Pioneer Credit Limited
Annual Report
for the year ended 30 June 2014
Pioneer Credit Limited ABN 44103003505
Annual Report - 30 June 2014
Lodged with the ASX under Listing Rule 4.3A.
Contents
Results for Announcement to the Market
Financial statements
Page
i
33
These financial statements are the consolidated financial statements of the Consolidated Entity consisting of
Pioneer Credit Limited and its subsidiaries. The financial statements are presented in the Australian currency.
Pioneer Credit Limited is a Company limited by shares, incorporated and domiciled in Australia. Its registered
office and principal place of business is:
Pioneer Credit Limited
188-190 Bennett Street
Perth Western Australia 6004
A description of the nature of the Consolidated Entity's operations and its principal activities is included in the
review of operations and activities on page 2 of the Annual Report and in the Directors' report on page 6 of the
Annual Report, both of which are not part of these financial statements.
The financial statements were authorised for issue by the Directors on 28 August 2014. The Directors have the
power to amend and reissue the financial statements.
Pioneer Credit Limited
Appendix 4E
Preliminary Final Report
for the year ended 30 June 2014
(previous corresponding period 30 June 2013)
Results for announcement to the market
Key Information
30 June
2014
$'000
30 June
2013
$'000
Change
$'000
%
Revenue from ordinary activities
25,761
16,673
9,088
55%
Net Profit after Taxation for the period attributable to
members
1,047
3,520
(2,473)
(70)%
Operating Profit after Taxation*
4,587
3,908
679
17%
* Operating profit is statutory profit after taxation before specific items that will not recur in the future and specific
items that will not recur in the ordinary course of business.
Dividends per ordinary share / distributions
Special Dividend
Return of Capital
Final 2014 Ordinary
Amount
per
security
(cents)
Franked
Amount
per
security
Record
date
Paid /
Payable
date
19.42
100% 30/04/2014 16/06/2014
54.70
N/A 30/04/2014 17/06/2014
3.10
100% 30/09/2014 17/10/2014
There is no provision for a final dividend in respect of the year ended 30 June 2014. Provisions for dividends to
be paid by the Company are recognised in the Consolidated Balance Sheet as a liability and a reduction in
retained earnings when the dividend has been declared.
Full commentary on the figures presented above, along with full commentary on the results for the period and
other significant information, has been provided in the 2014 Media Release and Results Presentation and
Consolidated Financial Statements - 30 June 2014, both released today.
Included in the Consolidated Financial Statements - 30 June 2014 released today are the following;
• Consolidated Statement of Comprehensive Income together with notes to the statement
• Consolidated Balance Sheet together with notes to the statement
• Consolidated Statement of Cash Flows together with notes to the statement
• Consolidated Statement of Changes in Equity, showing movements
i
Key Ratios
Net Tangible Assets per Fully Paid Ordinary Share
Basic Earnings per Fully Paid Ordinary Share
30 June 2014
(cents)
30 June 2013
(cents)
104.55
205.36
7.97
56.96
The Company converted to a public company on 7 February 2014, and was admitted to the official list of the ASX
Limited on Thursday 1 May 2014. Contributed equity increased by $36.373m which included the restructure of
the pre-admission of share capital. Detail of the movement in equity is included in the Consolidated Financial
Statements released today.
The Consolidated Financial Statements at 30 June 2014 and accompanying notes for Pioneer Credit Limited
have been audited and are not subject to any qualifications. The Independent Auditor's Report has been provided
with the Statements released today.
ii
Pioneer Credit Limited ABN 44 103 003 505
Annual Report
for the year ended 30 June 2014
Contents
Corporate Directory
Review of operations and activities
Directors' report
Corporate Governance Statement
Financial statements
Independent auditor's report to the members
Shareholder information
Page
1
2
6
23
33
87
89
Corporate Directory
Directors
Mr Michael Smith (Chairman)
Secretary
Mr Keith R John
Mr Rob Bransby
Mr Mark Dutton
Mr Leslie Crockett
Notice of annual general meeting
The annual general meeting of Pioneer Credit Limited
will be held at
Professional Public Relations
Level 2, 1 Altona Street
West Perth WA 6005
Principal registered office in Australia
Share register
Auditor
Solicitors
Bankers
188-190 Bennett Street
East Perth WA 6004
+61 8 9323 5000
Link Market Services Limited
Ground Floor
178 St Georges Terrace
Perth WA 6000
+61 1300 554 474
PricewaterhouseCoopers
Brookfield Place
125 St Georges Terrace
Perth WA 6000
+61 8 9238 3000
Gilbert + Tobin Lawyers
1202 Hay Street
West Perth WA 6005
+61 8 9413 8400
BankWest
Level 12B BankWest Place
300 Murray Street
Perth WA 6000
+61 08 9369 6952
Stock exchange listings
Pioneer Credit Limited shares are listed on the
Australian Securities Exchange (ASX).
Website
www.pioneercredit.com.au
Pioneer Credit Limited
30 June 2014
1
Review of operations and activities
Initial Public Offering
In October 2013 Pioneer Credit embarked on the process of transitioning to a publicly-listed Company, appointing
Azure Capital to manage its intended Initial Public Offering (IPO). The Company also appointed KPMG as
Investigating Accountants, Gilbert & Tobin as Solicitors with PwC continuing as the Independent Auditor. The
Company invested considerable resources (both human and financial) to ensure the best possible outcome for
both incoming shareholders as well as existing shareholders who desired to maintain as much equity as possible.
This was balanced with the achievement of an appropriate capital and shareholding structure to ensure the
Company is best positioned for its future growth plans.
Through the IPO the Company sought growth capital to deliver:
•
•
•
a diversification of its client base, by securing agreements with a broader range of major financial institutions
acquisition of additional customer portfolios at reasonable prices and
provision of working capital for future projects including additional premises to accommodate future growth.
In April 2014 a successful book build was completed, raising $40m, with the process fully underwritten by Lead
Manager Evans & Partners. Pioneer emerged from the book build with a shareholder base consisting of
predominantly institutional investors.
Following completion of the book build and lodgement of the prospectus, Pioneer Credit Limited was admitted to
the official list of the ASX Limited on 1 May 2014.
Since listing, Pioneer has made three significant announcements to the ASX consistent with the initial goals
outlined above. As a result of executing on a forward flow arrangement with a new vendor partner, and
completing a purchase with another vendor partner, the Company has completed purchases from three of
Australia’s four major banks over the past financial year and has ongoing agreements with each of these. The
Company has also expanded its relationship with a key second tier financial services partner and entered its first
five year forward flow purchase arrangement. This is understood to be the first of its kind in Australia and is
reflective of the depth of relationship that Pioneer has with its broader partner base and this partner in particular.
In every case, Pioneer has maintained its pricing discipline as outlined in the prospectus, or has on average
received more favourable pricing than had been achieved previously.
Review of operations and the results of those operations
Continuing on its growth path, the Company receipted customer payments of $37.575m, a 60.3% increase on the
previous year delivered on the back of 2H14 customer payments of $21.151m, an out performance of 2.5% on
the prospectus forecast. The Company delivered net revenue of $25.761m for the 12 months ended 30 June
2014, a 54.5% increase on the previous year.
The completion of the IPO was a significant milestone in the growth of the Company. The Directors have ensured
through this process and in the release of these financial statements, to crystalise and expense all possible
liabilities to best position the Company for the future.
As forecast, the costs associated with listing on the ASX have had a one-off material impact on the Company’s
profit. The statutory profit after tax attributable to the owners of Pioneer Credit Limited for the year ended 30 June
2014 was $1.047m (2013 $3.520m). Included in the statutory profit are the costs associated with the IPO charged
to the consolidated statement of comprehensive income, as well as a provision for costs on a commercial claim,
prior period taxation adjustments and the costs associated with amending historic private entity structures as the
Company moved to public ownership, which will not recur in the future. A full reconciliation of these items is
provided below.
The operating profit (statutory profit after taxation before specific items that will not recur in the future and specific
items that will not recur in the ordinary course of business) was $4.587m which is ahead of the pro-forma forecast
contained in the prospectus for the IPO. The following table summarises key reconciling items between statutory
profit after tax attributable to the owners of Pioneer Credit Limited and operating profit.
Pioneer Credit Limited
30 June 2014
2
Review of operations and activities
Reconciliation between statutory profit after tax attributable to the owners and operating profit
Key Information
Statutory profit after tax attributable to the owners
Specific items that will not recur in the future :
30 June
2014
$'000
1,047
30 June
2013
$'000
3,520
Financial
Statement
Note
Costs associated with the IPO charged to the consolidated statement
of comprehensive income
Share based payment expense arising on modification of share based
payment arrangement under the pre IPO equity structure
2,058
744
-
-
Interest on preference shares incurred while classified as borrowings
under the pre IPO equity structure
520
388
Correction on indirect taxation, relating to prior years *
Correction to income taxation relating to prior years
Specific items that will not recur in the ordinary course of business :
Costs on settlement of a commercial claim **
Tax effect :
Tax effect on the adjustments outlined above that are deductible for
income tax purposes
312
175
648
(917)
-
-
-
-
Operating Profit
4,587
3,908
3
4
4
5(a)
3
*
**
The correction represents an accrual for an uncertain indirect taxation position due to an
interpretation of legislation on which the Company is obtaining professional advice.
This item was disclosed in the prior year as a contingent liability which was crystallised and
expensed this financial year. There is no future liability which could arise in this matter.
Operating profit is a financial measure which is not prescribed by Australian Accounting Standards (“AAS”) and
represents the profit under AAS adjusted for specific items. The Directors consider operating profit to reflect the
core earnings of the Group. Operating profit is used by the Directors for purposes of providing market guidance to
shareholders and the market, and is calculated on a consistent basis year on year.
The operating profit information in the table has not been subject to specific audit procedures. However, the
statutory profit after taxation has been extracted from the consolidated statement of comprehensive income and
unless otherwise annotated, the specific key reconciling items have been extracted from the notes to the
consolidated financial statements as referenced in the table, from the accompanying financial statements for the
year ended 30 June 2014, which have been subject to audit (refer to page 87 for the auditor’s report on the
financial statements). The tax effect is calculated by applying the statutory tax rate of 30% to the key reconciling
items to the extent to which they are deductible for income tax purposes.
Financial, capital management and operational highlights
Key financial highlights for the year ended 30 June 2014:
•
•
•
•
•
•
•
customer payments of $37.575m (2013 $23.447m), an increase of 60.3%
operating cash flow of $22.514m (2013 $12.612m), an increase of 78.5%
statutory profit of $1.047m (2013 $3.520m)
operating profit after tax of $4.587m (2013 $3.908m), an increase of 17.4%
contributed equity increased by a net $36.373m
retained earnings decreased by $2.883m comprising statutory profit after taxation of $1,047m net of the
pre-IPO declaration and distribution of a dividend on ordinary shares held at 30 April 2014, $3.930m
the share based payment reserve movement of $1.037m arose primarily as a result of the recognition of the
share based payment expense on the modification of the employee share incentive scheme
Pioneer Credit Limited
30 June 2014
3
Review of operations and activities
Key capital management highlights for the year ended 30 June 2014:
•
•
•
•
•
•
an IPO capital raising closed over-subscribed with the issue of 25,000,000 ordinary shares raising $40m
an expanded Senior Debt Facility was entered on 20 March 2014 with the Group’s existing bankers with a
total facility limit of $54.06m comprising:
• a cash advance facility to fund the acquisition of purchased debt ledgers portfolios of up to $47m
• a bank guarantee facility to secure real estate lease obligations of up to $3.5m
• an overdraft facility of up to $1m
• a direct debit authority facility of $2.5m
• a credit card facility limit of $60,000
undrawn limit at 30 June 2014 for the acquisition of purchased debt portfolios was $43.963m
the overdraft facility was unused at 30 June 2014
in expanding the facility the Group extended its debt maturity profile over three years, at an average
borrowing cost of 5.12%
at year end the Group had net cash with gearing as a result not meaningful to compare.
The Group operates its capital structure in a conservative manner. All facility covenants were met throughout the
year. At 30 June 2014 the Group had loan to fair value of purchase debt portfolio value ratio of 11.64% compared
to a facility covenant of 45%. The Group reaffirms it targets a loan to value ratio of no more than 40%.
Net tangible assets per share were 104.55 cents. It is not meaningful to compare to the prior year due to the
change in equity structure as a result of the completion of the IPO.
Operational developments
In June 2014 Pioneer opened its first purpose-built facility in the Perth central business district. This new facility
was developed following the sub-lease of a lesser standard facility in the same building. A high quality premises
assists with attracting and retaining high performing customer service personnel who are essential to the
Company’s ongoing growth and development. The expansion will continue over the course of the next 18
months, with Pioneer committing to one new floor within the same building (to replace the existing sub-let floor);
and having options over a further two floors.
Given the importance of an appropriate and conservative financial and capital structure, the Company has
appointed a number of key advisers, among them;
•
•
KPMG has been engaged to develop, in association with Pioneer’s finance team, the policies and processes
to ensure the appropriate accounting treatment continues to be applied to the Company’s purchased debt
portfolios, and to ensure that the Company's policies were objectively developed and the associated
processes are robust.
PwC continues as Independent Auditor of the Company. It is the Board’s belief that this level of audit scrutiny
assists in ensuring the Company’s approach to valuation of purchased debt portfolios is not only appropriate
but also tested with a level of rigour that provides the greatest level of comfort possible to shareholders.
Board of Directors
In the lead up to the IPO, an extensive search was conducted through an international search firm for appropriate
Non-Executive Directors. The Company was delighted to welcome high-calibre, experienced Directors Mr
Michael Smith (Chairman of iiNet, 7-11 and Deputy Chairman of Automotive Holdings Group) and Mr Rob
Bransby (Managing Director of HBF Limited and Non-Executive Director of Goldfields Money Limited) to the
Board. Attracting quality individuals to Pioneer has always been and will remain a key goal of the Company.
The Board is currently interviewing for another member, aimed at further strengthening the Company’s Eastern
States based relationships and understanding of Australian financial institutions and expects to announce an
appointment to the Market once they are satisfied they have an appropriate candidate.
Pioneer Credit Limited
30 June 2014
4
Review of operations and activities
People
The strong performance achieved during the twelve months to 30 June 2014 was largely driven by the strong
leadership of our Operations Team and a continued sustained commitment to the success of the business by the
people who work within it.
Through our partnership with a key vendor, Pioneer opened a trial site in Manila, Philippines. The trial was a six
month opportunity to prove the concept of offshoring for a very specific customer segment and to ensure that the
business could continue to develop its industry leading compliance programme in a different jurisdiction.
Commensurate with Pioneer’s focus on quality, three Australian employees were seconded to the Philippines to
oversee the trial phase of the operation. These staff were supported by the Australian operations to ensure the
same quality individuals were recruited into the business and inducted on as close as possible to the same terms
as occur in our Australian operations. After the successful completion of the trial in January 2014, the Company
made a formal commitment to the ongoing operation of the Philippines facility.
The Company has continued to build staff numbers to ensure it is adequately resourced in order to meet its
growth targets. Having commenced FY14 with 124 people, the Company now has 234.
In addition to continuing to build a culture of customer service excellence, Pioneer maintains a proactive
approach in managing dispute resolution. Of the matters that have been referred by customers to the
Ombudsman for resolution, no complaints have been closed in the customer’s favour.
Dividends
In line with the Prospectus forecast, the Directors have declared a final fully franked dividend of 3.10 cents per
share. The dividend has a record date of 30 September 2014 and will be paid on 17 October 2014.
Outlook
Pioneer is pleased to reaffirm the forecasts for FY15 as outlined in the prospectus, with customer payments of
$57.4m and statutory profit after taxation of $6.6m.
It is also pleasing to reaffirm that the purchasing target for FY15 is now fully contracted (84% was contracted
prior to the IPO). The Company will continue to assess opportunities that may arise to ensure they are
appropriate given the capital of the business and its servicing ability.
The Company anticipates recruiting approximately 90 additional customer service personnel in the first half of
FY15. As outlined in the Prospectus, this will result in a repeat of the effect of FY14 where the Company’s
financial performance is skewed to the second half.
The Board expects the consistency of performance between 1H and 2H to improve in FY16 as the business
heads towards scale and the impact of recruitment is likely to be less significant as it may have been this year
and prior with relatively small staff numbers.
The capital position at completion of the IPO is robust and the Company remains focused on prudently managing
capital and maintaining a disciplined purchasing strategy which will ensure the strategic objectives can be
achieved without increasing its risk profile.
Pioneer Credit Limited
30 June 2014
5
Directors' Report
Your Directors present their report on the Consolidated Entity consisting of Pioneer Credit Limited and the entities
it controlled at the end of, or during, the year ended 30 June 2014. Throughout the report, the Consolidated Entity
is referred to as the Group.
Directors
The following persons were Directors of Pioneer Credit Limited during the whole of the financial year and up to
the date of this report:
Mr Keith R John
Mr Mark Dutton
Mr Michael Smith and Mr Rob Bransby were appointed as Directors on 7 February 2014 and continue in office at
the date of this report.
Mr James Singh resigned from the position of Director of Pioneer Credit Limited on 7 March 2014. Mr Singh
retained his executive position within the Group.
Principal activities
Pioneer Credit Limited is an Australian financial services provider, specialising in acquiring and servicing
unsecured retail debt portfolios. These portfolios consist of customers with financial obligations who become the
cornerstone of Pioneer’s business.
Pioneer Credit Limited values and respects our customers greatly. We work with them over time so that they can
meet their obligations and progress toward financial recovery, and through this process evolve as a “new
consumer”.
There was no significant change in the nature of these activities during the year.
Dividends
Dividends or distributions paid to members during the year were as follows:
CRPS - Declared and paid during the year 2014
Total amount
Date of
payment
Convertible redeemable preference share class A (reinvested)
Convertible redeemable preference share class B
Convertible redeemable preference share class C
$591,742
07/02/2014
$363,448
02/05/2014
$406,405
02/05/2014
The dividends described above were paid on Class A, B and C Redeemable Preference Shares (which
Shares were converted to Ordinary Shares on 28 April 2014) and were charged to the Consolidated
Statement of Comprehensive Income as 'Finance Expenses'.
Ordinary Shares - Declared and paid during the year 2014
Total amount
Date of
payment
Special dividend on fully paid ordinary shares held at 30 April 2014
$ 3,929,516 16/06/2014
Return of capital on fully paid ordinary shares held at 30 April 2014
$11,070,484 17/06/2014
There were no dividends paid in prior years.
Since the end of the financial year the Directors have declared the payment of a final dividend of 3.10 cents per
fully paid ordinary share to be paid on 17 October 2014.
Pioneer Credit Limited
30 June 2014
6
Directors' report
Review of operations
Information on the operations and financial position of the Group and its business strategies and prospects is set
out in the review of operations and activities on page 2 of this Annual Report.
Significant changes in the state of affairs
Significant changes in the state of affairs of the Group during the financial year were as follows:
•
•
Pioneer Credit Pty Limited converted to a public company on 7 February 2014.
The Company was admitted to the official list of ASX Limited on Thursday 1 May 2014.
The key financial highlights associated with this significant change have been outlined in note 1 to the financial
statements.
An expanded Senior Debt Facility was entered on 20 March 2014 with the Group's existing bankers with a total
facility limit of $54.060m. Details of the facility are disclosed in note 11(d)(i) to the consolidated financial
statements.
Events since the end of the financial year
No matter or circumstance has arisen since 30 June 2014 that has significantly affected the group’s operations,
results or state of affairs, or may do so in future years.
Environmental regulation
Pioneer Credit Limited is not affected by any significant environmental regulations in respect of its operations.
Pioneer Credit Limited
30 June 2014
7
Information on Directors
Mr Michael Smith
Non-Executive Chairman
Experience and expertise
Directors' report
Mr Smith is the Managing Director of strategic marketing
consultancy firm Black House, the Chairman of iiNet Limited, the
Australian Institute of Company Directors and the Lionel Samson
Sadleirs Group. Mr Smith is Deputy Chairman of Automotive
Holdings Group and 7-Eleven Stores Pty Ltd. He is also a Board
member of Giving West and Creative Partnerships Australia. He is a
Fellow of the Australian Institute of Company Directors and holds a
Doctor of Letters from the University of Western Australia for his
contribution to the business sector and the arts.
Listed Company Directorships
including those held at any time in
the previous 3 years
iiNet Limited (since 19 September 2007)
Automotive Holdings Group Limited (since 6 May 2010)
Chairman of the Board
Special responsibilities
Chairman of Nomination and Remuneration Committees, Member of
Audit Committee
Interests in shares and options
Ordinary Shares
Unlisted Options
62,500
300,000
Mr Keith R. John
Managing Director
Experience and expertise
Mr John is the Founder of Pioneer Credit Limited. He has been in
the receivables management industry since 1988 and is a Director of
the Australian Collectors and Debt Buyers Association Limited.
