The PNC Financial Services Group
Annual Report 2015

Plain-text annual report

Annual Report for the year ended 30 June 2015 Pioneer Credit Limited ABN 44 Pioneer Credit Limited ABN 44 103103103103 003003003003 505505505505 Pioneer Credit Limited ABN 44 Pioneer Credit Limited ABN 44 30 June 2015 Annual Report ---- 30 June 2015 Annual Report 30 June 2015 30 June 2015 Annual Report Annual Report with the ASX under Listing Rule 4.3A. Lodged with the ASX under Listing Rule 4.3A. Lodged with the ASX under Listing Rule 4.3A. with the ASX under Listing Rule 4.3A. Lodged Lodged Contents Contents Contents Contents Results for announcement to the market Financial Statements 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 Level 6, 108 St Georges Terrace Perth WA 6000 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 3 of the Annual Report and in the Directors' report on page 10 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 20 August 2015. The Directors have the power to amend and reissue the financial statements. Pioneer ABN 44 103 003 505 Credit Limited ABN 44 103 003 505 Pioneer Credit Limited ABN 44 103 003 505 ABN 44 103 003 505 Credit Limited Credit Limited Pioneer Pioneer Appendix 4E Appendix 4E Appendix 4E Appendix 4E Preliminary Final Report Preliminary Final Report Preliminary Final Report Preliminary Final Report for the year ended 30 June 2015 for the year ended 30 June 2015 for the year ended 30 June 2015 for the year ended 30 June 2015 (previous corresponding period 30 June 2014) (previous corresponding period 30 June 2014) (previous corresponding period 30 June 2014) (previous corresponding period 30 June 2014) Results for announcement to the market Results for announcement to the market Results for announcement to the market Results for announcement to the market Key information Key information Key information Key information Revenue from ordinary activities Net profit after taxation for the period attributable to members Operating profit after taxation * 30 June 30 June 30 June 30 June 2015 2015 2015 2015 $’000 $’000 $’000 $’000 38,788 7,441 30 June 30 June 30 June 30 June 2014201420142014 $’000 $’000 $’000 $’000 25,761 1,047 Change Change Change Change $’000 $’000 $’000 $’000 13,027 6,394 %%%% 51% 611% 7,808 4,587 3,221 70% * Operating profit after taxation is a financial measure which is not prescribed by Australian Accounting Standards (“AAS”) and represents the profit under AAS adjusted for specific non-cash and significant items. / distributions Dividends per ordinary share / distributions Dividends per ordinary share / distributions / distributions Dividends per ordinary share Dividends per ordinary share Final 2014 ordinary Interim 2015 ordinary Final 2015 ordinary Amount per Amount per Amount per Amount per (cents) security (cents) security (cents) (cents) security security 3.10 1.75 6.80 Franked Franked Franked Franked Amount per Amount per Amount per Amount per security security security security 100% 100% 100% Record Date Record Date Record Date Record Date 30/09/2014 31/03/2015 30/09/2015 / Payable PaidPaidPaidPaid / Payable / Payable / Payable DateDateDateDate 17/10/2014 17/04/2015 30/10/2015 There is no provision for a final dividend in respect of the year ended 30 June 2015. 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 and on the results for the period and other significant information is provided in the 2015 Media Release and Results Presentation and Consolidated Financial Statements - 30 June 2015, released today. Included in the Consolidated Financial Statements - 30 June 2015 released today are the following; • Consolidated Statement of Comprehensive Income together with notes to the statement • Consolidated Balance Sheet together with notes to the balance sheet • Consolidated Statement of Changes in Equity, showing movements • Consolidated Statement of Cash Flows together with notes to the statement Key Ratios Key Ratios Key Ratios Key Ratios Net tangible assets per fully paid ordinary share Basic Earnings per fully paid ordinary share 30 June 2015 30 June 2015 30 June 2015 30 June 2015 (cents) (cents) (cents) (cents) 115.69 16.40 30 June 2014 30 June 2014 30 June 2014 30 June 2014 (cents) (cents) (cents) (cents) 104.55 7.97 The Consolidated Financial Statements at 30 June 2015 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. i Pioneer Credit Limited ABN 44 103 003 505 Pioneer Credit Limited ABN 44 103 003 505 Pioneer Credit Limited ABN 44 103 003 505 Pioneer Credit Limited ABN 44 103 003 505 Annual Report Annual Report Annual Report Annual Report for the year ended 30 June 2015 for the year ended 30 June 2015 for the year ended 30 June 2015 for the year ended 30 June 2015 Contents Contents Contents Contents Corporate Directory Review of operations and activities Directors’ report Corporate Governance Statement Financial Statements Independent auditor’s report to the members Shareholder information 2 3 10 32 33 95 97 Corporate Directory Corporate Directory Corporate Directory Corporate Directory Directors Mr Michael Smith (Chairperson) Mr Keith John Mr Rob Bransby Mr Mark Dutton Ms Anne Templeman-Jones (appointed 23 September 2014) Company Secretary Mr Leslie Crockett Notice of annual general meeting The annual general meeting of Pioneer Credit Limited will be held at 11am on Thursday 29 October 2015 K&L Gates Level 32 44 St Georges Terrace Perth WA 6000 Principal registered office in Australia Share register Auditor Solicitors Bankers Level 6 108 St Georges Terrace Perth WA 6000 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 K&L Gates Level 32 44 St Georges Terrace Perth WA 6000 +61 8 9216 0900 BankWest Level 12B BankWest Place 300 Murray Street Perth WA 6000 +61 8 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 2015 Page 2 operations and activities Review of operations and activities Review of operations and activities operations and activities Review of Review of Pioneer Credit has had a very successful first full year of trading on the Australian Securities Exchange since listing in May 2014. As well as achieving growth and strong financial results, the Company has made significant progress in preparing for the next phase in its development, readying for the launch of new products during FY16. The listing advanced a range of opportunities for the Company, as a result of the raising of additional capital that has facilitated the continued growth of the business. The capital enabled the Company to expand its core business through an increased investment in debt portfolios as well as providing the financial strength required to properly grow our customer service and administrative teams and to secure additional office premises in order to accommodate that growth. As a result of the investments made during the year, the Board is pleased to report an operating profit after taxation that out-performed the Company’s Prospectus forecast by 18.3%. Operating and financial review Operating and financial review Operating and financial review Operating and financial review The statutory net profit after taxation for the year ended 30 June 2015 was $7.441m (2014: $1.047m). The operating profit after taxation was $7.808 m (2014: $4.587m). Operating profit after taxation is a financial measure which is not prescribed by Australian Accounting Standards (“AAS”) and represents the profit after taxation under AAS adjusted for specific non-cash and significant items. The Directors consider operating profit after taxation to reflect the core earnings of the Group. The following table summarises the key reconciling items between statutory profit after taxation and operating profit after taxation. The operating profit after taxation information in the table has not been subject to any specific audit procedures by the Group’s auditor and has been extracted from the notes referenced below from the accompanying financial statements for the year ended 30 June 2015, which have been subject to an audit; refer to page 95 for the auditor’s opinion on the financial statements. Key information Key information Key information Key information Financial Financial Financial Financial Statement Statement Statement Statement NoteNoteNoteNote 30 June 30 June 30 June 30 June 2015 2015 2015 2015 $’000 $’000 $’000 $’000 30 June 30 June 30 June 30 June 2014 2014 20142014 $’000 $’000 $’000 $’000 attributable to the owners ation attributable to the owners Statutory profit after taxation Statutory profit after tax attributable to the owners attributable to the owners ation ation Statutory profit after tax Statutory profit after tax 7,441 1,047 cash and significant items: Specific non----cash and significant items: Specific non cash and significant items: cash and significant items: Specific non Specific non Finalisation of indirect taxation, relating to prior years 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 Interest on preference shares incurred while classified as borrowings under the pre-IPO equity structure Correction of income taxation relating to prior years Finalisation of settlement of pre-IPO commercial claim Tax effect: Tax effect: Tax effect: Tax effect: Tax effect on the adjustments outlined above that are deductable for income tax purposes after taxation Operating profit after taxation Operating profit after taxation after taxation Operating profit Operating profit 4 4 5 5 6 4 355 - - - (8) 181 312 2,058 744 520 175 648 (161) (917) 7,808 7,808 7,808 7,808 4,587 4,587 4,587 4,587 Pioneer Credit Limited 30 June 2015 Page 3 Review of operations and activities Review of operations and activities Review of operations and activities Review of operations and activities Key financial highlights for the year ended 30 June 2015 Key financial highlights for the year ended 30 June 2015 Key financial highlights for the year ended 30 June 2015 Key financial highlights for the year ended 30 June 2015 • Cash receipts of $55.6m (2014 $35.8m) an increase of 55.5% over prior period equivalent • Statutory net profit after taxation of $7.441m (2014 $1.047m) 12.7% up on Prospectus forecast of $6.600m • Operating profit after taxation of $7.808m (2014 $4.587m) 18.3% up on Prospectus forecast • Operating EBIT of $12.076m (2014 $ 7.282m) 65.8% up on prior year • Operating EBIT margin of 31.2% (2014 28.3%) • Underlying Earnings per share of 17.21 cents 70.2% over the prior period equivalent • Net tangible assets per share 115.69c 10.7% over the prior period equivalent • Operating cash flow of $28.176m (2014 $13.642m) 106.5% over the prior period equivalent Capital Management Capital Management Capital Management Capital Management There were no changes to contributed equity during the year. The Group paid a dividend for the first half of the financial year of 1.75 cents per share. A final dividend of 6.80 cents per share has been declared with a record date of 30 September 2015, to be paid on 30 October 2015. The Group has also today announced the introduction of a dividend reinvestment plan to provide shareholders the opportunity to reinvest their dividends into the continued growth of the Group. The Group aims to optimise its capital structure in a conservative manner. All facility covenants were met throughout the year. At 30 June 2015 the Group had a loan to portfolio asset value ratio of 36.6% compared to the covenant of 45%. The undrawn limit on the senior debt facility was $18.791m and the overdraft facility was unused at 30 June 2015. Customer Payments and Financial Performance Customer Payments and Financial Performance Customer Payments and Financial Performance Customer Payments and Financial Performance Underlying Pioneer’s Prospectus forecast (which includes the period ended 30 June 2015) was an 18 month performance period projected using a range of assumptions developed in early 2014. The nature of Pioneer Credit’s business means the Company has a high degree of visibility of its expected financial performance and through the Prospectus period it anticipated a range of initiatives which would contribute to the level of future customer payments. Consistent with Pioneer Credit’s long-standing approach of working towards a complete understanding of the characteristics of the customer portfolios we purchase, and to ensure we manage and realise the appropriate value from those portfolios, Pioneer in FY15 commenced exploration of the secondary sale market. Pioneer has always seen the potential in this secondary sale market and has provided shareholders with a high degree of disclosure on the contribution of portfolio sales to the Company’s overall performance. The first successful sale (a small test of the market process and strength) was concluded in December 2014 and during the second half of FY15, Pioneer completed a further two successful sales of portfolios of customer accounts, generating cash in excess of $3.5m. The portfolio sales conducted are significant to Pioneer and we anticipate similar portfolio sales will be a regular feature of the Company’s operations. Pioneer Credit Limited 30 June 2015 Page 4 ctivities Review of operations and activities Review of operations and a ctivities ctivities Review of operations and a Review of operations and a Pioneer has demonstrated that it holds financial assets to manage value over the long term with an element of contribution arising due to liquidation on customer accounts over time, and when an opportunity arises, can and will, sell financial assets to re-invest the cash in financial assets with a higher anticipated return. The sales were portfolios of Part IX accounts (also commonly referred to as bankruptcy compromised accounts) that do not align with Pioneer’s business model and where no further value can be added by Pioneer through its customer service strategies to the customer. The Company anticipates making two portfolio sales in FY16. For context we anticipate these sales will be approximately $750,000 each (gross, before Pioneers portfolio expensing charge). Pioneer continues to focus on value management, portfolio value creation and efficiency to maximise margins. Pioneer has done that successfully this year, slightly ahead of expectations, and against a backdrop where significant progress was made and expense incurred in the development of our new financial products to come to market in FY16. From an operational perspective, the Company is pleased to provide the following commentary on the year just completed: Premises Premises Premises Premises Continued growth led to Pioneer expanding into a second floor in the Company’s Perth CBD premises in November 2014. This is a continuation of the state of the art facility it commenced building earlier in that year. This accommodation provides additional space for new customer facing team members, along with quality training facilities to ensure our people are well equipped with the vital knowledge and skills required to service our customers and excel in their roles. In early July 2015 a third floor was opened, enabling our corporate and administrative offices to be relocated into the same location as the operations teams. This shift will result in the decommissioning of other less efficient leased properties, and a consolidation of our real estate footprint, as those commitments expire in late 2015. The new facilities have been secured on favourable terms as a result of changes in Perth’s leasing market, and deliver numerous financial and operational benefits to the business. By securing centrally located, quality premises we have been able to attract a larger pool of high quality talent, not only in our customer service teams, but importantly in our corporate and administrative teams. Likewise we have seen continued improvement in our employee retention rate, which we expect will result in better productivity as team members continue to become more skilled and therefore build momentum over time. Pioneer has also reduced its per sqm employee impact on the environment as a result of leveraging improved efficiencies in the new premises, technology and infrastructure. Increased staff awareness