Pioneer Credit Limited (PNC.AX) Earnings Call Transcript & Summary

Welcome to Pioneer's 2025 Annual General Meeting. My name is Stephen Targett, and I'm Chair of the Board of Pioneer. I'd like to introduce you to the Board of Pioneer. On my left is Keith John, Managing Director; and to my right are Non-Executive Directors, Pauline Gately and Andrew Whitechurch. Also with us today are members of our executive, Company Secretary, Sue Symmons; and Chief Financial Officer, Barry Hartnett. Mr. Matthew Beevers, who is representing the company's auditors, RSM, for financial '25 is also here and available to answer any relevant questions as required. Mr. David Birrell, who shareholders will consider his appointment as a Non-Executive Director at today's meeting under Resolution 3, is also in the audience. The Notice of Meeting contains 7 items with 6 resolutions. Resolution 6 is a special resolution, which requires 75% majority of votes cast in favor by shareholders entitled to vote on the resolution. Before we proceed to the business of the meeting, I'll be providing my Chairman's address. Then following the formal part of the meeting and the closing of this AGM, Keith will provide his update. I confirm the copies of my address and presentations being made at this meeting have been lodged with the ASX. Before the meeting begins, there are a few housekeeping matters. Please ensure you have followed the instructions on MUFG's virtual meeting online guide, and have registered to vote by clicking on the Get a Voting Card button. As this is a meeting of Pioneer Credit Limited shareholders only -- sorry, only shareholders, their appointed proxies or corporate representatives are entitled to ask questions and vote. For those visitors who have joined us, you are not eligible to vote or ask questions but you are very welcome as observers. For shareholders, once you have registered, you may submit a question by clicking on the Ask a Question button, typing your question and clicking submit. We'll do our best to answer all questions during the meeting. So please keep these questions and comments concise to ensure as many questions as possible are answered. Following consideration of the '25 financial report, I will give shareholders the opportunity to ask questions of the Board or questions about the conduct of the audit by the independent auditor, RSM. You will also be given the opportunity to ask questions in relation to each of the resolutions to be considered by the meeting when they are brought forward for consideration. In accordance with the ASX corporate governance principles and recommendations, all resolutions will be voted on by a poll. Each resolution will be read, proxy votes will be displayed and shareholders will be given the opportunity to ask questions. The poll will then be undertaken and the meeting closed. The results of the poll will be provided to the ASX following the meeting. Proxy votes for each resolution will be as at the closing time for receipt of proxies, which was 10:00 a.m. Australian Western Standard Time on Tuesday, the 28th of October 2025. I will now move to the business of the meeting. Ladies and gentlemen, in accordance with the Corporations Act, a link was provided to shareholders on 26 September, 2025 to download the company's Notice of Annual General Meeting. A copy of the notice is available on our website at the Shareholders page. I propose the Notice of the Meeting be taken as read. I confirm there is a quorum present. Therefore, the meeting is properly constituted, and I declare the meeting open, and we'll move now to the Chairman's address. I'm honored to be representing the Board today as your Chair. We're hosting today's meeting via webcast allowing shareholders, proxy holders and visitors to attend virtually. This format enables everybody to watch the meeting live, allowing shareholders, proxy holders and corporate representatives to ask questions and submit their votes. I encourage all of you to fully participate in our online AGM. The past financial year has been pivotal for Pioneer. Financial year '25 saw the delivery of the financial performance we committed to some 12 months out and a return to the profitability and growth that the group has been historically known for. The result, of course, was in fact, much better than we committed to. And I'm proud to report that the company finished the period stronger, more resilient and well positioned for sustainable growth. We achieved a statutory net profit after tax of $6.7 million, well ahead of market expectations. On a normalized basis, our net profit after tax was $10.5 million, beating guidance to the market by 17%. These results reflect disciplined execution, operational efficiency and a deep commitment to our purpose, which is to put an end to debt stress. Our financial performance was underpinned by cash collections of $142.2 million, which were up 1%; EBITDA of $94 million, which was up 6%; and EBIT of $41.3 million, which is up 517%; and underpinned also by continued improvement to our cost of service, which is at 32%, the lowest level we've achieved and a level we continue to strive for, noting that we have guided to 33% to 35% for the time being. During the period, we closed out refinancing of our senior debt facility, which secured a $272.5 million syndicated facility with high-quality partners. This refinancing delivered $8 million in annualized pretax savings and provides the flexibility to support future investment opportunities. And earlier this week, with the support of our financiers, we repriced that facility after just 15 months, have now further reduced our senior funding cost by 1%. Our margin is now beginning to reflect the quality of the business that we are and is priced at BBSW plus 4.5%. This represents an annualized pretax savings to the company of approximately $2.5 million. Importantly, during the financial year, we further strengthened our market position. As of August this year, Pioneer is now the only PDP purchaser in Australia with agreements in place with all four major banks. We believe this reflects our reputation as an ethical servicer, our customer-first philosophy and our long-standing reputation for integrity and transparency. Our commitment to fair and respectful customer treatment remains unwavering, and our customer-first philosophy is demonstrated in many ways. We were pleased to receive formal recognition from AFCA, which noted a 45% reduction in financial difficulty complaints from Pioneer's customers and a 10% overall decrease in disputes, results that significantly outperform industry averages. These outcomes reflect our proactive approach to compliance and the genuine care we extend to those that we serve. This commitment is further evidenced by our customer Net Promoter Score of plus 20 and the waiver of $1.5 million of debt for vulnerable customers. We, of course, have a meaningful community focus and also provide financial and in-kind support to community organizations throughout the year. Within Pioneer, we continue to foster strong and inclusive culture with 53% of our leadership roles filled internally and an Employee Net Promoter Score of plus 6 underscoring the engagement and dedication of our team. During the financial year and into this new year, we have made significant strides in technology and in particular, by carefully and cautiously adopting artificial intelligence with an initial focus on enhancing our back office and operations support, improving the accuracy and speed of which we deliver our services, both internal and external, and increasing productivity. This is a significant piece of work and will evolve from hereon in and we are pleased with our early progress. We fully expect that the cautious and appropriate adoption of AI will improve the customer experience we provide and increase the productivity of our team over time. Now looking ahead, the PDP market in Australia is now expected to grow from $350 million in PDP investment back to its pre-COVID highs of $550 million over the next 2 years. This expected growth is likely to be driven by personal credit increasing year-on-year, representing a rebound in consumer borrowing, particularly in the unsecured segment, which includes personal loans and credit cards; the return to the PDP market of the final Big 4 bank for the first time since 2019; as well as financial institutions, banks and nonbank lenders increasing their focus on product distribution and then recycling capital by selling more portfolios of impaired credit than they have traditionally. This dynamic represents a meaningful opportunity for Pioneer, and we are well placed to capture this opportunity with a clear strategy, strong vendor relationships and a scalable platform. Finally, I know there's much interest in the litigation we commenced against PwC. At this point of time, we are unable to provide a substantive update to shareholders, other than to say the matter continues to progress and we are comfortable with its progress. We will, of course, provide substantive update to the market promptly once we have further information to share. And finally, on behalf of the Board, I'd like to thank our shareholders for continued support, our customers for their trust and our people for their unwavering commitment to our purpose. Financial year '25 was a year of delivery and financial year '26 will be a year of acceleration. Thank you. In a moment, we will move to the formal part of the meeting and the voting on resolutions. After the formal business concludes, our Managing Director will provide us with his update. Before moving on to the formalities of the meeting, are there any questions, Sue?