Listed Company Directorships
including those held at any time in
the previous 3 years
None
Special responsibilities
Managing Director
Interests in shares and options
Ordinary Shares
8,113,216
Mr Mark Dutton
Non-Executive Director
Experience and expertise
Mr Dutton is a Director at Banksia Capital and is a Non-Executive
Director of Mineral Resources Limited. Mr Dutton is a Chartered
Accountant and worked in Audit and Corporate Finance at
PricewaterhouseCoopers in the United Kingdom and Russia. He
holds an MA in Management Studies and Natural Sciences from the
University of Cambridge.
Listed Company Directorships
including those held at any time in
the previous 3 years
Mineral Resources Limited (since 8 November 2007)
Special responsibilities
Member of Nomination, Remuneration and Audit Committees
Interests in shares and options
Ordinary Shares
306,483
Pioneer Credit Limited
30 June 2014
8
Directors' report
Information on Directors (continued)
Mr Rob Bransby
Non-Executive Director
Experience and expertise
Listed Company Directorships
including those held at any time in
the previous 3 years
Special responsibilities
Mr Bransby is the Managing Director of HBF Limited which he joined
in August 2005 following a 25 year banking career at National
Australia Bank. Mr Bransby is the President of Private Healthcare
Australia and a Senior Fellow of the Financial Services Institute of
Australia (FINSIA) and a Fellow of the Australian Institute of
Management (AIM).
Goldfields Money Limited (since 10 May 2012)
Member of Nomination Committee, Member of Remuneration
Committee Chair of Audit Committee.
Interests in shares and options
Ordinary Shares
35,000
Company Secretary
Mr Leslie Crockett was appointed to the position of Company Secretary on 1 January 2013. Mr Crockett has
been the Chief Financial Officer of the Company since December 2012. He has over eight years experience in
senior financial roles in Australia in addition to extensive international experience. Mr Crockett qualified as a
chartered accountant with Deloitte and provided audit, consulting, financial advisory, risk management and tax
services to listed and unlisted clients.
Meetings of Directors
The number of meetings of the Company's Board of Directors and of each Board committee held during the year
ended 30 June 2014, and the number of meetings attended by each Director were:
Committee Meeting
Board Meetings
Audit
Remuneration
Attended
Held
Attended
Held
Attended
Held
7
14
14
7
5
7
14
14
7
9
1
*
1
1
*
1
*
1
1
*
1
*
1
1
*
1
*
1
1
*
Mr Michael Smith +
Mr Keith R. John
Mr Mark Dutton
Mr Rob Bransby +
Mr James Singh ++
Held = number of meetings held during the year and during the time the Director held office or was a member of
the committee
* Not a member of the relevant committee.
+ Mr Michael Smith and Mr Rob Bransby were appointed on 7 February 2014.
++ Mr James Singh resigned from the position of Director of Pioneer Credit Limited on 7 March 2014. Mr Singh
retained his executive position within the Group.
By way of resolution approving the adoption of the Corporate Governance Manual the Board Committees were
formed on 25 February 2014. A meeting of the Nomination Committee was not held during the financial year.
Pioneer Credit Limited
30 June 2014
9
Remuneration report
The Remuneration Committee is pleased to present the inaugural remuneration report for Pioneer Credit Limited
for the year ended 30 June 2014. The report sets out remuneration information for the Company’s non-executive
Directors, executive Directors and other key management personnel.
Directors' report
The report contains the following sections:
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
(j)
(k)
(l)
(m)
Key Management Personnel disclosed in this report
Remuneration governance
Use of remuneration consultants
Executive remuneration policy and framework
Relationship between remuneration and Pioneer Credit Limited's performance
Non-executive Director remuneration policy
Voting and comments made at the Company's 2014 Annual General Meeting
Details of remuneration
Service agreements
Details of share-based compensation and bonuses
Loans to Key Management Personnel
Equity instruments held by Key Management Personnel
Other transactions with Key Management Personnel
(a) Key Management Personnel disclosed in this report
Name
Mr Michael Smith +
Mr Keith R. John
Mr Mark Dutton
Mr Rob Bransby +
Mr James Singh ++
Mr Leslie Crockett
Position
Non-Executive Chairman
Managing Director
Non-Executive Director
Non-Executive Director
Executive Director
Chief Financial Officer and Company Secretary
Ms Lisa Stedman +++
Chief Operating Officer
+ Mr Michael Smith and Mr Rob Bransby were appointed Directors on 7 February 2014.
++ Mr James Singh resigned as a Director on 7 March 2014. He retained his executive position within the Group.
+++ Ms Lisa Stedman was appointed Chief Operating Officer of Pioneer Credit Limited on 1 July 2014.
(b) Remuneration governance
The Remuneration Committee is a Committee of the Board. The function of the Remuneration Committee is to
assist the Board in fulfilling its Corporate Governance responsibilities with respect to remuneration by reviewing
and making appropriate recommendations to the board on:
•
•
remuneration packages for Directors and senior executives; and
incentive and equity-based remuneration plans including the appropriateness of performance hurdles and
total payments proposed.
Their objective is to ensure that remuneration policies and structures are fair and competitive and aligned with the
long-term interests of the Company’s shareholders.
The Remuneration Committee (at http: //www.pioneercredit.com.au/ corporate/ investor-centre/
corporate-governance-policies/) charter provides further information on the role of this committee.
(c) Use of remuneration consultants
During the financial year ended 30 June 2014 the remuneration committee did not engage independent
remuneration consultants.
Pioneer Credit Limited
30 June 2014
10
Directors' report
Remuneration report (continued)
(d) Executive remuneration policy and framework
In considering the Company’s Remuneration Policy and levels of remuneration for executives, the Remuneration
Committee makes recommendations which:
• motivates executive Directors and senior executives to ensure long term sustainable growth of the Company
•
•
•
within an appropriate control framework;
demonstrates a clear correlation between senior executives’ performance and remuneration;
aligns the interests of key leadership with the long-term interests of the Company’s shareholders; and
prohibits executives from entering into transactions or arrangements which limit the economic risk of
participating in unvested entitlements.
The executive remuneration framework has three components:
•
•
•
base salary and benefits, including superannuation;
short-term incentives, and
long-term incentives.
Pioneer Credit Limited recognises the need to appropriately incentivise Key Management Personnel through a
long term incentive plan (a period regarded as 3 - 5 years) and has committed to working with independent
consultants to develop an appropriate scheme for the Company for approval at the 2014 Annual General
Meeting. Subsequent to the reporting date, Kelsen Human Resources have been appointed as independent
remuneration consultants by the Remuneration Committee to deliver a report and to make recommendations to
the Remuneration Committee. The Board has ensured appropriate protocols are in place to ensure the advice
received will be free from the undue influence of management.
To ensure that executive remuneration is aligned to Company performance, a significant portion of the
executives’ target pay is “at risk”. Executives receive their base salary and benefits structured as a total
employment cost package. Base salary is reviewed at least annually or on promotion, benchmarked against
market data for comparable roles in the market. There is no guaranteed base salary increases included in any
executives’ contracts. Retirement benefits are delivered under the Superannuation Guarantee (Administration)
Act 1992.
(e) Relationship between remuneration and Pioneer Credit Limited performance
Pioneer Credit Limited was admitted to the official list of ASX Limited on 1 May 2014. Prior to this date the
Company did not have publicly traded securities and the entity did not have a dividend policy.
The short term incentive element of executive remuneration has historically been awarded at the discretion of the
Board and based on earnings performance expressed as statutory profit after taxation. Participation in the year
ended 30 June 2014 is at the discretion of the Board with the key performance criteria based on the requirement
that the Company has at least met its forecast earnings, as well as the element as described that was paid on the
successful completion of the Initial Public Offer.
Pioneer Credit Limited
30 June 2014
11
Directors' report
Remuneration report (continued)
(f) Non-executive Director remuneration policy
Pioneer Credit Limited’s policy is to remunerate non-executive Directors at a fixed fee for time, commitment and
responsibilities. Remuneration for non-executive Directors is not linked to individual performance.
From time to time the Company may grant equity based incentives to non-executive Directors. The grant of an
equity based incentive is designed to attract and retain suitably qualified non-executive Directors.
The maximum aggregate amount of fees (including superannuation payments) that can be paid to non-executive
Directors is subject to approval by shareholders at a General Meeting.
Fees will be reviewed annually by the Remuneration Committee taking into account comparable roles and
independently generated market data.
The maximum annual aggregate Directors’ fee pool limit is $500,000 and was approved by shareholders on 23
December 2013.
(g) Voting and comments made at the Company's 2013 Annual General Meeting
As this is the first financial year as a disclosing entity, Pioneer Credit Limited was not previously subject to the
requirements of the Corporations Act S300. A remuneration report has not been previously required nor
prepared.
Pioneer Credit Limited
30 June 2014
12
Directors' report
Remuneration report (continued)
(h) Details of remuneration
The following tables show details of the remuneration received by the Group’s key management personnel for the
current financial year. As this is the inaugural remuneration report produced there is no comparative information
required and has not been provided as it would not contribute to meaningful disclosure.
2014
Name
Short-term employee
benefits
Post-
employ-
ment
benefits
Long-
term
benefits
Share
based
payments
Cash
salary
and fees
Cash
bonus
Non-
monetary
benefits
Super-
annuation
Annual
and long
service
leave
Options
Total
Non Executive Directors
Mr Michael Smith +
Mr Mark Dutton
Mr Rob Bransby +
Executive Directors
Mr Keith R. John
Mr James Singh ++
42,000
8,615
24,500
3,885
797
2,266
300,000 150,000
4,800
41,625
17,289
54,991
5,087
12,528
58,413
9,412
26,766
513,714
60,078
Other Key Management Personnel
Leslie Crockett
Lisa Stedman
229,923
43,750
153,692
22,275
4,800
9,540
26,040
16,277
(466)
136,500 440,547
686
162,000 364,470
+ Mr Michael Smith and Mr Rob Bransby were appointed Directors on 7 February 2014.
++ Mr James Singh resigned as a Director on 7 March 2014. Mr Singh retained his executive position within the
Group.
(i) Service agreements
Terms of employment for the executives are formalised in Service Agreements. The Service Agreements specify
remuneration, benefits and notice period. Participation in any STI or LTI plan is subject to the Board's discretion.
There are no benefits payable to any executive on termination. Significant provisions of each Service Agreement
are set out below.
Employee
Position
Salary
Short term incentive
Term of agreement and notice period
Mr Keith R.
John
Managing
Director
Mr Leslie
Crockett
Ms Lisa
Stedman
Chief
Financial
Officer
Chief
Operating
Officer
$300,000 per
annum plus
superannuation
(currently 9.5%)
$250,000 per
annum plus
superannuation
(currently 9.5%)
$200,000 per
annum plus
superannuation
(currently 9.5%)
Up to 100% of base
salary.
Continuing agreement with 12 months’
notice by either party to the
Employment Agreement
Up to 35% of base
salary.
Continuing agreement with 6 months’
notice by either party to the
Employment Agreement
Up to 55% of base
salary.
Continuing agreement with 6 months’
notice by either party to the
Employment Agreement
Pioneer Credit Limited
30 June 2014
13
Directors' report
Remuneration report (continued)
(i) Service agreements (continued)
Non-Executive Directors
On appointment to the Board all Non-Executive Directors enter into a Service Agreement with the Company in
the form of a letter of appointment summarising the Board policies and terms including remuneration, relevant to
the office of Director. A copy of the policy and procedure for selection and (re) appointment of Directors can be
found on www.pioneercredit.com.au/corporate/investor-centre/corporate-governance-policies/
Mr Michael Smith was appointed a Non-Executive Director on 7 February 2014, and was elected Chairman.
Mr Rob Bransby was appointed a Non-Executive Director on 7 February 2014.
Mr Mark Dutton continues his appointment to the Board as a Non-Executive Director.
The Company pays Mr Smith a fee of $120,000 per annum plus statutory superannuation and has issued him
300,000 Unlisted Options, the terms and conditions of which are set out below. Messrs Dutton and Bransby are
paid a fee of $70,000 per annum plus statutory superannuation. A Non-Executive Director is not entitled to
receive performance based remuneration. They may be entitled to fees or other amounts as the Board
determines where they perform duties outside the scope of the ordinary duties of a Director. They may also be
reimbursed for out of pocket expenses incurred.
(j) Details of share based compensation and bonuses
Employee Incentive Scheme
Prior to 30 June 2013, certain employees participated in an Employee Incentive Scheme. Under the Scheme
700,000 options were issued, of which 300,000 were issued to the Chief Financial Officer and the Chief
Operating Officer equally. Under the Scheme vesting of the options was at the sole discretion of the Board.
In advance of the completion of the Initial Public Offer and in recognition of the participants performance since
joining the Company, up to and including admission to the ASX on 1 May 2014, the Board determined that the
options vest. Every option was exercised and pursuant to the terms attaching to those options they were
ultimately converted to Ordinary Shares.
Participants have been provided with a limited recourse loan by the Company to exercise these options on the
following terms:
•
Interest is charged at the Indicator Interest Rate - Bank variable housing interest rate last published by the
Reserve Bank of Australia before the start of each year of income on 1 July.
• Minimum annual principal repayments are required, with full repayment required upon the earlier of:
• seven years; and
• termination of the borrower’s employment with Pioneer.
All distributions (dividends, capital returns and any other payments in respect of the shares) and sale
proceeds, net of the borrower’s income tax liability, are applied first to interest and principal repayments. The
borrower only becomes entitled to any distributions from the Company upon discharge of the loan;
Borrowers are prevented from dealing in their shares until the loan is discharged, except with the permission
of the Board; and
•
•
• Recourse to Pioneer is limited to the value of the shares acquired from exercising the Options. The liability of
the borrower to the lender to repay the principal loan amount is limited to the proceeds of any share sale, and
the lender agrees that payment of such amounts to it will constitute full and final satisfaction of the principal
loan amount. Under AASB 2 "Share-based Payment", the substance of the share purchase arrangement is
an option and until the exercise of the options shares issued to employees are treated as treasury shares. No
loan receivable from the employees is recognised until such time. The repayment of the loan by the
employee is treated as payment of the exercise price.
Pioneer Credit Limited
30 June 2014
14
Remuneration report (continued)
(j) Details of share based compensation and bonuses (continued)
Unlisted Options
Pioneer has 300,000 Options on issue which have been issued to Mr Smith, the Chairman, on the following terms
and conditions:
Directors' report
(a) Each Option will entitle the Option holder to purchase one Share for the exercise price (refer
clause (e) below) subject to satisfaction of the vesting conditions (refer clause (b) below).
(b) The vesting conditions are as follows
(i) 50,000 Options vest on the second anniversary of the Offer; and
(ii) 250,000 Options vest on the third anniversary of the Offer.
(c) Options may be forfeited upon termination of Mr Smith’s position as a Director of Pioneer.
(d) Unexercised Options will expire two years after vesting.
(e) The exercise price of each Option is 20% greater than the Offer Price. The Offer Price is the price
of the securities sold by Pioneer in its Initial Public Offer. The price was $1.60 per share; the
exercise price of each Option is $1.92.
The Option holders may not sell, assign, transfer or otherwise deal with, or grant a Security
Interest over an Option except with the written consent of Pioneer.
(f)
(g) Vested Options that have not expired may be exercised by paying the exercise price (refer clause
(e) above) to or as directed by Pioneer. Upon vesting the Options may not be exercised until the
first business day following that time which the Fair Market Value of the underlying Share
exceeds the exercise price.
(h) The Board may declare that all or a specified number of any unvested Options which have not
expired immediately vest if, in the opinion of the Board a Change of Control has occurred, or is
likely to occur.
The Board may declare that all or a specified number of any unvested Options which have not
expired immediately vest if in the opinion of the Board any person or corporation has a relevant
interest (as defined in the Corporations Act) in more than 90% of the Shares.
The Board may in its absolute discretion declare the vesting of an Option during such period as
the Board determines where:
(i) Pioneer passes a resolution for the voluntary winding up of Pioneer;
(ii) an order is made for the compulsory winding up of Pioneer; or
(iii) Pioneer passes a resolution in accordance with Listing Rule 11.2 to dispose of its main
undertaking.
If there is any internal reconstruction, reorganisation or acquisition of Pioneer which does not
involve a significant change in the identity of the ultimate shareholders of Pioneer, this clause
applies to any Option which has not vested by the day the reconstruction takes effect. The Board
may declare in its sole discretion whether and to what extent Options will vest.
In the event of any reorganisation (including consolidation, sub-division, reduction, return or
cancellation) of the issued capital of Pioneer, the rights attaching to the Options will be varied to
comply with ASX Listing Rules.
(i)
(j) An Option holder is not entitled to participate in any new issue of securities of Pioneer as a result
of holding the Options.
(k) Subject to the terms of the Options and the ASX Listing Rules, the Board may at any time by
written instrument, amend all or any of the provisions of terms of the Options.
Any amendment to the provisions of these terms must not materially reduce your rights before the
date of the amendment, unless the amendment is introduced primarily:
(i) for the purpose of complying with or conforming to present or future State, Territory or
Commonwealth legislation, the ASX Listing Rules or the constitution of Pioneer; or
(ii) to correct any manifest error, or mistake.
Subject to these terms, any amendment made under this rule may be given retrospective effect
as specified in the written instrument by which the amendment is made.
Pioneer Credit Limited
30 June 2014
15
Directors' report
Remuneration report (continued)
(j) Details of share based compensation and bonuses (continued)
For the purposes of this section, the following terms have the meaning set out below:
Change of Control means:
(i)
in the case of a takeover bid (as defined in section 9 of the Corporations Act), an offer or who
previously had voting power of less than 50% in Pioneer obtains voting power of more than 50%;
(ii) a Court approves under section 411(4)(b) of the Corporations Act, a proposed compromise or
arrangement for the purposes of or in connection with a scheme for the reconstruction of Pioneer
or its amalgamation with any other company or companies;
(iii) any person becomes bound or entitled to acquire shares in Pioneer under:
(a) section 414 of the Corporations Act (compulsory acquisition following a scheme or contract);
(b) Chapter 6A of the Corporations Act (compulsory acquisition of securities); or
(c) a selective capital reduction is approved by shareholders of Pioneer pursuant to section
256C(2) of the Corporations Act which results in a person who previously had voting power of
less than 50% in Pioneer obtaining voting power of more than 50%; or
in any other case, a person obtains voting power in Pioneer which the Board (which for the
avoidance of doubt will comprise those Directors holding office immediately prior to the person
acquiring that voting power) determines, acting in good faith and in accordance with their fiduciary
duties, is sufficient to control the composition of the Board.
(iv)
Fair Market Value means the last price at which the underlying Shares traded on the ASX during a regular trading
session.
Security Interest means a mortgage, charge, pledge, lien or other encumbrance of any nature.
Securities Trading Policy
Pioneer Credit Limited’s securities trading policy applies to all Directors and executives. The purchase or sale of
Company securities is permitted only during certain periods. Executives must not enter into any hedging
arrangements over unvested options under the Company’s employee option plans. The Company would consider
a breach of this policy as gross misconduct which may lead to disciplinary action and potentially dismissal.
Shares provided on exercise of remuneration options
Prior to 30 June 2013, certain employees participated in an Employee Incentive Scheme. Under the Scheme
300,000 options were issued to the Chief Financial Officer and the Chief Operating Officer equally. Vesting of the
options was at the sole discretion of the Board.
In advance of the completion of the Initial Public Offer and in recognition of the participants performance since
joining the Company, up to and including admission to the ASX on 1 May 2014, the Board determined that the
options vest. Every option was exercised and pursuant to the terms attaching to those options they were
ultimately converted to Ordinary Shares.
Participants have been provided with a limited recourse loan by the Company to exercise these options.
The loans end on the earlier of seven years from draw down date or the employee’s employment with the
Company is terminated. Interest is payable at a rate of 0% between draw down date and 30 June 2014, and
thereafter at the benchmark interest rate (Indicator Interest Rate - Bank variable housing interest rate last
published by the Reserve Bank of Australia before the start of each of the Company's year of income), calculated
daily.
The modified plan is accounted for as a ‘share option scheme’, accordingly the loan is not recognised in the
financial statements and shares not yet fully paid are recognised as Treasury Shares. By balance date a number
of loans had been settled in full.
Pioneer Credit Limited
30 June 2014
16
Directors' report
Remuneration report (continued)
(j) Details of share based compensation and bonuses (continued)
Name
Issue Date *
Grant and Vesting Date *
Exercise Date **
Conversion to Fully Paid Ordinary Shares
Expiry Date
Exercise Price
Value per Option at Grant Date
Number of shares issued and converted
Limited recourse "loan" balance payable at 30 June 2014***
Mr Leslie
Crockett
Ms Lisa
Stedman
3-Dec-12
19-Mar-14
8-Apr-13
28-Apr-14
3-Dec-16
1.43
0.91
150,000
92,161
1-Oct-11
19-Mar-14
8-Apr-13
28-Apr-14
1-Oct-15
1.26
1.08
150,000
-
*
Issue date refers to the date of the original employee incentive arrangement, grant
date not achieved until the Directors exercised their discretion to approve vesting,
and employees agreed to the modification
** On exercise the Options converted to management shares which the Board
determined would convert to fully paid ordinary shares
*** Employees agreed, subject to the options having vested and Pioneer Credit Limited
advancing limited recourse loans on the terms described above, to exercise all of the
options held.