has also lead to more engagement with our key environmental initiatives and Pioneer expects to see continued improvements and further endorsement of our environmental performance and resource management in the periods ahead. People People People People Throughout the year, Pioneer continued to expand its employee numbers. While this growth was most significant within the operations area, the Company recruited experienced administrative and corporate staff to bolster and improve the quality of the business and the programmes running within it. In line with our long-standing approach, a key priority through this expansion is Pioneer’s investment in training and development which assists our new customer service team members to become more productive and effective. Our focus remains on building a high quality team which is culturally aligned, highly skilled and knowledgeable, and empowered to deliver exceptional customer service. Pioneer Credit Limited 30 June 2015 Page 5 Review of operations and activities Review of operations and activities Review of operations and activities Review of operations and activities The growth in employee numbers required significant investment by the Company which impacted the financial result for the first half of FY15. Simultaneously, we also noticed the changing dynamics in a rapidly evolving employment market in Western Australia and at this point chose to reschedule some recruitment into 2H15 to take advantage of an increased labour pool. We are pleased that we made this decision, and while it certainly had the effect of dampening the immediate top line growth, the decision has led to Pioneer securing better quality candidates that are now making meaningful and sustainable productive gains within our business. We expect to see this increase in value to flow through our business in FY16 and beyond. A continued focus on people development and retention led to the launch of a Certificate IV in Customer Contact to the business. In FY15, this initiative enabled employees to enter into a fully subsidised Training Contract to commence the Nationally Accredited Qualification over an 18 month timeframe. The qualification has been customised by the external training provider to not only meet our exacting standards but in addition, be authentic to Pioneer’s principle driven culture and customer service philosophy. Before release this qualification was tested on a sample from the leadership group in order to validate its currency and alignment to the business. This course supplements the pre-existing Leadership Development Program which has been created, reviewed and evolved over the past three years. This is offered to all employees in order to further expand on the leadership principles which our culture is built upon and to set the benchmark for outstanding leadership and improved performance across all functions within the Company. In March 2015, Pioneer engaged an independent group to assess our corporate culture and our level of employee engagement. This assessment, which included a comprehensive survey of all staff, is regarded as an essential part of our internal performance review process. The results enabled us to ensure that while we continue to grow, the foundations that enabled that growth are not only maintained but are cultivated from within. Notably 81% of our employees completed the survey. Of those over 97% of staff would recommend Pioneer as a place to work and over 98% believed we consistently delivered excellent service to our customers. Certainly the number of unsolicited customer testimonials we receive supports that statistic. We share this type of information with our vendor partners (to continue to reinforce the value Pioneer brings to their businesses) on a regular basis and to recognise outstanding service at our end-of-month and year-end celebrations. Good culture drives great performance Good culture drives great performance Good culture drives great performance Good culture drives great performance Across the business, Pioneer continues to underpin every action and decision with its Leadership Principles. The business acknowledges that this foundation has created the engaged customer service culture that we celebrate today and in turn enables our success by empowering our people to proactively seek suitable and value based solutions to help Pioneer customers get their finances back on track. By continuing to recruit people who share our passion for outstanding customer service and by providing world class development programs and a high quality compliance program that everyone is responsible to uphold, Pioneer is proudly able to reaffirm its unique record of no negative ombudsman complaints and no regulatory enforceable undertakings ever. Pioneer is the only participant of any significance in the market that can make these statements. Very importantly, our record in this regard resonates with our vendor partners as they seek to continue to differentiate themselves from a fast changing financial sector through good corporate behaviour and strong, reliable and collaborative partnerships. Pioneer Credit Limited 30 June 2015 Page 6 Review of operations and activities Review of operations and activities Review of operations and activities Review of operations and activities By assigning the contractual rights of their customer base to Pioneer, our vendor partners ensure that they are aligned to an organisation that is clearly customer focused and who values not only their own brand but also the brands of those around them. Given the majority of our customers have recently been through a major life event such as divorce, loss of job or sickness, and are understandably experiencing varying degrees of distress, their smooth transition to Pioneer becomes even more pertinent. Pioneer continues to be very selective in terms of who we partner with and the manner in which we acquire customer accounts. Pioneer does not acquire telecommunications or utility accounts, we do not acquire loans that were originated as ‘bad credit’ loans and we do not acquire pay day lending accounts of any type. Debt acquisition Debt acquisition Debt acquisition Debt acquisition Against the backdrop of our stringent acquisition standards, Pioneer has grown its purchasing base during the financial year and now has forward flow (fixed term) agreements in place with three of the four major banks in Australia and is currently progressing discussions with the other of those banks. Additionally Pioneer’s exposure to regional banks is maintained and it also continues a long term partnership with one of Australia’s leading consumer leasing businesses. There has been considerable commentary recently regarding the price cycle in the purchased debt sector in Australia and about the potential for rising prices as the market becomes more competitive. Pioneer remains committed to providing price transparency to its shareholders and to providing price certainty to its vendor partners. Pioneer has not experienced the apparent price increases in the market that others have reported. This is a business that remains committed to applying discipline to every aspect of its operations, including its investment activities. Pioneer has continued to demonstrate that price is not the key determinant of a vendor’s decision to sell a debt portfolio. Pioneer, through our purchasing programme, our discipline, our exemplary compliance record, our price transparency, our proactive and transparent partnership mentality, our corporate culture and our customer engagement strategies continues to deliver tangible benefits to our vendor partners and this continues to be recognised through us having access to a consistent flow of quality customers to acquire at an appropriate price point. That discipline also applies to gearing and to the carrying value of the Company’s assets. Our discipline in ensuring our portfolio is cautiously valued on the balance sheet is fundamental to our capital management programme. Against a cautiously valued asset we have some debt, but a very manageable and conservative amount which at 30 June 2015 represented 36.6% of that asset for a total drawn position of $28.210m and undrawn capacity of $18.791m. Our facilities continue to operate well inside our very conservative covenants. Against this, Pioneer has very strong free cash flow of circa $28m in FY15 and a forecast of over $30m in FY16 before investments. Pioneer Credit Limited 30 June 2015 Page 7 Review of operations and activities Review of operations and activities Review of operations and activities Review of operations and activities Goldfields Money Limited Goldfields Money Limited Goldfields Money Limited Goldfields Money Limited During the period Pioneer acquired a ~14% equity position in Goldfields Money Limited (GMY) following an exhaustive process which was overseen independently by the Board and resulted from a unanimous decision (with the Managing Director abstaining). The equity was acquired at a Net Tangible Asset (NTA) value of $0.94 and well below the independent fair value valuation independently provided to the Board. The Board engaged the services of an independent corporate advisory firm to review the strategy for the acquisition and provide a recommendation on that strategy to ensure that the reasoning for such an investment was sound. The independent adviser also concluded that the acquisition price was well within fair market value estimates. By way of background, GMY is the smallest listed Authorised Deposit-taking Institution in Australia. In the Board’s view the acquisition of our equity stake was at a price well below its realistic value, and at a price point that was very near to NTA. Following the acquisition, Pioneer was able to appoint a nominee the Board of Directors of GMY. This investment provides a number of benefits to the Group, including: 1. capital discipline and credit risk protection - by making this investment in GMY we have secured a partner where we have the ability to influence how customer appropriate products are developed and then do that in a way where the credit risk, the balance sheet risk, is borne by that partner, under the oversight of the Australian Prudential Regulatory Authority (APRA). 2. operational upside - as Pioneer Credit prepares to launch debit and credit cards to its customers during FY16, our ability to manage customer relationships is a unique advantage against other white label offerings for credit cards and lending products. Our arrangement with Goldfields Money facilitates this in a manner that recognises Pioneer’s unique customer service competency. 3. corporate optionality - this investment provides Pioneer with a relatively low cost and near capital- covered investment that provides the Company with access to capital to grow our new credit cards business. The acquisition provides a range of options not readily available elsewhere in the market whereby in future periods we can either keep our risk off balance sheet with GMY, we can spread that relationship to other funders or when we become comfortable with the risk we can shift it on balance sheet to Pioneer for extra margin. We have little doubt that this investment will deliver value for shareholders over future years. Corporate Corporate Corporate Corporate The Company has been fortunate to gain the services of Anne Templeman-Jones, a highly qualified and respected Independent Non-Executive Director, who joined the Board in late 2014. Anne is based in New South Wales and has extensive relationships throughout the financial and professional services community. Anne is the Chairperson of the Audit and Risk Management Committee and her full biography can be viewed on page 13 of this Annual Report. Pioneer Credit Limited 30 June 2015 Page 8 Review of operations and activities Review of operations and activities Review of operations and activities Review of operations and activities Dividend Dividend Dividend Dividend Pioneer's intention is to distribute dividends representing 50% of profit after taxation to shareholders each year, subject to the Directors reviewing and approving such payment in the context of the capital requirements of the business. Consistent with the strong performance of the Company in FY15 the Board is pleased to declare a dividend of 6.80 cents per share. This takes the total dividends for FY15 to 8.55 cents per share, well ahead of Prospectus forecast and consensus expectations. The Board is also aware of the support of shareholders and the desire of many to continue to invest in the growth of the Company. The Board is pleased to advise that it has resolved to introduce a Dividend Reinvestment Plan (DRP) and in time for the dividend declared today. Full details of the DRP are released separately to the market and are available on the Pioneer website. The record date for the dividend is 30 September 2015 and the dividend will be paid to shareholders on 30 October 2015. Outlook Outlook Outlook Outlook The Company is pleased to provide guidance to the market as follows: Portfolio Investments at least $42.0m at least $ 8.8m Profit after Taxation Pioneer Credit Limited 30 June 2015 Page 9 Directors’ report Directors’ report Directors’ report 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 2015. Throughout the report, the Consolidated Entity is referred to as the Group. Directors Directors Directors 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 Michael Smith Mr Keith John Mr Rob Bransby Mr Mark Dutton Ms Anne Templeman-Jones was appointed as a Director on 23 September 2014 and continues in office at the date of this report. Principal activities Principal activities Principal activities Principal activities Pioneer is an Australian financial services provider, specialising in acquiring and servicing unsecured retail debt portfolios. These portfolios consist of people with financial obligations to Pioneer. These people become the cornerstone of Pioneer’s business and are our customers. We work closely with our customers who – for a range of reasons – have found themselves in financial difficulty. In the great majority of cases this has come about through a significant life event such as loss of job, serious health issues, marriage breakdown or domestic violence. A key goal at Pioneer, as we work with our customers, is to see them achieve financial recovery and evolve as a ‘new consumer’. There was no significant change in the nature of these activities during the year. Dividends Dividends Dividends Dividends Dividends or distributions paid to members during the year were as follows: Declared and paid during the year 2015 Ordinary shares –––– Declared and paid during the year 2015 Ordinary shares Declared and paid during the year 2015 Declared and paid during the year 2015 Ordinary shares Ordinary shares Dividend on fully paid ordinary shares held at 30 September 2014 Dividend on fully paid ordinary shares held at 31 March 2015 Total Total Total Total $$$$ $1,406,593 $794,045 Date of payment Date of payment Date of payment Date of payment 17/10/2014 17/04/2015 Since the end of the financial year the Directors have declared the payment of a final dividend of 6.80 cents per fully paid ordinary share with a record date of 30 September 2015 to be paid on 30 October 2015. Pioneer Credit Limited 30 June 2015 Page 10 Directors’ report Directors’ report Directors’ report Directors’ report operations Review of operations Review of operations operations Review of Review of 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 3 of this Annual Report. Significant changes in the state of affairs Significant changes in the state of affairs Significant changes in the state of affairs Significant changes in the state of affairs There were no significant changes in the state of affairs of the Group during the financial year. Events since the end of the financial year Events since the end of the financial year Events since the end of the financial year Events since the end of the financial year No matter or circumstance has arisen