41;11
although, you know, the board

00;45;41;11 - 00;45;44;11
would have the ultimate or be the ultimate arbiter of that.

00;45;44;17 - 00;45;48;02
But it's hard to imagine because of the the opportunities for us to reinvest.

00;45;48;15 - 00;45;49;16
But again, if there was

00;45;49;16 - 00;45;53;02
a really great opportunity for us that was really accretive for shareholders

00;45;53;14 - 00;45;56;04
and it meant that we shouldn't be paying out a dividend

00;45;56;04 - 00;45;59;04
and that's a discussion that we would have with our shareholders

00;45;59;20 - 00;46;03;12
and explain to them and show them and the benefits of the business.

00;46;03;12 - 00;46;05;22
We're not afraid to do that at all.

00;46;06;27 - 00;46;08;12
It's about what's best

00;46;08;12 - 00;46;11;26
for the collective group of shareholders as it should be.

00;46;12;05 - 00;46;14;26
Yeah. Love that.

00;46;14;26 - 00;46;16;15
There was a reference

00;46;16;15 - 00;46;19;27
in the recent slide deck about the vendor partners that you have.

00;46;19;27 - 00;46;22;27
I believe you work with about 18 or so of them.

00;46;23;10 - 00;46;27;21
Can you give us an outline of what they look like, what the relationship is like,

00;46;27;21 - 00;46;30;21
who else they interact with, and just the general,

00;46;30;28 - 00;46;35;09
well, the way the way that you sort of rely and manage those relationships?

00;46;35;24 - 00;46;36;18
Yeah, for sure.

00;46;36;18 - 00;46;40;10
So there's the 4 big banks and a couple of banks

00;46;40;10 - 00;46;43;10
that sort of sit on either side of those.

00;46;43;10 - 00;46;45;16
There's only 3 of those big banks selling at the moment.

00;46;45;16 - 00;46;48;08
We buy off each of them

00;46;48;08 - 00;46;51;04
and our relationship with them is different.

00;46;51;04 - 00;46;55;22
So with the Commonwealth Bank, for example, we have a 5 year agreement,

00;46;56;15 - 00;47;00;10
the first time a banks ever done that in Australia

00;47;01;13 - 00;47;01;23
and we

00;47;01;23 - 00;47;05;18
share that agreement with Credit Corp and that's

00;47;05;18 - 00;47;08;19
really good rata to its regular flow that comes in every month.

00;47;08;19 - 00;47;12;04
And, and that's a that's a very long standing relationship

00;47;12;04 - 00;47;15;09
that Pioneer has and it’s probably

00;47;15;09 - 00;47;18;14
our broadest relationship, you know, relationships right throughout the banks.

00;47;18;14 - 00;47;21;01
And that's important because these, you know,

00;47;21;01 - 00;47;22;29
these are very, very large businesses

00;47;22;29 - 00;47;26;15
so us understanding what's happening in Andrew's part of the world

00;47;26;26 - 00;47;30;04
is really instructive because, you know, might impact

00;47;30;04 - 00;47;33;27
what's happening in Kieth’s part or Tom's part or the Belinda’s part or whatever

00;47;35;10 - 00;47;38;09
that all goes to, as we were talking about before, how it might inform

00;47;38;09 - 00;47;42;00
what our strategies are and how we value debts and so forth.

00;47;42;20 - 00;47;45;07
And then we've got the non-bank

00;47;45;07 - 00;47;48;12
lenders, Andrew, that sit beneath them.

00;47;50;04 - 00;47;52;18
Our relationships are, generally speaking,

00;47;52;18 - 00;47;55;25
with the more brand conscious of that group.

00;47;56;11 - 00;47;57;23
Okay,

00;47;57;23 - 00;48;00;22
you know, they care about their consumers, they care about their brand, they

00;48;00;22 - 00;48;02;22
to make sure it's looked after.

00;48;02;22 - 00;48;05;08
And one of the reasons they choose us over others is

00;48;05;08 - 00;48;07;07
we don't have a lending business.

00;48;07;07 - 00;48;09;25
So where there are competitors that have lending businesses,

00;48;09;25 - 00;48;12;23
they generally choose to steer away from them

00;48;12;23 - 00;48;15;22
because they don't want to be sharing their

00;48;15;27 - 00;48;18;27
customer lists and their IP in that case.