(k) Loans to Key Management Personnel
A loan to / (from) a Director in the form of a short term rolling credit facility was in place during the year. The
nature of the loan relates to a form of historical working capital facility from the founder and Managing Director
and with the move to becoming a listed Company has been discontinued.
The loan was unsecured and did not pay nor attract interest.
There are no other loans made to Directors or other key management personnel of the Group, including their
close family members and entities related to them.
Name
Loan to Director / (from
Director) at start of the year
Net Interest not charged
Loan to Director / (from
Director) at the end of the
year
Keith John
(54,055)
5,576
-
The amounts shown for net interest not charged in the table above represents the difference between the amount
paid and payable/ received and receivable for the year and the amount of net interest that would have been
charged/ received on an arm’s length basis.
No write-downs or allowances for doubtful receivables have been recognised in relation to any loans made to
Key Management Personnel.
(l) Equity instruments held by Key Management Personnel
The tables on the following page show the number of:
options over ordinary shares in the Company;
rights to deferred shares granted under the executive STI scheme, and
(i)
(ii)
(iii) shares in the Company,
that were held during the financial year by key management personnel of the Group, including their close family
members and entities related to them.
There were no shares granted during the reporting period as compensation. No options have been granted to
any Director or executives since the end of the financial year.
Pioneer Credit Limited
30 June 2014
17
Directors' report
Remuneration report (continued)
(l) Equity instruments held by Key Management Personnel (continued)
Options holdings
Issued
balance at
the start of
the year
Granted as
compensation
Vested
Exercised
Balance at
the end of
the year
Vested and
Exercisable
Unvested
-
300,000
-
-
300,000
150,000
150,000
150,000
150,000
150,000
150,000
150,000
150,000
-
-
-
-
-
300,000
-
-
Name
Mr Michael
Smith
Mr Leslie
Crockett
Ms Lisa
Stedman
Share Holdings
Name
Balance at the
start of the
year
Non Executive Directors
Mr Michael Smith
Mr Mark Dutton
Mr Rob Bransby
Executive Directors
Mr Keith R. John
Mr James Singh
-
193,932
-
7,960,165
434,540
Other key management personnel
Received
during the
year on the
exercise of
options and
conversion to
ordinary
shares
Other changes
during the year
Balance at the
end of the year
Held nominally
-
-
-
-
-
62,500
112,551
35,000
62,500
306,483
35,000
62,500
306,483
-
153,051
8,113,216
8,113,216
2,348
436,888
-
Mr Leslie Crockett
Ms Lisa Stedman
-
104,167
150,000
150,000
13,984
20,833
163,984
275,000
13,984
125,000
(m) Other transactions with Key Management Personnel
Leases entered into with related parties
The Managing Director, Mr John is a beneficiary of the John Family Primary Investments Trust and the sole
Director and secretary of Avy Nominees Pty Limited. This entity has entered into lease agreements with Pioneer
Credit Limited for the premises at 118 Royal Street, East Perth, 188 Bennett Street, East Perth and 190 Bennett
Street, East Perth. The lease contracts are at arms length.
Pioneer Credit Limited
30 June 2014
18
Directors' report
Remuneration report (continued)
(m) Other transactions with Key Management Personnel (continued)
Design consulting agreement
The Managing Director, Mr John is a beneficiary of the John Family Building and Design Trust and the sole
Director and secretary of Avy Nominees Pty Limited. Pioneer Credit Limited and Avy Nominees Pty Limited are
parties to an agreement for design and project management services for the commercial fit-out of Pioneer Credit
Limited’s office premises. The agreement commenced on 1 November 2013 and continues on a monthly until
terminated by either party on one month’s notice. Alana John Design receives $10,000 (plus GST and
incidentals) per month for the provision of the services. For the year ended 30 June 2014 the total amount of
$107,294 has been paid.
The table includes aggregate amounts of each of the above types of other transactions with key management
personnel.
Amounts recognised as expense
Rental expenses and other services
Contributions to superannuation funds on behalf of Directors
Remuneration paid to Directors
2014
$
382,842
53,660
592,635
1,029,137
Pioneer Credit Limited
30 June 2014
19
Directors' report
Shares under option
Unissued ordinary shares of Pioneer Credit Limited under option at the date of this report are as follows:
Name
Mr Michael Smith
Mr Michael Smith
Date options
granted
Expiry date
Issue price
Number under
option
7-Feb-14
7-Feb-14
1-May-18
1-May-19
1.92
1.92
50,000
250,000
Shares issued on the exercise of options
The following ordinary shares of Pioneer Credit Limited were issued during the year ended 30 June 2014 on the
exercise of options granted to all qualifying participants in the Employee Incentive Scheme. No further shares
have been issued since that date. No amounts are unpaid on any of the shares.
Date options granted
Issue price of shares
19-Mar-14
19-Mar-14
Insurance of officers
Number of shares
issued
1.43
1.26
300,000
400,000
700,000
During the financial year, Pioneer Credit Limited paid a premium of $21,043 (2013 $7,075) to insure the Directors
and secretaries of the Company and its Australian-based controlled entities.
The liabilities insured are legal costs that may be incurred in defending civil or criminal proceedings that may be
brought against the officers in their capacity as officers of entities in the Group, and any other payments arising
from liabilities incurred by the officers in connection with such proceedings. This does not include such liabilities
that arise from conduct involving a wilful breach of duty by the officers or the improper use by the officers of their
position or of information to gain advantage for themselves or someone else or to cause detriment to the
Company. It is not possible to apportion the premium between amounts relating to the insurance against legal
costs and those relating to other liabilities.
Indemnity of auditors
Pioneer Credit Limited has agreed to indemnify their auditors, PricewaterhouseCoopers, to the extent permitted
by law, against any claim by a third party arising from it's breach of their audit engagement agreement. The
indemnity stipulates that Pioneer Credit Limited will meet the full amount of any such liabilities including a
reasonable amount of legal costs.
Proceedings on behalf of the company
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring
proceedings on behalf of the Company, or to intervene in any proceedings to which the Company is a party, for
the purpose of taking responsibility on behalf of the Company for all or part of those proceedings.
No proceedings have been brought or intervened in on behalf of the Company with leave of the Court under
section 237 of the Corporations Act 2001.
Pioneer Credit Limited
30 June 2014
20
Directors' report
Non-audit services
The Company may decide to employ the auditor on assignments additional to their statutory audit duties where
the auditor’s expertise and experience with the Company and / or the Group are important.
Details of the amounts paid or payable to the auditor (PricewaterhouseCoopers Australia) for non-audit services
provided during the year are set out below.
The Board of Directors has considered the position and, in accordance with advice received from the audit
committee, is satisfied that the provision of the non-audit services is compatible with the general standard of
independence for auditors imposed by the Corporations Act 2001. The Directors are satisfied that the provision of
non-audit services by the auditor, as set out below, did not compromise the auditor independence requirements
of the Corporations Act 2001 for the following reasons:
•
•
all non-audit services have been reviewed by the audit committee to ensure they do not impact the
impartiality and objectivity of the auditor; and
none of the services undermine the general principles relating to auditor independence as set out in APES
110 Code of Ethics for Professional Accountants.
During the year the following fees were paid or payable for non-audit services provided by the auditor of the
parent entity, its related practices and non-related audit firms
Other assurance services
PricewaterhouseCoopers Australian firm
Special Purpose Review Half Year
Due Diligence Services
Taxation services
PricewaterhouseCoopers Australian firm
International Tax consulting
Tax compliance services
Other services
PricewaterhouseCoopers Australian firm
Preparation of general purpose accounts
Auditor's independence declaration
2014
$
2013
$
62,943
-
62,943
12,500
13,464
25,964
-
-
88,907
-
59,029
59,029
-
-
-
30,000
30,000
89,029
A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is
set out on page 22.
Rounding of amounts
The Company is of a kind referred to in Class Order 98/100, issued by the Australian Securities and Investments
Commission, relating to the 'rounding off' of amounts in the Directors' report. Amounts in the Directors' report
have been rounded off in accordance with that Class Order to the nearest thousand dollars, or in certain cases,
to the nearest dollar.
This report is made in accordance with a resolution of Directors.
Keith R. John
Managing Director
Perth
28 August 2014
Pioneer Credit Limited
30 June 2014
21
Auditor’s Independence Declaration
As lead auditor for the audit of Pioneer Credit Limited for the year ended 30 June 2014, I declare that
to the best of my knowledge and belief, there have been:
a)
no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
b)
no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Pioneer Credit Limited and the entities it controlled during the period.
William P R Meston
Partner
PricewaterhouseCoopers
Perth
28 August 2014
PricewaterhouseCoopers, ABN 52 780 433 757
Brookfield Place, 125 St Georges Terrace, PERTH WA 6000, GPO Box D198, PERTH WA 6840
T: +61 8 9238 3000, F: +61 8 9238 3999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
22
Corporate Governance Statement
The Board is responsible for establishing the Company’s corporate governance framework, the key features of
which are set out in this Section. In establishing its corporate governance framework, the Board has referred to
the Principles & Recommendations.
In accordance with ASX Listing Rule 1.1 Condition 13, the corporate governance statement set out in this Section
4.3 discloses the extent to which the Company intends to follow the recommendations as at the date of approval
of this Annual Report. The Company will follow each recommendation where the Board has considered the
recommendation to be an appropriate benchmark for its corporate governance practices. Where the Company's
corporate governance practices will follow a recommendation, the Board has made appropriate statements
reporting on the adoption of the recommendation. In compliance with the "if not, why not" reporting regime,
where, after due consideration, the Company's corporate governance practices will not follow a recommendation,
the Board has explained it reasons for not following the recommendation and disclosed what, if any, alternative
practices the Company will adopt instead of those in the recommendation.
The following governance-related documents can be found on the Company's website at
www.pioneercredit.com.au/corporate/investor-centre/corporate-governance-policies/:
Charters
Board
Audit Committee
Nomination Committee
Remuneration Committee
Policies and Procedures
Policy and Procedure for Selection and (Re) Appointment of Directors
Process for Performance Evaluations
Policy on Assessing the Independence of Directors
Diversity Policy (summary)
Code of Conduct (summary)
Policy on Continuous Disclosure (summary)
Compliance Procedures (summary)
Procedure for the Selection, Appointment and Rotation of External Auditor
Shareholder Communication Policy
Risk Management Policy (summary)
Whistleblower Policy (summary)
Securities Trading Policy
Pioneer Credit Limited
30 June 2014
23
Corporate Governance Statement
Principle 1: Lay solid foundations for management and oversight
Board
Roles and responsibilities of the Board and Senior Executives
(Recommendations: 1.1, 1.3)
The Company has established the functions reserved to the Board, and those delegated to senior executives and
has set out these functions in its Board Charter.
The Board is collectively responsible for promoting the success of the Company through its key functions of
overseeing the management of the Company, providing overall corporate governance of the Company,
monitoring the financial performance of the Company, engaging appropriate management commensurate with
the Company's structure and objectives, involvement in the development of corporate strategy and performance
objectives, and reviewing, ratifying and monitoring systems of risk management and internal control, codes of
conduct and legal compliance.
Senior executives are responsible for supporting the Managing Director and assisting the Managing Director in
implementing the running of the general operations and financial business of the Company in accordance with
the delegated authority of the Board. Senior executives are responsible for reporting all matters which fall within
the Company's materiality thresholds at first instance to the Managing Director or, if the matter concerns the
Managing Director, directly to the Chair or the lead independent Director, as appropriate.
The Company’s Board Charter is disclosed on the Company’s website.
Principle 2: Structure the board to add value
Skills, experience, expertise and period of office of each Director
(Recommendation: 2.6)
A profile of each Director setting out their skills, experience, expertise and period of office is set out in the
Directors’ Report.
The mix of skills and diversity for which the Board is looking to achieve in its membership is represented by the
current Board. The Board comprises Directors with significant experience as non-executive Directors of public
companies; marketing experience; accounting and financial expertise; experience in the management and growth
of businesses and extensive experience in the industry in which Pioneer operates. The Board considers that
these skills and experience are appropriate for Pioneer.
Director independence
(Recommendations: 2.1, 2.2, 2.3, 2.6)
The Board does not have a majority of Directors who are independent.
As noted above, the Board considers that the composition of the Board is adequate for the Company’s current
size and operations, and includes an appropriate mix of skills and expertise, relevant to the Company’s business.
These skills include members with significant experience as non-executive Directors of public companies,
relevant experience in the management and growth of businesses together with extensive experience in the
industry in which Pioneer operates.
Pioneer Credit Limited
30 June 2014
24
Corporate Governance Statement
Principle 2: Structure the board to add value (continued)
The Board will review its composition as the Company’s circumstances change. The Board will have regard to
the Company’s Diversity Policy and the balance of independence on the Board in identifying appropriate
candidates for any appointments for the Board.
The independent Directors of the Company are Mr Michael Smith and Mr Rob Bransby. These directors are
independent as they are non-executive Directors who are not members of management and who are free of any
business or other relationship that could materially interfere with, or could reasonably be perceived to materially
interfere with, the independent exercise of their judgement.
The Board considers the independence of Directors having regard to the relationships listed in Box 2.1 of the
Principles & Recommendations and the Company's materiality thresholds.
The Board has agreed on the following guidelines, as set out in the Company's Board Charter for assessing the
materiality of matters:
•
•
•
Balance sheet items are material if they have a value of more than 5% of pro-forma net assets
Profit and loss items are material if they will have an impact on the current year operating result of 5% or
more.
Items are also material if they impact on the reputation of the Company, involve a breach of legislation, are
outside the ordinary course of business, could affect the Company’s rights to its assets, if accumulated would
trigger the quantitative tests, involve a contingent liability that would have a probable effect of 5% or more on
balance sheet or profit and loss items, or will have an effect on operations which is likely to result in an
increase or decrease in net income or dividend distribution of more than 5%.
• Contracts will be considered material if they are outside the ordinary course of business, contain
exceptionally onerous provisions in the opinion of the Board, impact on income or distribution in excess of the
quantitative tests, there is a likelihood that either party will default, and the default may trigger any of the
quantitative or qualitative tests, are essential to the activities of the Company and cannot be replaced, or
cannot be replaced without an increase in cost which triggers any of the quantitative tests, contain or trigger
change of control provisions, are between or for the benefit of related parties, or otherwise trigger the
quantitative tests.
The non-independent Directors of the Company are the Company’s Managing Director, Mr Keith R. John and
non-executive Director, Mr Mark Dutton. Mr Mark Dutton is a Director at Banksia Capital, a substantial
shareholder of the Company.
The independent Chair of the Board is Mr Michael Smith.
The Managing Director is Mr Keith R. John who is not Chair of the Board.
Independent professional advice
(Recommendation: 2.6)
To assist Directors with independent judgement, it is the Board's policy that if a Director considers it necessary to
obtain independent professional advice to properly discharge the responsibility of their office as a Director then,
provided the Director first obtains approval from the Chair for incurring such expense, the Company will pay the
reasonable expenses associated with obtaining such advice. Where it is the Chair who is seeking the
independent professional advice, the role of the Chair to consider and provide approval as set out above will be
carried out by the Chair of the Audit Committee.
The non-independent Directors of the Company are the Company’s Managing Director, Mr Keith R. John and
non-executive Director, Mr Mark Dutton. Mr Mark Dutton is a Director at Banksia Capital, a substantial
shareholder of the Company.
Pioneer Credit Limited
30 June 2014
25
Corporate Governance Statement
Principle 2: Structure the board to add value (continued)
Selection and (Re)Appointment of Directors
(Recommendation: 2.6)
In determining candidates for the Board, the Nomination Committee will follow a prescribed process whereby it
will evaluate the mix of skills, experience, expertise and diversity of the existing Board. In particular, the
Nomination Committee is to identify the particular skills and diversity that will best increase the Board's
effectiveness. Consideration will also be given to the balance of independent Directors. Potential candidates will
be identified and, if relevant, the Nomination Committee will recommend an appropriate candidate for
appointment to the Board. Any appointment made by the Board will be subject to ratification by shareholders at
the next general meeting.
The Board recognises that Board renewal is critical to performance and the impact of Board tenure on
succession planning. Each Director other than the Managing Director, must not hold office (without re-election)
past the third annual general meeting of the Company following the Director's appointment or three years
following that Director's last election or appointment (whichever is the longer). However, a Director appointed to
fill a casual vacancy or as an addition to the Board must not hold office (without re-election) past the next annual
general meeting of the Company. At each annual general meeting a minimum of one Director or one third of the
total number of Directors must resign. A Director who retires at an annual general meeting is eligible for
re-election at that meeting. Re-appointment of Directors is not automatic.
The Company’s Policy and Procedure for the Selection and Re (Appointment) of Directors is disclosed on the
Company’s website.
Board committees
Nomination Committee
(Recommendations: 2.4, 2.6)
The Board has established a Nomination Committee comprising Mr Michael Smith (Chair), Mr Rob Bransby and
Mr Mark Dutton.
The Company has adopted a Nomination Committee Charter which describes the role, composition, functions
and responsibilities of the Nomination Committee. The Company’s Nomination Committee Charter is disclosed
on the Company’s website.
Audit Committee
(Recommendations: 4.1, 4.2, 4.3, 4.4)
The Board has established an Audit Committee comprising Mr Rob Bransby (Chair), Mr Michael Smith and Mr
Mark Dutton. The Audit Committee is structured in compliance with Recommendation 4.2 as it comprises three
non-executive Directors, a majority of whom are independent and the Chair of the Audit Committee is not also
Chair of the Board.
The Company has adopted an Audit Committee Charter which describes its role, composition, functions and
responsibilities of the Audit Committee.
Details of each of the Director's qualifications are set out in the Directors’ Report. All Audit Committee members
consider themselves to be financially literate and have industry knowledge. Further, Mr Bransby is an
experienced financial services executive and Mr Dutton is a member of the Institute of Chartered Accountants.
Pioneer Credit Limited
30 June 2014
26
Corporate Governance Statement
Principle 2: Structure the board to add value (continued)
Remuneration Committee
(Recommendations: 8.1, 8.2, 8.3, 8.4)
The Board has established a Remuneration Committee comprising Mr Michael Smith (Chair), Mr Rob Bransby
and Mr Mark Dutton.
The Remuneration Committee is structured in accordance with Recommendation 8.2 as it comprises three
non-executive Directors, a majority of whom are independent and it is chaired by an independent Director. This
committee is discussed in further detail under Principle eight.
Performance evaluation
Senior executives
(Recommendations: 1.2, 1.3)
The Managing Director will review the performance of the senior executives. The Managing Director will conduct
a performance evaluation of the senior executives by meeting individually with each senior executive on a
six-monthly basis to review performance against the senior executive’s responsibilities as outlined in his or her
contract with the Company.
The Managing Director's performance evaluation will be reviewed by the Nomination Committee. The Nomination
Committee will conduct a performance evaluation of the Managing Director annually by roundtable discussion
with the Managing Director to review performance against KPIs set for the previous year, and to establish KPIs
for the forthcoming year.
Board, its committees and individual directors
(Recommendations: 2.5, 2.6)
The Chair will have the overall responsibility for evaluating the Board and, when deemed appropriate, Board
committees and individual Directors. The process employed by the Chair for evaluating the performance of the
Board, individual Directors and any applicable committees may involve:
• meeting with and interviewing each Director;
•
•
•
•
facilitating a round-table discussion by the Board;
on-going observation and discussion;
circulation of questionnaires; and
outsourcing to independent specialist consultants.
Measures against which the performance of the Board, its committees and individual Directors will be measured
include:
•
•
•
•
•
•
assessment of the skills, performance and contribution of individual members of the Board;
the performance of the Board as a whole and of its various committees;
awareness of Directors of their responsibilities and duties as directors of the Company and of corporate
governance and compliance requirements;
awareness of Directors of the Company’s strategic direction;
understanding by the Directors of the Company’s business and the industry and environment in which it
operates;
avenues for continuing improvement of Board functions and further development of Director skill base.
The method by which performance evaluations are carried out each year will be reported by the Company in its
corporate governance statement in its Annual Report.
The Company’s process for performance evaluation is disclosed on the Company’s website.
Pioneer Credit Limited
30 June 2014
27
Corporate Governance Statement
Principle 3: Promote ethical and responsible decision making
Code of Conduct
(Recommendations: 3.1, 3.5)
The Company has established a Code of Conduct as to the practices necessary to maintain confidence in the
Company and its subsidiaries' integrity, the practices necessary to take into account its legal obligations and the
reasonable expectations of its stakeholders and the responsibility and accountability of individuals for reporting
and investigating reports of unethical practices.
