Pioneer Credit Limited (PNC) Earnings Call Transcript

Good morning, and welcome to Pioneer's 2026 Annual General Meeting. My name is Stephen Targett, and I'm Chair of the Board. To begin with, I'd like to introduce the members of the Pioneer Board. On my left is Keith John, Managing Director; and to my right, and Non-Executive directors, Pauline Gately, Andrew Whitechurch, and our newest Director, David Birrell, who joined the Board at last year's AGM. As I'll be retiring by rotation at this meeting, I'm offering myself for reelection, I will hand it to Pauline Gately to chair the meeting at that point. Also with us today are members of our executive, Company Secretary, Sue Symmons; and Chief Financial Officer, Barry Hartnett; and Mr. Matthew Beevers, who is representing the company's auditors, RSM for Financial Year '26. Matthew is available to answer any relevant questions as required. The Notice of The Meeting contains 7 items of business with 6 resolutions. Resolutions 5 and 6 are special resolutions, which require 75% majority of votes cast in favor by shareholders entitled to vote on that resolution. Before we proceed to the business of the meeting, I'll be providing my Chairman's address. I confirm that a copy 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 Get A Voting Card button. As this is a meeting of Pioneer Credit Limited shareholders, only shareholders, their appointed proxies, or corporate representatives are entitled to ask questions or 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 the Ask A Question button, typing your question and clicking submit. We will 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 2026 financial report, I'll give shareholders the opportunity to ask general questions to the Board or questions about the conduct of the audit by the independent auditor, RSM. You'll also be given the opportunity to ask questions in relation to each of the resolutions to be considered by the meeting when they're brought forward for consideration. In accordance with the ASX corporate governance principles and recommendations, all resolutions will be voted on via 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 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 the closing time for receipt of the proxies, which was 10:00 a.m. Australian Western Standard Time on Tuesday, 27th of October '26. 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 the 24th of September 2026 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 Meeting be taken as read. I confirm that there is a quorum present. Therefore, the meeting is properly constituted, and I declare the meeting open, and we'll move to my Chairman's address. Good morning, and welcome to the 2026 Annual General Meeting of Pioneer Credit Limited. I'm honored to represent the Board today as your Chair. Before turning to the year-end review, I should explain 1 departure from our usual AGM format. Ordinarily, our Managing Director, Keith John, would make a separate presentation after the formal business of the meeting. Today, there will be no separate Managing Director's presentation because the company is involved in several matters which are at an advanced stage. Those matters may be significant, but they are not yet at a point where the company can properly disclose further information. Rather than repeat information or risk creating an incomplete impression, I will, therefore, provide a more comprehensive address than usual, covering the company's performance, strategy, and outlook. Keith is present and will participate in shareholders' questions with me and your Board. We will answer questions as fully as we can while respecting the company's continuous disclosure obligations. We're holding today's meeting by webcast so that shareholders, proxy holders, and visitors can participate wherever they are located. Shareholders and corporate representatives can ask questions and submit their votes during the meeting and I encourage you to participate fully. Financial year '26 was a defining year for Pioneer. It was a year in which the operational and strategic foundations established over several years translated into record profitability, record investment in purchased debt portfolios, lower funding costs, and a stronger balance sheet. Just as importantly, these outcomes were delivered while Pioneer remain firmly committed to its purpose, to put an end to debt stress. That purpose is not separate from our commercial strategy. It is central to it. In our industry, sustainable financial performance depends on earning and retaining the trust of customers, vendor-partners, regulators, employees, funders, and shareholders. Pioneer's customer-first servicing approach, strong compliance culture, and disciplined investment process, reinforce that trust and, over time, strengthen the economics of our business. The Board believes financial year '26 demonstrates that customer care, sound governance and commercial success are not competing objectives. At Pioneer, they are mutually reinforcing. Pioneer delivered substantial improvement in profitability during financial year '26 as we committed to shareholders that we would. Revenue increased by 7% to approximately $100 million. Statutory net profit after tax increased to $23.1 million, more than 3x the financial '25-year result. Basic earnings per share increased to $0.1453 and net tangible assets per share increased to $0.3895. These outcomes were not a product of a single event. They reflected the combined effect of disciplined portfolio investment, improved market conditions, careful cost management, and a materially better funding profile. Three features of our results are particularly important. First, the market for purchased debt portfolio has continued to recover. Major banks progressively