since 30 June 2015 that has significantly affected the Group’s operations, results or state of affairs, or may do so in future years. Environmental regulation Environmental regulation Environmental regulation Environmental regulation Pioneer Credit Limited is not affected by any significant environmental regulations in respect of its operations. Information on Directors Information on Directors Information on Directors Information on Directors Mr Michael Smith Experience and expertise Listed Company Directorships including those held at any time in the previous 3 years Special responsibilities Interests in shares and options Non-Executive Chairperson A highly experienced company director and executive, Michael was appointed Non-Executive Chairperson of Pioneer Credit in February 2014. In addition to his role as Managing Director of strategic marketing consultancy firm Black House, Michael is the Chairperson of iiNet Limited, the Lionel Samson Sadleir Group, National Chairperson of the Australian Institute of Company Directors, Deputy Chairperson of Automotive Holdings Group Ltd and 7-Eleven Stores Pty Ltd, and a board member of Creative Partnership Australia. Michael is a fellow of the Australian Institute of Company Directors and holds a Doctor of Letters (Hon) from the University of Western Australia for his contribution to business and the arts. iiNet Limited Automotive Holdings Group Ltd (since 19 September 2007) (since 6 May 2010) Chairperson of the Board Chairperson of Nomination Committee Chairperson of Remuneration Committee Member of Audit and Risk Management Committee Ordinary Shares Unlisted Options 62,500 300,000 Pioneer Credit Limited 30 June 2015 Page 11 Mr Keith John Experience and expertise Managing Director Mr John has over 25 years’ experience in the financial services industry, both in Australia and in Asia, and is the founder of Pioneer Credit. Directors’ report Directors’ report Directors’ report Directors’ report Mr John has a strong interest in philanthropy and through his business and directorships supports numerous charitable organisations across Australia. An industry leader, Mr John serves on a number of industry bodies. In addition to his role as Managing Director of Pioneer Credit, Keith is Director of Midbridge Investments Pty Ltd. None Managing Director Ordinary Shares 8,213,216 Non-Executive Director Mr Bransby is the Managing Director of HBF Health Limited and a Director of HealthGuard Health Benefits Pty Ltd. Prior to working at HBF, Mr Bransby enjoyed a successful career in including Corporate Finance Manager, banking, holding positions Corporate Banking Western Australia and Head of Business Financial Services in New South Wales during 25 years at the National Australia Bank Ltd. Mr Bransby is President of Private Healthcare Australia (PHA), Deputy Chairperson of Members Own Health Funds and a Director of Goldfields Money Ltd and Synergy. He is also a Member of the International Federation of Health Plans’ (iFHP) Council of Management. (since 10 May 2012) Goldfields Money Limited Resigned 16 September 2014, Re- appointed 20 February 2015 Listed Company Directorships including those held at any time in the previous 3 years Special responsibilities Interests in shares and options Mr Rob Bransby Experience and expertise Listed Company Directorships including those held at any time in the previous 3 years Special responsibilities Member of Nomination Committee Member of Remuneration Committee Interests in shares and options Ordinary Shares 35,000 Mr Mark Dutton Experience and expertise Non-Executive Director Mr Dutton has served as a Non-Executive Director of Pioneer Credit since May 2010. The founder and director of Banksia Capital, Mr Dutton was previously a partner at Navis Capital and a director at Foundation Capital and at BancBoston Capital. Prior to embarking on his private equity career, Mr Dutton worked at in PricewaterhouseCoopers in the UK and Russia. Corporate Finance Audit and Listed Company Directorships including those held at any time in the previous 3 years Special responsibilities Interests in shares and options Mr Dutton is a chartered accountant and a member of the Institute of Chartered Accountants of England & Wales. Mr Dutton also holds an MA in Management Studies and Natural Sciences from the University of Cambridge. Mineral Resources Limited (from 8 November 2007 to 20 November 2014) Member of Nomination Committee Member of Remuneration Committee Member of Audit and Risk Management Committee Ordinary Shares 306,483 Pioneer Credit Limited 30 June 2015 Page 12 Ms Anne Templeman-Jones Experience and expertise Non-Executive Director Ms Templeman-Jones joined the Board in September 2014. Directors’ report Directors’ report Directors’ report Directors’ report Ms Templeman-Jones is a highly regarded professional non-executive director who also serves on the boards of APN News & Media Limited, GUD Holdings Limited and Cuscal Limited, chairing the Audit and Risk Committees, Remuneration Committee and Risk Committees respectively. In a career spanning over 30 years, Ms Templeman-Jones has worked for a number of leading organisations including PwC, ANZ and Westpac, where over the last seven year period until 2013 she held the positions of Head of Private Bank in NSW and ACT, Head of Strategy and Risk for the Pacific Bank operations, Director Group Risk Reward and Director Strategy in Westpac’s Institutional Bank. Listed Company Directorships including those held at any time in the previous 3 years Special responsibilities Interests in shares and options A chartered accountant, Ms Templeman-Jones has a Bachelor of Commerce from UWA, an Executive MBA from AGSM and a Masters in Risk Management from the University of NSW. She is a Fellow of the Australian Institute of Company Directors and a member of the Australian Institute of Chartered Accountants. Cuscal Limited APN News & Media Limited GUD Holdings Chairperson of Audit and Risk Management Committee Member of Nomination Committee Member of Remuneration Committee Ordinary Shares (since 20 March 2013) (since 4 June 2013) (since 1 August 2015) Nil Pioneer Credit Limited 30 June 2015 Page 13 Meeting of Directors Meeting of Directors Meeting of Directors Meeting of Directors Directors’ report Directors’ report Directors’ report Directors’ report The number of meetings of the Company's Board of Directors and of each Board committee held during the year ended 30 June 2015, and the number of meetings attended by each Director were: Name Name NameName Board Meetings Board Meetings Board Meetings Board Meetings Committee Meetings Committee Meetings Committee Meetings Committee Meetings Audit and Risk Audit and Risk Audit and Risk Audit and Risk Remuneration Remuneration Remuneration Remuneration Nomination Nomination Nomination Nomination Attended Attended Attended Attended HeldHeldHeldHeld Attended HeldHeldHeldHeld Attended HeldHeldHeldHeld Attended Attended HeldHeldHeldHeld Attended Attended Attended Attended Attended Attended Attended Attended Mr Michael Smith Mr Keith John* Mr Rob Bransby Mr Mark Dutton Ms Anne Templeman-Jones+ 11 11 11 10 5 11 11 11 11 11 2 * 1 1 1 2 * 1 2 1 2 * 2 2 * 2 * 2 2 * 1 * 1 1 * 1 * 1 1 * 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 Ms Anne Templeman-Jones was appointed a Non-Executive Director on 23 September 2014 and was elected Chairperson of the Audit and Risk Management Committee on 29 October 2014. Company Secretary Company Secretary Company Secretary Company Secretary Leslie Crockett joined Pioneer Credit as Chief Financial Officer in December 2012, and in early 2013 was appointed Company Secretary. A chartered accountant, Leslie has experience working across a range of industries including financial services, property development, construction, retail and manufacturing covering jurisdictions in Europe, the United Kingdom, Africa, the USA and the Caribbean. Prior to joining Pioneer Credit he was a divisional finance executive for an ASX100 listed group. Leslie qualified as a chartered accountant with Deloitte, where he provided audit, consulting, financial advisory, risk management and tax services. He holds a Bachelor of Accounting from the University of South Africa and business qualifications from Melbourne Business School. Pioneer Credit Limited 30 June 2015 Page 14 Remuneration Report Remuneration Report Remuneration Report Remuneration Report a) b) c) d) e) f) g) h) i) j) k) l) Key Management Personnel covered in this report Remuneration policy and link to performance Remuneration expenses for KMP Contractual arrangements with executive KMP Non-executive director arrangements Non-executive director remuneration for 2015 Relative proportions of fixed vs variable remuneration expense Performance based remuneration granted and forfeited during the year Terms and conditions of share-based payment arrangements Equity instruments held by Key Management Personnel Loans given to Key Management Personnel Other transactions with Key Management Personnel a)a)a)a) Key Management Personnel covered in this report Key Management Personnel covered in this report Key Management Personnel covered in this report Key Management Personnel covered in this report Non-Executive and executive directors Directors’ report Directors’ report Directors’ report Directors’ report 15 15 21 23 23 24 24 24 25 26 27 27 Mr Michael Smith Mr Keith John Mr Rob Bransby Mr Mark Dutton Ms Anne Templeman-Jones Other key management personnel Independent Non-Executive Chairperson Non-Independent Executive Managing Director Independent Non-Executive Director Non-Independent Non-Executive Director Independent Non-Executive Director appointed on 23 September 2014 Ms Lisa Stedman Mr Leslie Crockett Chief Operating Officer Chief Financial Officer and Company Secretary b)b)b)b) Remuneration policy and link to performance Remuneration policy and link to performance Remuneration policy and link to performance Remuneration policy and link to performance The Remuneration Committee is a Committee of the Board comprising: Mr Michael Smith (Chairperson); Mr Rob Bransby; and Mr Mark Dutton. All three members of the Remuneration Committee are Non-Executive Directors, the majority are Independent and the Chairperson of this Committee is an Independent Non-Executive Director. 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; incentive and equity-based remuneration plans for executive Directors and senior executives; appropriate performance hurdles and other key performance indicators to ensure remuneration is aligned to shareholder expectations; and • The appropriateness of total payments proposed to Directors and senior executives Pioneer Credit Limited 30 June 2015 Page 15 Directors’ report Directors’ report Directors’ report Directors’ report The Committee’s objective is to ensure that remuneration policies and structures are fair to both the Company and its employees and competitive in the marketplace such that the Company continues to be able to attract and retain quality individuals and so that those individuals are aligned with the long-term interests of the Company’s shareholders. The Remuneration Committee charter, on Pioneer’s corporate web-site, provides further information on the role of this committee. The Committee reviews and determines remuneration policy and structure annually to ensure it remains aligned to business needs and meets our remuneration principles. From time to time, the committee also engages external remuneration consultants to assist with this review, see note i) below for further information. In particular, the board aims to ensure that remuneration practices are: aligned to the Company’s strategic and business objectives; • competitive and reasonable, enabling the Company to attract and retain quality talent; • • developed for creation of long term shareholder value; • • transparent and easily understood by all stakeholders; and acceptable to shareholders. In considering the Company’s Remuneration Policy and its levels of remuneration for executives, the Remuneration Committee makes recommendations which: • motivate executive Directors and senior executives to ensure the 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. i)i)i)i) Use of remuneration consultants Use of remuneration consultants Use of remuneration consultants Use of remuneration consultants To ensure the Remuneration Committee is fully informed when making remuneration decisions, the Remuneration Committee will periodically seek external remuneration advice. Given that the Company listed shortly prior to the commencement of the reporting period the Remuneration Committee thought it appropriate to independently review all executive employment agreements and engaged Kelsen Human Resources Pty Ltd (Kelsen) to conduct that review. Kelsen has confirmed by way of written declaration to the Remuneration Committee that their review was conducted independent of any persons within the Company. The review was undertaken using the Company’s 2014 Annual Report, a substantial range of other publically available data and a relative assessment of ASX listed companies of similar revenue scale, profitability and industry. The Kelsen review and recommendations were delivered independently to the Remuneration Committee. On this basis, the Board is satisfied that the recommendations were made free from undue influence from any members of the Key Management Personnel. Pioneer Credit Limited 30 June 2015 Page 16 Directors’ report Directors’ report Directors’ report Directors’ report In responding to the findings reported by Kelsen on 18 December 2014, the Remuneration Committee recommended to the Board of the Company increases in fixed remuneration for its senior executives. The fixed remuneration increases were in the 25th percentile of the acceptable range of fixed remuneration. These recommendations were presented to and approved by the Board of the Company at its meeting on 18 December 2014. The Board is desirous of moving all key executives to the 50th percentile over the course of the next two reporting periods on the basis that the executives continue to deliver at least appropriate value to the Company and that the Company continues to meet its financial and other goals. Kelsen recommended that the fees paid to the Chairperson of the Board and the other Non-Executive Directors of the Company remain unchanged. Kelsen was paid $17,028 for their services. ii)ii)ii)ii) term performance term and long----term performance Balancing shortttt----term and long Balancing shor term performance term performance term and long term and long Balancing shor Balancing shor To ensure that executive remuneration is aligned to Company performance, a reasonable 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 or where there is a significant change in role responsibilities and is benchmarked against market data for comparable roles in the market. There is no guaranteed base salary increase included in any executives’ contracts. Retirement benefits are delivered under the Superannuation Guarantee (Administration) Act 1992. The short term incentive provided as part of an executive’s remuneration is awarded based on an assessment of key performance indicators (KPI’s). These KPI’s are agreed between the Remuneration Committee and the executive prior to the commencement of each reporting period. The KPI’s are structured differently for each executive with a common focus on key value drivers in the business. These include Profit after Taxation, compliance performance and a peer and direct report assessment of alignment to and conduct displayed in and of Pioneer’s Leadership Principles. Other role specific KPI’s are also assessed for each executive. The Company also recognises the need to appropriately incentivise its executives through a long term incentive plan. At its Annual General Meeting on 29 October 2014 the Pioneer Credit Equity Incentive and Indeterminate Rights Plans were approved by shareholders. Subject to the achievement of the Performance Condition, participants are