The Company has also established a Whistleblower Policy. The aim of the policy is to ensure that Directors,
officers and employees comply with the obligations set out in the Code of Conduct and to encourage reporting of
violations (or suspected violations) and provide effective protection from victimisation or dismissal to those
reporting by implementing systems for confidentiality and report handling.
A summary of the Company’s Code of Conduct and Whistleblower Policy is disclosed on the Company’s website.
Diversity
(Recommendations: 3.2, 3.3, 3.4, 3.5)
The Company has established a Diversity Policy, which provides that the Board will set measurable objectives for
achieving gender diversity that are appropriate for the Company, and for the Board to assess annually the
objectives set and progress towards achieving them.
The Company reports the following proportions as at 30 June 2014;
Number of women employees in the whole organisation
Number of women in senior executive positions
Number of women on the Board
Objective
Actual
Number
91
2
1
%
50
25
25
Number
108
2
0
%
59
28.6
0
A summary of the Company’s Diversity Policy is disclosed on the Company’s website.
Principle 4: Safeguard integrity in financial reporting
The Board has established a separate Audit Committee to monitor and review the integrity of financial reporting
and the Company's internal financial control systems and risk management systems.
The Audit Committee comprises Rob Bransby (Chair), Michael Smith and Mark Dutton. The Audit Committee is
structured in compliance with Recommendation 4.2 as it comprises three non-executive Directors, a majority of
whom are independent and the Chair of the Audit Committee is not also Chair of the Board.
The Company has adopted an Audit Committee Charter which describes its role, composition, functions and
responsibilities of the Audit Committee.
The Managing Director and the Chief Financial Officer have provided a declaration to the Board in accordance
with section 295A of the Corporations Act and have assured the Board that such declaration is founded on a
sound system of risk management and internal controls and that the system is operating effectively in all material
respects in relation to financial reporting risks.
Pioneer Credit Limited
30 June 2014
28
Corporate Governance Statement
Principle 4: Safeguard integrity in financial reporting (continued)
The Company has established a Procedure for the Selection, Appointment and Rotation of its External Auditor.
The Board is responsible for the initial appointment of the external auditor and the appointment of a new external
auditor when any vacancy arises, as recommended by the Audit Committee (or its equivalent). Candidates for the
position of external auditor must demonstrate complete independence from the Company through the
engagement period. The Board may otherwise select an external auditor based on criteria relevant to the
Company's business and circumstances. The performance of the external auditor is reviewed on an annual basis
by the Audit Committee (or its equivalent) and any recommendations are made to the Board.
The Company’s Audit Committee Charter and Procedure for Selection, Appointment and Rotation of External
Auditor are disclosed on the Company’s website.
Principle 5: Make timely and balanced disclosures
Continuous Disclosure
(Recommendations: 5.1, 5.2)
The Company ensures that shareholders and the market are fully informed of its strategy, performance and
details of any information or events that could have a material impact on the value of the Company’s securities.
The Company has established written policies and procedures designed to ensure compliance with ASX Listing
Rule disclosure requirements and accountability at a senior executive level for that compliance.
A summary of the Company’s Policy on Continuous Disclosure and Compliance Procedures are disclosed on the
Company’s website.
Principle 6: Respect the rights of shareholders
Shareholder Communication
(Recommendations: 6.1, 6.2)
The Company recognises the rights of its shareholders and other interested stakeholders to have access to
balanced, understandable and timely information concerning the operations of the Company.
The Company has designed a communications policy for promoting effective communication with shareholders
and encouraging shareholder participation at general meetings.
The Company’s Shareholder Communication Policy is disclosed on the Company’s website.
Pioneer Credit Limited
30 June 2014
29
Corporate Governance Statement
Principle 7: Recognise and manage risk
Risk Management
Recommendations: 7.1, 7.2, 7.3, 7.4)
The Board has adopted a Risk Management Policy, which sets out the Company's risk profile. Under the policy,
the Board is responsible for approving the Company's policies on risk oversight and management and satisfying
itself that management has developed and implemented a sound system of risk management and internal
control.
Under the policy, the Board delegates day-to-day management of risk to the Managing Director, who is
responsible for identifying, assessing, monitoring and managing risks. The Managing Director is also responsible
for updating the Company's material business risks to reflect any material changes, with the approval of the
Board.
In fulfilling the duties of risk management, the Managing Director may have unrestricted access to Company
employees, contractors and records and may obtain independent expert advice on any matter they believe
appropriate, with the prior approval of the Board.
In addition, the following risk management measures have been adopted by the Board to manage the Company's
material business risks:
•
•
•
•
the Board has established authority limits for management, which, if proposed to be exceeded, requires prior
Board approval;
the Board has adopted a compliance procedure for the purpose of ensuring compliance with the Company’s
ACL;
the Board has adopted a compliance procedure for the purpose of ensuring compliance with the Company's
continuous disclosure obligations; and
the Board has adopted a corporate governance manual which contains other policies to assist the Company
to establish and maintain its governance practices.
The Board requires management to design, implement and maintain risk management and internal control
systems to manage the Company's material business risks. The Board has received a report from management
as to the effectiveness of the Company's management of its material business risks for the relevant reporting
period.
A summary of the Company’s Risk Management Policy is disclosed on the Company’s website.
Principle 8: Remunerate fairly and responsibly
Remuneration Committee
(Recommendations: 8.1, 8.2, 8.3, 8.4)
The Board has established a Remuneration Committee comprising Michael Smith (Chair), Rob Bransby and
Mark Dutton.
The Remuneration Committee is structured in accordance with Recommendation 8.2 as it comprises three
non-executive Directors, a majority of whom are independent and it is chaired by an independent Director.
The Board has adopted a Remuneration Committee Charter which describes the role, composition, functions and
responsibilities of the Remuneration Committee.
Details of remuneration, including the Company’s policy on remuneration, are contained in the “Remuneration
Report” as part of the Company’s Annual Report. The Company's policy is to remunerate non-executive Directors
at a fixed fee for time, commitment and responsibilities. Remuneration for non-executive Directors is not linked to
individual performance. From time to time the Company may grant options to non-executive Directors. The grant
of options is designed to attract and retain suitably qualified non-executive Directors. The maximum aggregate
amount of fees (including superannuation payments) that can be paid to non-executive Directors is subject to
approval by shareholders at a General Meeting.
Pioneer Credit Limited
30 June 2014
30
Corporate Governance Statement
Principle 8: Remunerate fairly and responsibly (continued)
Executive remuneration consists of a base salary and performance incentives. Long term performance incentives
may include options, performance rights, share appreciation rights or other equity based products granted at the
discretion of the Board on the recommendation of the Remuneration Committee and subject to obtaining the
relevant approvals. The grant of equity based products is designed to recognise and reward efforts as well as to
provide additional incentive to continue those efforts for the benefit of the Company, and may be subject to the
successful completion of performance hurdles. Executives are offered a competitive level of base pay at market
rates (for comparable companies), which are reviewed at least annually to ensure market competitiveness.
There are no termination or retirement benefits for non-executive Directors (other than for superannuation).
The Company's Securities Trading Policy includes a statement of the Company's policy on prohibiting
transactions in associated products which limit the risk of participating in unvested entitlements under any equity
based remuneration schemes.
The Company’s Remuneration Committee Charter and Securities Trading Policy are disclosed on the Company’s
website.
ASX Corporate Governance Council recommendations checklist
The following table sets out the Company’s position with regard to adoption of the Principles &
Recommendations upon its admission to ASX:
CGC’s Principles and Recommendations Comply
Principle 1: Lay solid foundations for management and oversight
(Yes / No)
1.1 Companies should establish the functions reserved to the Board and those delegated to
senior executives and disclose those functions.
1.2 Companies should disclose the process for evaluating the performance of senior executives.
1.3 Companies should provide the information indicated in the Guide to Reporting on Principle 1.
Principle 2: Structure the Board to add value
2.1 A majority of the Board should be independent Directors.
2.2 The chair should be an independent Director.
2.3 The roles of chair and chief executive officer should not be exercised by the same individual.
2.4 The Board should establish a nomination committee.
2.5 Companies should disclose the process for evaluating the performance of the Board, its
committees and individual Directors.
Yes
Yes
Yes
No
Yes
Yes
Yes
Yes
2.6 Companies should provide the information indicated in the Guide to Reporting on Principle 2.
Yes
Principle 3: Promote ethical and responsible decision-making
3.1 Companies should establish a code of conduct and disclose the code or a summary of the
Yes
code as to:
- the practices necessary to maintain confidence in the Company’s integrity
- the practices necessary to take into account their legal obligations and the reasonable
expectations of their stakeholders
- the responsibility and accountability of individuals for reporting and investigating reports of
unethical practices.
3.2 Companies should establish a policy concerning diversity and disclose the policy or a
Yes
summary of that policy. The policy should include requirements for the Board to establish
measureable objectives for achieving gender diversity and for the Board to assess annually
both the objectives and progress in achieving them.
3.3 Companies should disclose in each annual report the measureable objectives for achieving
gender diversity set by the Board in accordance with the diversity policy and progress in
achieving them.
Yes
Pioneer Credit Limited
30 June 2014
31
ASX Corporate Governance Council recommendations checklist (continued)
3.4 Companies should disclose in each annual report the proportion of women employees in the
Yes
whole organisation, women in senior executive positions and women on the Board.
3.5 Companies should provide the information indicated in the Guide to Reporting on Principle 3.
Yes
Corporate Governance Statement
Principle 4: Safeguard integrity in financial reporting
4.1 The Board should establish an audit committee.
4.2 The audit committee should be structured so that it:
- consists only of non-executive Directors
- consists of a majority of independent Directors
- is chaired by an independent chair, who is not chair of the Board
- has at least three members.
4.3 The audit committee should have a formal charter.
4.4 Companies should provide the information indicated in the Guide to Reporting on Principle 4.
Principle 5: Make timely and balanced disclosure
5.1 Companies should establish written policies designed to ensure compliance with ASX Listing
Rule disclosure requirements and to ensure accountability at a senior executive level for that
compliance and disclose those policies or a summary of those policies.
Yes
Yes
Yes
Yes
Yes
5.2 Companies should provide the information indicated in the Guide to Reporting on Principle 5.
Yes
Principle 6: Respect the rights of shareholders
6.1 Companies should design a communications policy for promoting effective communication
Yes
with shareholders and encouraging their participation at general meetings and disclose their
policy or a summary of that policy.
6.2 Companies should provide the information indicated in the Guide to Reporting on Principle 6.
Yes
Principle 7: Recognise and manage risk
7.1 Companies should establish policies for the oversight and management of material business
Yes
risks and disclose a summary of those policies.
7.2 The Board should require management to design and implement the risk management and
internal control system to manage the Company’s material business risks and report to it on
whether those risks are being managed effectively. The Board should disclose that
management has reported to it as to the effectiveness of the Company’s management of its
material business risks.
7.3 The Board should disclose whether it has received assurance from the chief executive officer
(or equivalent) and the chief financial officer (or equivalent) that the declaration provided in
accordance with section 295A of the Corporations Act is founded on a sound system of risk
management and internal control and that the system is operating effectively in all material
respects in relation to financial reporting risks.
Yes
Yes
7.4 Companies should provide the information indicated in the Guide to Reporting on Principle 7.
Yes
Principle 8: Remunerate fairly and responsibly
8.1 The Board should establish a remuneration committee.
8.2 The remuneration committee should be structured so that it:
- consists of a majority of independent Directors
- is chaired by an independent Director
- has at least three members
Yes
Yes
8.3 Companies should clearly distinguish the structure of non-executive Directors’ remuneration
Yes
from that of executive Directors and senior executives.
8.4 Companies should provide the information indicated in the Guide to Reporting on Principle 8.
Yes
Pioneer Credit Limited
30 June 2014
32
Pioneer Credit Limited ABN 44103003505
Annual report - 30 June 2014
Contents
Financial statements
Consolidated statement of comprehensive income
Consolidated balance sheet
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to the consolidated financial statements
Directors' declaration
Independent auditor's report to the members
Page
34
35
36
37
38
86
87
These financial statements are the consolidated financial statements of the Consolidated Entity consisting of
Pioneer Credit Limited and its subsidiaries. A list of subsidiaries is included in note 13. The financial statements
are presented in the Australian currency.
Pioneer Credit Limited is a Company limited by shares, incorporated and domiciled in Australia. Its registered
office and principal place of business is:
Pioneer Credit Limited
188-190 Bennett Street
Perth Western Australia 6004
The financial statements were authorised for issue by the Directors on 28 August 2014. The Directors have the
power to amend and reissue the financial statements.
Pioneer Credit Limited
30 June 2014
33
Consolidated statement of comprehensive income
Revenue from operations
Employee expense
Direct expenses
Rental expenses
Finance expenses
Other expenses
Professional expenses
Travel and entertainment
Information technology and communications
Depreciation and amortisation expense
Profit before income tax
Income tax expense
Profit from continuing operations
Blank
Total comprehensive income for the year
Total comprehensive income for the year is attributable to:
Owners of Pioneer Credit Limited
Notes
2014
$'000
2013
$'000
2
4
4
5
25,761
16,673
11,718
2,747
1,294
1,443
1,023
2,908
570
1,320
379
2,359
1,312
1,047
1,047
6,135
1,306
1,014
973
374
616
269
555
376
5,055
1,535
3,520
3,520
1,047
3,520
Cents
Cents
Earnings per share for profit attributable to the ordinary equity
holders of the Company:
Basic earnings per share
Diluted earnings per share
20
20
7.97
7.97
56.96
56.96
The above consolidated statement of comprehensive income should be read in conjunction with the
accompanying notes.
Pioneer Credit Limited
30 June 2014
34
Consolidated balance sheet
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Other current assets
Current tax receivables
Financial assets at fair value through profit or loss
Total current assets
Non-current assets
Receivables
Property, plant and equipment
Intangible assets
Other non-current assets
Deferred tax assets
Financial assets at fair value through profit or loss
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Borrowings
Current tax liabilities
Accruals, provisions and other liabilities
Total current liabilities
Non-current liabilities
Borrowings
Provisions and other liabilities
Other financial liabilities
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Contributed equity
Other reserves
Retained earnings
Capital and reserves attributable to owners of Pioneer Credit Limited
Total equity
Notes
2014
$'000
2013
$'000
6(a)
6(a)
6(b)
6(a)
7(a)
7(c)
7(b)
6(b)
6(c)
6(d)
6(c)
6(d)
6(e)
8(a)
8(b)
8(c)
4,458
2,570
246
327
29,183
36,784
-
2,537
161
61
1,198
29,560
33,517
967
778
144
-
21,081
22,970
223
715
-
-
203
17,850
18,991
70,301
41,961
11,352
5,376
-
2,599
19,327
2,012
1,360
-
3,372
2,481
6,571
1,219
1,280
11,551
8,838
-
8,497
17,335
22,699
28,886
47,602
13,075
45,464
1,037
1,101
47,602
9,091
-
3,984
13,075
47,602
13,075
The above consolidated balance sheet should be read in conjunction with the accompanying notes.
Pioneer Credit Limited
30 June 2014
35
Consolidated statement of changes in equity
Convertible
Redeemable
Preference
Shares
$'000
Contributed
equity
$'000
Retained
earnings
$'000
Share Based
Payment
Reserve
$'000
Balance at 1 July 2012
3,341
5,423
464
Total comprehensive income for the year
-
-
3,520
Transactions with owners in their capacity as
owners:
Current and deferred tax through equity
CRPS B accrued interest conversion
-
333
333
(6)
-
(6)
-
-
-
Restated balance at 30 June 2013
3,674
5,417
3,984
-
-
-
-
-
-
Contributed
equity
$'000
Notes
Convertible
Redeemable
Preference
Shares
$'000
Retained
earnings
$'000
Share Based
Payment
Reserve
$'000
Balance at 30 June 2013
3,674
5,417
3,984
Total comprehensive income for the
year
Transactions with owners in their
capacity as owners:
Contributions of equity, net of transaction
costs
CRPS B & C Conversion to contributed
equity
CRPS A Conversion to contributed equity
Current and deferred tax through equity
Treasury shares issued and share based
payments
Employee share scheme
Return of Capital and Dividend paid
8(a)
6(e)
8(a),
8(b)
12(b)
-
38,543
7,754
5,413
656
403
91
(11,070)
41,790
-
-
-
(5,413)
(4)
-
-
-
(5,417)
1,047
-
-
-
-
-
-
(3,930)
(3,930)
-
-
-
-
-
-
1,037
-
-
1,037
Total
equity
$'000
9,228
3,520
(6)
333
327
13,075
Total
equity
$'000
13,075
1,047
38,543
7,754
-
652
1,440
91
(15,000)
33,480
Balance at 30 June 2014
45,464
-
1,101
1,037
47,602
The above consolidated statement of changes in equity should be read in conjunction with the accompanying
notes.
Pioneer Credit Limited
30 June 2014
36
Consolidated statement of cash flows
Cash flows from operating activities
Receipts from customers (inclusive of goods and services tax)
Payments to suppliers and employees (inclusive of goods and services
tax)
Interest received
Interest paid
Income taxes paid
Net cash inflow from operating activities
Cash flows from investing activities
Payments for property, plant and equipment
Payments for intangible assets
Payments for financial assets at fair value through profit or loss
Repayment of loans from related parties
Proceeds of loans from related parties
Net cash (outflow) from investing activities
Cash flows from financing activities
Proceeds from issues of convertible redeemable preference shares
Capital raising costs
Proceeds from borrowings
Repayment of borrowings
Dividends paid to Company's shareholders
Proceeds from issue of ordinary shares
Return of capital
Treasury shares
Net cash inflow from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Cash and cash equivalents at end of year
Non-cash investing and financing activities see note 9(b)
Notes
2014
$'000
2013
$'000
35,779
22,571
9(a)
7(a)
3
12(b)
8(a)
8(a)
8(a)
(9,423)
26,356
67
(708)
(3,201)
22,514
(701)
(226)
(31,626)
(1,621)
1,567
(32,607)
99
(4,233)
26,061
(34,782)
(3,930)
41,120
(11,070)
319
13,584
3,491
967
4,458
(8,788)
13,783
32
(411)
(792)
12,612
(911)
-
(26,456)
(4,223)
4,291
(27,299)
4,250
-
21,123
(10,606)
-
-
-
-
14,767
80
887
967
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
Pioneer Credit Limited
30 June 2014
37
Contents of the notes to the consolidated financial statements
1
2
3
4
5
6
7
8
9
Significant changes in the current reporting period
How numbers are calculated
Revenue
Individually significant items
Other income and expense items
Income tax expense
Financial assets and financial liabilities
Non-financial assets and liabilities
Equity
Cash flow information
Risk
10
11
12
Critical accounting estimates and judgements
Financial risk management
Capital management
Group structure
13
Subsidiaries
Unrecognised items
14
15
16
Contingencies
Commitments
Events occurring after the reporting period
Other information
17
18
19
20
21
22
23
24
Related party transactions
Share-based payments
Remuneration of auditors
Earnings per share
Deed of cross guarantee
Assets pledged as security
Parent entity financial information
Summary of significant accounting policies
Page
39
40
41
42
42
43
44
53
56
59
60
61
61
64
66
67
68
69
69
69
70
71
72
75
76
77
77
78
79
Pioneer Credit Limited
30 June 2014
38
1 Significant changes in the current reporting period
Significant changes in the state of affairs of the Group during the financial year were as follows:
In October 2013 Pioneer Credit Pty Ltd embarked on the process of transitioning to a publicly-listed Company,
and was converted to a public company on 7 February 2014 in anticipation of completing an Initial Public Offering
(IPO).
In April 2014 a successful book build was completed with the process fully underwritten by the Lead Manager,
Evans & Partners. Following completion of the book build and lodgement of the prospectus, Pioneer Credit
Limited was admitted to the official list of ASX Limited on 1 May 2014.
Key financial highlights include:
•
•
•
•
•
•
•
•
pre-IPO issue of preference shares under a dividend reinvestment plan amounting to $591,742
pre-IPO conversion of preference shares and reclassification to ordinary shares in the sum of $8.406m
pre-IPO modification of the employee share incentive scheme and conversion to ordinary shares amounting
to $403,497, relatedly the share based payment reserve movement of $1.037m arose primarily as a result of
the recognition of the share based payment expense of $705,000 on this modification
pre-IPO declaration and distribution of a return of capital on ordinary shares held on 30 April 2014, $11.070m
pre-IPO declaration and distribution of a dividend on ordinary shares held at 30 April 2014, $3.930m
capital raising completed on the issue of 25,000,000 ordinary shares under the Initial Public Offer, yielding
$40m with incremental costs directly attributable to the new share issue amounting to $2.175m
included in the statutory profit are the costs associated with the IPO charged to the consolidated statement of
comprehensive income amounting to $2.058m
to encourage broad based employee ownership the Company issued fully paid ordinary shares under the
Employee Offer amounting to $215,520, with a related share based payment expense of $90,520
An expanded Senior Debt Facility was entered on 20 March 2014 with the Group's existing bankers with a total
facility limit of $54.060m. Details of the facility are disclosed in note 11(d)(i) to the consolidated financial
statements.