return to more established sale programs. The addressable market expanded and Pioneer's preferred position with vendors strengthened. That trend accelerated late in financial year '26 and has continued into financial year '27. Second, management maintained operating discipline while continuing to invest in customer service, compliance, technology, and future capability. Cost of service was 34%, within the guided range of 33% to 35% which demonstrates that Pioneer can grow its portfolio base without allowing cost to rise at the same rate. Third, the company materially improved its funding profile. The downward repricing of interest credit margins paid on syndicated facility and the medium-term notes is expected to deliver annualized cash savings of around $4.5 million. Lower funding costs improve current earnings, but their strategic value is broader. They expand the range of portfolio opportunities that made Pioneer's return requirements and provide greater flexibility in the allocation of capital. Taken together, these outcomes show that Pioneer's earnings improvement is supported by structural changes in the business, not merely by a favorable movement in 1 financial period. The repricing also reflects the confidence of sophisticated funders in Pioneer's credit performance. Those funders have access to detailed portfolio level data and were not ordinarily agreed to reduce pricing during the term of facility without evidence that the business and its assets were performing well. It's worth explaining more clearly how Pioneer's business creates value over time. Pioneer acquires portfolio of customer accounts from banks and other financial institutions. Those portfolios are purchased only after detailed analysis of expected customer payments, product characteristics, historical performance, operational requirements, regulatory considerations, and the return available for the capital invested. We also assess counterparty risks. Pioneer will not acquire portfolios when we're not satisfied with the vendors' credit standards, conduct, and financial position are consistent with responsible, long-term partnership, particularly in more difficult lending conditions. The purchase of a portfolio is therefore not the end investment decision. It is the beginning of a long-term servicing task. Value is created through disciplined pricing and acquisition, respectful and effective customer engagement, durable payment arrangements, and careful management of hardship and vulnerability, and efficient servicing over many years. This long duration model matters. Portfolios acquired in 1 year generally contribute cash collections and earnings over an extended period. The benefit of good investment compounds as newer portfolios added to the existing book provided that acquisition discipline and servicing standards are always maintained. During financial year '26 Pioneer invested approximately $105 million in purchased debt portfolios, a record for the company, and ahead of the guidance provided at the beginning of the year. A significant portion of that investment occurred late in the financial year and therefore only made a limited contribution to financial year '26 earnings. Those portfolios now form part of the earnings platform for financial year '27 and subsequent periods. At 30th of June '26, the carrying value of Pioneer's portfolio book was approximately $400 million. The importance of that figure is not simply its size. It represents a diversified base of assets from which future customer payments are expected to be generated, supported by the company's servicing capability and long operating history. The Board's focus is not on purchasing for the sake of volume. Capital is deployed only when management and the investment committee is satisfied that expected returns, customer outcomes, operational capability, and strategic alignment meet Pioneer's requirements. In a stronger supply environment, it's particularly important that the company retains its discipline to decline opportunities that do not meet those standards. That discipline is also reflected in executive remuneration. Pioneer does not reward its senior leaders for merely completing portfolio purchases or achieving short-term results. Remuneration is weighted towards long-term outcomes, better aligning management decisions, and with the multi-year life of the assets and with those interest of shareholders. Pioneer's standing with vendors is 1 of the company's most important competitive advantages. Pioneer is the only purchaser with agreements in place against all 4 major Australian banks. This position has been built over many years through a reliable execution, strong governance, careful treatment of customers, and respect for the reputation of vendors, partners -- vendor-partners. The company also makes deliberate choices about where it will and will not participate. Pioneer does not acquire payday loan portfolios and does not compete with vendor partners by originating new consumer credit. We see lenders as partners, not as a sales channel. Our interests are aligned: To achieve appropriate financial outcomes while providing good customer experience, minimizing complaints, and protecting the vendors brand. This removes an important potential conflict and give vendors confidence that Pioneer is solely focused on appropriately servicing on the customers entrusted to it. These choices can constrain short-term opportunity, but they strengthen the business over the longer term. In a market where regulation, data security, customer outcomes, and reputation protection are increasingly important, scale alone is not enough. Vendors require purchaser with capital, operational capability, mature governance, and a servicing model that can withstand detailed scrutiny. The cost and complexity of