No questions.

Are there any questions on the phone line?

There are no questions on the phone line at this time.

Thank you. Following the formalities of the meeting, I'll be passing over to Keith for his presentation. You will have the opportunity to ask questions of Keith following his presentation and at the conclusion of the meeting. If there are no further questions at this time, I'll now move to the formal business of the meeting. As mentioned, all resolutions will be decided on by a poll. Each resolution will be read, proxy votes will be displayed and shareholders will be given the opportunity to ask questions. The poll will then be undertaken and the meeting closed. The results of the poll will be provided to the ASX later today. The first order of business is to receive and consider the financial report, the director's report and the auditor's report for the year ended 30th of June 2025. The 2025 Annual Report contains those reports. A copy of the 2025 Annual Report was made available on the company's website and were sent to those shareholders who requested it. The financial statements have been approved by directors and audited by RSM. As required by Section 317 of the Corporations Act, I now lay before the meeting the financial report, the directors' report and the auditor's report for the year ended 30th of June 2025. No vote is required on this item. At this time, I would like to take any general questions or comments about the financial report, directors' report and auditor's report. Mr. Matthew Beevers, our audit partner for financial year '25 from RSM, is also available to answer any specific questions that you may have about the conduct of the audit. I confirm that there have been no questions submitted in writing to the auditor prior to this meeting. If you have any questions specifically relating to remuneration, please wait until Resolution 1 is dealt with. Are there any questions, Sue?

No, there are no questions.

And are there any questions on the phone line?

There are no questions on the phone line at this time.