Pioneer Credit Limited
30 June 2014
39
How numbers are calculated
This section provides additional information about those individual line items in the financial statements that the
Directors consider most relevant in the context of the operations of the entity.
2
3
4
5
6
7
8
9
Revenue
Individually significant items
Other income and expense items
Income tax expense
Financial assets and financial liabilities
Non-financial assets and liabilities
Equity
Cash flow information
41
42
42
43
44
53
56
59
Pioneer Credit Limited
30 June 2014
40
2 Revenue
Revenue from operations
From continuing operations
Operating revenues
Liquidation of cash flows from purchased debt portfolios
Change in value of purchased debt portfolios
Net gain on financial assets - purchased debt portfolios
Services
Other revenue
Interest
Revenue recognition
2014
$'000
2013
$'000
37,230
(11,814)
25,416
22,870
(6,773)
16,097
278
544
67
25,761
32
16,673
Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue
are net of returns, trade allowances, rebates and amounts collected on behalf of third parties.
The Group recognises revenue when the amount of revenue can be reliably measured, it is probable that future
economic benefits will flow to the entity and specific criteria have been met for each of the Group's activities as
described below. The Group bases its estimates on historical results, taking into consideration the type of
customer, the type of transaction and the specifics of each arrangement.
Revenue is recognised for the major business activities using the methods outlined below.
(i) Customer payments, Debt purchase income
Net gains on financial assets are disclosed in the consolidated statement of comprehensive income as cash flows
from purchased debt portfolios net of any change in fair value of the portfolios. The Group classifies purchased
debt portfolios as financial assets at fair value through profit or loss.
The net gain on these assets is disclosed as revenue in the consolidated statement of comprehensive income.
Net gains or losses on financial assets measured at fair value are recognised as they accrue.
Interest income
(ii)
Interest income is recognised using the effective interest method.
(iii) Services Income
Revenue from rendering services is recognised to the extent that it is probable that revenue benefits will flow to
the Group and the revenue can be reliably measured.
Pioneer Credit Limited
30 June 2014
41
3 Individually significant items
The following items are significant to the financial performance of the Group, and so are listed separately here.
These specific costs have been included in profit before income tax.
Initial Public Offering Costs
Costs incurred to list on the stock exchange
Costs apportioned to capital raising
Commercial claim
Settlement Provision
Legal Costs
2014
$'000
2013
$'000
4,233
(2,175)
2,058
420
228
648
-
-
-
-
-
-
(a)
Initial Public Offering costs
Pioneer Credit Limited was admitted to the official list of ASX Limited on Thursday 1 May 2014. Consistent with
the requirements of Australian Accounting Standards, the incremental costs that are directly attributable to
issuing new shares have been deducted from equity (net of any income tax benefit), and costs that related to the
stock market listing, or were otherwise not incremental and directly attributable to issuing new shares, were
recorded as an expense in the consolidated statement of comprehensive income. The nature of this cost item is
that it will not recur in the future.
(b) Commercial claim
At 30 June 2013, the Group determined that a contingent liability existed for a claim against it of approximately
$420,000 in respect to a commercial dispute. This dispute has now been settled and the Group has recognised
the prior year contingent liability in the current year.
The nature of this item is that it is unlikely to recur in the normal course of business.
4 Other income and expense items
This note provides a breakdown of specific costs included in profit before income tax.
Expenses
Employee benefits expenses inclusive of on-costs
Share Based Payment Modification
Share Based Payments
Chairman Options
Finance costs
Interest and finance charges paid/payable for financial liabilities not at fair
value through profit or loss
Interest on Convertible Redeemable Preference Shares
2014
$'000
2013
$'000
744
95
14
853
923
520
1,443
-
-
-
-
585
388
973
Pioneer Credit Limited
30 June 2014
42
Other income and expense items
Expenses (continued)
Depreciation and amortisation
Amortisation
Depreciation
5 Income tax expense
(a)
Income tax expense
Current tax
Prior period under-provision
Deferred tax
Income tax expense is attributable to:
Profit from continuing operations
Deferred income tax (revenue) expense included in income tax expense
comprises:
(Decrease) increase direct to equity
Decrease (Increase) in deferred tax assets
(b) Numerical reconciliation of income tax expense to prima facie tax payable
Profit from continuing operations before income tax expense
Tax at the Australian tax rate of 30.0% (2013 - 30.0%)
Non-deductible entertainment costs
Non-deductible provision for fringe benefits tax
Assessable interest not recognised in P&L
Deductible interest not recognised in P&L
Deferred tax expenses recognised directly in equity
Non-deductible CRPS Interest
Non-deductible Share Based Payments
Underprovision for prior year taxation
Income tax expense
(c) Amounts recognised directly in equity
Aggregate current and deferred tax arising in the reporting period and not
recognised in net profit or loss or other comprehensive income but directly
debited or credited to equity:
Current tax - credited directly to equity
Net deferred tax - credited directly to equity
65
314
379
-
376
376
2014
$'000
1,672
175
(535)
1,312
2013
$'000
1,499
-
36
1,535
2,359
5,055
460
(996)
(536)
2014
$'000
2,359
708
29
1
-
-
-
156
243
175
1,312
(6)
42
36
2013
$'000
5,055
1,517
23
1
2
(2)
(6)
-
-
-
1,535
(3,671)
(6,590)
2014
$'000
2013
$'000
192
460
652
-
6
6
Pioneer Credit Limited
30 June 2014
43
6 Financial assets and financial liabilities
The Group holds the following financial instruments:
Financial assets
2014
Cash and cash equivalents
Trade and other receivables *
Financial assets at fair value through profit or loss
2013
Cash and cash equivalents
Trade and other receivables *
Financial assets at fair value through profit or loss
* excluding prepayments
Financial liabilities
2014
Trade and other payables **
Borrowings
Accruals, provisions and other liabilities
2013
Trade and other payables **
Borrowings
Accruals, provisions and other liabilities
Other financial liabilities
** excluding non-financial liabilities
Assets at
FVTPL
$'000
Notes
Financial
assets at
amortised
cost
$'000
6(a)
6(b)
Notes
6(a)
6(b)
-
-
58,743
58,743
-
-
38,931
38,931
4,458
2,570
-
7,028
967
1,001
-
1,968
Liabilities at
FVTPL
$'000
Notes
Liabilities at
amortised
cost
$'000
6(c)
6(d)
Notes
6(c)
6(d)
6(e)
-
-
-
-
-
-
-
-
-
11,352
7,388
2,523
21,263
2,481
15,409
1,280
8,497
27,667
Total
$'000
4,458
2,570
58,743
65,771
967
1,001
38,931
40,899
Total
$'000
11,352
7,388
2,523
21,263
2,481
15,409
1,280
8,497
27,667
The Group’s exposure to various risks associated with the financial instruments is discussed in note 11. The
maximum exposure to credit risk at the end of the reporting period is the carrying amount of each class of
financial assets mentioned above.
Pioneer Credit Limited
30 June 2014
44
(a) Trade and other receivables
Trade receivables
Current tax receivable
Other receivables
Prepayments
Financial assets and financial liabilities
2014
Non-
current
$'000
-
-
-
61
61
Current
$'000
877
105
1,693
246
2,921
Total Current
$'000
$'000
652
877
-
105
126
1,693
144
307
922
2,982
2013
Non-
current
$'000
-
-
223
-
223
Total
$'000
652
-
349
144
1,145
Further information relating to loans related to related parties and Key Management Personnel is set out in note
17.
(i) Classification as trade and other receivables
Trade receivables are amounts due from customers for services performed in the ordinary course of business.
Other receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in
an active market. If collection of the amounts is expected in one year or less they are classified as current assets.
If not, they are presented as non-current assets. Trade receivables are generally due for settlement within 30
days and therefore are all classified as current. The Group’s impairment and other accounting policies for trade
and other receivables are outlined in notes 11(c) and 24(e) respectively.
(ii) Other receivables
These amounts generally arise from transactions outside the usual operating activities of the Group.
(iii) Fair value of trade and other receivables
Due to the short-term nature of the current receivables, their carrying amount is assumed to be the same as their
fair value. For the majority of the non-current receivables, the fair values are also not significantly different to their
carrying amounts.
(iv) Impairment and risk exposure
Information about the impairment of trade and other receivables, their credit quality and the Group’s exposure to
credit risk, foreign currency risk and interest rate risk can be found in note 11(a) and 11(c).
None of the non-current receivables are impaired or past due but not impaired.
Pioneer Credit Limited
30 June 2014
45
(b) Financial assets at fair value through profit or loss
Financial assets and financial liabilities
The amount of the financial assets at fair value is classified as follows:
Current
Non-current
Current and non-current
At beginning of year
Payments for purchased debt portfolios
Liquidation of cash flows from purchased debt portfolios
Net gain on financial assets - purchased debt portfolios
2014
$'000
2013
$'000
29,183
29,560
58,743
21,081
17,850
38,931
2014
$'000
2013
$'000
38,931
31,626
(37,230)
25,416
58,743
19,248
26,456
(22,870)
16,097
38,931
Changes in fair values of financial assets at fair value through profit or loss are recorded in the consolidated
statement of comprehensive income.
(i) Classification of financial assets at fair value through profit or loss
The Group has designated purchased debt portfolios as financial assets at fair value through profit or loss.
Purchased debt portfolios have been included in this category of financial assets as it is managed and its
performance is evaluated on a fair value basis.
Purchased debt portfolios are initially recorded at acquisition cost and thereafter at fair value in the balance
sheet, transaction costs are expensed as incurred. In the absence of a sufficiently active market the fair value of
a particular portfolio is determined based on a valuation technique. The valuation is based on the present value
of expected future cash flows. Note (iv) below explains how the fair values of purchased debt portfolios are
determined, including information regarding the key assumptions used.
The fair value gains or losses on financial assets are disclosed in the consolidated statement of comprehensive
income as part of cash flows from purchased debt portfolios net of any change in fair value of the portfolios.
Purchased debt portfolios are included as non-current assets, except for the amount of the portfolio that is
expected to be realised within 12 months of the balance sheet date, which is classified as a current asset.
(ii) Amounts recognised in profit or loss
Changes in fair values of financial assets at fair value through profit or loss are recorded as part of revenue.
(iii) Risk exposure and fair value measurements
Information about the Group's exposure to price risk is provided in note 11. For information about the methods
and assumptions used in determining fair value please refer to note 6() below.
(iv) Fair value and fair value measurements
(i) Fair value hierarchy
This section explains the judgements and estimates made in determining the fair values of the financial
instruments that are recognised and measured at fair value in the financial statements. To provide an indication
about the reliability of the inputs used in determining fair value, the Group has classified its financial instruments
into the three levels prescribed under the accounting standards. An explanation of each level follows underneath
the table.
Pioneer Credit Limited
30 June 2014
46
(b) Financial assets at fair value through profit or loss
Financial assets and financial liabilities
30 June 2014
Financial assets
Financial assets at FVTPL
30 June 2013
Financial assets
Financial assets at FVTPL
Level 1
$'000
Level 2
$'000
Level 3
$'000
Total
$'000
-
-
58,743
58,743
Level 1
$'000
Level 2
$'000
Level 3
$'000
Total
$'000
-
-
38,931
38,931
There were no transfers between levels in both 2014 and 2013.
Level 1: The fair value of financial instruments traded in active markets (such as publicly traded derivatives, and
trading and available-for-sale securities) is based on quoted market prices at the end of the reporting period.
Level 2: The fair value of financial instruments that are not traded in an active market (for example,
over-the-counter derivatives) is determined using valuation techniques which maximise the use of observable
market data and rely as little as possible on entity specific estimates. If all significant inputs required to fair value
an instrument are observable, the instrument is included in level 2.
Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is
included in level 3.
(ii) Valuation techniques used to derive level 3 fair values
If one or more of the significant inputs is not based on observable market data (unobservable inputs), the
instrument is included in level 3. Unobservable inputs are those not readily available in an active market due to
market illiquidity or complexity of the product. This is the case for purchased debt portfolios for which there is not
considered to be a sufficiently active secondary market.
The fair value of financial instruments that are not traded in an active market, the purchased debt portfolios, is
determined using valuation techniques. These valuation techniques maximise the use of observable market data
where it is available and rely as little as possible on entity specific estimates.
The specific valuation technique used to determine the fair value of financial instruments is a Discounted Cash
Flow (DCF) approach, which incorporates the following variables:
Expected liquidation rate - expressed as a percentage of the face value
Face value - of purchased debt portfolios acquired
•
•
• Cash flow liquidation period - the period over which cash flows liquidate
• Discount rate - factors in a risk free interest rate and appropriate credit adjustment for risks not built into the
underlying cash flows expected to be recovered
• Cost - acquisition cost of recently acquired purchased debt portfolios
(iii) Fair value measurements using significant unobservable inputs (level 3)
See the table in note 6(b) for changes in level 3 instruments for the year ended 30 June 2014 and 30 June 2013.
Analysis of change in fair value year ended 30 June 2014.
Actual versus forecast cash flow
Change in future forecast cash flows
Net gain on financial assets - purchased debt portfolios
2014
$'000
6,978
18,438
25,416
Pioneer Credit Limited
30 June 2014
47
Financial assets and financial liabilities
(b) Financial assets at fair value through profit or loss
(iii) Fair value measurements using significant unobservable inputs (level 3) (continued)
Transfers between levels and changes in valuation techniques
There were no transfers between the levels of the fair value hierarchy in both years ended 30 June 2014 and 30
June 2013.
There were also no significant changes made to any of the valuation techniques applied in both years ended 30
June 2014 and 30 June 2013.
Valuation inputs and relationships to fair value
The following table summarises the quantitative impact on those elements of the purchased debt portfolios that
are sensitive to the significant unobservable inputs used in level 3 fair value measurements:
Pioneer Credit Limited
30 June 2014
48
Financial assets and financial liabilities
(b) Financial assets at fair value through profit or loss
(iii) Fair value measurements using significant unobservable inputs (level 3) (continued)
Valuation inputs and relationships to fair value (continued)
Description
Fair Value
$'000
Valuation
Technique
Unobservable
Inputs
Range of Inputs Relationship to Fair Value
Financial
Assets at
FVTPL
58,743
Discounted
Cash Flow
and
Validation
Expected liquidation
rate
1% change in
liquidation rate
3% change in
liquidation rate
Impact of a seven
year liquidation
period versus a six
year liquidation
period
Variance in
risk-adjusted
discount rate by
100bps
Cash flow liquidation
period
Discount rate
A reduction in liquidation
rate by 1% results in a
decrease in fair value on
total estimated cash flows
by $1,810,289, an increase
results in an increase in fair
value on total estimated
cash flows of $1,810,289.
A reduction in liquidation
rate by 3% results in a
decrease in fair value on
total estimated cash flows
by $5,430,695, an increase
results in an increase in fair
value on total estimated
cash flows of $5,430,695.
Results in a decrease in fair
value of $1,087,460.
The higher the risk-adjusted
rate the lower the fair value.
A reduction in rate by 100
bps results in an increase in
fair value by $716,864, an
increase results in a
decrease in fair value of
$694,237.
A reasonably possible change in liquidation rates has been determined to be plus or minus 3%. A 1% change in
liquidation rates has also been disclosed for informational purposes.
Historical aggregate debt purchases weighted by face value and investment
A breakdown of the Company's total aggregated purchase costs (net of amounts returned to the Vendor Partner
due to agreed recourse criteria) by price category to 30 June 2014 is set out below.
Pioneer Credit Limited
30 June 2014
49
(b) Financial assets at fair value through profit or loss
(iii) Fair value measurements using significant unobservable inputs (level 3) (continued)
Valuation inputs and relationships to fair value (continued)
Financial assets and financial liabilities
Face value $596.780m with investment at cost (not fair value) $84.706m.
Valuation Process
The key assumption in the valuation of the purchased debt portfolios is in determining the liquidation rate.
Assumptions about the liquidation rate are made based on product characteristics, payment history, market
conditions and management experience.
At time of purchase, the price paid is generally determined by an open market tender process in which
participants perform their own due diligence and determine the price they are willing to pay. Existing in house
knowledge of the portfolio under offer or similar equivalents is utilised along with a consideration of macro and
micro economic factors and are assessed using the experience of senior management.
Subsequent to purchase, fair value adjustments are made in line with expected revenue liquidations. An
assessment of gross nominal future cash flow is made over periods varying from six to eight years depending on
the level of liquidation history within a portfolio. Discount rates used to present value the gross nominal future
cash flows incorporate a risk free rate and appropriate credit adjustment for risks not built into the underlying
cash flows expected to be recovered.
The main level 3 inputs used by the Group in measuring the fair value of financial instruments are derived and
evaluated as follows:
•
Expected liquidation rate: Product characteristics, payment and liquidation history and management
experience with historic performance of comparable portfolios.
Pioneer Credit Limited
30 June 2014
50
Financial assets and financial liabilities
(b) Financial assets at fair value through profit or loss
(iii) Fair value measurements using significant unobservable inputs (level 3) (continued)
Valuation Process (continued)
•
Face value: Determined at the date the purchased debt portfolio was acquired.
• Cash flow liquidation period: Periods range from six to eight years depending on liquidation history.
• Discount rate: incorporate a risk free rate and appropriate credit adjustment for risks not built into the
underlying cash flows expected to be recovered.
• Cost: recently acquired purchased debt portfolios may be valued at cost, where it is considered to
approximate fair value.
Consistent with the manner in which purchased debt portfolios are managed, performance is evaluated on a fair
value basis. Independent validation of the fair value determined under the DCF approach is also undertaken. The
validation comprises an overall review of key elements contributing to cash liquidations including analysis of the
quantum, tenure and qualitative characteristics of the payment arrangements performance as well as
assessment of performance on other key observable customer statuses.
(c) Trade and other payables
Trade payables
Payroll tax & other statutory liabilities
Other payables
2014
Non-
current
$'000
-
-
-
-
Current
$'000
11,352
276
1,885
13,513
Total Current
$'000
$'000
2,481
11,352
1,331
276
1,168
1,885
4,980
13,513
2013
Non-
current
$'000
-
-
-
-
Total
$'000
2,481
1,331
1,168
4,980
See note 7(d) for detail on current provisions.
Risk exposure
Information about the Group's exposure to foreign exchange risk is provided in note 11.
The carrying amounts of trade payables and Payroll tax and other statutory liabilities are assumed to be the same
as their fair values, due to their short-term nature.
(d) Borrowings
Secured
Bank loans
Other loans
Unsecured
Other loans
2014
Non-
current
$'000
2,012
-
2,012
-
-
Current
$'000
804
4,471
5,275
101
101
Total Current
$'000
$'000
2013
Non-
current
$'000
3,044
3,527
6,571
8,838
-
8,838
Total
$'000
11,882
3,527
15,409
-
-
-
-
-
-
2,816
4,471
7,287
101
101
* Further information relating to loans related to related parties and Key Management Personnel is set out in note 17.
5,376
2,012
7,388
6,571
8,838
15,409
Pioneer Credit Limited
30 June 2014
51
Financial assets and financial liabilities
(d) Borrowings
(i) Secured liabilities and assets pledged as security
Security over all the assets and undertakings of each Pioneer Credit Limited, Pioneer Credit Acquisition Services
Pty Limited, Sphere Legal Pty Limited and Pioneer Credit (Philippines) Pty Limited and unlimited cross
guarantees and indemnities from each of these entities.
All property of the Group comprises the Group total assets of $70,301,000 (2013: $41,961,000)
See note 11(d)(i)for details of the financing arrangements available to the Group to which the security relates.
(ii) Compliance with loan covenants
Pioneer Credit Limited has complied with the financial covenants of its borrowing facilities during the 2014 and
2013 reporting periods, see note 12 for details.
(iii) Fair value
For the majority of the borrowings, the fair values are not materially different to their carrying amounts, since the
interest payable on those borrowings is either close to current market rates or the borrowings are of a short-term
nature.
(iv) Risk exposures
Details of the Group’s exposure to risks arising from current and non-current borrowings are set out in note 11.
(e) Non-current liabilities - Other financial liabilities
(i) Convertible redeemable preference shares
Convertible redeemable preference shares - B
Convertible redeemable preference shares - C
Transaction costs
Convertible redeemable preference share dividend payable
2014
$'000
-
-
-
-
-
2013
$'000
3,419
4,250
(14)
842
8,497
In the current financial year, the company was admitted to the official list of the ASX Limited and completed the
conversion of all classes of convertible redeemable preference shares and reclassification to fully paid ordinary
shares.