granted Performance Rights and Indeterminate Rights as approved by the Board. As the Performance Conditions are not able to be met within the reporting period there were no grants made during this financial year. Front of mind in the development of the Company’s incentive plans is the delivery of earnings growth and the contribution to long term sustainable shareholder value through the creation and delivery of value in all aspects of the Company. The incentive plans recognise and support this value creation by encouraging and rewarding not just exemplary and leading good corporate behaviour, but also the development of a service focussed and high performing culture. The success of this is measured through customer feedback, employee engagement results and ultimately through the increase in fair value measured on the Companies balance sheet (representing the improvement in value created from the point of investment in Purchase Debt Portfolios) and the earning per share the Company reports each period. The Company listed in May 2014 and published an eighteen month forecast. The performance hurdles of the incentive plans have focussed on the delivery of the forecast result and with the limited public company history, a four year historical analysis of performance is not considered meaningful in this context. Pioneer Credit Limited 30 June 2015 Page 17 iii)iii)iii)iii) Relationship between remuneration and Pioneer Credit Limited performance Relationship between remuneration and Pioneer Credit Limited performance Relationship between remuneration and Pioneer Credit Limited performance Relationship between remuneration and Pioneer Credit Limited performance Directors’ report Directors’ report Directors’ report Directors’ report Remuneration framework Element Element Element Element Fixed remuneration (FR) Short-term incentive (STI) Long-term incentive (LTI) Purpose Purpose Purpose Purpose Provide base salary benchmarked to the recommended median including superannuation, and non-monetary benefits Rewards Executives for their contribution based on assessment of performance against Key Performance Indicators Rewards Executives for their contribution to the creation of shareholder value Performance Metrics Performance Metrics Performance Metrics Performance Metrics Nil Potential Value Potential Value Potential Value Potential Value Benchmarked to 25th percentile of the recommended median 25% of fixed remuneration Grant of Performance Rights and Indeterminate Rights in the case of the Managing Director of up to 150,000 ordinary shares for each executive. Vesting occurs over 3 to 5 years from the base date of 1 July 2014 Key Performance Indicators provide a basis for evaluation of financial performance on a total return basis and include a related measurement against the Leadership Principles and contribution to strategic and quality management goals Target 1 (50% of the Target 1 (50% of the Target 1 (50% of the Target 1 (50% of the Performance Condition) Performance Condition): Performance Condition) Performance Condition) the financial performance of the Company for the 12 month financial period ending 30 June 2015 of a $6,600,000 operating profit after taxation as approved by the Board for release to the ASX (in the form of audited financial results) Target 2 (50% of the Target 2 (50% of the Target 2 (50% of the Target 2 (50% of the Performance Condition) Performance Condition): Performance Condition) Performance Condition) individual assessment against the Company’s ‘Leadership Principles’ Target 1 and Target 2 comprise the total “Performance Condition” and are co-dependent Pioneer Credit Limited 30 June 2015 Page 18 iv)iv)iv)iv) term incentives Short----term incentives Short term incentives term incentives Short Short Directors’ report Directors’ report Directors’ report Directors’ report Feature Max Max Max Max opportunity opportunity opportunity opportunity Performance Performance Performance Performance metrics metrics metrics metrics Description MD and KMP: 25% of fixed remuneration MD and KMP: 25% of fixed remuneration MD and KMP: 25% of fixed remuneration MD and KMP: 25% of fixed remuneration Key Performance Indicators are aligned to our strategic priorities of shareholder value, evaluation of financial performance on a total return basis, operational excellence, risk management and appropriate long term strategic goals MetricMetricMetricMetric Leadership and Growth Initiatives Weight Target Weight Target Target Target Weight Weight Board’s assessment of 30% leadership and strategy delivery Management of value, operating profit and customer payments performance 10-20% Regulatory compliance 30- 60% Reason for selection Reason for selection Reason for selection Reason for selection Long term strategic growth and building of a culture of excellence through the Leadership Principles Sustainable management of value and delivery of optimal financial performance Differentiation through compliance excellence and appropriate management of risk Financial Performance on a total return basis Risk and Compliance Delivery of STI Delivery of STI The STI is paid on release of the audited financial year results Delivery of STI Delivery of STI Board Board Board Board discretion discretion discretion discretion The Board reserves the right to amend, vary or revoke the terms of any incentive plan from time to time, at its sole and absolute discretion v)v)v)v) term incentives Long----term incentives Long term incentives term incentives Long Long At the Annual General Meeting held on 29 October 2014, shareholders approved the Pioneer Credit Equity Incentive Plan (the “Plan”). Subject to the achievement of performance conditions, participants may be entitled to be granted Performance Rights and Indeterminate Rights as approved by the Board. The number of rights which are granted to any participant will be determined by reference to achievement of both Target 1 and Target 2 (together the Performance Condition) as described below. Target 1 (50% of the Performance Condition): The financial performance of the Company for the 12 month financial period ended 30 June 2015 of a $6,600,000 operating profit after taxation as approved by the Board for release to the ASX (in the form of audited financial results). Target 2 (50% of the Performance Condition): Individual assessment against the Company’s ‘Leadership Principles’. There are six Leadership Principles as follows: 1. Technical Competence 2. Clear Communication 3. Unwavering Passion 4. Fearless Vision 5. Unlimited Accessibility 6. Selfless Loyalty In respect of assessing an individual’s performance, there is a binary determination in respect of each of the six principles (i.e. the Company’s expectation has either been met or not been met). Pioneer Credit Limited 30 June 2015 Page 19 Directors’ report Directors’ report Directors’ report Directors’ report Assessment of the Managing Director’s performance against the Leadership Principles will be reviewed by the Remuneration Committee and will be reported to the Board for its approval. Assessment of the Chief Financial Officer’s and Chief Operating Officer’s performance against the Leadership Principles will be reviewed by the Remuneration Committee or its delegate. Together, Target 1 and Target 2 comprise the total “Performance Condition” and are co-dependent. • Target 1 acts as the “first gate” in respect of the Award – i.e. Target 1 must be met prior to any Rights being granted. • Target 2 acts as the “second gate” in respect of the FY2015 Managing Director’s Award in that the Participant must also meet the Company’s expectation on four or more of the Leadership Principles against which he is assessed prior to any Rights being granted. • Target 1 and Target 2 have an equal weighting as follows: o Achievement of Target 1 (and subject to meeting Target 2 conditions): 50% of the Total Available Rights will be granted. o Achievement of Target 2 (and subject to meeting Target 1 conditions): up to 50% of the Total Available Rights will be granted. Rights will vest in accordance with the following schedule (each a “Vesting Date”): • base Date plus 3 years whereby 60% Rights will vest; • base Date plus 4 years whereby 25% Rights will vest; and • base Date plus 5 years whereby 15% Rights will vest, where the Base Date is 1 July 2014 (collectively “Vesting Conditions”) and provided the Participant remains employed by the Group at a respective Vesting Date. Pioneer Credit Limited 30 June 2015 Page 20 c)c)c)c) Remuneration expenses for KMP Remuneration expenses for KMP Remuneration expenses for KMP Remuneration expenses for KMP The following table shows details of the remuneration expense recognised for the Group’s Non- Executive, and Executive Directors and Key Management Personnel for the current and previous financial year measured in accordance with the requirements of accounting standards. Directors’ report Directors’ report Directors’ report Directors’ report executive Directors NonNonNonNon----executive Directors executive Directors executive Directors Fixed remuneration Fixed remuneration Fixed remuneration Fixed remuneration Variable remuneration Variable remuneration Variable remuneration Variable remuneration Cash Cash Cash Cash salary salary salary salary NonNonNonNon---- monetary monetary monetary monetary benefits benefits benefits benefits Annual Annual Annual Annual and long and long and long and long service service service service PostPostPostPost---- employment employment employment employment benefits benefits benefits benefits Cash Cash Cash Cash bonus bonus bonus bonus PostPostPostPost---- employment employment employment employment Options benefits Options benefits Options Options benefits benefits Year Year YearYear Total Total Total Total Mr Michael Smith + 2015 2014 120,461 42,000 Mr Rob Bransby + 2015 2014 70,269 24,500 Mr Mark Dutton 2015 2014 70,269 8,615 Ms Anne Templeman-Jones ++ 2015 2014 Total 2015 2015 2015 2015 2014 54,115 - 315,114 315,114 315,114 315,114 75,115 - - - - - - - - ---- - - - - - - - - - ---- - 11,444 3,885 6,676 2,266 6,676 797 5,141 - 29,937 29,937 29,937 29,937 6,948 - - - - - - - - ---- - - - - - - - - - ---- - 30,068 161,973 12,528 58,413 - - - - - - 76,945 26,766 76,945 9,412 59,256 - 30,068 30,068 30,068 30,068 375,119 375,119 375,119 375,119 12,528 94,591 Pioneer Credit Limited 30 June 2015 Page 21 Directors’ report Directors’ report Directors’ report Directors’ report Executive Directors Executive Directors Executive Directors Executive Directors Fixed remuneration Fixed remuneration Fixed remuneration Fixed remuneration Variable remuneration Variable remuneration Variable remuneration Variable remuneration Cash Cash Cash Cash salary salary salary salary NonNonNonNon---- monetary monetary monetary monetary benefits benefits benefits benefits Annual Annual Annual Annual and long and long and long and long service service service service PostPostPostPost---- employment employment employment employment benefits benefits benefits benefits Cash Cash Cash Cash bonus bonus bonus bonus PostPostPostPost---- employment employment employment employment Options benefits Options benefits Options Options benefits benefits Year Year YearYear Mr Keith John 2015 361,685 5,280 32,321 28,794 94,950 2014 300,000 4,800 17,289 27,750 150,000 Mr James Singh +++ 2015 2014 - 54,991 - - - - - 5,087 - - 9,020 13,875 - - - - - - Total Total Total Total 532,050 513,714 - 60,078 Personnel Other Key Management Personnel Other Key Management Personnel Personnel Other Key Management Other Key Management Fixed remuneration Fixed remuneration Fixed remuneration Fixed remuneration Variable remuneration Variable remuneration Variable remuneration Variable remuneration Cash Cash Cash Cash salary salary salary salary NonNonNonNon---- monetary monetary monetary monetary benefits benefits benefits benefits Annual Annual Annual Annual and long and long and long and long service service service service PostPostPostPost---- employment employment employment employment benefits benefits benefits benefits Cash Cash Cash Cash bonus bonus bonus bonus PostPostPostPost---- employment employment employment employment Options benefits Options benefits Options Options benefits benefits Year Year YearYear Total Total Total Total Ms Lisa Stedman 2015 2014 246,415 10,560 153,692 9,540 1,577 686 23,409 58,400 5,548 - 345,909 14,217 22,275 2,060 162,000 364,470 Mr Leslie Crockett 2015 265,846 2014 229,923 Total Total Total Total 5,280 4,800 6,312 (466) 25,255 63,000 5,985 - 371,678 21,993 43,750 4,047 136,500 440,547 2015 2015 2015 2015 873,946 873,946 873,946 873,946 21,120 21,120 21,120 21,120 40,210 40,210 40,210 40,210 77,458 77,458 77,458 77,458 216,350 216,350 216,350 216,350 20,553 20,553 20,553 20,553 ---- 1,249,637 1,249,637 1,249,637 1,249,637 2014 738,606 19,140 17,509 69,047 216,025 19,982 298,500 1,378,809 Total KMP remuneration expensed Total KMP remuneration expensed Total KMP remuneration expensed Total KMP remuneration expensed 2015 2015 2015 2015 1,189,060 1,189,060 1,189,060 1,189,060 21,120 21,120 21,120 21,120 40,210 40,210 40,210 40,210 107,395 107,395 107,395 107,395 216,350 216,350 216,350 216,350 20,553 20,553 20,553 20,553 30,068 30,068 30,068 30,068 1,624,756 1,624,756 1,624,756 1,624,756 2014 813,721 19,140 17,509 75,995 216,025 19,982 311,028 1,473,400 + ++ +++ Mr Michael Smith and Mr Rob Bransby were appointed Directors on 7 February 2014 Ms Anne Templeman-Jones was appointed a Director on 23 September 2014 Mr James Singh resigned as a Director on 7 March 2014. Mr Singh retained his executive position within the Group There was no increase in the base salary for Non-Executive Directors during the year. Executive Directors and other KMP’s base salaries increased on 1 January 2015. Pioneer Credit Limited 30 June 2015 Page 22 d)d)d)d) Contractual arrangements with e xecutive KMP Contractual arrangements with executive KMP xecutive KMP xecutive KMP Contractual arrangements with e Contractual arrangements with e The terms of employment for Company executives are formalised in individual service agreements. The Service Agreements specify remuneration, benefits and notice period. Participation in any STI or LTI plan as previously disclosed 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. Directors’ report Directors’ report Directors’ report Directors’ report Employee Employee Employee Employee Position Position Position Position Salary Salary Salary Salary Mr Keith John Managing Director Ms Lisa Stedman Chief Operating Officer Mr Leslie Crockett Chief Financial Officer $422,000 per annum plus superannuation (currently 9.5%) to a maximum of $30,000 per annum $292,000 per annum plus superannuation (currently 9.5%) to a maximum of $30,000 per annum $280,000 per annum plus superannuation (currently 9.5%) to a maximum of $30,000 per annum Term of agreement Term of agreement Term of agreement Term of agreement and notice period and notice period and notice period and notice period Continuing agreement with 12 months’ notice by either party to the Employment Agreement Continuing agreement with 6 months’ notice by either party to the Employment Agreement Continuing agreement with 6 months’ notice by either party to the Employment Agreement e)e)e)e) NonNonNonNon----executive director arrangements executive director arrangements executive director arrangements executive director arrangements Mr Michael Smith (Chairperson), Mr Rob Bransby and Mr Mark Dutton were re-elected to the Board at the Annual General Meeting of the Company on 29 October 2014 and continue in their appointments to the Board as Non-Executive Directors. Ms Anne Templeman-Jones was appointed to the Board on 23 September 2014. 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. 