00;48;18;29 - 00;48;21;01
But we're meeting with them all the time.

00;48;21;01 - 00;48;23;25
You know, what does the future look like for you?

00;48;23;25 - 00;48;27;29
What is it about your business that you need me to focus on?

00;48;28;26 - 00;48;30;22
You know, there's a whole range of things.

00;48;30;22 - 00;48;33;21
Remediation is a big part of our industry at the moment where,

00;48;35;01 - 00;48;36;00
you know,

00;48;36;00 - 00;48;39;23
these organisations are righting wrongs that might have occurred

00;48;39;23 - 00;48;43;26
over the course of the past few years, and that impacts us.

00;48;44;10 - 00;48;45;14
There's work for us to do.

00;48;45;14 - 00;48;49;16
So we want to be ahead of the curve and and really work on what that looks like.

00;48;49;25 - 00;48;52;25
The last part is policy development.

00;48;53;18 - 00;48;55;28
So certain organisations

00;48;55;28 - 00;48;59;03
have different approaches to certain things.

00;48;59;03 - 00;49;03;20
So the easy one to talk about is financial hardship, you know, so

00;49;04;25 - 00;49;08;12
when we're developing policy, you know, it's much easier to do that

00;49;08;12 - 00;49;11;27
when you consider the breadth of the groups that we deal with

00;49;11;27 - 00;49;14;27
and we can go and literally

00;49;15;06 - 00;49;18;05
pick the eyes out, for lack of a better description of the best policy

00;49;19;03 - 00;49;21;19
that there is, has to be something we believe in

00;49;21;19 - 00;49;24;29
and something we own and something that's meaningful to our business.

00;49;24;29 - 00;49;25;28
Of course.

00;49;25;28 - 00;49;28;14
But the ability for us to develop policy

00;49;30;08 - 00;49;30;28
and approach

00;49;30;28 - 00;49;34;24
to consumers from, you know, the biggest institutions

00;49;34;24 - 00;49;37;24
in this country is something that shouldn't be

00;49;38;12 - 00;49;40;07
lost on anyone, certainly not lost on us.

00;49;40;07 - 00;49;42;11
It's a very powerful,

00;49;42;11 - 00;49;45;15
it’s a very powerful part of our business that is,

00;49;46;00 - 00;49;48;05
yeah, and frankly, we don't talk about it that much either.

00;49;48;05 - 00;49;50;06
But it's a very powerful part of our business.

00;49;50;06 - 00;49;52;01
Interesting. Interesting.

00;49;52;01 - 00;49;56;00
I've been a bit selfish and asked all the questions here and time

00;49;56;00 - 00;49;59;19
is racing by fast, so I'm going to go to some viewer questions now.

00;50;01;07 - 00;50;02;21
Damian's got a question here.

00;50;02;21 - 00;50;05;27
Has the BNPL, the Buy Now Pay Later phenomenon,

00;50;06;12 - 00;50;09;28
where they're looking to recover small amounts out of future income flows.

00;50;10;09 - 00;50;13;21
Has that put pressure on the Pioneer model of striking a monthly

00;50;13;21 - 00;50;17;17
payment deal with individuals that are included within PDLs?

00;50;17;22 - 00;50;21;21
Do you see any upside for Pioneer with the mooted change of the

00;50;21;25 - 00;50;23;09
Buy Now Pay Later system?

00;50;24;11 - 00;50;25;01

00;50;25;01 - 00;50;29;14
And thanks to Damian, it's a really important question and obviously,

00;50;30;03 - 00;50;31;29
you know, in particular in the last few years

00;50;31;29 - 00;50;34;29
there's been a lot of focus on Buy Now Pay Later.

00;50;36;04 - 00;50;37;12
So my comments of course

00;50;37;12 - 00;50;42;10
are general, I can't talk to specifics but as a general rule

00;50;42;10 - 00;50;45;25
what's happened with Buy Now Pay Later is there are a generally 2 types

00;50;45;25 - 00;50;49;06
of consumers that fall into that bucket.

00;50;49;21 - 00;50;52;21
One is those consumers that never miss a beat.