Thank you. As there are no further questions -- sorry, no questions, I'll proceed to consider the proposed resolutions on today's agenda. Resolution 1 is to consider, and if thought fit, to pass a resolution to adopt the remuneration report. I now put the resolution to the meeting that for the purpose of Section 250R(2) of the Corporations Act and for all other purposes, approval is given for the adoption of the remuneration report for the financial year ended 30th of June 2025 as contained in the directors' report. I confirm that the remuneration report is included within the directors' report on Pages 23 to 31 of the company's 2025 Annual Report. While the vote on this item is advisory only and does not bind the company or its directors, please be assured that the Board takes into consideration any feedback we receive from shareholders. The Board abstains in the interest of good corporate governance from making a recommendation in relation to this resolution. Voting restrictions apply to this resolution. Key management personnel, the closely related parties whose remuneration details are contained in the remuneration report, are excluded from voting on this resolution, except where exercising direct proxies on behalf of persons whose remuneration details are not included in the remuneration report. Proxy votes are now displayed. Are there any questions, Sue?

There are no questions.

Are there any questions on the phone line?

There are no questions on the phone line at this time.

Thank you. As there are no questions and voting will be conducted by a poll, I'll now move to the next resolution. Resolution 2 is to consider, and if thought fit, pass a resolution to elect Pauline Gately as a Non-Executive Director of the company. I will now put a resolution to the meeting. That, for the purposes of clause 6.1(f)(i)(A) of the company's constitution, ASX Listing Rule 14.4 and for all other purposes, Pauline Gately, a Director who was elected in August 2023 retires and having offered herself for reelection and being eligible is reelected as a Director. Pauline's experience and qualifications are set out on Page 10 of the Notice of the Meeting. The Board, with Pauline abstaining, unanimously recommends that shareholders vote in favor of this resolution. Proxy votes are now displayed. Are there any questions, Sue?

There are no questions.

And any questions on the phone line?

There are no questions on the phone line at this time.

Thank you. As there are no questions, voting will be conducted by poll, and I'll move to the next resolution. Resolution 3 is to consider, and if thought fit, pass a resolution to elect David Birrell as a Non-Executive Director of the company. As noticed in the Notice of the Meeting, Pioneer's largest institutional shareholder, Samuel Terry Asset Management, has requested the company consider the appointment of David as a Director. The company does not have an agreement with Samuel Terry of any nature, including a right to appoint, and their request has come because David was responsible for Samuel Terry's Pioneer position during his tenure there, and they are keen to continue their close connection with the company. David's full bio is contained on Page 11 of the Notice of the Meeting. I put the resolution of the meeting that for the purpose of clause 6.1(c) of the company's constitution and for all other purposes, Mr. David Birrell be elected as a Director. The Board unanimously recommends that shareholders vote in favor of this resolution. Proxy votes are now displayed. Are there any questions, Sue?

There are no questions.

Any questions on the phone line?

There are no questions on the phone line at this time.

Thank you. As there's no questions, voting will be conducted by poll, and we'll move to the next resolution. Resolution 4 is to consider, and if thought fit, pass the resolution to ratify the issue of 17,241,379 fully paid ordinary shares. I now put the resolution to the meeting that for the purposes of ASX Listing Rule 7.4 and all other purposes, the issue of 17,241,379 paid ordinary shares to institutional investors, as more fully described in the explanatory statement, be approved. The Board unanimously recommends that shareholders vote in favor of this resolution. Proxy votes are now displayed. Are there any questions, Sue?

There are no questions.

Are there any questions on the phone line?

There are no questions on the phone line at this time.

Thank you. As there are no questions and voting will be conducted by a poll, I'll now move to the next resolution. Resolution 5, grant of indeterminate rights to Mr. Keith John. To consider, and if thought fit, pass the resolution to grant indeterminate rights to Mr. Keith John under Pioneer's Credit Equity Incentive Plan. The Notice of the Meeting contains full details of the grant, but to summarize, these rights are long-term incentives to be issued annually for up to 3 years and will vest over time, subject to performance conditions. The structure follows external advice received by the Board from remuneration consultants, which recommend annual incentive opportunities of 150% to 250% of total fixed remuneration for the Managing Director. This proposed grant represents a conservative approach at up to 100% of Mr. John's base remuneration. For financial year '26, the proposed grant of 50% of his base remuneration represents approximately 19% to 32% of the remuneration consultants benchmark and will result in an issue of 782,412 rights. The Board believes this structure aligns Mr. John's interest with those of shareholders and supports long-term value creation. I now put the resolution to the meeting, that for the purposes of ASX Listing Rule 10.14 and for all other purposes, approval is given to the company to issue to the Managing Director, Mr. Keith John, or his nominee, a maximum number of indeterminant rights under the company's equity incentive plan that is up to but no more than 100% of Mr. John's annual base remuneration issued annually for a maximum of 3 years after the date of this AGM for nil consideration and on the terms described in the explanatory statement. The Board, with Mr. John abstaining, unanimously recommends to shareholders to vote in favor of this resolution. Proxy votes are now displayed. Are there any questions, Sue?