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 Boards policies and the appointment 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 our Corporate Governance website. Pioneer Credit Limited 30 June 2015 Page 23 f)f)f)f) NonNonNonNon----executive director remuneration for 2015 executive director remuneration for 2015 executive director remuneration for 2015 executive director remuneration for 2015 Directors’ report Directors’ report Directors’ report Directors’ report Name Name NameName Mr Michael Smith Mr Rob Bransby Mr Mark Dutton Ms Anne Templeman-Jones Fixed remuneration Fixed remuneration Fixed remuneration Fixed remuneration 120,000 70,000 70,000 70,000 Superannuation Superannuation Superannuation Superannuation 11,400 6,650 6,650 6,650 Total Total Total Total 131,400 76,650 76,650 76,650 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. No such payments were made during the reporting period. Fees will be reviewed annually by the Remuneration Committee taking into account comparable roles and independently generated market data. 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. On his appointment on 7 February 2014, the Company issued Mr Michael Smith 300,000 Unlisted Options, the terms and conditions of which are set out below. g)g)g)g) Relative proportions of fixed vs variable remuneration expense Relative proportions of fixed vs variable remuneration expense fixed vs variable remuneration expense fixed vs variable remuneration expense Relative proportions of Relative proportions of The following table shows the relative proportions of remuneration that are linked to performance and those that are fixed, based on the amounts disclosed as statutory remuneration expense. Name Name NameName Executive Directors Executive Directors Executive Directors Executive Directors Mr Keith John 2015 Other Key Management Personnel Other Key Management Personnel Other Key Management Personnel Other Key Management Personnel Ms Lisa Stedman 2015 Mr Leslie Crockett 2015 remuneration Fixed remuneration Fixed remuneration remuneration Fixed Fixed At risk –––– STISTISTISTI At risk At risk At risk 80% 82% 81% 20% 18% 19% h)h)h)h) Performance based remuneration granted and forfeited during the year Performance based remuneration granted and forfeited during the year Performance based remuneration granted and forfeited during the year Performance based remuneration granted and forfeited during the year The table below shows for each KMP how much of their STI cash bonus was awarded and how much was forfeited. Name Name NameName Mr Keith John Ms Lisa Stedman Mr Leslie Crockett Total opportunity Total opportunity Total opportunity Total opportunity $$$$ 105,500 73,000 70,000 Awarded Awarded Awarded Awarded %%%% 90% 80% 90% Forfeited Forfeited Forfeited Forfeited %%%% 10% 20% 10% Pioneer Credit Limited 30 June 2015 Page 24 i)i)i)i) Terms and conditions of share based payment arrangements Terms and conditions of share----based payment arrangements based payment arrangements based payment arrangements Terms and conditions of share Terms and conditions of share Directors’ report Directors’ report Directors’ report Directors’ report Performance Rights and Indeterminate Rights Performance Rights and Indeterminate Rights Performance Rights and Indeterminate Rights Performance Rights and Indeterminate Rights There is no share based compensation recognised in the 2015 financial year as there have been no rights granted under the Pioneer Credit Equity Incentive Plan. Unlisted Options Unlisted Options Unlisted Options Unlisted Options Pioneer has 300,000 options on issue with respect to the 2014 grant to Mr Michael Smith. The sum of $30,072 (2014 $12,530) has been recognised as a share based payment with respect to these options. The key terms and conditions of the Options are: 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. f) The Option holder may not sell, assign, transfer or otherwise deal with, or grant a Security Interest over an Option except with the written consent of Pioneer 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. Pioneer Credit Limited 30 June 2015 Page 25 Directors’ report Directors’ report Directors’ report Directors’ report i) 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. 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) ii) 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 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. For the purposes of this section, the following terms have the meaning set out below: Change of Control means: i) ii) iii) 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%; 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; 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 l) 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. 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. j)j)j)j) Equity instruments held by Key Management Personnel Equity instruments held by Key Management Personnel Equity instruments held by Key Management Personnel Equity instruments held by Key Management Personnel The tables below show the number of: • options over ordinary shares in the Company; • 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. Pioneer Credit Limited 30 June 2015 Page 26 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. Directors’ report Directors’ report Directors’ report Directors’ report Option holdings Option holdings Option holdings Option holdings Name Name NameName Mr Michael Smith Share holdings Share holdings Share holdings Share holdings Issued Issued Issued Issued balance at balance at balance at balance at the start the start the start the start of the of the of the of the year year year year 300,000 Granted as Granted as Granted as Granted as compensation compensation compensation compensation - Vested Vested Vested Vested - Exercised Exercised Exercised Exercised - Balance Balance Balance Balance at the at the at the at the end of end of end of end of the year the year the year the year 300,000 Vested Vested Vested Vested and and and and Exercis---- Exercis Exercis Exercis ableableableable - Unvested Unvested Unvested Unvested 300,000 Name Name NameName Balance at the start Balance at the start Balance at the start Balance at the start of the year of the year of the year of the year Other changes Other changes Other changes Other changes during the year during the year during the year during the year Balance at the end Balance at the end Balance at the end Balance at the end of the year of the year of the year of the year Held Held Held Held nominally nominally nominally nominally NonNonNonNon----EEEExecutive Directors xecutive Directors xecutive Directors xecutive Directors Mr Michael Smith Mr Rob Bransby Mr Mark Dutton Ms Anne Templeman Jones Executive Directors Executive Directors Executive Directors Executive Directors Mr Keith John Other Key management Personnel Other Key management Personnel Other Key management Personnel Other Key management Personnel Ms Lisa Stedman Mr Leslie Crockett 62,500 35,000 306,483 - - - - - 62,500 35,000 306,483 - 62,500 - 306,483 - 8,113,216 100,000 8,213,216 8,213,216 275,000 163,984 - - 275,000 163,984 125,000 13,984 k)k)k)k) Loans given to Key Management Personnel Loans given to Key Management Personnel Loans given to Key Management Personnel Loans given to Key Management Personnel No loans were made to Key Management Personnel during the financial year. l)l)l)l) Other transactions with Key Management Personnel Other transactions with Key Management Personnel Other transactions with Key Management Personnel Other transactions with Key Management Personnel i)i)i)i) Leases entered into with related parties Leases entered into with related parties Leases entered into with related parties Leases entered into with related parties The Managing Director, Mr Keith John is a beneficiary of the John Family Primary Investments Trust and the sole Director and Secretary of Avy Nominees Pty Limited, which is trustee of the John Family Primary Investments Trust (JFPIT). JFPIT is the owner of three premises which are leased by the Company. The premises, the subject of the leases, are situated at 118 Royal Street, East Perth, 188 Bennett Street, East Perth and 190 Bennett Street, East Perth. The lease contracts are at arm’s length. For the year ended 30 June 2015 the total amount of $330,000 has been paid to JFPIT in respect of the leases. The leases for 118 Royal Street, East Perth and 188 Bennett Street, East Perth expire on 31 December 2015 and are not expected to be renewed. The lease for 190 Bennett Street, East Perth expires on 31 December 2015 and is expected to be renewed. Pioneer Credit Limited 30 June 2015 Page 27 Directors’ report Directors’ report Directors’ report Directors’ report ii)ii)ii)ii) Design consulting agreement Design consulting agreement Design consulting agreement Design consulting agreement The Managing Director, Mr Keith John is a beneficiary of the John Family Building and Design Trust and the sole Director and Secretary of Avy Nominees Pty Limited, which is trustee of the John Family Building and Design Trust trading as Alana John Design (AJD). The Company and AJD are parties to an agreement for design and project management services for the commercial fit-out of the Company’s office premises. The agreement commenced on 1 November 2013 and continues on a monthly basis until terminated by either party on one month’s notice. For the year ended 30 June 2015 the total amount of $160,917 has been paid for the services. Following completion of the fit-out of the Company’s premises the agreement with AJD was finalised on 31 July 2015. iii)iii)iii)iii) ssociate Investment in associate Investment in a ssociate ssociate Investment in a Investment in a At a meeting of the Board of the Company on 26 March 2015, the Board (with Mr Keith John abstaining) approved the Company presenting an offer to Midbridge Investments Pty Ltd (MB) to acquire all of its shareholding in ASX listed Goldfields Money Limited in an off-market transaction at a price of $1.04 per share. The shareholding represented approximately 14.1% of the issued equity in Goldfields Money Ltd. MB is a private investment vehicle of the Company’s Managing Director Mr Keith R John. On the 8 April 2015 the Company formally presented its offer to MB which was accepted. The offer was for an amount of $2,302,972.88. The sum was paid by instalments and settled in full during the reporting period. Neither MB, Mr Keith John or any associate of those parties received any interest, financial accommodation or benefit as a result of being paid by instalment. Shares under option Shares under option Shares under option Shares under option Unissued ordinary shares of Pioneer Credit Limited under option at the date of the report are as follows: Name Name NameName Mr Michael Smith Mr Michael Smith Date options granted options granted Date options granted options granted Date Date 7 February 2014 7 February 2014 Expiry date Expiry date Expiry date Expiry date 1 May 2018 1 May 2019 Issue price Issue price Issue price Issue price $1.92 $1.92 Number under option Number under option Number under option Number under option 50,000 250,000 Shares issued on the exercise of options Shares issued on the exercise of options Shares issued on the exercise of options Shares issued on the exercise of options No shares were issued in the reporting period on the exercise of options. Insurance of officers Insurance of officers Insurance of officers Insurance of officers During the financial year, Pioneer Credit Limited paid a premium of $43,833 (2014 $21,043) to insure the Directors and Secretaries of the Company and its Australian-based controlled entities. The insurance premium increased significantly once Pioneer was admitted to the official list of the Australian Stock Exchange on 1 May 2014. 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 Pioneer Credit Limited 30 June 2015 Page 28 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. Directors’ report Directors’ report Directors’ report Directors’ report Indemnity of auditors Indemnity of auditors Indemnity of auditors Indemnity of auditors Pioneer Credit Limited has agreed to indemnify its auditors, PricewaterhouseCoopers, to the extent permitted by law, against any claim by a third party arising from its 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. ompany Proceedings on behalf of the Company Proceedings on behalf of the C ompany ompany Proceedings on behalf of the C Proceedings on behalf of the C 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. audit services NonNonNonNon----audit services audit services 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. Pioneer Credit Limited 30 June 2015 Page 29 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 Directors’ report Directors’ report Directors’ report Directors’ report Other assurance services Other assurance services Other assurance services Other assurance services Network firms of PricewaterhouseCoopers Australia Network firms of PricewaterhouseCoopers Australia Network firms of PricewaterhouseCoopers Australia Network firms of PricewaterhouseCoopers Australia Special Purpose Review Half Year Total remuneration for other assurance services Total remuneration for other assurance services Total remuneration for other assurance services Total remuneration for other assurance services Taxation services Taxation services Taxation services Taxation services PricewaterhouseCoopers Australia PricewaterhouseCoopers Australia PricewaterhouseCoopers Australia PricewaterhouseCoopers Australia International tax consulting Tax compliance services Total remuneration for taxation services Total remuneration for taxation services Total remuneration for taxation services Total remuneration for taxation services Other services Other services Other services Other services International Network firms of PricewaterhouseCoopers Australia International Network firms of PricewaterhouseCoopers Australia International Network firms of PricewaterhouseCoopers Australia International Network firms of PricewaterhouseCoopers Australia Payroll services ervices other services Total remuneration for other s Total remuneration for ervices ervices other s other s Total remuneration for Total remuneration for audit services Total remuneration for non----audit services Total remuneration for non audit services audit services Total remuneration for non Total remuneration for non 2015 2015 2015 2015 $$$$ 2014 2014 20142014 $$$$ - ---- 62,943 62,943 62,943 62,943 62,943 34,526 134,528 169,054 169,054 169,054 169,054 12,500 13,464 25,964 25,964 25,964 25,964 2,137 2,137 - - 171,191 171,191 171,191 171,191 88,907 88,907 88,907 88,907 A copy of the Auditor’s Independence Declaration as required under section 307C of the Corporations Act 2001 is set out on page 31. Rounding of amounts Rounding of amounts Rounding of amounts 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 John Keith John John John Keith Keith Managing Director Perth 20 August 2015 Pioneer Credit Limited 30 June 2015 Page 30 Auditor’s Independence Declaration As lead auditor for the audit of Pioneer Credit Limited for the year ended 30 June 2015, 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 20 August 2015 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. Page 31 Corporate Governance Statement Corporate Governance Statement Corporate Governance Statement Corporate Governance Statement Pioneer Credit Limited and the Board are committed to achieving and demonstrating the highest standards of corporate governance. Pioneer Credit Limited has reviewed its corporate governance practices against the Corporate Governance Principles and Recommendations (3rd edition) published by the ASX Corporate Governance Council. The 2015 corporate governance statement is dated as at 30 June 2015 and reflects the corporate governance practices in place throughout the 2015 financial year. The 2015 corporate governance statement was approved by the board on 20 August 2015. A description of the Group's current corporate governance practices is set out in the Group's corporate governance statement which can be viewed at http://www.pioneercredit.com.au/corporate/investor-centre/corporate-governance-statement/ Pioneer Credit Limited 30 June 2015 Page 32 Financial Statements Financial Statements Financial Statements Financial Statements Pioneer Credit Limited ABN 44 Pioneer Credit Limited ABN 44 103103103103 003003003003 505505505505 Pioneer Credit Limited ABN 44 Pioneer Credit Limited ABN 44 30 June 2015 Annual report ---- 30 June 2015 Annual report 30 June 2015 30 June 2015 Annual report Annual report Contents Contents Contents Contents Consolidated statement of comprehensive income Consolidated balance sheet Consolidated statement of changes in equity Consolidated statement of cash flows Contents of the notes to the consolidated financial statements Directors’ declaration Independent auditor’s report to the members 34 35 36 37 38 94 95 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 14. 