Pioneer Credit Ltd (ASX:PNC) is a financial company that specialises in providing personalised solutions for individuals to reduce debt. Pioneer Credit’s main service is a phone app (Pioneer Path) that allows individuals to track their personal spending and assists in discovering ways to save income. In addition, Pioneer Credit Solutions business specialises in acquiring and servicing retail debt portfolios. Pioneer credit has a market capitalisation of A$63 million.

 

What are the results from Pioneer Credit FY19?

Today (Monday 30 September 2019) Pioneer Credit released its FY19 annual results. The main points are as follows:

  • Cash receipts for FY19 is A$120 million, up 14.7 per cent from FY18.
  • Purchased Debt Portfolios (PDPs) held at Amortised Cost (AC) in FY19 of A$249.8m up 11.23% from FY18.
  • Net profit after tax for FY19 is A$4.3 million, down 75.7 per cent from FY18.
  • Earnings before interest and tax for FY19 is A$13.2 million, down 54.1 per cent from FY18.
  • Earnings per share (basic) for FY19 is A6.88 cents, down 76 per cent from FY18.
  • Interim 2019 ordinary dividend of A4.31 cents per share (100 per cent franked). No final dividend will be paid to shareholders for FY19.

What were the drivers of this result?

Pioneer Credit management notes, “The application of AC to more than 900 PDPs acquired by the Company over the past 10 years has been complex, most notably changing the timing of when earnings are recognised in the Company’s accounts. The transition to AC has resulted in the Company reporting a Net Profit after Taxation (NPAT) of A$4.3 million for the period”.

 

What is the outlook for Pioneer Credit?

Australia has one of the highest household debt levels in the world. According to the Australian Bureau of Statistics, in 2015 – 2016, based on the ratio of debt to either income or assets, around three-in-ten households (29 per cent) were classified as ‘over-indebted’. With household debt rising, demand for financial services to assist in servicing debt could increase in the coming years.

Pioneer Credit management notes, “The Company has a strong market position due to its servicing approach and continues to fund its PDP forward flow commitments in a sustainable manner from cash flow. Liquidations have started well in FY20 and since the beginning of July there has been a number of approaches from existing and new vendors to sell additional portfolios to the Company, which we expect to capitalise on post the conclusion of the Azure Capital process.”

 

What is the market reaction?

The initial market reaction to Pioneer Credit FY19 is unknown. Pioneer Credit management has requested a trading halt until 31 October 2019. This is in light of a number of trading halt announcements in the previous month. Pioneer Credit has a P/E ratio around 10 and an annual dividend yield of around 5 per cent (fully franked).

 

Disclaimer:

This article has been prepared by the Australian Stock Report Pty Ltd (AFSL: 301 682. ABN: 94 106 863 978)

(“ASR”). ASR is part of Amalgamated Australian Investment Group Limited (AAIG) (ABN: 81 140 208 288 Level 13, 130 Pitt Street, Sydney NSW 2000).

This article is provided for informational purpose only and does not purport to contain all matters relevant to any particular investment or financial instrument. Any market commentary in this communication is not intended to constitute “research” as defined by applicable regulations. Whilst information published on or accessed via this website is believed to be reliable, as far as permitted by law we make no representations as to its ongoing availability, accuracy or completeness. Any quotes or prices used herein are current at the time of preparation. This document and its contents are proprietary information and products of our firm and may not be reproduced or otherwise disseminated in whole or in part without our written consent unless required to by judicial or administrative proceeding. The ultimate decision to proceed with any transaction rests solely with you. We are not acting as your advisor in relation to any information contained herein. Any projections are estimates only and may not be realised in the future.

ASR has no position in any of the stocks mentioned.

September 30, 2019