00;50;53;12 - 00;50;55;25
They don't need the credit, that you've just given the more credit

00;50;55;25 - 00;50;59;05
and maybe it's a smarter use of money, maybe it's more efficient

00;50;59;05 - 00;51;02;07
for them, ease of use and so forth.

00;51;02;07 - 00;51;04;28
So there's that part and then there's the part consumers

00;51;04;28 - 00;51;09;15
that are struggling to make ends meet and use Buy Now

00;51;09;15 - 00;51;13;28
Pay Later as a short term crutch, for lack of a better description.

00;51;14;11 - 00;51;18;13
We have limited exposure to those consumers.

00;51;20;03 - 00;51;23;03
The big banks don't lend to them heavily

00;51;24;03 - 00;51;28;00
and subsequently we haven't seen that flow through

00;51;28;15 - 00;51;32;06
into our books and have seen no degradation

00;51;32;06 - 00;51;35;09
in performance over time because of Buy Now Pay Later.

00;51;35;16 - 00;51;36;20
We don't buy it.

00;51;36;20 - 00;51;40;06
By the way, we have in the past bought

00;51;41;14 - 00;51;45;19
a very small segment, but it was not the traditional way

00;51;45;19 - 00;51;48;07
we think about it, which is not credit regulated.

00;51;48;07 - 00;51;51;06
We've bought credit regulated product only

00;51;51;23 - 00;51;54;22
in the past and we think that's smart for our business.

00;51;54;22 - 00;51;57;21
So we don't see a lot of impact from it.

00;51;57;21 - 00;52;00;05
But we certainly see,

00;52;00;05 - 00;52;05;12
you know, when we speak to others in the sector, that deal with bankruptcy

00;52;05;12 - 00;52;08;12
and the sort of the

00;52;08;13 - 00;52;11;22
the very challenge part of the credit

00;52;12;22 - 00;52;16;07
ecosystem, there's big impacts of Buy Now Pay Later in there.

00;52;17;22 - 00;52;19;26
Yeah.

00;52;19;26 - 00;52;21;11
I'm looking at some of these questions here

00;52;21;11 - 00;52;24;11
which were sort of lodged, we may have touched on these,

00;52;24;11 - 00;52;27;22
so apologies if there's any repetition and if you feel you've answered

00;52;27;22 - 00;52;29;01
it, we'll just will just move on.

00;52;29;01 - 00;52;32;01
But if there's anything further to add, please do.

00;52;32;12 - 00;52;35;09
One from Paul is saying interesting interview so far.

00;52;35;09 - 00;52;38;24
With the addressable market of debt limited to safer and more sustainable

00;52;38;24 - 00;52;42;04
vectors such as banks, how does this play into your growth strategy?

00;52;43;26 - 00;52;45;09
Yeah,

00;52;45;09 - 00;52;46;00
thank you, Paul.

00;52;46;00 - 00;52;49;10
Well, look, I mean, the banks are growing businesses themselves, right?

00;52;49;10 - 00;52;52;16
If we look at the size of the banking institutions, the Australian banks,

00;52;53;09 - 00;52;54;08
they've grown dramatically

00;52;54;08 - 00;52;58;12
over the course of the last few years, well last few decades

00;52;58;20 - 00;53;02;14
and they're only going to continue to grow

00;53;03;01 - 00;53;06;25
if they can continue to to grow their subscriber base.

00;53;06;25 - 00;53;10;12
We've got an increasing population and we've certainly

00;53;10;12 - 00;53;13;19
got a lot of immigration happening over the next couple of years

00;53;13;19 - 00;53;16;19
into this country, and all of those are drivers of growth.

00;53;16;26 - 00;53;20;22
Not just into the banks but into that non-bank sector.

00;53;21;16 - 00;53;23;27
What we need to be careful of

00;53;23;27 - 00;53;26;27
is to make sure that we, again

00;53;26;27 - 00;53;31;16
only keep focused on the quality that we understand.

00;53;31;16 - 00;53;35;21
So when I talk about the non-bank sector, I'm talking about

00;53;36;06 - 00;53;39;02
those groups that

00;53;40;07 - 00;53;43;07
effectively have bank grade debt,

00;53;43;08 - 00;53;47;07
but who new to bank customers might choose to deal with because of ease.