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 Level 6, 108 St Georges Terrace Perth WA 6000 The financial statements were authorised for issue by the Directors on 20 August 2015. The Directors have the power to amend and reissue the financial statements. Pioneer Credit Limited 30 June 2015 Page 33 Consolidated statement of comprehensive income Consolidated statement of comprehensive income Consolidated statement of comprehensive income Consolidated statement of comprehensive income NoteNoteNoteNote Revenue from operations Revenue from operations Revenue from operations Revenue from operations Other income Employee expenses Rental expenses Direct expenses Information technology and communications Professional expenses Depreciation and amortisation Travel and entertainment Other expenses Finance expenses Share of profit of associate accounted for using the equity method Profit before income tax Profit before income tax Profit before income tax Profit before income tax Income tax expense Profit from continuing operations Profit from continuing operations Profit from continuing operations Profit from continuing operations Total comprehensive income for the year Total comprehensive income for the year Total comprehensive income for the year Total comprehensive income for the year Total comprehensive income for the year is attributable to: Total comprehensive income for the year is attributable to: Total comprehensive income for the year is attributable to: Total comprehensive income for the year is attributable to: Owners of Pioneer Credit Limited Earnings per share for profit attributable to the ordinary equity holders of Earnings per share for profit attributable to the ordinary equity holders of Earnings per share for profit attributable to the ordinary equity holders of Earnings per share for profit attributable to the ordinary equity holders of the Company: the Company: the Company: the Company: Basic earnings per share Diluted earnings per share 3 3 5 5 6 22 22 2015 2015 2015 2015 $’000 $’000 $’000 $’000 2014 2014 20142014 $’000 $’000 $’000 $’000 38,697 38,697 38,697 38,697 91919191 38,788 38,788 38,788 38,788 25,694 67 25,761 (16,893) (16,893) (16,893) (16,893) (2,059) (2,059) (2,059) (2,059) (1,846) (1,846) (1,846) (1,846) (1,772) (1,772) (1,772) (1,772) (1,169) (1,169) (1,169) (1,169) (938) (938) (938) (938) (469) (469) (469) (469) (1,425) (1,425) (1,425) (1,425) (1,513) (1,513) (1,513) (1,513) 8888 10,712 10,712 10,712 10,712 (3,271) (3,271) (3,271) (3,271) 7,441 7,441 7,441 7,441 7,441 7,441 7,441 7,441 (11,718) (1,294) (2,747) (1,320) (2,908) (379) (570) (1,054) (1,412) - 2,359 (1,312) 1,047 1,047 7,441 7,441 7,441 7,441 1,047 Cents Cents Cents Cents Cents 16.40 16.40 16.40 16.40 16.40 16.40 16.40 16.40 7.97 7.97 The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes. Pioneer Credit Limited 30 June 2015 Page 34 Consolidated balance sheet Consolidated balance sheet Consolidated balance sheet Consolidated balance sheet ASSETS ASSETS ASSETS ASSETS Current assets Current assets Current 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 Total current assets Total current assets Total current assets NonNonNonNon----current assets current assets current assets current assets Property, plant and equipment Intangible assets Investments accounted for using the equity method Other non-current assets Deferred tax assets Financial assets at fair value through profit or loss current assets Total non----current assets Total non current assets current assets Total non Total non Total assets Total assets Total assets Total assets LIABILITIES LIABILITIES LIABILITIES LIABILITIES Current liabilities Current liabilities Current liabilities Current liabilities Trade and other payables Borrowings Current tax liabilities Accruals, provisions and other liabilities liabilities Total current liabilities Total current liabilities liabilities Total current Total current liabilities current liabilities NonNonNonNon----current liabilities liabilities current current Borrowings Provisions and other liabilities current liabilities Total non----current liabilities Total non current liabilities current liabilities Total non Total non Total liabilities Total liabilities Total liabilities Total liabilities Net assets Net assets Net assets Net assets EQUITY EQUITY EQUITY EQUITY Contributed equity Other reserves Retained earnings Capital and reserves attributable to the owners of Pioneer Credit Limited 9(a) 9(f) 9(g) Total equity Total equity Total equity Total equity NoteNoteNoteNote 30 June 2015 2015 30 June 2015 2015 30 June 30 June $’000 $’000 $’000 $’000 30 June 2014 2014 30 June 20142014 30 June 30 June $’000 $’000 $’000 $’000 7(a) 7(a) 7(b) 8(a) 8(c) 8(b) 7(b) 7(c) 7(d) 7(d) 2,168 2,168 2,168 2,168 2,190 2,190 2,190 2,190 411411411411 ---- 32,576 32,576 32,576 32,576 37,345 37,345 37,345 37,345 4,335 4,335 4,335 4,335 384384384384 2,321 2,321 2,321 2,321 45454545 1,129 1,129 1,129 1,129 49,346 49,346 49,346 49,346 57,560 57,560 57,560 57,560 94,905 94,905 94,905 94,905 3,851 3,851 3,851 3,851 11,874 11,874 11,874 11,874 1,199 1,199 1,199 1,199 1,888 1,888 1,888 1,888 18,812 18,812 18,812 18,812 20,999 20,999 20,999 20,999 2,216 2,216 2,216 2,216 23,215 23,215 23,215 23,215 42,027 42,027 42,027 42,027 52,878 52,878 52,878 52,878 45,464 45,464 45,464 45,464 1,01,01,01,073737373 6,341 6,341 6,341 6,341 52,878 52,878 52,878 52,878 52,878 52,878 52,878 52,878 4,458 2,570 246 327 29,183 36,784 2,537 161 - 61 1,198 29,560 33,517 70,301 11,352 5,376 - 2,599 19,327 2,012 1,360 3,372 22,699 47,602 45,464 1,037 1,101 47,602 47,602 The above consolidated balance sheet should be read in conjunction with the accompanying notes. Pioneer Credit Limited 30 June 2015 Page 35 changes in equity Consolidated statement of changes in equity Consolidated statement of changes in equity changes in equity Consolidated statement of Consolidated statement of Contributed Contributed Contributed Contributed equity equity equity equity $’000 $’000 $’000 $’000 Convertible Convertible Convertible Convertible Redeemable Redeemable Redeemable Redeemable Preference Preference Preference Preference Shares Shares Shares Shares $’000 $’000 $’000 $’000 Share Share Share Share Based Based Based Based Payment Payment Payment Payment Reserve Reserve Reserve Reserve $’000 $’000 $’000 $’000 Balance at 1 July 2013 Balance at 1 July 2013 Balance at 1 July 2013 Balance at 1 July 2013 3,674 5,417 Total comprehensive income for the year Transactions with owners in theiriririr Transactions with owners in the Transactions with owners in the Transactions with owners in the capacity as owners capacity as owners capacity as owners 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 Balance at 30 June 2014 Balance at 30 June 2014 Balance at 30 June 2014 Balance at 30 June 2014 - 38,543 7,754 5,413 656 403 91 (11,070) 41,790 45,464 - - - (5,413) (4) - - - (5,417) Retained Retained Retained Retained earnings earnings earnings earnings $’000 $’000 $’000 $’000 Total Total Total Total equity equity equity equity $’000 $’000 $’000 $’000 3,984 13,075 1,047 1,047 - - - - - 38,543 7,754 - 652 1,440 - (3,930) (3,930) 91 (15,000) 33,480 - - - - - - 1,037 - - 1,037 NoteNoteNoteNote Contributed Contributed Contributed Contributed equity equity equity equity $’000 $’000 $’000 $’000 45,464 Balance at 1 July 2014 Balance at 1 July 2014 Balance at 1 July 2014 Balance at 1 July 2014 Total comprehensive income for the year in theiriririr Transactions with owners in the Transactions with owners in the in the Transactions with owners Transactions with owners capacity of owners capacity of owners capacity of owners capacity of owners Treasury shares and share based payments Dividends declared and paid 9(f) 13(b) Balance at 30 June 2015 Balance at 30 June 2015 Balance at 30 June 2015 Balance at 30 June 2015 45,464 - 1,037 1,101 47,602 Convertible Convertible Convertible Convertible Redeemable Redeemable Redeemable Redeemable Preference Preference Preference Preference Shares Shares Shares Shares $’000 $’000 $’000 $’000 Share Share Share Share Based Based Based Based Payment Payment Payment Payment Reserve Reserve Reserve Reserve $’000 $’000 $’000 $’000 Retained Retained Retained Retained earnings earnings earnings earnings $’000 $’000 $’000 $’000 Total Total Total Total equity equity equity equity $’000 $’000 $’000 $’000 - - - - - - 1,037 1,101 47,602 - 7,441 7,441 36 - 36 - 36 (2,201) (2,201) (2,201) (2,165) 1,073 6,341 52,878 - - - - The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes. Pioneer Credit Limited 30 June 2015 Page 36 Consolidated statement of cash flows Consolidated statement of cash flows Consolidated statement of cash flows Consolidated statement of cash flows NoteNoteNoteNote 30 June 2015 2015 30 June 2015 2015 30 June 30 June $’000 $’000 $’000 $’000 30 June 2014 2014 30 June 20142014 30 June 30 June $’000 $’000 $’000 $’000 Cash flows from operating activities Cash flows from operating activities Cash flows from operating activities 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 Net income taxation paid activities Net cash inflow from operating activities Net cash inflow from operating activities activities Net cash inflow from operating Net cash inflow from operating Cash flows from investing activities Cash flows from investing activities Cash flows from investing activities Cash flows from investing activities Payments for property, plant and equipment Payments for intangible assets Acquisitions of financial assets at fair value through profit or loss Payment for investment in associate Proceeds of loans from related parties Repayment of loans from related parties Proceeds from the sale of property, plant and equipment investing activities Net cash outflow from investing activities Net cash outflow from investing activities investing activities Net cash outflow from Net cash outflow from Cash flows from financing activities Cash flows from financing activities Cash flows from financing activities Cash flows from financing activities Proceeds from borrowings Repayment of borrowings Dividends paid to Company’s shareholders Proceeds from issue of ordinary shares Return of capital Capital raising costs Treasury shares loan repayment Proceeds from issues of convertible redeemable preference shares activities Net cash inflow from financing activities Net cash inflow from financing activities activities Net cash inflow from financing Net cash inflow from financing Cash flows from financing activities Cash flows from financing activities Cash flows from financing activities Cash flows from financing activities Net (decrease) / increase in cash and cash equivalents Cash and cash equivalents at the beginning of the financial year the year Cash and cash equivalents at the end of the year Cash and cash equivalents at the end of the year the year Cash and cash equivalents at the end of Cash and cash equivalents at the end of 10(a) 8(a) 8(c) 15 13(b) 9(a) 9(a) 9(a) 9(c) 55,629 55,629 55,629 55,629 (24,949) (24,949) (24,949) (24,949) 30,680 30,680 30,680 30,680 91919191 (919) (919) (919) (919) (1,676) (1,676) (1,676) (1,676) 28,176 28,176 28,176 28,176 (1,599) (1,599) (1,599) (1,599) (345) (345) (345) (345) (49,433) (49,433) (49,433) (49,433) (2,313) (2,313) (2,313) (2,313) ---- ---- 8888 (53,682) (53,682) (53,682) (53,682) 37,076 37,076 37,076 37,076 (11,665) (11,665) (11,665) (11,665) (2,201) (2,201) (2,201) (2,201) ---- ---- ---- 6666 ---- 23,216 23,216 23,216 23,216 (2,290) (2,290) (2,290) (2,290) 4,458 4,458 4,458 4,458 2,168 2,168 2,168 2,168 35,779 (18,295) 17,484 67 (708) (3,201) 13,642 (701) (226) (22,314) - 1,567 (1,621) - (23,295) 26,061 (35,222) (3,930) 41,120 (11,070) (4,233) 319 99 13,144 3,491 967 4,458 The above consolidated statement of cash flows should be read in conjunction with the accompanying notes. Pioneer Credit Limited 30 June 2015 Page 37 Contents of the notes to the consolidated financial statements Contents of the notes to the consolidated financial statements Contents of the notes to the consolidated financial statements Contents of the notes to the consolidated financial statements period reporting period current reporting changes inininin thethethethe current Significant changes Significant period period reporting reporting current current changes changes Significant Significant 1 Significant changes in the current reporting period 39 calculated numbers areareareare calculated HoHoHoHowwww numbers calculated calculated numbers numbers Individually significant items 2 Segment information 3 Revenue from operations 4 5 Other expense items 6 Income tax expense 7 Financial assets and financial liabilities 8 Non-financial assets and liabilities 9 Equity 10 Cash flow information RiskRiskRiskRisk 11 Critical accounting estimates and judgements 12 Financial risk management 13 Capital management Group structure Group structure Group structure Group structure 14 Subsidiaries 15 Associates Unrecognised items Unrecognised items Unrecognised items Unrecognised items 16 Contingencies 17 Commitments 18 Events occurring after the reporting period Other information Other information Other information Other information 19 Related party transactions 20 Share-based payments 21 Remuneration of auditors 22 Earnings per share 23 Deed of cross guarantee 24 Assets pledged as security 25 Parent entity financial information 26 Summary of significant accounting policies 41 41 42 43 44 45 56 60 63 65 65 69 72 73 76 76 76 78 80 82 83 84 84 84 85 Pioneer Credit Limited 30 June 2015 Page 38 1)1)1)1) Significant changes in the current reporting period Significant changes in the current reporting period Significant changes in the current reporting period Significant changes in the current reporting period Significant events and transactions that have affected the Group’s financial position and performance during the period under review are as follows: statements otes to the consolidated financial statements NNNNotes to the consolidated financial statements statements otes to the consolidated financial otes to the consolidated financial Additional Revenue Stream Additional Revenue Stream Additional Revenue Stream Additional Revenue Stream Consistent with our long-standing approach of working towards a complete understanding of the characteristics of the customer portfolios we purchase, and to ensure we realise the appropriate value from those portfolios, the Group has successfully entered the secondary sale market for portfolios of accounts that we believe: • will not meet our requirements for the customers to evolve into the ‘new consumer’ (Part IX customers and customers we are unable to secure realistic payment arrangements with), and • where the value to be realised from a portfolio sale provides the greatest expected value to the Group. The Group will continue to manage value on an ongoing basis and make decisions about whether long term liquidation or selling financial assets is expected to maximise the return on the portfolio. Investment in Associate Investment in Associate Investment in Associate Investment in Associate As outlined in our 2014 Prospectus and updates to the market since listing on the ASX, the Group is working towards the expansion of its revenue streams through the offering of financial products in the 2015 calendar year. An equity stake in Goldfields Money Limited (ASX: GMY) was acquired during