The purchase that boosted our investment guidance to $85M this year
00:00:00:00 - 00:00:34:12
Finola Burke
Hello I’m Finola Burke from RaaS and welcome to our 2024 outlook series. Today, our focus is on ethically motivated financial services group Pioneer Credit ASX ticker PNC. And joining me to discuss the outlook for 2024 for Pioneer Credit is Managing Director Keith John welcome Keith and thanks for joining me. Hi Finola good to be with you. So Pioneer Credit ended 2023 with the new finance arrangement from Nomura which helped underpin the purchase of an additional 24 million in portfolio debt.
00:00:34:14 - 00:01:14:20
Finola Burke
Take us through this. What this arrangement meant for the group and the outlook? For sure, thanks. I think we walked into 24 guiding to invest about $60 million in PDPs for the financial year. It's been a range of opportunities that have come up for the group. Generally speaking, because of our you know, preferred status around the way we treat customers and the way we think about customers and as Panthera looked to divest a material part of their banking and finance portfolio, it was all with one bank, Commonwealth Bank.
00:01:14:20 - 00:01:51:04
Keith John
Who we've got a very good relationship with and which they, you know, they backed us into buying. So it's a which enabled us to lift our guidance from 60 million investment up to 85 for the year. We're very, very happy with that. It's a really nice transaction for Pioneer. It's a really important one as we continue that growth and validates not just the operational excellence and we have, but also the viability of this business and the future for this business.
00:01:51:07 - 00:02:18:10
Keith John
You know, the banks don't consent if they don't have a huge belief in your ability to be able to deliver appropriately and consistently for the long term. And so we're very pleased with what it means for us in that regard. So with the lifting of your earnings guidance, do you feel that your portfolio return expectations are stable in light of the current cost of living and interest rate levels?
00:02:18:12 - 00:02:47:05
Keith John
Yeah, I mean, it's I think the bit that everyone is surprised about is the lack of impact from the current cost of living crisis into finance books. You know, it's really difficult to find a period near enough where we've gone through this sort of shock to the consumer. I think by and large, though, it underpins what we've always said about Australian consumers.
00:02:47:07 - 00:03:13:06
Keith John
Australian consumers are a very honorable people you know go home and thinking of ways to pay down the debt. So whilst our book is performing well, in fact we've seen no sort of measurable difference in performance at any level of output. You know, there is a very severe cost of living crimp, which I think is more being felt.
00:03:13:08 - 00:03:43:17
Keith John
And from what we hear anecdotally from our customer base into discretionary purchases, retail, but in particular food, you know, there's been a bit of noise this week in particular around the cost of meat. I mean, meat's very high cost and we hear about that stuff all the time. So from our perspective, our books performing incredibly well, Our customers are meeting their commitments, signing up to new commitments, and we've not seen any performance.
00:03:43:19 - 00:04:11:06
Keith John
We remain alert to changes, but it seems to be that we're heading into a period of easing. And whilst our consumers aren't necessarily directly affected by interest rates, certainly the interest rates coming off is going to be beneficial for some of the people that we deal with. So, you know, we look forward to that. But more so, we genuinely hope people get through this period with their families.
00:04:11:07 - 00:04:37:07
Keith John
Well, you know, it's great they're meeting their commitments, but they're people trying to get ahead and trying to live. And we're really conscious of that. And Keith you recently provided an update on the senior refinancing process and noted conditions have allowed additional financiers to join the negotiations. Can we expect to see the refinancing completed in this half?
00:04:37:07 - 00:05:08:11
Finola Burke
Could it take a different shape to current facilities? It'll definitely be completed this half, as I stated or we stated earlier this week or last week to the market in our update, there's no timing imperative. There are no covenant imperatives or anything like that for us to do a refi now. It's an opportunity for us to reduce our cost of funds and do that in a material way that adds materially to the bottom line of the company.
00:05:08:13 - 00:05:40:00
Keith John
I think as more people have heard about Pioneer understand our journey and understand the very strong cash generating capabilities and qualities of this business, we've had more financiers come out of the woodworks. That's a tad frustrating from a timing perspective. But it's an incredible honour for us as a business and something that we need to explore to make sure that we've got the best solution for us, you know, for the medium term that we can continue to grow.
00:05:40:00 - 00:06:02:01
Keith John
There's a massive opportunity that exists in our market now, and we think it grows quite heavily over the course of the next couple of years. We expect to be investing sort of between 125 and 150 million dollars. We're going to need some support to do that from our financiers. And that's what we expect to occur over the next couple of years.
00:06:02:01 - 00:06:26:22
Finola Burke
So we're taking our time, but we fully expect that the refi will be closed and settled. Definitely this half. Pioneer Credit also commenced legal proceedings late last year against former auditor PWC. And without going into details of proceedings, can you confirm that the litigation is fully funded and will not impact the operations of the business?
00:06:26:24 - 00:06:56:02
Keith John
It certainly won't impact the operations of the business Finola. We took a long time to get that litigation up. There were two reasons for that. One is obviously to make sure that the business is performing well and that has to be our number one priority. And then the second part is to make sure that the work that needed to be done to mount litigation against you know PWC was comprehensive.
00:06:56:06 - 00:07:21:15
Keith John
It was complete, but it was done in a manner where it was considered and really well understood and so forth. And I think our the statement of claim that we filed with the Supreme Court, which has been released to the ASX, I think that lays out the shareholders really succinctly. But in a very comprehensive manner, just how solid that claim is and the validity of it.
00:07:21:17 - 00:07:47:17
Keith John
So look, there's a bit of a journey to go on that of course, litigation is not a it's not a quick exercise, but we're hopeful to, you know, to start getting some progress on that through this year. And you've previously flagged the prospects for a return to dividends. Is that something you would contemplate in the FY24 year? Won't be for FY24.
00:07:47:19 - 00:08:20:20
Keith John
Can we do that in FY25? I think it's entirely possible, you know, and FY26 certainly probable. You know, there's a range of things that will flow into when we pay dividends and how we pay them and so forth. You know, I think there's no doubt about our desire to get back to doing that and to repaying shareholders for their loyalty and support for the, you know, the trust they place in us in investing their capital with us.
00:08:20:22 - 00:08:44:22
Keith John
But we need to balance that against what are the opportunities sit in front of the business today how we fund those opportunities and what's in the best interests of shareholders. But yeah, look, we're pretty close to that now. Well, thank you Keith for joining us today to discuss the outlook for Pioneer Credit 2024. Looking forward to catching up with you through the course of the next 12 months to check on your progress.
00:08:44:24 - 00:08:55:19
Keith John
Really appreciate it. Thank you Finola.