00;53;47;22 - 00;53;50;24
So, you know, if I was to think my children,

00;53;51;07 - 00;53;54;22
you know, I've got a 20 year old boy, if he was to go and get a loan,

00;53;54;22 - 00;53;59;18
he would probably go to an online non-bank lender.

00;53;59;24 - 00;54;02;26
He still bank quality

00;54;03;09 - 00;54;06;21
probably only for a couple of thousand dollars, but he's still bank quality.

00;54;06;26 - 00;54;10;26
Yeah, but he'll go somewhere that's easier to transact for him.

00;54;10;26 - 00;54;15;12
So there’s a significant amount of growth that’s available to us.

00;54;16;11 - 00;54;20;26
I think that it is going to continue for some time yet.

00;54;21;10 - 00;54;24;21
And then to your point Andrew before, there are other segments that we

00;54;24;21 - 00;54;25;12
don't deal in.

00;54;26;15 - 00;54;29;14
Telecommunications and utilities is one segment.

00;54;29;14 - 00;54;32;16
We don't deal in that segment at the moment because we don't have the skill set,

00;54;33;08 - 00;54;36;00
but we can build it or we could buy it or so forth.

00;54;36;00 - 00;54;37;01
But we're,

00;54;37;01 - 00;54;39;22
you know, we're back to the sticking in your lane

00;54;39;22 - 00;54;43;23
for the next sort of 3 or 4 or 5 years until you've really got to,

00;54;43;23 - 00;54;46;23
you know, captured a lot of the growth that's available, then the share

00;54;46;25 - 00;54;50;25
and then stop looking at what else is appropriate at the time.

00;54;51;25 - 00;54;55;25
Less is really more when it comes to growth strategies, in my humble opinion.

00;54;55;25 - 00;54;59;12
Like, sometimes when things are going well the world's your oyster.

00;54;59;12 - 00;55;01;22
We could do this, we could do that. We’re actually seeing some

00;55;01;22 - 00;55;05;28
of the consequences of technology space now that is coming home to roost.

00;55;05;28 - 00;55;10;11
I mean, Zero was just investing everything it had it all kinds of other things,

00;55;10;11 - 00;55;13;04
have some real moonshots in there and some other prudent investments.

00;55;13;04 - 00;55;16;04
But what it really did, I get it to a point, was really just sort of muddy

00;55;16;04 - 00;55;19;13
the true economics and the core magic part of the business.

00;55;19;13 - 00;55;22;13
So, yeah, I think that makes a hell of a lot of sense.

00;55;22;13 - 00;55;22;21
Yeah,

00;55;24;09 - 00;55;26;17
Damian's got one here as well.

00;55;26;17 - 00;55;29;02
And again, we may have touched on this, but how will Pioneer cope

00;55;29;02 - 00;55;32;14
with a higher interest rate regime and is there any change in the approach

00;55;32;14 - 00;55;35;14
of the big end of town in selling off PDLs?

00;55;36;12 - 00;55;38;06
Yeah. So no real approach,

00;55;38;06 - 00;55;41;20
a change in approach in terms of selling PDLs.

00;55;41;20 - 00;55;44;21
I mean, I've mentioned just earlier that there's one bank

00;55;44;21 - 00;55;47;27
that's not selling currently and they haven't through COVID either.

00;55;47;27 - 00;55;50;29
And, they're working through some remediation stuff

00;55;51;19 - 00;55;54;17
coming out of the back of the Hayne Royal Commission, but we expect them to be back

00;55;54;17 - 00;55;57;20
selling in the next year and so forth.

00;55;57;20 - 00;56;00;23
So no real approach to that.

00;56;01;04 - 00;56;04;17
If anything, I think we're going to see 2 things.

00;56;04;17 - 00;56;08;27
One is a continuation or more people adopting longer term agreements

00;56;08;27 - 00;56;12;05
like we have the Commonwealth Bank and secondly will be a

00;56;12;26 - 00;56;16;13
progression towards selling more than they might have

00;56;16;13 - 00;56;20;15
in the past because we're regulated compared to the unregulated sort

00;56;20;15 - 00;56;24;17
of contingent debt collection, part of the economy.

00;56;24;17 - 00;56;28;21
So I think that will be, that's probably what we're going to see.

00;56;28;21 - 00;56;29;16
And I apologise,

00;56;29;16 - 00;56;31;28
I missed the second part of that question, Andrew.