the financial year. Goldfields Money Limited (Goldfields) is the only ASX listed Western Australian based Authorised Deposit- taking Institution. The Group entered into a Memorandum of Understanding with Goldfields for the development of banking products. This agreement is a significant step towards the Group’s long term goal of offering a wide range of financial products to our customers. See note 15 for additional information on the investment in Goldfields Money Limited. Pioneer Credit Limited 30 June 2015 Page 39 otes to the consolidated financial statements NNNNotes to the consolidated financial statements otes to the consolidated financial statements otes to the consolidated financial statements ow numbers are calculated HHHHow numbers are calculated ow numbers are calculated ow 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, including: • • • accounting policies that are relevant for an understanding of the items recognised in the financial statements. These cover situations where the accounting standards either allow a choice or do not deal with a particular type of transaction analysis and sub-totals information about estimates and judgements made in relation to particular items. Individually significant items 2 Segment information 3 Revenue from operations 4 5 Other expense items 6 Income tax expense 7 Financial assets and financial liabilities 8 Non-financial assets and liabilities 9 Equity 10 Cash flow information 41 41 42 43 44 45 56 60 63 Pioneer Credit Limited 30 June 2015 Page 40 the consolidated financial statements otes to the consolidated financial statements NNNNotes to the consolidated financial statements the consolidated financial statements otes to otes to 2)2)2)2) Segment information Segment information Segment information Segment information For management purposes, the Company is organised into one main business segment, which is the provision of financial services, specialising in acquiring and servicing unsecured retail debt portfolios in Australia and more recently the sale of certain portfolios. All of the Company’s activities are interrelated, and each activity is dependent on the others. Accordingly, all significant operating decisions are based upon analysis of the Company as one segment. The financial results from this segment are equivalent to the financial statements of the Company as a whole. The Company operated in one geographical segment being Australia. The Company does not have any major customers which comprise more than 10% of revenue. The Company continues to monitor the appropriateness of segment reporting particularly with the introduction of the investment in associate during the period under review. Segment reporting may be appropriate for future reporting periods. 3)3)3)3) Revenue from operations Revenue from operations Revenue from operations Revenue from operations From continuing operations From continuing operations From continuing operations From continuing operations Operating revenues Operating revenues Operating revenues Operating revenues Liquidation of cash flows from purchased debt portfolios Proceeds from the sale of purchased debt portfolios Change in value of purchased debt portfolios Net gain on financial assets – purchased debt portfolios Services Revenue recognition Revenue recognition Revenue recognition Revenue recognition 2015 2015 2015 2015 $’000 $’000 $’000 $’000 2014 2014 20142014 $’000 $’000 $’000 $’000 51,707 51,707 51,707 51,707 3,526 3,526 3,526 3,526 (16,702) (16,702) (16,702) (16,702) 38,531 38,531 38,531 38,531 166166166166 38,697 38,697 38,697 38,697 37,230 - (11,814) 25,416 278 25,694 Revenue is measured at the fair value of the consideration received or receivable. 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. Customer payments, Debt purchase income Customer payments, Debt purchase income Customer payments, Debt purchase income 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 recognises 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. Pioneer Credit Limited 30 June 2015 Page 41 otes to the consolidated financial statements NNNNotes to the consolidated financial statements otes to the consolidated financial statements otes to the consolidated financial statements Sale of purchased debt portfolios Sale of purchased debt portfolios Sale of purchased debt portfolios Sale of purchased debt portfolios Revenue from the sale of purchased debt portfolios is recognised to the extent that it is probable that the revenue benefits will flow to the Group and the revenue can be reliably measured. Services Income Services Income Services Income 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. Other income Other income Other income Other income Interest income Other income recognition Other income recognition Other income recognition Other income recognition Interest income Interest income Interest income Interest income 2015 2015 2015 2015 $’000 $’000 $’000 $’000 91919191 2014 2014 20142014 $’000 $’000 $’000 $’000 67 Interest income is recognised using the effective interest method. 4)4)4)4) items Individually significant items Individually significant items items Individually significant Individually significant 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 Initial Public Offering Costs Initial Public Offering Costs Initial Public Offering Costs Costs incurred to list on the stock exchange Costs apportioned to capital raising Commercial Claim Commercial Claim Commercial Claim Commercial Claim Settlement and settlement provision Legal costs Indirect Taxation Indirect Taxation Indirect Taxation Indirect Taxation Finalisation of prior periods indirect taxation position Professional costs 2015 2015 2015 2015 $’000 $’000 $’000 $’000 ---- ---- ---- 166166166166 15151515 181181181181 169169169169 186186186186 355355355355 2014 2014 20142014 $’000 $’000 $’000 $’000 4,233 (2,175) 2,058 420 228 648 312 - 312 Pioneer Credit Limited 30 June 2015 Page 42 otes to the consolidated financial statements NNNNotes to the consolidated financial statements otes to the consolidated financial statements otes to the consolidated financial statements Initial Public Offering Costs Initial Public Offering Costs Initial Public Offering Costs 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. Commercial Claim Commercial Claim Commercial Claim Commercial Claim The prior period outstanding commercial dispute claim was finalised during the period under review. An additional cost over and above the initial provision has been recognised. The full claim has now been settled, with additional legal costs. This claim has been settled and there is no future liability which could arise in this matter. Indirect Taxation Indirect Taxation Indirect Taxation Indirect Taxation A previously uncertain interpretation of an indirect taxation position has been finalised in the period under review with the assistance of professional advice. The nature of this cost item is that it will not recur in the future. 5)5)5)5) Other expense items Other expense items Other expense items Other expense items This note provides a breakdown of specific costs included in profit before income tax. Finance expenses Finance expenses Finance expenses Finance expenses Bank fees and borrowing expenses Interest and finance charges paid / payable for financial liabilities not at fair value through profit and loss Interest on Convertible Redeemable Preference Shares Employee benefits expense inclusive of on costs Employee benefits expense inclusive of on----costs costs costs Employee benefits expense inclusive of on Employee benefits expense inclusive of on Share based payment modification Share based payments Chairman options Depreciation and amortisation Depreciation and amortisation amortisation amortisation Depreciation and Depreciation and Depreciation Amortisation 2015 2015 2015 2015 $’000 $’000 $’000 $’000 2014 2014 20142014 $’000 $’000 $’000 $’000 594594594594 919919919919 ---- 1,513 1,513 1,513 1,513 ---- ---- 30303030 30303030 816816816816 122122122122 938938938938 184 708 520 1,412 744 95 14 853 314 65 379 Pioneer Credit Limited 30 June 2015 Page 43 otes to the consolidated financial statements NNNNotes to the consolidated financial statements otes to the consolidated financial statements otes to the consolidated financial statements 6)6)6)6) Income tax expense Income tax expense Income tax expense Income tax expense This note provides an analysis of the Group’s income tax expense, shows what amounts are recognised directly in equity and how the tax expense is affected by non-assessable and non-deductible items. It also explains significant estimates made in relation to the Group’s tax position. Income tax expense Income tax expense Income tax expense Income tax expense Current tax Current tax Current tax Current tax Current tax on profits for the year Adjustments for current tax of prior periods Deferred income tax Total current tax expense Income tax is attributable to: Income tax is attributable to: Income tax is attributable to: Income tax 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 facie tax payable Numerical reconciliation of income tax expense to prima facie tax payable Numerical reconciliation of income tax expense to prima facie tax payable facie tax payable Numerical reconciliation of income tax expense to prima Numerical reconciliation of income tax expense to prima Profit from continuing operations before income tax expense Profit from continuing operations before income tax expense Profit from continuing operations before income tax expense Profit from continuing operations before income tax expense Tax at the Australian tax rate of 30.0% (2014 – 30.0%) Non-deductible entertainment costs Non-deductible provision for fringe benefits tax Non-deductible CRPS interest Non-deductible share based payments (Over)under provision for prior year taxation Share of net profits of associate Other non-deductibles expense Income tax expense Income tax expense expense Income tax Income tax Amounts recognised directly in equity Amounts recognised directly in equity Amounts recognised directly in equity Amounts recognised directly in equity Aggregate current and deferred tax arising in the reporting period and not recognised in Aggregate current and deferred tax arising in the reporting period and not recognised in Aggregate current and deferred tax arising in the reporting period and not recognised in 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 net profit or loss or other comprehensive income but directly debited or credited to credited to credited to net profit or loss or other comprehensive income but directly debited or net profit or loss or other comprehensive income but directly debited or equity: equity: equity: equity: Current tax – credited directly to equity Net deferred tax – (debited) / credited directly to equity 2015 2015 2015 2015 $’000 $’000 $’000 $’000 3,327 3,327 3,327 3,327 (8) (8) (8) (8) (48) (48) (48) (48) 3,271 3,271 3,271 3,271 2014 2014 20142014 $’000 $’000 $’000 $’000 1,672 175 (535) 1,312 10,712 10,712 10,712 10,712 2,359 (117) (117) (117) (117) 69696969 (48) (48) (48) (48) 460 (995) (535) 2015 2015 2015 2015 $’000 $’000 $’000 $’000 2014 2014 20142014 $’000 $’000 $’000 $’000 10,712 10,712 10,712 10,712 2,359 3,214 3,214 3,214 3,214 20202020 19191919 ---- 12121212 (8) (8) (8) (8) (2) (2) (2) (2) 16161616 3,271 3,271 3,271 3,271 708 29 1 156 243 175 - - 1,312 2015 2015 2015 2015 $’000 $’000 $’000 $’000 2014 2014 20142014 $’000 $’000 $’000 $’000 117117117117 (117) (117) (117) (117) ---- 192 460 652 Pioneer Credit Limited 30 June 2015 Page 44 otes to the consolidated financial statements NNNNotes to the consolidated financial statements otes to the consolidated financial statements otes to the consolidated financial statements 7)7)7)7) Financial assets and financial liabilities Financial assets and financial liabilities Financial assets and financial liabilities Financial assets and financial liabilities This note provides information about the Group’s financial instruments, including: • • • • an overview of all financial instruments held by the Group specific information about each type of financial instrument accounting policies information about determining the fair value of the instruments, including judgements and estimation uncertainty involved. The Group holds the following financial instruments: Financial assets Financial assets Financial assets Financial assets NoteNoteNoteNote Assets at FVTPL Assets at FVTPL Assets at FVTPL Assets at FVTPL $’000 $’000 $’000 $’000 Financial Financial Financial Financial assets at assets at assets at assets at amortised cost amortised cost amortised cost amortised cost $’000 $’000 $’000 $’000 2015 2015 2015 2015 Cash and cash equivalents Trade and other receivables * 7(a) Financial assets at FVTPL 7(b) 2014 2014 20142014 Cash and cash equivalents Trade and other receivables * 7(a) Financial assets at FVTPL 7(b) *excluding prepayments Financial liabilities Financial liabilities Financial liabilities Financial liabilities - - 81,922 81,922 - - 58,743 58,743 2,168 2,190 - 4,358 4,458 2,570 - 7,028 Financial Financial Financial Financial liabilities at liabilities at liabilities at liabilities at amortised amortised amortised amortised cost cost cost cost $’000 $’000 $’000 $’000 NoteNoteNoteNote 2015 2015 2015 2015 Trade and other payables ** 7(c) Borrowings 7(d) Accruals, provisions and other liabilities 2014201420142014 Trade and other payables ** Borrowings Accruals, provisions and other liabilities **excluding non-financial liabilities 7(c) 7(d) 3,851 32,873 1,993 38,717 11,352 7,388 2,524 21,264 Total Total Total Total $’000 $’000 $’000 $’000 2,168 2,190 81,922 86,280 4,458 2,570 58,743 65,771 Total Total Total Total $’000 $’000 $’000 $’000 3,851 32,873 1,993 38,717 11,352 7,388 2,524 21,264 The Group’s exposure to various risks associated with the financial instruments is discussed in note 12. 