meeting those standards create meaningful barriers to entry. Pioneer has invest in those capability over many years. The result is a business that is difficult to replicate quickly, and is increasingly well-placed as vendors become more selective about the organizations with which they partner. We do not take this position for granted. Every portfolio acquired and every customer interaction carries responsibility. The strength of the Pioneer's market condition will continue to depend on consistent execution and on retaining the confidence of every stakeholder. During financial year '26, Pioneer supported approximately 280,000 Australians experiencing debt stress. Our hardship and care teams assisted customers experiencing vulnerability and financial difficulty, and the company waived approximately $1.8 million of debt for customers in significant hardship. Customer satisfaction continues to be an important measure. Pioneer achieved a Net Promoter Score of plus 22% on a rolling 6-month basis. Given the current economic environment and cost of living pressure, this is a pleasing result. For debt purchaser, a positive Net Promoter Score is significant. It reflects the quality and empathy of our approach and our understanding of customers' individual circumstances. It also shows that customers can experience respectful, practical, and constructive pathway even when circumstances are difficult. The commercial relevance is equally clear; Better customer engagement supports sustainable payment arrangements. Strong customer outcomes reduced complaints and conduct risk. Consistent servicing protects vendor brands. Those outcomes strengthen Pioneer's ability to retain existing vendor relationships and compete for new portfolio supply. During the year, the Financial Counsellors Association of Western Australia independently reviewed Pioneer's hardship and care framework. That external perspective is valuable. It helps the company test its approach against the experience of those working directly with people in financial difficulty and identify further opportunities for improvement. The Board expects Pioneer to continue leading rather than merely meeting minimum standards. That expectation is both the right 1 for customers and for a sound, long-term commercial strategy. Another important feature of Pioneer's outlook is the scalability of its operating platform. Management has continued to invest in leadership capability, performance disciplines, process simplification, workflow design, and technology. These initiatives are intended to support a larger portfolio base without a proportionate increase in costs while maintaining or improving customer and compliance outcomes. Artificial intelligence forms part of that work, but the Board's approach is deliberately measured. Pioneer is not adopting technology for novelty or publicity. Each application must have a clear purpose and assessed against customer outcomes, regulatory requirements, privacy, cybersecurity, accuracy, and ethical use. The opportunity is meaningful. Properly govern technology can expand coverage and consistency of quality assurance, identify customer needs earlier, reduce repetitive administrative work, improved decision support, and allow our people to focus more of their time on interactions requirement judgment and care. The company's AI governance framework, responsible use of AI policy and executive oversight provides the controls which this capability is being developed. We are already applying AI selectively and supports the first stage of recruitment by conducting consistent on-demand screening interviews and providing structured information for human review. [ Belinda ] assists customers after hours by capturing their needs and arranging timely follow-up. More broadly, that customer-facing AI is intended to make Pioneer easy to access at the time the customer chooses, including outside standard business hours, while maintaining appropriate identity, compliance, hardship escalation, and audit safeguards. Our customer engagement capabilities are being expanded in controlled stages so that customers have more convenient ways to engage with us without reducing the quality of care, or removing the access to people when human judgment is required. The objective is not to remove human accountability, it is to use technology to make Pioneer more accessible, consistent, responsive, and efficient while preserving the human judgment that is essential to our purpose. These investments are designed to deliver better service, stronger risk management, and further operating leverage as the business grows. The value will depend on disciplined execution, appropriate controls, and continued oversight by management and the Board. The Board is conscious that Pioneer operates a capital-intensive business and that balance sheet discipline is fundamental to shareholder value. The $17 million institutional placement completed after year-end strengthened the company's capital position and increased flexibility to pursue attractive opportunities. Capital will continue to be allocated carefully between portfolio investment, debt reduction, liquidity, and other initiatives capable of producing sustainable long-term returns. Pioneer remains focused on deleveraging. Group loan-to-value ratio was approximately 93% in July 2024 and is now below 77%. That improvement has been driven substantially by stronger profitability, cash generation, and lower funding costs while the company continued to invest at record levels. At the same time, Pioneer must retain the capacity to act when high-quality portfolios become available. The appropriate balance is not achieved by adopting an absolute position on debt or growth. It is achieved by considering the quality, timing, and expected returns of each