There are no questions.

Any questions on the phone line?

There are no questions on the phone line at this time.

As there are no questions and voting will be conducted by poll, I'll now move to the final resolution. Resolution 6 is approval of a 10% placement facility. ASX Listing Rule 7.1 allows companies to issue 15% of their fully paid ordinary shares over any 12-month period without shareholder approval. ASX Listing Rule 7.1A enables eligible entities to seek approval for an additional 10% of their fully paid ordinary shares over any 12-month period. Pioneer is an eligible entity as it is not included in the S&P/ASX 300 Index and has a market capitalization of less than $300 million. Resolution 6 seeks shareholder approval by way of a special resolution to have the ability to issue securities under the 10% placement facility. While the company currently has no plans to make an issue of equity securities under Listing Rule 7.1A, this approval provides the company with additional flexibility. I now put the resolution to the meeting, that for the purpose of listing Rule 7.1A and for all other purposes, approval is given for the company to have additional capacity to issue up to that number of securities equal to 10% of the issued capital of the company at the time of issue provided for in ASX Listing Rule 7.1A.2 and otherwise on the terms and conditions as set out in the explanatory statement. The Board unanimously recommends that shareholders vote in favor of this resolution. The proxy votes are therefore displayed. Thank you. Are there any questions, Sue?

There are no questions.

Any questions on the phone line?

There are no questions online at this time.

Okay. As there are no further questions and no further resolutions, I will now move to the poll. Ladies and gentlemen, the company has adopted the ASX Corporate Governance Council guidelines, which recommends that a poll be called on all substantive resolutions. MUFG has been appointed by Pioneer as returning officer for the poll. Shareholders who have registered may click on the Get a Voting card button and once your voting card appears, all the resolutions to be voted on will be displayed. You may need to use the scroll bar on the right-hand side of the voting card to view all resolutions. Please follow the prompts online to complete the voting card and then click Submit Details and Vote button. The proxy votes I hold as a nominated proxy for shareholders in relation to each resolution are now displayed. Online voting will end 5 minutes after the close of the meeting. The results of the poll will be released to the ASX later today and posted on our website. [Voting]

In accordance with the company's constitution, I confirm that there is no other business brought forward to be transacted. As there is no further business, that concludes the formal proceedings of the 2025 Annual General Meeting of Pioneer Credit Limited, and I thank you again for attending and declare the meeting closed. Having concluded our Annual General Meeting, I'd now like to invite Keith John to present his Managing Director's presentation. Keith?