Prior to conversion, convertible redeemable preference shares were convertible by the holder or redeemable by
the Company at any time before possible future events not wholly in the control of the Company or holder (exit
date). Convertible redeemable preference shares conferred on their holders the right to receive notices of and to
attend and vote at general meetings of the Company. The holder of each convertible redeemable preference
share present in person or by proxy or by representative would on a show of hands be entitled to one vote and on
a poll to one vote for each Ordinary Share into which it is convertible at the meeting date. Convertible
redeemable preference shares ranked in preference to ordinary shares. Convertible redeemable preference
shares accrued a dividend at a fixed 8% per annum. The Company had discretion over payment of accrued
dividends, except where an event giving rises to an exit date occurs, at which point they become payable in cash.
Pioneer Credit Limited
30 June 2014
52
7 Non-financial assets and liabilities
(a) Property, plant and equipment
Plant and
equipment
$'000
Furniture,
fittings and
equipment
$'000
Machinery
and vehicles
$'000
Leasehold
improvements
$'000
384
(204)
180
180
495
(40)
(229)
406
702
(296)
406
406
485
(214)
-
677
1,187
(510)
677
42
(10)
32
32
84
(9)
(12)
95
110
(15)
95
95
34
(22)
-
107
145
(38)
107
41
(24)
17
17
-
-
(4)
13
41
(28)
13
13
-
(2)
-
11
41
(30)
11
-
-
-
-
332
-
(131)
201
332
(131)
201
201
182
(76)
1,435
1,742
1,949
(207)
1,742
Total
$'000
467
(238)
229
229
911
(49)
(376)
715
1,185
(470)
715
715
701
(314)
1,435
2,537
3,322
(785)
2,537
At 1 July 2012
Cost or fair value
Accumulated depreciation
Net book amount
Year ended 30 June 2013
Opening net book amount
Additions
Disposals
Depreciation charge
Closing net book amount
At 30 June 2013
Cost or fair value
Accumulated depreciation
Net book amount
Year ended 30 June 2014
Opening net book amount
Additions
Depreciation charge
Lease incentive
Closing net book amount
At 30 June 2014
Cost or fair value
Accumulated depreciation
Net book amount
(i) Non-current assets pledged as security
Refer to note 6(d)(i) for information on non-current assets pledged as security by the Group.
(ii) Depreciation methods and useful lives
Depreciation of property, plant and equipment is calculated using the diminishing balance method to allocate their
cost or revalued amounts, net of their residual values, over their estimated useful lives or, in the case of
leasehold improvements and certain leased plant and equipment, the shorter lease term as follows:
Furniture, fittings and equipment
Leasehold improvements
-
-
- Machinery and vehicles
Plant and equipment
-
15 - 50%
20 - 50%
25%
15 - 66.7%
See note 24 for the other accounting policies relevant to property, plant and equipment.
(iii) Lease incentive asset
The lease incentive received relates to leasehold improvements in general and has been accounted for as such,
with a corresponding liability recognised in Other liabilities.
The lease incentive asset is depreciated over 9 years, being the term of the lease.
Pioneer Credit Limited
30 June 2014
53
Non-financial assets and liabilities
(b) Deferred tax balances
Deferred tax assets
The balance comprises temporary differences attributable to:
Employee benefits (annual leave)
Retirement benefit obligations (superannuation payable)
Other
Other expenses (audit, accounting, payroll tax)
Short Term Incentive
Share issue expenses
Other (Formation Costs, Blackhole Costs)
Sub-total other
Net deferred tax assets
Movements
At 1 July 2012
(Charged)/credited
- to profit or loss
- directly to equity
At 30 June 2013
(Charged)/credited
- to profit or loss
- directly to equity
At 30 June 2014
Employee
Benefits
$'000
Retirement
Benefit
Obligation
$'000
33
29
-
62
24
-
86
12
28
-
40
(12)
-
28
2014
$'000
86
39
125
171
-
888
14
1,073
1,198
Other
$'000
200
(93)
(6)
101
523
460
1,084
2013
$'000
62
40
102
50
16
13
22
101
203
Total
$'000
245
(36)
(6)
203
535
460
1,198
Pioneer Credit Limited
30 June 2014
54
(c)
Intangible assets
At 30 June 2013
Net book amount
Year ended 30 June 2014
Additions - acquisition
Amortisation charge
Closing net book amount
At 30 June 2014
Cost
Accumulated amortisation
Net book amount
Non-financial assets and liabilities
Software
$'000
-
226
(65)
161
226
(65)
161
(i) Amortisation methods and useful lives
The Group amortises intangible assets with a limited useful life using the straight-line method over the following
periods:
-
Software
1-3 years
See note 24(g) for the other accounting policies relevant to intangible assets, and note 24(p) for the Group’s
policy regarding impairments.
(d) Provisions
Employee Benefits
Commercial claim
Notes
Current
$'000
-
279
279
2014
Non-
current
$'000
84
-
84
Total
$'000
Current
$'000
2013
Non-
current
$'000
84
279
363
-
-
-
-
-
-
Total
$'000
-
-
-
Information about individual provisions and significant estimates
(i)
Employee benefits
Long service leave
The liabilities for long service leave and annual leave are not expected to be settled wholly within 12 months after
the end of the period in which the employees render the related service. They are therefore recognised in the
provision for employee benefits and measured as the present value of expected future payments to be made in
respect of services provided by employees up to the end of the reporting period using the projected unit credit
method. Consideration is given to expected future wage and salary levels, experience of employee departures
and periods of service. Expected future payments are discounted using market yields at the end of the reporting
period of government bonds with terms and currencies that match, as closely as possible, the estimated future
cash outflows. Remeasurements as a result of experience adjustments and changes in actuarial assumptions are
recognised in profit or loss.
Pioneer Credit Limited
30 June 2014
55
Non-financial assets and liabilities
(d) Provisions
The obligations are presented as current liabilities in the consolidated balance sheet if the entity does not have
an unconditional right to defer settlement for at least twelve months after the reporting date, regardless of when
the actual settlement is expected to occur.
Commercial claim
See note 3(b) for details of the provision raised relating to the commercial claim.
(ii) Movements in provisions
2013
Employee
benefits
$'000
Commercial
claim
$'000
Carrying amount at end of year
-
-
2014
Charged/(credited) to profit or loss
Amounts used during the year
Carrying amount at end of year
Employee
benefits
$'000
Commercial
$'000
84
-
84
420
(141)
279
(iii) Amounts not expected to be settled within 12 months
No employee of the Group will be eligible to take long service leave within the next 12 months.
Total
$'000
-
Total
$'000
504
(141)
363
8 Equity
(a) Contributed equity
(i) Share capital
Ordinary shares - fully paid
Convertible Redeemable Preference "A"
shares (net of costs & tax)
(ii) Movements in ordinary share capital
Notes
2014
Shares
2013
Shares
8(a)(ii)
44,973,990
6,366,745
-
44,973,990
5,537,851
11,904,596
2014
$'000
45,464
-
45,464
2013
$'000
3,674
5,417
9,091
Date
1 July 2012
Details
Number of
shares
$'000
Opening balance
Shares issued in lieu of CRPS B interest payable
Deferred tax through equity
Closing balance
11,626,816
277,780
-
11,904,596
8,764
333
(6)
9,091
Pioneer Credit Limited
30 June 2014
56
(a) Contributed equity
1 July 2013
Opening balance
Deferred tax through equity
CRPS A Re- investment
CRPS B Conversion (net of transaction costs)
CRPS C Conversion (net of transaction costs)
Management Options
Return of Capital
Employee Offering
Initial Public Offering
Transaction costs arising on share issue (note 3)
Closing balance
(iii) Ordinary shares
All authorised ordinary shares have been issued.
Equity
9,091
652
592
3,406
4,349
403
(11,070)
216
40,000
(2,175)
45,464
11,904,596
-
591,742
3,419,035
3,623,917
300,000
-
134,700
25,000,000
-
44,973,990
Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Company in
proportion to the number of and amounts paid on the shares held.
At a general meeting of shareholders; every shareholder entitled to vote may vote in person or by proxy, attorney
or representative; on a show of hands every shareholder who is present in person or by proxy, attorney or
representative has one vote; and on a poll every shareholder who is present in person or by proxy, attorney or
representative has one vote for every share held, but, in respect of partly-paid shares, shall have a fraction of a
vote for each partly-paid share.
Shares acquired under the Employee Offer are held under a trading lock. Shares in the Employee Offer
otherwise carry the same rights and entitlements of fully paid ordinary Shares, including dividend and voting
rights.
Pre-initial public offering shareholders, which includes management share holders, have entered into voluntary
escrow arrangements in respect of the shares they held on listing on the Australian Stock Exchange. The escrow
period is the same for all escrowed shareholders, being the period from 1 May 2014 to 10 trading days after the
date on which Pioneer releases to the ASX its results for the full financial year ending 30 June 2015, which is
expected to be on or before 28 August 2015.
During the escrow period, the escrowed shareholders may deal in any of their shares to the extent the dealing is
required by applicable law (including an order of court of competent jurisdiction). The restriction on ‘disposing’ is
broadly defined and includes, among other things, selling, assigning, transferring or otherwise disposing of any
interests in the Shares, encumbering or granting a security interest over the Shares, doing or omitting to do, any
act if the act or omission would have the effect of transferring effective ownership or control of any of the Shares
or agreeing to do any of those things.
(iv) Treasury shares
Management Options
Balance 30 June 2014
Details
Number of
shares
$'000
400,000
400,000
1,024
1,024
(v) Employee share scheme
Information relating to the employee share scheme, including details of shares issued under the scheme, is set
out in note 18.
(vi) Options
Information relating to the Chairman's Options and Management Options, including details of options issued,
exercised and lapsed during the financial year and options outstanding at the end of the financial year, is set out
in note 18.
Pioneer Credit Limited
30 June 2014
57
(b) Other reserves
The following table shows a breakdown of the balance sheet line item ‘other reserves’ and the movements in
these reserves during the year. A description of the nature and purpose of each reserve is provided below the
table.
Equity
Movements:
Share-based payments
Chairman's Options
Management Options
Balance 30 June 2014
2014
$'000
2013
$'000
13
1,024
1,037
-
-
-
(i) Nature and purpose of other reserves
Share-based payments
The share-based payments reserve is used to recognise:
•
•
the grant date fair value of options issued to employees but not exercised over the vesting period
the grant date fair value of shares issued to employees over the vesting period
Pioneer Credit Limited
30 June 2014
58
(c) Retained earnings
Movements in retained earnings were as follows:
Balance 1 July
Net profit for the year
Dividends
Balance 30 June
9 Cash flow information
2014
$'000
3,984
1,047
(3,930)
1,101
(a) Reconciliation of profit after income tax to net cash inflow from operating activities
Profit for the period
Depreciation and amortisation
Write off of assets
Non-cash employee benefits expense - share-based payments
Accrued interest on convertible redeemable preference shares
Fair value losses on financial assets at fair value through profit or loss
Capital raising costs disclosed in financing activities (note 3)
Change in operating assets and liabilities:
(Increase) decrease in trade receivables
(Increase) decrease in deferred tax assets through profit or loss
Increase (decrease) in trade payables
(Decrease) increase in provision for income taxes payable
Increase in accruals and other liabilities
Net cash inflow (outflow) from operating activities
(b) Non-cash investing and financing activities
Shares issued in lieu of CRPS B dividend payable
Employee share scheme (note 18(c))
2014
$'000
1,047
379
-
808
520
11,814
2,058
(1,729)
(535)
8,263
(1,354)
1,243
22,514
2014
$'000
-
91
91
Equity
2013
$'000
464
3,520
-
3,984
2013
$'000
3,520
376
49
-
387
6,773
-
(842)
36
917
708
688
12,612
2013
$'000
333
-
333
Pioneer Credit Limited
30 June 2014
59
Risk
This section of the notes discusses the Group’s exposure to various risks and shows how these could affect the
Group’s financial position and performance.
10
11
12
Critical estimates, judgements and errors
Financial risk management
Capital management
61
61
64
Pioneer Credit Limited
30 June 2014
60
10 Critical accounting estimates and judgements
Estimates and judgements are continually evaluated and are based on historical experience and other factors,
including expectations of future events that may have a financial impact on the entity and that are believed to be
reasonable under the circumstances.
The preparation of financial statements requires the use of accounting estimates which, by definition, will seldom
equal the actual results. Management also needs to exercise judgement in applying the Group’s accounting
policies.
Critical accounting estimates and assumptions
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by
definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of
causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are
discussed below.
Fair value measurement of financial instruments
The fair value of financial instruments that are not traded in a sufficiently active market is determined using
valuation techniques. The Group uses its judgement to select a variety of methods and make assumptions,
including considering market conditions existing at the end of each reporting period. The Group uses its
judgement and makes assumptions as to the allocation of purchased debt portfolios between current and
non-current asset allocations. For details of the key assumptions used and the impact of changes to these
assumptions see note 6(b).
11 Financial risk management
The Group's activities expose it to a variety of financial risks: market risk, credit risk and liquidity risk. The Group's
overall risk management program focuses on the unpredictability of financial markets and seeks to minimise
potential adverse effects on the financial performance of the Group.
The Group uses different methods to measure the different types of risk to which it is exposed. These methods
include sensitivity analysis in the case of interest rates, preparation and review of aging analysis for credit risk
and projected cash flow analysis across portfolio categories to manage the risk associated with the purchased
debt portfolio.
Risk management is the responsibility of key management personnel policies under approval by the board of
Directors to ensure that the total risk exposure of the Group is consistent with the Group strategy, is in line with
Group covenants and is within the risk tolerance guidelines of the Group. To manage interest rate and credit risk
arising from the investment in purchased debt portfolios, the Group undertakes pricing analysis at tender stage.
Pricing is determined by a bidding process in a tender market place with each purchaser relying on their own
analysis. Analysis by the Group includes consideration of information supplied under due diligence at tender
stage, as well as macro and micro economic elements to which senior management experience and judgement is
applied. In many cases there exists in-house knowledge of the performance of portfolios with similar
characteristics and in other cases data analysis is restricted to the information supplied at due diligence.
Purchased debt portfolios are subsequently managed and performance is evaluated on a fair value basis.
The Group periodically considers the need to make use of derivative financial instruments and hedging
arrangements to manage interest rate risk. There are currently no such arrangements in place.
During the year under review, there has been no change to the Group’s exposures to the above risks or the
manner in which these risks are managed and measured.
Pioneer Credit Limited
30 June 2014
61
(a) Summarised sensitivity analysis - Interest rate risk
The following table summarises the sensitivity of the Group's financial assets and financial liabilities to interest
rate risk. Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate
because of changes in market interest rates.
Financial risk management
At 30 June 2014
Financial liabilities
Borrowings
At 30 June 2013
Financial liabilities
Borrowings
Carrying
amount
$'000
-100 bps
+100 bps
Profit
$'000
Profit
$'000
3,038
136
(136)
11,882
79
(79)
Financial assets sensitive to interest rate risk comprise cash and cash equivalents only, for which the sensitivity
is too insignificant to warrant meaningful disclosure.
(b) Market risk
This is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in
market prices. This comprises;
(i) Foreign exchange risk
The Group has no financial instruments associated with foreign exchanges and as such there is no risk
associated with fluctuations in foreign exchange rates.
(ii) Cash flow and fair value interest rate risk
The Group’s main interest rate risk arises from long-term loans and borrowings issued at variable interest rates.
The Group’s fixed rate borrowings and receivables are carried at amortised cost and not subject to interest rate
risk.
As at the end of the reporting period the Group had the following variable rate loans and borrowings outstanding:
Instruments used by the Group
30 June 2014
30 June 2013
Weighted
average
interest rate
%
Weighted
average
interest rate
%
Balance
$'000
Balance
$'000
Bank overdrafts and bank loans
5.13%
3,038
5.02%
11,882
The Group analyses its interest rate exposure on a dynamic basis. Various scenarios are simulated taking into
consideration refinancing, renewal of existing positions and alternative financing. Based on these scenarios, the
Group calculates the impact on profit or loss of a defined interest rate shift. The scenarios are run only for
liabilities that represent the major interest-bearing positions. The simulation is done on a half yearly basis to verify
that the maximum loss potential is within the limit given by management.
(iii) Price risk
The Group has no financial instruments associated to market prices and as such there is no risk associated with
fluctuations in market prices. Financial assets at fair value through profit and loss relate entirely to the purchased
debt portfolio.
(c) Credit risk
Credit risk arises from cash and cash equivalents, credit exposures to customers, including outstanding
receivables and committed transactions.
Pioneer Credit Limited
30 June 2014
62
Financial risk management
(c) Credit risk
(i) Risk management
Credit risk is managed on a Group basis. For banks and financial institutions, only independently rated parties
with a minimum rating of ‘A’ are accepted. For customers, management assesses the credit quality of the
customer, taking into account its financial position, past experience and other factors. Individual risk limits are set
based on internal or external ratings in accordance with limits set by the management. The compliance with
credit limits by corporate customers is regularly monitored by management.
There are no significant concentrations of credit risk, whether through exposure to individual customers, specific
industry sectors and/or regions.
The Group is also exposed to investment credit risk from the significant investment in purchased debt portfolios.
Risk limits are set based on internal ratings in accordance with limits set by management. The compliance with
Investment credit limits on the purchased debt portfolios is regularly monitored by management.
Impaired trade receivables
As at 30 June 2014, no current trade receivables of the Group were impaired, nor overdue.
(d) Liquidity risk
Prudent liquidity risk management implies maintaining sufficient cash and the availability of funding through an
adequate amount of committed credit facilities to meet obligations when due. Due to the dynamic nature of the
business, management maintains flexibility in funding by maintaining availability under committed credit lines.
Management monitors rolling forecasts of the Group’s liquidity reserve on the basis of expected cash flow. Cash
flow is forecast on a day-to-day basis to ensure that sufficient funds are available to meet requirements on the
basis of expected cash flows. Liquidity risk is further managed through maintaining a reputable credit profile.
(i) Financing arrangements
The Group had access to a Senior Debt Facility of $54,060,000 facility at the end of the financial year (2013:
$21,750,000). The facility comprises a cash advance facility to fund the acquisition of purchased debt ledger
portfolios, a bank guarantee facility, an overdraft facility, a direct debit authority facility and a credit card facility.
The overdraft facility was unused at 30 June 2014 and the undrawn limit on the cash advance facility was
$43,963,000 at 30 June 2014. The facility is subject to the Group meeting a number of financial undertakings, all
of which have been met to date. The facility will expire on 31 July 2017. Management has no reason to believe
that the facility will not be renewed and / or extended beyond this date.
The Group is required to keep the finance provider fully informed of relevant details of the Group as they arise.
(ii) Maturities of financial liabilities
The following table reflects an undiscounted contractual maturity analysis for financial liabilities. The timing of
cash flows represented in the table to settle financial liabilities reflects the earliest contractual settlement dates
and does not reflect management’s expectation that the facilities will be extended.
At 30 June 2014
Trade payables
Borrowings (excluding finance leases)
Accruals, provisions and other liabilities
Total non-derivatives
Within 1
year
$'000
1 and 2
years
$'000
Over 2
years
$'000
11,352
5,479
2,439
19,270
-
812
-
812
-
1,514
84
1,598
Pioneer Credit Limited
30 June 2014
63
(d) Liquidity risk
At 30 June 2013
Trade payables
Borrowings (excluding finance leases)
Accruals, provisions and other liabilities
Other financial liabilities
Total non-derivatives
12 Capital management
(a) Risk management
The Group's objectives when managing capital are to
Financial risk management
2,481
7,090
1,280
-
10,851
-
6,886
-
-
6,886
-
3,124
-
8,497
11,621
•
safeguard their ability to continue as a going concern, so that they can continue to provide returns for
shareholders and benefits for other stakeholders, and
• maintain an optimal capital structure to reduce the cost of capital.
(b) Dividends
(i) Ordinary shares
Special dividend on fully paid ordinary shares held on 30 April 2014 of 19.415
cents (2013 : Nil) per share paid on 16 June 2014
Final dividend
(ii) Return of Capital
Return of capital on fully paid ordinary shares held on 30 April 2014 of 54.698
cents (2013 : Nil) per share paid on 17 June 2014
Return of capital
(iii) Dividends not recognised at the end of the reporting period
In addition to the above dividends, since year end the Directors have
recommended the payment of a final dividend of 3.10 cents per fully paid
ordinary share (2013 - Nil), fully franked based on tax paid at 30%. The
aggregate amount of the proposed dividend expected to be paid on 17 October
2014 out of retained earnings at 30 June 2014, but not recognised as a liability at
year end, is
2014
$'000
2013
$'000
3,930
-
2014
$'000
2013
$'000
11,070
-
2014
$'000
2013
$'000
1,407
-
(iv) Franked dividends
The franked portions of the final dividends recommended after 30 June 2014 will be franked out of existing
franking credits or out of franking credits arising from the payment of income tax in the year ended 30 June 2015.