opportunity against liquidity, covenant headroom, funding costs in the best interest of shareholders. The Board and management, therefore, assess capital decisions through this full cycle. This includes the expected life of the acquired asset, the pace of cash generation, funding maturity and cost, market supply, and downside scenarios. The objective is to preserve resilience while allowing the company to invest when the expected risk-adjusted return justifies doing so. The funding improvements achieved in financial year '26, the equity raised after year-end, and the growing portfolio base leave Pioneer better placed to manage that balance than it has been for some time. Strong governance remains fundamental to everything Pioneer does. During financial year '26, the board continued to focus on risk management, regulatory compliance, cybersecurity, privacy, data governance, funding, and customer outcomes. David Birrell joined the Board during the year, adding further capital market and investment experience. Pioneer also became the first Australian debt purchaser admitted as a member of the Australian Retail Credit Association. That membership reflects the company's commitment to responsible credit practices, transparency, and importantly, constructive industry participation. Governance is sometimes described as a constraint on growth. Our Board sees it differently. In a regulated financial services business, mature governance is an enabler of sustained growth. It protects customers and shareholders and support vendor confidence and allows the company to take considered risks within a clear framework. We remain alert to the risk inherent in the business, including portfolio performance, funding, regulation, cybersecurity, data, litigation and execution. The company's prospects are attractive, but they must be pursued with appropriate caution and accountability. I will also comment briefly on Pioneer's proceedings against his former auditor, PwC. The claim exceeds $30 million and concerns complex matters. Pioneer's legal advisers remain comfortable with the company's position and the progress that's being made. The Board is conscious that shareholders would like the matter brought to a conclusion, as would we. However, litigation outcomes and timing are inherently uncertain. The Board will continue to manage the proceedings in what it considers the best interest of the company and of all shareholders. We will not compromise the company's position for the sake of speed and we will update the market when it's appropriate and permissible to do so. The claim represents potential additional value, but it is not the foundation of the Board's confidence in Pioneer. That confidence rests on performance, market position, and future cash-generating capacity of the underlying business. Looking forward, the Board remains optimistic while retaining the discipline appropriate to an ASX-listed financial services company. Portfolio suppliers trending towards levels not seen before the pandemic -- since before the pandemic. Pioneer enters financial year '27 with lower funding costs, stronger vendor relationships, a larger portfolio base, enhanced capital flexibility, and a servicing platform capable of further scale. The opportunity is not to simply purchase more. It is to convert Pioneer's trusted market position into carefully selected portfolio growth, to service those portfolios well, and to allow that investment to generate cash collections and earnings over time. It is also to continue improving productivity, so the growth in the portfolio base translates into stronger returns rather than matching increase in operating costs. The Board's priorities are, therefore, clear: maintain investment and pricing discipline, continue to reduce cost of service through scale, process improvement and technology, strengthen customer experience and hardship capability, preserve prudent funding and capital management while maintaining strong governance, compliance, and risk oversight. In closing, Pioneer today is stronger and more capable of business than it was several years ago. It has demonstrated that it can deliver record profitability while maintaining investment discipline. It has a growing portfolio base capable of contributing over multiple periods. It has trusted relationships across Australia's major banks and financial institutions. It is differentiated -- it has a differentiated service model that supports customer, vendor, and shareholder outcomes. It has improving funding economics, increasing operating leverage, and a clear opportunity to deploy its capabilities into a recovering market. None of these strengths remove the need for caution. Pioneer remains exposed to economic conditions, regulation, funding markets, portfolio performance, and execution risk. The Board's confidence comes from not only -- not from assuming those risks will disappear, but from the company's experience, discipline, and capability in managing them. I thank our shareholders for their continued support and confidence in Pioneer. I also acknowledge and also thank our Managing Director, Keith John, and our executive teams, and every Pioneer employee. Their commitment, professionalism, and focus on customers was central to the results received in financial year '26 and to the opportunities now before the company. We are proud of what's been achieved, but we remain clear eyed about the work ahead. The Board will continue to focus on responsible growth, balance sheet strength, customer outcomes and sustainable long-term value for shareholders. Thank you for your ongoing support of Pioneer Credit Limited. In a moment, we'll move to the formal part of the meeting and the voting on resolutions. Before moving on to the formalities for the meeting, are there any questions, Sue?