00;56;33;04 - 00;56;35;28
I just archived it.

00;56;35;28 - 00;56;38;28
Where are we?

00;56;39;18 - 00;56;41;07
I've lost it.

00;56;41;07 - 00;56;42;26
Oh, does it does it change your approach?

00;56;42;26 - 00;56;46;14
Does it change your approach to the big end of town in selling off PDLs?

00;56;46;19 - 00;56;49;14
In other words, does it influence decision as to whether

00;56;49;14 - 00;56;52;14
try and reclaim themselves or sell it on?

00;56;52;19 - 00;56;55;07
They're very focused, I think, again, on their businesses.

00;56;55;07 - 00;56;56;09
You know, if you look at

00;56;56;09 - 00;56;59;17
if you look at the big banks, they've got out of wealth

00;56;59;17 - 00;57;02;29
and they've got out of life and they're back to banking.

00;57;03;25 - 00;57;05;29
This is not banking

00;57;05;29 - 00;57;08;29
and that's why we exist

00;57;09;28 - 00;57;12;28
and it's a very important part of their,

00;57;13;09 - 00;57;15;19
you know, their operational strategy.

00;57;15;19 - 00;57;17;25
I mean, it's a way to look at it, really.

00;57;17;25 - 00;57;22;04
When you think about Pioneer’s customers, the banks, you know, not the people

00;57;22;04 - 00;57;25;04
who you sort of helping get back on track here.

00;57;26;00 - 00;57;28;05
I mean, it's got to be pretty compelling to sort of say, let's

00;57;28;05 - 00;57;30;00
we've got all these loans here.

00;57;30;00 - 00;57;31;14
We know that we're not going to collect,

00;57;31;14 - 00;57;33;16
you know, the face value of these things back.

00;57;33;16 - 00;57;34;27
We could spend a bunch of effort

00;57;34;27 - 00;57;37;27
and time do it, or you guys could just give us a certain amount for it.

00;57;37;27 - 00;57;41;20
We get the capital, we're on to what we do, and you guys can sort of deal

00;57;41;20 - 00;57;45;01
with the sort of the legwork on all of that time.

00;57;45;02 - 00;57;49;00
You know, it just usually when you're looking at a company, it's always

00;57;49;00 - 00;57;52;09
a really nice place to sort of start with, what’s the actual problem you’re solving?

00;57;52;13 - 00;57;54;16
Who are you solving the problem for and what's the problem?

00;57;54;16 - 00;57;57;04
And I think that's the useful context.

00;57;57;04 - 00;57;58;09
And that I think highlights it well.

00;57;58;09 - 00;58;01;05
I think Andrew, if I can just jump in there.

00;58;01;05 - 00;58;04;24
The greatest way to

00;58;05;25 - 00;58;06;26
sort of really

00;58;06;26 - 00;58;12;02
bring that point home is this, you know, in a credit card.

00;58;12;02 - 00;58;15;02
So if I've got a $10,000 credit card bill outstanding

00;58;15;18 - 00;58;18;15
at the bank and it's 180 days past due,

00;58;18;15 - 00;58;23;04
I need to have $10,000 of capital sitting aside, that credit card.

00;58;23;14 - 00;58;24;09

00;58;24;09 - 00;58;27;05
If I sell it, I get back $2,000. Right.

00;58;27;05 - 00;58;30;27
So I've got $2,000 in the hand and I've freed up the other 8000.

00;58;31;05 - 00;58;34;18
But that $2,000, whilst I might have lost $8,000,

00;58;34;19 - 00;58;39;02
I can then go on lever that 35 to 40 times

00;58;39;02 - 00;58;42;02
into a home loan.

00;58;42;07 - 00;58;44;07
That's incredible leverage.

00;58;44;07 - 00;58;45;19

00;58;45;19 - 00;58;49;13
You make your money back pretty quickly when you can get 35 or 40 times leverage

00;58;49;28 - 00;58;51;20
back of that thing.

00;58;51;20 - 00;58;55;05
So if every $2,000, you know, they're lending out $80,000.

00;58;55;13 - 00;58;56;17

00;58;56;17 - 00;59;00;18
And, you know, you do the math, there’s good money in that.