Pioneer Credit Limited
30 June 2014
64
(b) Dividends
Capital management
Consolidated entity
2014
$'000
2013
$'000
Franking credits available for subsequent reporting periods based on a tax rate of
30.0% (2013 - 30.0%)
1,454
848
The above amounts are calculated from the balance of the franking account as at the end of the reporting period,
adjusted for franking credits and debits that will arise from the settlement of liabilities or receivables for income
tax and dividends after the end of the year.
(c) Capital risk management
Although the Group is not subject to any externally imposed regulatory requirement, it has adopted a
conservative and proactive capital management strategy. The Group has taken a prudent approach to gearing
with the significant sources of funding being supplied by shareholder equity and variable rate financier
borrowings, as well as appropriate trade working capital arrangements. All major capital related initiatives require
board approval.
The Group completed a successful capital markets fund raising with the issue of 25,000,000 fully paid ordinary
shares under the initial public offering on 1 May 2014. As a consequence this successful capital markets fund
raising, the condition precedent on the renewed Senior Debt Facility was met. The Group is well funded at
balance date and into the foreseeable future.
Management monitor key balance sheet ratios as part of the strategy as well as to demonstrate compliance with
the financier covenant requirements. Three year rolling capital forecast analysis is regularly reviewed to assess
the impact of growth and future opportunity on funding requirements with a focus on determining adequacy of
short to medium term requirements.
Arrangements with the Group's financier are in place to ensure that there is sufficient undrawn credit available to
meet unforeseen circumstances should they arise. Financing facilities are renegotiated on a regular basis to
ensure that they are sufficient for the Group’s projected growth.
As far as possible, asset purchases are funded from operational cashflow, allowing undrawn balances to be
maintained. Cash is monitored on a daily basis to ensure that immediate and short term requirements can be
met. By maintaining a balance of undrawn funds, the Company reduces the risk of liquidity and going concern
issues.
Details of financing facilities are set out in note 11(d)(i).
Under the terms of the senior debt facility, the Group is required to comply with the following financial covenants
at all times, tested monthly;
• Interest Cover Ratio for the preceding 12 month period, of at least 3:1;
• Debt Service Ratio for the preceding 12 month period of at least 3:1;
• Gearing Ratio not exceeding 45%; and
• Variance To Budget Ratio for the preceding 12 month period of at least 0.85:1
The Group has met all covenant obligations of the financier at all times during the current and prior years.
This strategy was followed during both financial years.
Pioneer Credit Limited
30 June 2014
65
Group structure
This section provides information which will help users understand how the Group structure affects the financial
position and performance of the Group as a whole.
13
Subsidiaries
67
Pioneer Credit Limited
30 June 2014
66
13 Subsidiaries
Significant investments in subsidiaries
The consolidated financial statements incorporate the assets, liabilities and results of the following principal
subsidiaries in accordance with the accounting policy described in note 24(b):
Name of entity
incorporation Class of shares
Equity holding
Country of
Pioneer Credit Acquisition Services Pty Limited
Sphere Legal Pty Limited
Pioneer Credit (Philippines) Pty Limited *
Pioneer Credit Acquisitions (UK) Limited **
Australia
Australia
Australia
United Kingdom
Ordinary
Ordinary
Ordinary
Ordinary
2014
%
100
100
100
100
2013
%
100
100
-
-
* Pioneer Credit (Philippines) Pty Limited was incorporated on 20 January 2014 and has not conducted any
business since inception to the date of this report.
** Pioneer Credit Acquisitions (UK) Limited is an entity incorporated in the United Kingdom.
- Pioneer Credit Limited entered into a trust deed on 14 May 2014, in which Pioneer Credit Limited is the
beneficiary.
-
-
-
-
-
-
The beneficiary paid the whole of the consideration for all of the issued share capital of Pioneer Credit
Acquisitions (UK) Limited (the Asset) and the trustees hold the Asset in trust for the beneficiary.
The trustees hold the Asset and all rights pertaining to the Asset and all income and proceeds of the
Asset upon trust for the beneficiary until the vesting date. Vesting date is the shorter of 80 years on the
date of termination of the trust by the beneficiary.
The trustees are related parties to Pioneer Credit Limited.
The trustees deal with the Assets and all such rights, privileges, benefits, income and proceeds in such
manner as Pioneer Credit Limited may from time to time in writing direct or not otherwise.
The trustees share exercise all rights attaching to the Asset in such a manner as Pioneer Credit Limited
may from time to time in writing direct and not otherwise.
The most recent annual accounts filed on Pioneer Credit Acquisitions (UK) Limited were as at 28
February 2014. The only assets in the accounts were GBP3.00 cash on hand for the entire issued share
capital. There were no liabilities.
Pioneer Credit Limited
30 June 2014
67
Unrecognised items
This section of the notes provides information about items that are not recognised in the financial statements as
they do not satisfy the recognition criteria.
14
15
16
Contingencies
Commitments
Events occurring after the reporting period
69
69
69
Pioneer Credit Limited
30 June 2014
68
14 Contingencies
The Director's are of the opinion that no contingent liabilities or contingent assets exist as at the date of this
report.
15 Commitments
(a) Non-cancellable operating leases
The Group leases various offices under non-cancellable operating leases expiring within two to nine years. The
leases have varying terms, escalation clauses and renewal rights. On renewal, the terms of the leases are
renegotiated.
Commitments for minimum lease payments in relation to non-cancellable
operating leases are payable as follows:
Within one year
Later than one year but not later than five years
Later than five years
2014
$'000
2013
$'000
1,347
5,075
5,628
12,050
769
459
-
1,228
One lease agreement includes a lease incentive. The assets obtained by the Group have been recognised as
Leasehold Improvements and are depreciated over the shorter of their useful life or the lease term. The lease
incentive is presented as part of the lease liabilities and is reversed on a straight line basis over the lease term.
(b) Service Contract
The Group has entered into a services contract ending in August 2019, with an option to extend for a further
three years.
Commitments for minimum service payments in relation to non-cancellable
contract are payable as follows:
Within one year
Later than one year but not later than five years
2014
$'000
2013
$'000
1,483
1,770
3,253
-
-
-
16 Events occurring after the reporting period
No matter or circumstance has occurred subsequent to year end that has significantly affected, or may
significantly affect, the operations of the Group, the results of those operations or the state of affairs of the Group
or economic entity in subsequent financial years.
Pioneer Credit Limited
30 June 2014
69
Other information
This section of the notes includes other information that must be disclosed to comply with the accounting
standards and other pronouncements, but that is not immediately related to individual line items in the financial
statements.
17
18
19
20
21
22
23
24
Related party transactions
Share-based payments
Remuneration of auditors
Earnings per share
Deed of cross guarantee
Assets pledged as security
Parent entity financial information
Summary of significant accounting policies
71
72
75
76
77
77
78
79
Pioneer Credit Limited
30 June 2014
70
17 Related party transactions
(a) Parent entities
The Parent entity within the Group is Pioneer Credit Limited.
(b) Subsidiaries
Interests in subsidiaries are set out in note 13.
(c) Key management personnel
Short-term employee benefits
Post-employment benefits
Long-term benefits
Share-based payments
2014
$
2013
$
1,048,887
95,977
17,509
311,028
1,473,401
721,389
64,132
-
-
785,521
Detailed remuneration disclosures are provided in the remuneration report on pages 10 to 19.
(d) Transactions with other related parties
The following transactions occurred with related parties:
Rental expenses and other services
Other related parties
Superannuation contributions
2014
$
2013
$
382,842
274,653
Contributions to superannuation funds on behalf of Directors
53,660
28,576
Other transactions
Remuneration paid to Directors of the ultimate Australian parent entity
592,635
317,512
(e) Loans to / (from) related parties
Loans to / (from) other related parties, short term rolling credit facility
Beginning of the year
Loans from related parties
Loan repayments to related parties
End of year
2014
$
2013
$
(54,055)
(1,566,843)
1,620,898
-
13,119
(4,290,757)
4,223,583
(54,055)
Loans to / from related parties were brought to an end with listing on the Australian Stock Exchange. Related
party loans did not accrue interest and were unsecured.
(f) Contributed capital held by related parties
The movements during the reporting period in the value of ordinary shares in the Parent entity held directly,
indirectly or beneficially by key management person, including their related parties are:
Pioneer Credit Limited
30 June 2014
71
(f) Contributed capital held by related parties (continued)
Ordinary shares acquired
Modification of employee share option
Conversion of convertible redeemable preference shares
Related party transactions
2014
$
2013
$
405,869
189,000
12,320,215
12,915,084
306,407
-
-
306,407
(g) Convertible redeemable preference shares held by related parties
In the current financial year, the Company was admitted to the official list of the ASX Limited and completed on
the conversion of all classes of convertible redeemable preference shares and reclassification to fully paid
ordinary shares.
Prior to this conversion and reclassification, the movements during the reporting period in the value of convertible
redeemable preference shares in the Parent entity held directly, indirectly or beneficially by key management
person, including their related parties are:
CRPS A
CRPS B
(h) Terms and conditions
2014
$
2013
$
562,307
41,781
604,088
-
3,440,698
3,440,698
A special dividend and a return of capital was made on fully paid ordinary shares held on 30 April 2014.
See note 8(a)(iii) for general terms and conditions on ordinary shares.
18 Share-based payments
(a) Options
At 30 June 2014, the Company had the following share-based payment arrangement.
On 7 February 2014, the Company established a share option scheme that entitles the Chairman to purchase
300,000 shares (50,000 shares vest in April 2016 and 250,000 vest in April 2017) in the Company at an exercise
price of $1.92. Under the scheme, each share option which vests converts to one ordinary share of Pioneer on
payment of the exercise price.
Fair value of options granted
The fair value of the Chairman's share options has been measured using a binomial pricing model. Service
conditions attached to the transactions were not taken into account in measuring grant date fair value.
Fair value at grant date
Expected IPO price at grant date
Exercise price
Expected volatility (weighted-average)
Expected life (weighted-average)
Expected dividend yield
Risk-free interest rate (based on government bonds)
Tranche 1
$0.28
$1.60
$1.92
35%
4.22 years
4.5%
3.041%
Tranche 2
$0.31
$1.60
$1.92
35%
5.22 years
4.5%
3.266%
Expected volatility has been based on an evaluation of the historical volatility of the share price of similar entities,
particularly over the historical period commensurate with the expected term. The expected term of the
instruments has been based on historical experience and general option holder behaviour.
Pioneer Credit Limited
30 June 2014
72
Share-based payments
(b) Management Options
Prior to 30 June 2013, certain eligible employees participated in an Employee Incentive Scheme.
Under the Employee Incentive Scheme employees were issued 700,000 unvested options which vested at the
sole discretion of the Board. Grant date was therefore deferred until the date on which there was shared
understanding of the terms and conditions of the arrangement.
In advance of the completion of the Initial Public Offer, in recognition of the participant’s performance since
joining the Company up to and including the date of admission to the ASX on 1 May 2014, the Board determined
that the options vest. 300,000 options were recognised at $1.43 on 19 March 2014 and 400,000 options were
recognised at $1.26 on 19 March 2014, the then respective grant dates, as there were no further vesting
conditions to be met.
On modification of the Employee Incentive Scheme, employees were required to immediately exercise the vested
options to acquire Non-Ordinary Management (NOM) Shares, to be funded through a non-recourse loan. The
NOM were ultimately converted to Ordinary Shares.
The loans end on the earlier of seven years from draw down date or the date the employee’s employment with
the lender is terminated. Interest is payable at a rate of 0% between draw down date and 30 June 2014, and
thereafter at the benchmark interest rate (Indicator Interest Rate - Bank variable housing interest rate last
published by the Reserve Bank of Australia before the start of each of the Lender’s year of income), calculated
daily.
The modified plan is accounted for as a ‘share option scheme’, accordingly the loan is not recognised in the
financial statements and shares not yet fully paid are recognised as Treasury Shares. By balance date a number
of loans had been settled in full.
Fair value of options granted
The fair value has been measured using the following inputs:
Fair value at grant date
Share price at grant date
Consideration paid
Loan expiry
Capital return per share
Special dividend
Interest rate on loan (post 30 June 2014)
Exercise Price
$1.26
$1.08
$1.60
$1.26
28/12/2021
$0.55
$0.19
5.95%
$1.43
$0.91
$1.60
$1.43
28/12/2021
$0.55
$0.19
5.95%
Service conditions attached to the transactions were not taken into account in measuring fair value.
Pioneer Credit Limited
30 June 2014
73
Share-based payments
(c) Employee share scheme
During the year, to encourage broad based employee share ownership, the Company completed an Employee
Offer which allowed eligible employees of the Company to be gifted up to $1,000 worth of Shares and/or to
acquire $5,000 worth of Shares on a tax-deferred basis.
Through participation in the Employee Offer, 56,575 ordinary shares were issued to eligible employees for no
cash consideration and 78,125 ordinary shares were issued to eligible employees by way of salary sacrifice. The
Employee Offer shares issued were valued at $1.60 each. The shares issued for no consideration are an
expense to the Company.
Key management personnel and other senior management were not eligible to participate in the Employee Offer.
A participant in the Employee Offer must not sell, transfer or create a security interest or otherwise deal in the
Shares acquired under the Employee Offer until the earlier of:
• In respect of the up to $1,000 offer, the end of three years from the time the Shares are acquired by the
participant;
• In respect of the $5,000 salary sacrifice offer, two years after the Shares have been granted; or in either case
• the time when the participant ceases to be employed by Pioneer.
Shares acquired under the Employee Offer will be held under a trading lock, otherwise carry the same rights and
entitlements of fully paid ordinary Shares, including dividend and voting rights.
(d) Expenses arising from share-based payment transactions
Total expenses arising from share-based payment transactions recognised during the period as part of employee
benefit expense were as follows:
Chairman's options
Management options
Employee share scheme
2014
$'000
13
705
91
809
2013
$'000
-
-
-
-
Pioneer Credit Limited
30 June 2014
74
19 Remuneration of auditors
During the year the following fees were paid or payable for services provided by the auditor of the Parent entity,
its related practices and non-related audit firms:
(a) PricewaterhouseCoopers
(i) Audit and other assurance services
Audit and other assurance services
Audit and review of financial statements
Total remuneration for audit and other assurance services
2014
$
2013
$
194,743
194,743
85,000
85,000
Total remuneration of PricewaterhouseCoopers
194,743
85,000
(b) Network firms of PricewaterhouseCoopers
(i) Audit and other assurance services
Other assurance services
Initial public offering professional services
(ii) Other services
Other compliance and accounting advice
Benchmarking services
Total remuneration for other services
62,943
-
25,964
-
25,964
30,000
59,029
89,029
Total remuneration of network firms of PricewaterhouseCoopers
88,907
89,029
(c) Non-PricewaterhouseCoopers related audit firms
(i) Audit and other assurance services
Audit and other assurance services
Audit and review of financial statements
Initial public offering professional services
(ii) Other services
Other tax, compliance and accounting advice
-
324,469
324,469
53,000
-
53,000
89,909
127,090
Total remuneration of non-PricewaterhouseCoopers related firms
414,378
180,090
Total remuneration
698,028
354,119
Pioneer Credit Limited
30 June 2014
75
20 Earnings per share
(a) Basic earnings per share
From continuing operations attributable to the ordinary equity holders of the
Company
Total basic earnings per share attributable to the ordinary equity holders of the
Company
(b) Diluted earnings per share
From continuing operations attributable to the ordinary equity holders of the
Company
Total diluted earnings per share attributable to the ordinary equity holders of the
Company
(c) Reconciliation of earnings used in calculating earnings per share
Basic earnings per share
Profit attributable to the ordinary equity holders of the Company used in
calculating basic earnings per share:
From continuing operations
Diluted earnings per share
Profit from continuing operations attributable to the ordinary equity holders of the
Company
2014
Cents
2013
Cents
7.97
7.97
2014
Cents
7.97
7.97
56.96
56.96
2013
Cents
56.96
56.96
2014
$'000
2013
$'000
1,047
3,522
Used in calculating diluted earnings per share
1,047
3,522
(d) Weighted average number of shares used as the denominator
2014
Number
2013
Number
Weighted average number of ordinary shares used as the denominator in
calculating basic earnings per share
13,129,482
6,182,573
Weighted average number of ordinary and potential ordinary shares used as the
denominator in calculating diluted earnings per share
13,129,482
6,182,573
Pioneer Credit Limited
30 June 2014
76
21 Deed of cross guarantee
Pioneer Credit Limited and Pioneer Credit Acquisition Service Pty Limited are parties to a deed of cross
guarantee, entered into on 27 June 2014, under which each Company guarantees the debts of the others. By
entering into the deed, the wholly-owned entities have been relieved from the requirement to prepare a financial
report and Directors' report under Class Order 98/1418 (as amended) issued by the Australian Securities and
Investments Commission.
The consolidated financial statements of Pioneer Credit Limited include the subsidiaries as set out in note 13 to
these consolidated financial statements. Of these, Sphere Legal Pty Limited is the only subsidiary that is not
party to the deed of cross guarantee that is not dormant. In addition the Directors have determined that Sphere
Legal Pty Limited Is not a reporting entity.
At 30 June 2014, Sphere Legal Pty Limited has total assets of $204,641 and generated net revenue of $240,030.
22 Assets pledged as security
The carrying amount of assets pledged as security is disclosed in note 6(d)(i).
Pioneer Credit Limited
30 June 2014
77
23 Parent entity financial information
(a) Summary financial information
The individual financial statements for the Parent entity show the following aggregate amounts:
Balance sheet
Current assets
Total assets
Current liabilities
Total liabilities
Shareholders' equity
Issued capital
Reserves
Share based payment
Accumulated losses
Profit (Loss) for the year
Total comprehensive income
2014
$'000
2013
$'000
2,297
340
48,613
17,075
1,810
2,924
3,170
11,420
(136,329)
(16,965)
45,459
1,037
(1,053)
9,091
-
(3,436)
45,443
5,655
6,313
6,313
(181)
(181)
(b) Guarantees entered into by the Parent entity
The Parent entity is bound under an unlimited commercial guarantee and indemnity as part of the Group, with
security held over all property.
(c) Contingent liabilities of the Parent entity
The Parent entity did not have any contingent liabilities as at 30 June 2014 or 30 June 2013.
(d) Contractual commitments for the acquisition of property, plant or equipment
The Parent entity has no contractual commitments for the acquisition of the property, plant or equipment at 30
June 2014 (2013: Nil).
Pioneer Credit Limited
30 June 2014
78
24 Summary of significant accounting policies
Contents of the summary of significant accounting policies
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
(j)
(k)
(l)
(m)
(n)
(o)
(p)
(q)
Basis of preparation
Principles of consolidation
Income tax
Cash and cash equivalents
Trade & other receivables
Property, plant and equipment
Intangible assets
Trade and other payables
Borrowings
Provisions
Employee benefits
Contributed equity
Earnings per share
Goods and Services Tax (GST)
Rounding of amounts
Impairment of assets
Leases
Page
79
80
81
81
81
82
82
82
83
83
83
84
84
84
84
85
85
The principal accounting policies adopted in the preparation of these consolidated financial statements are set
out below. These policies have been consistently applied to all the years presented, unless otherwise stated. The
financial statements are for the Consolidated Entity consisting of Pioneer Credit Limited and its subsidiaries (the
'Group').
(a) Basis of preparation
These general purpose financial statements have been prepared in accordance with Australian Accounting
Standards and interpretations issued by the Australian Accounting Standards Board and the Corporations Act
2001. Pioneer Credit Limited is a for-profit entity for the purpose of preparing the financial statements.
(i) Compliance with IFRS
The consolidated financial statements of the Pioneer Credit Limited Group also comply with International
Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).
(ii) Basis of measurement
The consolidated financial statements have been prepared on an accruals basis and are based on historical
costs modified, where applicable, by the measurement at fair value of selected financial assets and financial
liabilities. The consolidated financial statements have been prepared on a going concern basis.
(iii) Functional and presentation currency
The consolidated financial statements are presented in Australian dollars, which is Pioneer Credit Limited's
functional and presentation currency.
(iv) Critical accounting estimates
The preparation of financial statements requires the use of certain critical accounting estimates. It also requires
management to exercise its judgement in the process of applying the Group's accounting policies. The areas
involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant
to the financial statements, are disclosed in note 10.
(v) Changes to presentation
Certain classifications on the consolidated statement of comprehensive income and consolidated balance sheet
have been reclassified. The Group believes that this will provide more relevant information to stakeholders as it is
more in line with common practice in the industry the Group is operating in. The comparative information has
been reclassified accordingly.