Yes, I have a general question for Keith. In terms of AGM best practice, hybrid meetings are better than virtual meetings. Will you offer a hybrid next year with an ability to both attend in person and online? It is also better when companies disclose the proxy votes to the ASX along with formal addresses. Will you do that next year? And were there any material proxy protest votes today? Will a full copy of the AGM webcast be published on your website for the benefit of shareholders who are unable to watch live?

The Board considers the most appropriate forum for these meetings each year. If there is something substantive to be discussed with shareholders at that time, then certainly we'll consider it. But at the moment, we have very few shareholders that actually attended AGM and the additional cost that goes towards holding an in-person or a hybrid AGM is far outweighed by the benefit that's achieved. Also considering that your management and your Board are available at all times. My phone number is on the bottom of most every ASX announcement, and we respond to every shareholder who calls or has questions. With respect, Sue -- just going to -- sorry. Sorry, with respect to the proxy votes, they are disclosed prior to each vote on each poll that's conducted today. So they are before you, obviously, get the opportunity to vote if you want to do that or to change your vote as the case may be. And finally, with respect to publishing our AGM, consistent with our prior practice, it's available on our website generally within day of it being conducted.

Thanks, Keith. Are there any other questions at this stage, Sue? Are there any questions on the phone?

There are no audio questions at this time.

Thank you. I'll now move to the formal business of the meeting. As mentioned, all resolutions will be decided on a poll. Each resolution will be read. Proxy votes will be displayed and shareholders will be given the opportunity to ask or submit questions. The poll will then be undertaken and the meeting closed. The results of the poll will be provided to the ASX later today. As Resolution 2 relates to my reelection as a director, I'll be handing the Chair to Non-Executive Director, Pauline Gately, to put that resolution to the meeting. The first order of business, to receive and consider the financial report and the Director's report for the financial year ended 30th of June 2026. The 2026 annual report contains those reports. A copy of the report is made available on the company's website and was sent to shareholders who requested it. The financial statements have been approved by the Directors and audited by RSM. As required by Section 317 of the Corporations Act, I will now lay before the meeting the financial report and the auditor's report for the financial year 30th of June 2026. At this time, I'd like to take any general questions or comments about the financial report, Directors' report and the auditor's report. Mr. Matthew Beevers, our audit partner for financial year '26 from RSM, is also available to answer any specific questions you may have about the conduct of the audit. I confirm there have been no questions submitted in writing to the auditor prior to the meeting. If you have any questions specifically relating to the remuneration, please wait until Resolution 1 is dealt with. Are there any questions, Sue.

There are no questions.

Are there any questions on the phone line?

There are no audio questions at this time.

Thank you. As there are no questions, I'll now proceed to consider the proposed resolutions on today's agenda. Resolution 1 is to consider, and if thought, fit pass the 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 2026, as contained in the Directors' report. I confirm that the remuneration report is included within the Director's report on Pages 21 to 28 of the company's 2026 annual report. While the vote on this item is advisory only and does not bind the company or its Directors, please be assured the Board takes into consideration any feedback we receive from shareholders. The Board abstains in interest of good corporate governance from making a recommendation in relation to this resolution. Voting restrictions apply to the resolution, key management personnel, and their closely related parties whose remuneration details are contained in the remuneration report, are excluded from voting on this resolution, except where exercising a direct proxy on behalf of persons whose remuneration details are not included in the report. Are there any questions, Sue?

There are no questions.

Are there any questions on the phone line?

There are no audio questions at this time.

Thank you. If there are no further questions, voting will be conducted by poll. I'll now move to the next resolution. Resolution 2 is to consider, and if thought fit, pass the resolution to reelect myself as a Non-Executive Director of the company. For good governance, I'll hand the chair to independent Non-Executive Director, Pauline Gately.

As Steve has mentioned, Resolution 2 is the reelection of Stephen Targett as a Non-Executive Director. I now put the resolution to the meeting. But 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, Mr. Stephen Targett retires and, having offered himself for reelection and being eligible, is reelected as a Director. Steve's experience and qualifications are set out on Page 9 of the Notice of Meeting. The Board, with Steve 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.

Are there any questions on the phone line?

There are no audio questions at this time.

Thank you, both. As there are no questions and voting will be conducted by a poll, I'll now pass the chair back to Steve to move to the next resolution. Thank you.

Thank you, Pauline. Resolution 3 is to consider, and if thought fit, pass a resolution to ratify the issue of 28,333,334 fully paid ordinary shares. I now put the resolution to the meeting that for the purpose of ASX Listing Rule 7.4 and all other purposes, the issue of 28, 333, 334 shares issued to sophisticated and institutional investors comprising of 24,108,201 shares issued under ASX Listing Rule 7.1 and 4,225,133 shares issued under ASX Listing Rule 7.1A as more fully described in the explanatory statement be approved. The Board unanimously recommends that shareholders vote in favor of this resolution. Are there any questions, Sue?

Yes, there is a question for Keith. Why didn't we offer our retail shareholders a share purchase plan after this year's placement, which is being approved today? Will you offer your retail shareholders and make good SPP before the next year's AGM?

Thank you, Sue, and thank you for the question. The Board takes advice on the best way to conduct any equity raise that it participates in, which it did on this occasion. The advice that we received was, given the quantum we were seeking to raise at the time frame in which we were seeking to raise it and all the other conditions concerning that -- were that we were best placed to do an institutional placement only. That is what we did. With respect to offering a make good share purchase plan, there's certainly ample opportunity for shareholders to provide stock on market at the moment or to buy stock on market at the moment for a price not dissimilar or even lower than what we did the equity raise in July [ at ]. So there's plenty of opportunity there and no need to proceed to do an SPP when people can simply buy on market as suits them.