00;59;00;28 - 00;59;01;16

00;59;01;16 - 00;59;03;16
There is as long as they know what they're doing.

00;59;03;16 - 00;59;05;29
We've seen some interesting things the states in terms

00;59;08;00 - 00;59;10;19
Fascinating, another rabbit hole I’ll avoid.

00;59;10;19 - 00;59;14;17
I'm going to wrap this up soon Keith, because I am mindful of your time.

00;59;14;17 - 00;59;17;06
So a couple of quick fire ones here.

00;59;17;06 - 00;59;20;18
What does the competitive landscape look like and to what extent do you feel

00;59;20;18 - 00;59;23;18
you can increase your share of wallet growth?

00;59;25;07 - 00;59;27;02
Landscape looks amazing.

00;59;27;02 - 00;59;30;06
We're really down to one big player

00;59;30;06 - 00;59;34;09
with a big balance sheet, Credit Corp and Pioneer with a, you know,

00;59;34;09 - 00;59;38;12
an enviable reputation and really good cash flow.

00;59;38;13 - 00;59;41;01
So great environment.

00;59;41;01 - 00;59;42;11
We're the only 2 listed players

00;59;42;11 - 00;59;45;11
and really the ones that the banks are choosing to deal with.

00;59;45;26 - 00;59;49;12
So that's good in terms of growing share of wallet

00;59;51;09 - 00;59;53;09
that is about as much as

00;59;53;09 - 00;59;56;09
contacting consumers, providing good solutions.

00;59;56;12 - 00;59;59;07
So if I provide a solution in a really, really,

00;59;59;07 - 01;00;02;23
really neat manner that respects the customer's circumstances,

01;00;03;13 - 01;00;04;17
they will reward me well.

01;00;04;17 - 01;00;06;05
So I talk about internally,

01;00;06;05 - 01;00;08;18
I'll talk about our business as a sales business.

01;00;08;18 - 01;00;09;25
I have a customer,

01;00;09;25 - 01;00;13;04
I know what they prepared to pay me or what they've got to pay me.

01;00;13;18 - 01;00;16;22
I just need to find out how do I service them appropriately

01;00;16;22 - 01;00;19;02
to convince them that it's the right time to pay me.

01;00;21;00 - 01;00;21;17
If I service

01;00;21;17 - 01;00;24;07
them well, they'll pay me well if I service them poorly, they won't.

01;00;24;07 - 01;00;25;13
It's as simple as that.

01;00;25;13 - 01;00;26;16
Yeah, absolutely.

01;00;26;16 - 01;00;28;26
It's a real people business.

01;00;28;26 - 01;00;31;11
Actually speaking of that, the other question from Paul here

01;00;31;11 - 01;00;36;13
is that, so you're very much positioned as a someone to sort of help

01;00;36;13 - 01;00;40;24
them get back on track so they can engage with the banking system.

01;00;40;24 - 01;00;42;22
I mean, this is in everyone's interest right.

01;00;42;22 - 01;00;45;22
You don't want to cut people completely off or send them down an

01;00;45;27 - 01;00;48;27
unwritten retrievable sort of debt spiral.

01;00;49;07 - 01;00;51;23
Are there other competitors out there

01;00;51;23 - 01;00;54;28
that that might be more cavalier in that approach?

01;00;54;28 - 01;00;57;18
And maybe a follow on question, all that in regard to that,

01;00;57;18 - 01;01;01;10
is that something that you need to be alert to in the industry of

01;01;01;20 - 01;01;03;14
of the irrational competitor?

01;01;03;14 - 01;01;06;09
So there may be someone comes along and I'll just buy anything at any price.

01;01;06;09 - 01;01;10;07
You can look that as a veteran and say that’s not going to end

01;01;10;07 - 01;01;13;07
well for you, but it could still make life really difficult

01;01;13;10 - 01;01;14;20
for you for a couple of years

01;01;14;20 - 01;01;18;08
as they gobble everything up at prices, you're just not prepared to bid at.

01;01;18;13 - 01;01;20;01
Any comments along that.

01;01;21;00 - 01;01;23;22
Besides the veteran comment, Andrew? Yeah lots.

01;01;23;22 - 01;01;27;05

01;01;27;10 - 01;01;30;10
I’m not sure I like being called a veteran.