(vi) New and amended standards adopted by the Group
The Group has applied the following standards and amendments for first time in their annual reporting period
commencing 1 January 2013:
Pioneer Credit Limited
30 June 2014
79
Summary of significant accounting policies
(a) Basis of preparation
•
•
•
•
•
•
AASB 10 Consolidated Financial Statements, AASB 11 Joint Arrangements, AASB 12 Disclosure of Interests
in Other Entities, AASB 128 Investments in Associates and Joint Ventures, AASB 127 Separate Financial
Statements and AASB 2011-7 Amendments to Australian Accounting Standards arising from the
Consolidation and Joint Arrangements Standards
AASB 2012-10 Amendments to Australian Accounting Standards - Transition Guidance and other
Amendments which provides an exemption from the requirement to disclose the impact of the change in
accounting policy on the current period
AASB 13 Fair Value Measurement and AASB 2011-8 Amendments to Australian Accounting Standards
arising from AASB 13
AASB 119 Employee Benefits (September 2011) and AASB 2011-10 Amendments to Australian Accounting
Standards arising from AASB 119 (September 2011)
AASB 2012-5 Amendments to Australian Accounting Standards arising from Annual Improvements
2009-2011 Cycle and
AASB 2012-2 Amendments to Australian Accounting Standards - Disclosures - Offsetting Financial Assets
and Financial Liabilities
The adoption of these standards only affected the disclosures in the notes to the financial statements.
(vii) New standards and interpretations not yet adopted
Certain new accounting standards and interpretations have been published that are not mandatory for 30 June
2014 reporting periods and have not been early adopted by the Group. The Group’s assessment of the impact of
these new standards and interpretations is set out below.
Title of
standard
AASB 9
Financial
Instruments
Nature of change
AASB 9 addresses the
classification,
measurement and
derecognition of financial
assets and financial
liabilities. Since
December 2013, it also
sets out new rules for
hedge accounting.
Impact
When adopted, the standard will affect
the Group's accounting for financial
assets and liabilities.
The Group has designated purchased
debt portfolios as at fair value through
profit and loss and other financial
assets at amortised costs. Financial
liabilities are accounted for at
amortised cost. There is no
expectation that the current accounting
policies will be changed.
Mandatory application
date/ Date of adoption
by Group
Must be applied for
financial years
commencing on or after 1
January 2017 *.
The Group has not yet
decided whether to adopt
any parts of AASB 9
early.
* The mandatory application of this standard may be further deferred once the IASB has agreed on a mandatory date for the
equivalent international standard.
There are no other standards that are not yet effective and that are expected to have a material impact on the
entity in the current or future reporting periods and on foreseeable future transactions.
(b) Principles of consolidation
Subsidiaries
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Pioneer Credit
Limited ('Company' or 'Parent entity') as at 30 June 2014 and the results of all subsidiaries for the year then
ended. Pioneer Credit Limited and its subsidiaries together are referred to in this financial report as the Group or
the Consolidated Entity.
Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls
an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and
has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully
consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date
that control ceases.
Pioneer Credit Limited
30 June 2014
80
Summary of significant accounting policies
(b) Principles of consolidation
The acquisition method of accounting is used to account for business combinations by the Group.
Intercompany transactions, balances and unrealised gains on transactions between Group companies are
eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of
the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure
consistency with the policies adopted by the Group.
Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are
de-consolidated from the date that control ceases.
(c)
Income tax
The income tax expense or revenue for the period is the tax payable on the current period's taxable income
based on the applicable income tax rate adjusted by changes in deferred tax assets and liabilities attributable to
temporary differences and to unused tax losses.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the
end of the reporting period. Management periodically evaluates positions taken in tax returns with respect to
situations in which applicable tax regulation is subject to interpretation. It establishes provisions where
appropriate on the basis of amounts expected to be paid to the tax authorities.
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the
tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However,
deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill. Deferred income tax
is also not accounted for if it arises from the initial recognition of an asset or liability in a transaction other than a
business combination, that at the time of the transaction affects neither accounting nor taxable profit or loss.
Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by
the end of the reporting period and are expected to apply when the related deferred income tax asset is realised
or the deferred income tax liability is settled.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is
probable that future taxable amounts will be available to utilise those temporary differences and losses.
Pioneer Credit Limited and its wholly-owned Australian controlled entities have implemented the tax consolidation
legislation. As a consequence, these entities are taxed as a single entity and the deferred tax assets and
liabilities of these entities are set off in the consolidated financial statements.
Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in
other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive
income or directly in equity, respectively.
(d) Cash and cash equivalents
For the purpose of presentation in the statement of cash flows, cash and cash equivalents includes cash on
hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original
maturities of three months or less that are readily convertible to known amounts of cash and which are subject to
an insignificant risk of changes in value, and bank overdrafts. Bank overdrafts are shown within borrowings in
current liabilities in the balance sheet.
(e) Trade & other receivables
Trade receivables are recognised initially at fair value, less provision for impairment. Trade receivables are
generally due for settlement within 30 days. They are presented as current assets unless collection is not
expected for more than 12 months after the reporting date.
Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are
written off by reducing the carrying amount directly. An allowance account (provision for impairment of trade
receivables) is used when there is objective evidence that the Group will not be able to collect all amounts due
according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the
debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments (more than 30
days overdue) are considered indicators that the trade receivable is impaired. The amount of the impairment
allowance is the difference between the asset's carrying amount and the present value of estimated future cash
flows, discounted at the original effective interest rate. Cash flows relating to short-term receivables are not
discounted if the effect of discounting is immaterial.
Pioneer Credit Limited
30 June 2014
81
Summary of significant accounting policies
(e) Trade & other receivables (continued)
The amount of the impairment loss is recognised in profit or loss within other expenses. When a trade receivable
for which an impairment allowance had been recognised becomes uncollectible in a subsequent period, it is
written off against the allowance account. Subsequent recoveries of amounts previously written off are credited
against other expenses in profit or loss.
(f) Property, plant and equipment
All property, plant and equipment acquired are stated at historical cost less depreciation. Historical cost includes
expenditure that is directly attributable to the acquisition of the items.
The depreciation methods and periods used by the Group are disclosed in note 7(a).
Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate,
only when it is probable that future economic benefits associated with the item will flow to the Group and the cost
of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset
is derecognised when replaced. All other repairs and maintenance are charged to profit or loss during the
reporting period in which they are incurred.
The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each
reporting period.
An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount
is greater than its estimated recoverable amount.
Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included
in profit or loss. When revalued assets are sold, it is Group policy to transfer any amounts included in other
reserves in respect of those assets to retained earnings.
(g) Intangible assets
(i) Software
Costs incurred in acquiring software and licenses that will contribute to future period financial benefits through
revenue generation and/or cost reduction are capitalised to software and systems.
(ii) Amortisation methods and periods
Refer to note 7(c) for details about amortisation methods and periods used by the Group for intangible assets.
(h) Trade and other payables
These amounts represent liabilities for goods and services provided to the Group prior to the end of financial year
which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition. Trade and
other payables are presented as current liabilities unless payment is not due within 12 months from the reporting
date.
Pioneer Credit Limited
30 June 2014
82
Summary of significant accounting policies
(i) Borrowings
All borrowings are initially recognised at fair value which is usually their principal amount, net of directly
attributable transaction costs incurred. Subsequent to initial recognition they are measured at amortised cost
using the effective interest rate method. Interest is recognised using the effective interest method.
Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that
it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw
down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn
down, the fee is capitalised as a prepayment for liquidity services and amortised over the period of the facility to
which it relates.
Convertible redeemable preference shares (CRPS) comprise of two components, the financial liability in respect
of the principal raised and the dividend earned, and an equity instrument. This classes them as compound
financial instruments. AASB 132 requires that the liability component be measured first and the difference
between the proceeds of the issue and the fair value of the liability is assigned to the equity component. Under
the current terms of the shares, there is no residual element to be assigned as an equity component and the full
amount of the proceeds of the issue is carried as a liability. The dividends on these preference shares are
recognised in profit or loss as finance costs, and where payable in arrears, is accrued over the period it becomes
due, recorded at the contracted rate as part of borrowings.
Borrowings are removed from the balance sheet when the obligation specified in the contract is discharged,
cancelled or expired. Borrowings are classified as current liabilities unless the Group has an unconditional right to
defer settlement of the liability for at least 12 months after the reporting period.
(j) Provisions
Provisions for legal claims and make good obligations are recognised when the Group has a present legal or
constructive obligation as a result of past events, it is probable that an outflow of resources will be required to
settle the obligation and the amount has been reliably estimated. Provisions are not recognised for future
operating losses.
Provisions are measured at the present value of management's best estimate of the expenditure required to
settle the present obligation at the end of the reporting period. The discount rate used to determine the present
value is a pre-tax rate that reflects current market assessments of the time value of money and the risks specific
to the liability. The increase in the provision due to the passage of time is recognised as an interest expense.
(k) Employee benefits
(i) Short-term obligations
Liabilities for wages and salaries, including non-monetary benefits, annual leave and accumulating sick leave
expected to be settled within 12 months after the end of the period in which the employees render the related
service are recognised in respect of employee's services up to the end of the reporting period and are measured
at the amounts expected to be paid when the liabilities are settled. The liability for annual leave and accumulating
sick leave is recognised in the provision for employee benefits. All other short-term employee benefit obligations
are presented as payables.
(ii) Share-based payments - Chairman's Options
The grant date fair value of equity-settled share-based payment awards granted to employees is generally
recognised as an expense, with a corresponding increase in equity, over the vesting period of the awards. The
amount recognised as an expense is adjusted to reflect the number of awards for which the related service
conditions are expected to be met, such that the amount ultimately recognised is based on the number of awards
that meet the related service conditions at the vesting date.
Pioneer Credit Limited
30 June 2014
83
Summary of significant accounting policies
(k) Employee benefits
(iii) Share-based payments - Management Options
The grant-date fair value of share-based payment awards granted to employees is recognised as an employee
expense, with a corresponding increase in equity, over the period that the employees become unconditionally
entitled to the awards. The amount recognised as an expense is adjusted to reflect the number of awards for
which the related service and non-market performance conditions are expected to be met, such that the amount
ultimately recognised as an expense is based on the number of awards that meet the related service and
non-market performance conditions at the vesting date. For share-based payment awards with non-vesting
conditions, the grant-date fair value of the share-based payment is measured to reflect such conditions and there
is no true-up for differences between expected and actual outcomes.
For share-based payment awards structured as a share purchase arrangement, which include a limited recourse
feature, shares rights issued to employees are treated as treasury shares and no loan receivable from employees
is recognised until the right is exercised.
The fair value of the share-based payment awards granted to employees is measured using inputs including
share price on measurement date, exercise price of the instrument, expected volatility, weighted average
expected life of the instruments, expected dividends, and the risk-free interest rate (based on government
bonds). Service and non-market performance conditions attached to the transactions are not taken into account
in determining grant date fair value.
(l) Contributed equity
Ordinary shares are classified as equity.
(m) Earnings per share
(i) Basic earnings per share
Basic earnings per share is calculated by dividing:
•
•
the profit attributable to owners of the Company, excluding any costs of servicing equity other than ordinary
shares
by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus
elements in ordinary shares issued during the year and excluding treasury shares (note 8(a)(iv)).
(ii) Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into
account:
•
•
the after income tax effect of interest and other financing costs associated with dilutive potential ordinary
shares, and
the weighted average number of additional ordinary shares that would have been outstanding assuming the
conversion of all dilutive potential ordinary shares.
(n) Goods and Services Tax (GST)
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred
is not recoverable from the taxation authority. In this case it is recognised as part of the cost of acquisition of the
asset or as part of the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of
GST recoverable from, or payable to, the taxation authority is included with other receivables or payables in the
consolidated balance sheet.
Cash flows are presented on a gross basis.
(o) Rounding of amounts
The Company is of a kind referred to in Class Order 98/100, issued by the Australian Securities and Investments
Commission, relating to the 'rounding off' of amounts in the financial statements. Amounts in the financial
statements have been rounded off in accordance with that Class Order to the nearest thousand dollars, or in
certain cases, the nearest dollar.
Pioneer Credit Limited
30 June 2014
84
Summary of significant accounting policies
(p) Impairment of assets
Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are tested
annually for impairment, or more frequently if events or changes in circumstances indicate that they might be
impaired. Other assets are tested for impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s
carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value
less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest
levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows
from other assets or groups of assets (cash-generating units). Non-financial assets other than goodwill that
suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting period.
(q) Leases
Leases of property, plant and equipment where the Group, as lessee, has substantially all the risks and rewards
of ownership are classified as finance leases. Finance leases are capitalised at the lease's inception at the fair
value of the leased property or, if lower, the present value of the minimum lease payments. The corresponding
rental obligations, net of finance charges, are included in other short-term and long-term payables. Each lease
payment is allocated between the liability and finance cost. The finance cost is charged to profit or loss over the
lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each
period. The property, plant and equipment acquired under finance leases is depreciated over the asset's useful
life or over the shorter of the asset's useful life and the lease term if there is no reasonable certainty that the
Group will obtain ownership at the end of the lease term.
Leases in which a significant portion of the risks and rewards of ownership are not transferred to the Group as
lessee are classified as operating leases (note 15(a)). Payments made under operating leases (net of any
incentives received from the lessor) are charged to profit or loss on a straight-line basis over the period of the
lease.
Pioneer Credit Limited
30 June 2014
85
Directors' declaration
In the Directors' opinion:
(a)
the financial statements and notes set out on pages 33 to 85 are in accordance with the Corporations Act
2001, including:
(i)
(ii)
complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory
professional reporting requirements, and
giving a true and fair view of the Consolidated Entity's financial position as at 30 June 2014 and of
its performance for the year ended on that date, and
there are reasonable grounds to believe that the Company will be able to pay its debts as and when they
become due and payable, and
at the date of this declaration, there are reasonable grounds to believe that the members of the extended
closed Group identified in note 21 will be able to meet any obligations or liabilities to which they are, or
may become, subject by virtue of the deed of cross guarantee described in note 21.
(b)
(c)
Note 24(a) confirms that the financial statements also comply with International Financial Reporting Standards as
issued by the International Accounting Standards Board.
The Directors have been given the declarations by the chief executive officer and chief financial officer required
by section 295A of the Corporations Act 2001.
This declaration is made in accordance with a resolution of Directors.
Keith R. John
Managing Director
Perth
28 August 2014
Pioneer Credit Limited
30 June 2014
86
Independent auditor’s report to the members of
Pioneer Credit Limited
Report on the financial report
We have audited the accompanying financial report of Pioneer Credit Limited (the company), which
comprises the consolidated balance sheet as at 30 June 2014, the consolidated statement of
comprehensive income, consolidated statement of changes in equity and consolidated statement of
cash flows for the year ended on that date, a summary of significant accounting policies, other
explanatory notes and the directors’ declaration for Pioneer Credit Limited (the consolidated entity).
The consolidated entity comprises the company and the entities it controlled at year’s end or from time
to time during the financial year.
Directors’ responsibility for the financial report
The directors of the company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that is free from material misstatement, whether due to fraud or error. In Note 24, the
directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial
Statements, that the financial statements comply with International Financial Reporting Standards.
Auditor’s responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted
our audit in accordance with Australian Auditing Standards. Those standards require that we comply
with relevant ethical requirements relating to audit engagements and plan and perform the audit to
obtain reasonable assurance whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures
in the financial report. The procedures selected depend on the auditor’s judgement, including the
assessment of the risks of material misstatement of the financial report, whether due to fraud or error.
In making those risk assessments, the auditor considers internal control relevant to the consolidated
entity’s preparation and fair presentation of the financial report in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of
accounting policies used and the reasonableness of accounting estimates made by the directors, as well
as evaluating the overall presentation of the financial report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinion.
Independence
In conducting our audit, we have complied with the independence requirements of the Corporations
Act 2001.
PricewaterhouseCoopers, ABN 52 780 433 757
Brookfield Place, 125 St Georges Terrace, PERTH WA 6000, GPO Box D198, PERTH WA 6840
T: +61 8 9238 3000, F: +61 8 9238 3999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
87
Independent auditor’s report to the members of
Pioneer Credit Limited (cont’d)
Auditor’s opinion
In our opinion:
(a)
the financial report of Pioneer Credit Limited is in accordance with the Corporations Act 2001,
including:
(i)
(ii)
giving a true and fair view of the consolidated entity's financial position as at 30 June
2014 and of its performance for the year ended on that date; and
complying with Australian Accounting Standards (including the Australian Accounting
Interpretations) and the Corporations Regulations 2001.
(b)
the financial report and notes also comply with International Financial Reporting Standards as
disclosed in Note 24.
Report on the Remuneration Report
We have audited the remuneration report included in pages 10 to 19 of the directors’ report for the
year ended 30 June 2014. The directors of the company are responsible for the preparation and
presentation of the remuneration report in accordance with section 300A of the Corporations Act
2001. Our responsibility is to express an opinion on the remuneration report, based on our audit
conducted in accordance with Australian Auditing Standards.
Auditor’s opinion
In our opinion, the remuneration report of Pioneer Credit Limited for the year ended 30 June 2014
complies with section 300A of the Corporations Act 2001.
Matters relating to the electronic presentation of the audited
financial report
This auditor’s report relates to the financial report and remuneration report of Pioneer Credit Limited
(the company) for the year ended 30 June 2014 included on Pioneer Credit Limited’s web site. The
company’s directors are responsible for the integrity of Pioneer Credit Limited’s web site. We have not
been engaged to report on the integrity of this web site. The auditor’s report refers only to the financial
report and remuneration report named above. It does not provide an opinion on any other information
which may have been hyperlinked to/from the financial report or the remuneration report. If users of
this report are concerned with the inherent risks arising from electronic data communications they are
advised to refer to the hard copy of the audited financial report and remuneration report to confirm
the information included in the audited financial report and remuneration report presented on this
web site.
PricewaterhouseCoopers
William P R Meston
Partner
Perth
28 August 2014
88
Shareholder
The shareholder information set out below was applicable as at 21 August 2014.
A. Distribution of equity securities
Analysis of numbers of equity security holders by size of holding:
Holding
1 - 1,000
1,000 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 and over
Holders
84
138
96
214
47
579
Ordinary Shares
44,637
473,522
729,058
7,099,653
37,027,120
45,373,990
There were 25 holders of less than a marketable parcel of ordinary shares.
B. Equity security holders
Twenty largest quoted equity security holders
The names of the twenty largest holders of quoted equity securities are listed below:
Name
ALANA NATASHA JOHN
BANKSIA MANAGEMENT PTY LIMITED
NATIONAL NOMINEES LIMITED
CITICORP NOMINEES PTY LIMITED
BC FUND II PTY LIMITED
J P MORGAN NOMINEES AUSTRALIA LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
RBC INVESTOR SERVICES AUSTRALIA NOMINEES PTY LIMITED
BERNARD JOCELYN PATRICK PREFUMO
RBC INVESTOR SERVICES AUSTRALIA NOMINEES PTY LIMITED
NIRIBI PTY LIMITED
SHARLIN NOMINEES PTY LIMITED
AVY NOMINEES PTY LIMITED
JAMES ARTHUR SINGH & KRISTY NICOLE MILWARD
BNP PARIBAS NOMINEES PTY LIMITED
MIDBRIDGE INVESTMENTS PTY LIMITED
CS FOURTH NOMINEES PTY LIMITED
UBS NOMINEES PTY LIMITED
ESCOR INVESTMENTS PTY LIMITED
SANDINI PTY LIMITED
Ordinary shares
Number held
Percentage of
issued shares
7,168,186
5,612,634
4,076,876
3,027,725
2,033,915
1,953,290
1,281,250
1,029,000
903,706
895,862
593,872
519,558
450,574
436,887
383,000
337,470
328,150
312,500
312,500
310,000
31,966,955
15.80
12.37
8.99
6.67
4.48
4.30
2.82
2.27
1.99
1.97
1.31
1.15
0.99
0.96
0.84
0.74
0.72
0.69
0.69
0.68
70.43
Pioneer Credit Limited
30 June 2014
89
B. Equity security holders (continued)
Unquoted equity securities
Name
MICHAEL SMITH
C. Substantial holders
Substantial holders in the Company are set out below:
ALANA NATASHA JOHN
BANKSIA MANAGEMENT PTY LIMITED & BC FUND II PTY LIMITED
DISCOVERY ASSET MANAGEMENT PTY LIMITED
SOLARIS INVESTMENT MANAGEMENT LIMITED
COMMONWEALTH BANK OF AUSTRALIA
Shareholder
Options
Number held
300,000
Percentage of
issued options
100
Number
held
Percentage
8,113,216
7,646,548
2,812,500
2,812,500
2,433,900
17.88%
16.85%
6.20%
6.20%
5.36%
D. Securities subject to voluntary escrow
Escrow ends
10 days after release to ASX of 30 June 2015 results
1 May 2016
1 May 2017
E. Voting rights
Class
Ordinary shares
Ordinary shares
Ordinary shares
Number of shares
20,239,290
71,875
48,445
At a general meeting of shareholders; every shareholder entitled to vote may vote in person or by proxy, attorney
or representative; on a show of hands every shareholder who is present in person or by proxy, attorney or
representative has one vote; and on a poll every shareholder who is present in person or by proxy, attorney or
representative has one vote for every share held, but, in respect of partly-paid shares, shall have a fraction of a
vote for each partly-paid share.
Pioneer Credit Limited
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90