Thank you, Steve, and thank you to everyone for joining us today participating in the AGM and for your interest in Pioneer. A very quick overview about Pioneer and what makes us special and makes us a highly investable business. Pioneer is an ethical debt recovery business with an industry-leading compliance record. And Steve spoke about that and the developments and the advancements that we've had across that and now our dispute resolution processes during his presentation. We're a leading purchaser, Australian-focused and domiciled here with a clear mandate to just operate in Australia, purchasing retail debt portfolios. We acquire those portfolios, mostly of the major banks and nonbank financial institutions in what is a virtual duopoly in this market. What we don't do is we do not invest in payday loans or lower-quality type credit. We are focused on buying the best quality consumers in the Australian market, and that provides resilience into our business but also the greatest propensity for these customers to heal over time. As we've mentioned, Pioneer is now a preferred partner of each of the Big 4 banks and is the only purchaser in the Australian market with an agreement in place with each of them. That is something we're very, very proud of and something we believe reflects the quality, the integrity and the relationships that we hold with these institutions and the trust they have in us to look after customers well, particularly in an environment where there is increased consumer focus on customer treatment and regulatory focus. Pioneer has a great reputation for operating exceedingly well in this environment. Since 2008, we've invested almost $830 million into portfolios. And this provides us with a very broad data set and very -- a deep understanding of how these portfolios perform so that when we enter the market and we invest our capital, your capital alongside you, we do it with great knowledge and with great accuracy and with a level of safety that enables us to grow our profitability. In terms of FY '26, we're clearly only -- we've completed 3, 4 months. We're well through the fourth month now, of course. The biggest news so far this financial year has been the reduction in the cost of our senior funding after just 15 months by 100 basis points, down to BBSW plus 450 points. This is a remarkable achievement. It reflects the great quality of our business, the delivery of our commitments to you, the equity markets, and also the understanding of our financiers which is exceptionally deep into our business and their desire to ensure that we remain with them for a very long time. That particular event, announced only a couple of weeks ago, saves us about $2.5 million on a pretax basis annualized. It's a remarkable achievement in a very, very short period of time and adds to the underlying strength of this business. To date, we've purchased $25 million of portfolios across the business, a 50% increase on our prior corresponding period. We are well on track to exceed $40 million for the half. And obviously, this is a really important part of our business because it's these portfolios, the quality portfolios we buy, that enables us to continue to grow our earnings. We also now fully expect that we will exceed $80 million for the full financial year, and we look forward to updating shareholders on that as we continue to develop our business. And again, all of this is underpinned by our arrangements portfolio, some $418 million, which provides regular cash collections every single month into our business. In terms of the opportunity set, there really are two things that are critical to this business. First is our underwriting. Back to that deep data set that we have in this very, very deep understanding of this industry. We underwrite exceptionally well. On the left-hand side there, the black graph, you can see what money multiple we've underwritten at. And on the right-hand side, in the orange, you can see the money multiples that we've either achieved or are forecast to achieve. And you'll see that it is well above our underwriting. Our underwriting is a level we're comfortable of purchasing at and the orange, the expected recovery, is the outperformance effectively against that. We're very, very pleased with what's happening in the market for Pioneer. We, again, think it's a very strong reflection of who we are as a business and what we bring to the table in terms of protecting the brands of the very best vendors in the country. It's a very important aspect of our proposition to them. On the right-hand side, our estimated remaining collections. This is at 30 June, some $702 million of cash expected to flow through to our business over the next few years, underpinned by that $418 million in payment arrangements. And you can see that we've got a diverse product type across all of the industries that we're specialists in. And that is likewise diverse across our vendors with no material risk across any vendor as we're dealing with 21 or 22 currently across that $80 million program this year. Shareholder alignment is critical in any business, and it's more so critical in small financials. There is no other business in this sector where there is shareholder alignment like there is at Pioneer. And as Steve mentioned previously, long-term incentives form a part of that. Across my executive and my leadership, there are no short-term incentives, and we think that's really important. We buy assets that we earn the majority of the income from over 3 or 4 years. And subsequently, we incentivize people over that period. This ensures that we remained aligned to your capital at all times. We make good long-term decisions for our business at all times and that we are always standing right alongside you, our shareholders, who entrust us with their capital and we invest that very, very cautiously. For this year, we've got a hurdle for vesting of the last 3 years' incentives, which is to achieve a statutory net profit after taxation of $18 million, a number we have guided to for some time now and which we continue to and are pleased to continue to guide to today. Finally, the outlook for this year or for the rest of this year. Firstly, a total addressable market of some $400 million. The market is growing, as Steve has said, and we're looking at capturing somewhere between 20% and 22% or 23% of that market this year. We've got incredible relationships with incredible organizations that are valued, and we fully expect those to be able to support that ambition of ours, which we're well advanced on. Our focus, as always, remains on selective high-return acquisitions. That's where we focus, and that's what we will deliver to you this year. We're fully funded for our investment. We've got exceptionally strong cash generation. As Steve mentioned, last year, some $95 million in EBITDA. We've got ample funding should we need it for our investments. So we fully expect to be able to fund our investments from existing cash flow this year and from our existing facilities with ample opportunity to grow should any outsized opportunities present themselves. We also have the ability or the opportunity to put further pressure on our funding costs. Now when we mentioned this right at the outset last year when we first announced our refinancing, there was some skepticism around that. And already, we have delivered a material saving to shareholders and to the company. We fully expect to keep putting some pressure down on that number over the coming months. Finally, our FY '26 guidance, as we've mentioned, a statutory net profit after taxation of over $18 million. Clearly, we've demonstrated so far the steps that we have taken to deliver upon that number. We fully expect to deliver upon that number for shareholders, and we look forward to updating you as the year progresses. That concludes my presentation. Before I take questions, I'd please like to pass my thanks to my Board, to my Chair for their work, congratulate Pauline and David on being elected to the Board, reelected in Pauline's case. We're very lucky to have the directors that we do, and we're very pleased with the contribution, and I'm very pleased with the support they provide me, and then to my executive and in particular, to Sue and Barry, for their commitment and hard work, and to my broader team, I thank all of you. I'll now take questions from any shareholders.

No questions.

There being no questions, we'll call to close the presentation. Again, thank you all for your attendance and your interest in Pioneer.