01;01;30;28 - 01;01;33;27
Look yeah, our industry is the same as any other industry.

01;01;33;27 - 01;01;36;10
I mean, I was asked a question the other day and said,

01;01;36;10 - 01;01;39;28
you know, this industry has at times a poor reputation.

01;01;39;28 - 01;01;42;27
And I said that that's true of every industry, right.

01;01;42;27 - 01;01;44;27
The media, you’re part of the media.

01;01;44;27 - 01;01;47;09
And there's parts that are got a bad reputation,

01;01;47;09 - 01;01;49;14
sporting clubs and sporting codes.

01;01;49;14 - 01;01;52;15
And now the finance industry, banks, insurance companies.

01;01;52;15 - 01;01;55;08
Yeah. It's, you know, and our industry is no different.

01;01;55;08 - 01;01;58;25
So, you know, we spend a lot of time you asked about our relationship

01;01;58;28 - 01;01;59;24
the banks.

01;01;59;24 - 01;02;02;22
We spend an incredible amount of time

01;02;02;22 - 01;02;05;05
in explaining to people

01;02;05;05 - 01;02;08;17
what we do, why we do it, how we do it, and who we are.

01;02;09;17 - 01;02;12;28
And the one thing I think is critical about

01;02;12;28 - 01;02;15;28
all of that is also saying, hey we get it wrong.

01;02;17;00 - 01;02;18;28
But when we do, we own it.

01;02;18;28 - 01;02;23;03
Yeah, no questions asked, no shirking our responsibilities.

01;02;23;13 - 01;02;26;19
We're good people with good intent, trying to do good things,

01;02;27;14 - 01;02;29;28
but we're not perfect.

01;02;29;28 - 01;02;31;22
And that is,

01;02;31;22 - 01;02;34;27
you know, and selfishly, it's a very powerful

01;02;35;25 - 01;02;38;20
it's a very powerful marketing

01;02;38;20 - 01;02;39;28
position.

01;02;39;28 - 01;02;42;00
But you can't fake it.

01;02;42;00 - 01;02;44;03
It has to be you.

01;02;44;03 - 01;02;45;08
And that's all us.

01;02;45;08 - 01;02;47;26
And if

01;02;47;26 - 01;02;51;23
your listeners today, you go and look on LinkedIn

01;02;51;23 - 01;02;54;20
under my profile, or Pioneer’s profile at the moment,

01;02;54;20 - 01;02;55;28
we've got a series of interviews,

01;02;55;28 - 01;02;59;10
some of the of them at the cut ups of Scott Phillips

01;03;00;06 - 01;03;04;24
from The Motley Fool, his views and we talk about these things precisely.

01;03;04;24 - 01;03;08;08
We've got our brand proposition on there, they're really important things.

01;03;08;08 - 01;03;11;06
So whilst there are some in the sector that

01;03;12;15 - 01;03;14;23
don't,

01;03;14;23 - 01;03;17;16
you know, conduct themselves in the manner that we do,

01;03;17;16 - 01;03;20;16
they're locked out of most of the contracts.

01;03;20;16 - 01;03;22;20
Okay.

01;03;22;20 - 01;03;25;26
And, and that's why reputation is so important to us.

01;03;26;16 - 01;03;29;16
Yeah. Yeah. Absolutely.

01;03;29;17 - 01;03;32;16
Gosh, there's, there's a lot more questions to ask

01;03;32;16 - 01;03;35;21
but I won't and it's usually a really good sign,

01;03;35;21 - 01;03;38;01
Keith, when the time goes fast and it's gone very fast

01;03;38;01 - 01;03;40;06
so it's been a fascinating conversation.

01;03;40;06 - 01;03;43;14
So, nothing left to say other than really appreciate your time.

01;03;43;24 - 01;03;45;23
Thanks for providing some really useful insights.

01;03;45;23 - 01;03;47;20
And look, we'd love to touch base again a year

01;03;47;20 - 01;03;50;20
or so down the track and see how things are going.

01;03;50;22 - 01;03;54;01
For sure, we appreciate the opportunity and thank you for the time,

01;03;54;01 - 01;03;55;10
Andrew, I've really enjoyed it.

01;03;55;10 - 01;03;58;00
Yeah, our pleasure. Our pleasure. Thank you. Thanks.