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 2015 Page 45 a)a)a)a) Trade and other receivables Trade and other receivables Trade and other receivables Trade and other receivables otes to the consolidated financial statements NNNNotes to the consolidated financial statements otes to the consolidated financial statements otes to the consolidated financial statements Trade receivables Other receivables Prepayments 2015 2015 2015 2015 NonNonNonNon---- current current current current $’000 $’000 $’000 $’000 Total Total Total Total $’000 $’000 $’000 $’000 Current $’000 ---- ---- 45454545 45454545 1,247 1,247 1,247 1,247 943943943943 456456456456 2,646 2,646 2,646 2,646 876 1,694 246 2,816 2014 Non- current $’000 - - 61 61 Total $’000 876 1,694 307 2,877 Current Current Current Current $’000 $’000 $’000 $’000 1,247 1,247 1,247 1,247 943943943943 411411411411 2,601 2,601 2,601 2,601 Further information relating to loans to related parties and Key Management Personnel is set out in note 19. lassification as trade and other receivables CCCClassification as trade and other receivables lassification as trade and other receivables lassification 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 recovery 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 12(c) and 26(e) respectively. Other receivables Other receivables Other receivables Other receivables These amounts generally arise from transactions outside the usual operating activities of the Group. e of trade and other receivables Fair value of trade and other receivables Fair valu e of trade and other receivables e of trade and other receivables Fair valu Fair valu 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. Impairment and risk exposure Impairment and risk exposure Impairment and risk exposure 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 12(a) to 12(c). None of the non-current receivables are impaired or past due but not impaired. Pioneer Credit Limited 30 June 2015 Page 46 b)b)b)b) Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss include the following: otes to the consolidated financial statements NNNNotes to the consolidated financial statements otes to the consolidated financial statements otes to the consolidated financial statements Purchased debt portfolios Purchased debt portfolios Purchased debt portfolios Purchased debt portfolios Current Non-current Movement on financial assets at fair value is as follows: Movement on financial assets at fair value is as follows: Movement on financial assets at fair value is as follows: Movement on financial assets at fair value is as follows: Current and current Current and nonnonnonnon----current current current Current and Current and At beginning of period Additions for the period, net of recourse * Liquidation of cash flows from purchased debt portfolios Sale of purchased debt portfolios Net gain on financial assets – purchased debt portfolios 2015 2015 2015 2015 $’000 $’000 $’000 $’000 2014 2014 20142014 $’000 $’000 $’000 $’000 32,576 32,576 32,576 32,576 49,346 49,346 49,346 49,346 81,922 81,922 81,922 81,922 29,183 29,560 58,743 2015 2015 2015 2015 $’000 $’000 $’000 $’000 2014 2014 20142014 $’000 $’000 $’000 $’000 58,743 58,743 58,743 58,743 39,881 39,881 39,881 39,881 (51,707) (51,707) (51,707) (51,707) (3,526) (3,526) (3,526) (3,526) 38,531 38,531 38,531 38,531 81,922 81,922 81,922 81,922 38,931 31,626 (37,230) - 25,416 58,743 * Recourse relates to PDP accounts returned, at cost, to the vendor partners per the terms of the debt purchasing arrangement where the underlying account facility does not meet the contractual terms of the purchase arrangement. i)i)i)i) Classification of financial assets at fair value through profit or loss Classification of financial assets at fair value through profit or loss Classification of financial assets at fair value through profit or loss Classification of financial assets at fair value through profit or loss Pioneer Credit Limited classifies purchased debt portfolios (PDP’s) at fair value through profit and loss (FVTPL) as per AASB 139 Financial Instruments: Recognition and Measurement, paragraph 9 part (b) (ii) because; • at initial recognition Pioneer designates PDP’s acquired as at fair value through profit or loss; • Pioneer manages the PDPs and regularly evaluates their performance on a fair value basis in accordance with a documented risk management or investment strategy; • Pioneer has information on that basis about the PDPs and provides the information internally to the Company's Key Management Personnel; • Pioneer reports this relevant information in the comprehensive disclosures provided. The strategy is to provide an overall return on the Company’s portfolio of investments, as opposed to any particular individual customer contract. The Company maintains a documented investment strategy for PDPs and under the Risk Management Policy the management and measurement of its PDPs is properly documented in its Risk Register. The performance management emphasis of the Group is on a total return basis focusing on growth in its payment arrangement portfolios and the total return to the Group measured as operating profit after taxation. The evaluation of performance on a total return basis is clearly required by the documented and approved Key Performance Indicators under which the Group’s performance is evaluated. Pioneer Credit Limited 30 June 2015 Page 47 otes to the consolidated financial statements NNNNotes to the consolidated financial statements otes to the consolidated financial statements otes to the consolidated financial statements When management decisions are made with respect to an investment in the portfolios or the liquidation of cash flows, they are made from the point of view of the group of financial assets as a whole, as opposed to on an individual asset basis. Monthly management reporting reports on returns expressed in terms of overall portfolio return multiples on investment and internal rate of return. An important factor in the investment strategy is to manage a reasonable level of volatility of returns in expectation of overall long term value growth. Purchased debt portfolios are initially recorded at acquisition cost, which on the basis of the transaction being at arm’s length is considered to be fair value, and thereafter at fair value in the balance sheet, with transaction costs expensed as incurred. In the absence of a sufficiently active market, the fair value of any 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 value of purchased debt portfolios is 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 value. 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)ii)ii)ii) Amounts recognised in profit or loss Amounts recognised in profit or loss Amounts recognised in profit or loss Amounts recognised in profit or loss Changes in the fair value of financial assets at fair value through profit or loss are recorded as part of revenue. iii)iii)iii)iii) Risk exposure and fair value measurements Risk exposure and fair value measurements Risk exposure and fair value measurements Risk exposure and fair value measurements Information about the Group's exposure to price risk is provided in note 12. For information about the methods and assumptions used in determining fair value please refer to note 7(v) below. iv)iv)iv)iv) Fair value and fair value measurements Fair value and fair value measurements Fair value and fair value measurements Fair value and fair value measurements a)a)a)a) Fair value hierarchy Fair value hierarchy Fair value hierarchy 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. 30 June 2015 30 June 2015 30 June 2015 30 June 2015 Financial assets Financial assets at FVTPL 30 June 2014 30 June 2014 30 June 2014 30 June 2014 Financial assets Financial assets at FVTPL Level 1 Level 1 Level 1 Level 1 $’000 $’000 $’000 $’000 Level 2 Level 2 Level 2 Level 2 $’000 $’000 $’000 $’000 Level 3333 Level Level Level $’000 $’000 $’000 $’000 Total Total Total Total $’000 $’000 $’000 $’000 ---- ---- ---- 81818181,,,,922922922922 81,922 ---- 58,743 58,743 58,743 58,743 58,743 Pioneer Credit Limited 30 June 2015 Page 48 otes to the consolidated financial statements NNNNotes to the consolidated financial statements otes to the consolidated financial statements otes to the consolidated financial statements Level 1: Level 1: Level 1: 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: Level 2: Level 2: 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: Level 3: Level 3: Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in Level 3. b)b)b)b) Transfers between levels Transfers between levels Transfers between levels Transfers between levels There were no transfers between levels in 2014 or 2015. c)c)c)c) VVVValuation techniques used to derive fair values aluation techniques used to derive fair values aluation techniques used to derive fair values aluation techniques used to derive fair values The objective of valuation techniques is to arrive at a fair value measurement that reflects the price that would be received to sell the asset or paid to transfer the liability in an orderly transaction between market participants at the measurement date. Level 3 Level 3 Level 3 Level 3 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 PDPs for which there is not considered to be a sufficiently active secondary market. Consistent with the long-standing approach of working towards a complete understanding of the characteristics of the customer portfolios the Group purchases, and to ensure Pioneer manage and realise the appropriate value from those portfolios, Pioneer in FY15 commenced exploration of the secondary sale market for portfolios of accounts that: • will not meet our requirements for the customers to evolve into the ‘new consumer’ (i.e Part IX customers and customers we are unable to secure realistic payment arrangements with); and • where the value to be realised from a portfolio sale provides a better than expected value to the Group. The first successful sale of a small test portfolio was concluded in December 2014 and during the second half of the financial year Pioneer completed additional successful sales of portfolios of customer accounts. The second half sales were of portfolios of Part IX accounts (also commonly referred to as bankruptcy compromised accounts). Pioneer Credit Limited 30 June 2015 Page 49 otes to the consolidated financial statements NNNNotes to the consolidated financial statements otes to the consolidated financial statements otes to the consolidated financial statements Pioneer engaged experts in the financial services brokerage market to facilitate the sale process including, but not limited to, portfolio valuation, issuer approval, and sales execution and post sales processes. The fair value of financial instruments that are not traded in an active market, the PDPs, 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) which incorporates, at least, the following material variables: • Expected liquidation rate • Face value • Cash flow liquidation period • Discount rate • Cost Expressed as a percentage of the face value over time. Of purchased debt portfolios. The period over which cash flows liquidate. Factors in a risk free interest rate and appropriate credit adjustment for risks not built into the underlying expected cash flows. Acquisition cost of acquired PDPs. d)d)d)d) Fair value measurements using significant unobservable inputs Fair value measurements using significant unobservable inputs inputs inputs Fair value measurements using significant unobservable Fair value measurements using significant unobservable Analysis of change in fair value for the year ended 30 June 2015 Analysis of change in fair value for the year ended 30 June 2015 Analysis of change in fair value for the year ended 30 June 2015 Analysis of change in fair value for the year ended 30 June 2015 Actual versus forecast cash flow Change in future forecast cash flows Changes in valuation techniques Changes in valuation techniques Changes in valuation techniques Changes in valuation techniques 2015 2015 2015 2015 $’000 $’000 $’000 $’000 11,003 27,528 38,531 There were no significant changes made to the discounted cash flow valuation applied in the current and prior financial year. Within the valuation model there were improvements made based on observable statistical evidence. Pioneer Credit Limited 30 June 2015 Page 50 Valuation inputs and relationship to fair value Valuation inputs and relationship to fair value Valuation inputs and relationship to fair value Valuation inputs and relationship 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: nancial statements otes to the consolidated financial statements NNNNotes to the consolidated fi nancial statements nancial statements otes to the consolidated fi otes to the consolidated fi Description Description Description Description Financial Assets at Fair Value Through Profit or Loss Fair value Fair value Fair value Fair value $’000 $’000 $’000 $’000 Valuation Valuation Valuation Valuation technique technique technique technique Unobservable Unobservable Unobservable Unobservable inputs inputs inputs inputs Range of inputs Range of inputs Range of inputs Range of inputs Relationship to Fair Relationship to Fair Relationship to Fair Relationship to Fair Value Value Value Value 81,922 Discounted Cash and Validation Flow Expected liquidation rate 1% change liquidation rate in Expected liquidation rate 3% change liquidation rate in Cash flow liquidation period Discount rate Impact of a seven year liquidation period versus a six year liquidation period Variance risk- adjusted discount rate by 100 bps in Discount rate in Variance risk- adjusted discount rate by 300 bps A reduction in liquidation rate by 1% results in a decrease in fair value on cash estimated total flows by $0.706m, an increase in an results increase in fair value on total cash estimated flows of $0.706m. A reduction in liquidation rate by 3% results in a decrease in fair value on cash estimated total flows by $2.118m, an increase in an results increase in fair value on total cash estimated flows of $2.118m. Results in an increase in fair value of $1.611m. fair the value. The higher risk- adjusted rate the lower the A reduction in rate by 100 bps results in an increase in fair value by $1.230m, an increase results in a decrease in fair value of $1.186m. The higher risk- adjusted rate the lower the A reduction in rate by 300 bps results in an increase in fair value by $3.831m, an increase results in a decrease in fair value of $3.434m. value. the fair A reasonably possible change in liquidation rates and discount rates has been determined to be plus or minus 3%. A 1% change in liquidation rates and discount rates has also been disclosed for comparison purposes only. Pioneer Credit Limited 30 June 2015 Page 51 otes to the consolidated financial statements NNNNotes to the consolidated financial statements otes to the consolidated financial statements otes to the consolidated financial statements It is noted the weighted average discount rate for originated customer accounts, substantially comprising credit cards and personal loans, have fluctuated within a range of 17.6% to 20.9% over the last two years forming the basis of the above sensitivity range. In determining the weighted average discount rate the key input is the current market rate for originated loans and advances with similar characteristics, for example credit card or personal loan rates, appropriately risk adjusted. For subsequent measurement, under AASB 139 Financial Instruments: Recognition and Measurement, the other potential method for recognition and measurement is, if the prescribed definition is met, “Loans and receivables” measured at amortised cost. The difference between the carrying value under an amortised cost measurement approach and fair value is expected to be within the reasonably possible range if the discount rate were to be varied as described in the table above. Historical aggregate debt purchases weighted by face value and investment Face value acquired $843m with investment cost (not fair value) of $123m. Pioneer Credit Limited 30 June 2015 Page 52 otes to the consolidated financial statements NNNNotes to the consolidated financial statements otes to the consolidated financial statements otes to the consolidated financial statements v)v)v)v) Valuation Process Valuation Process Valuation Process Valuation Process A key assumption in the valuation of the purchased debt portfolios is in determining the expected liquidation rate. Assumptions about the liquidation rate are based on originator and product characteristics, payment history, market conditions and management experience. At the 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 assessed using the experience of senior management. Subsequent to purchase, fair value adjustments are made in line with expected customer payment liquidations. An assessment of gross nominal future cash flow is made over periods varying from six to ten years depending on the level of liquidation history and forecasting accuracy confidence based on observable historical evidence 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, noting that the cash flows to which the rates are applied are appropriately risk adjusted. The valuation of a PDP requires estimation of: a) the expected future cash flows; b) the expected timing of receipt of those cash flows; and c) the current discount rate. Under amortised cost the valuation would in contrast to using the discount rate in c) instead utilise the original effective interest rate extrapolated at investment date (nominated by the purchaser) and this rate would not change over time. The estimation of cash flows and the estimation of their timing is broadly the same as used in the fair value measurement. At the end of each reporting period, under amortised cost, an entity shall assess whether there is any objective evidence of impairment. If any such evidence exists, the entity shall determine the amount of any impairment loss. Similarly if expectations of future cash flows were to subsequently increase a gain would be recognised, calculated by discounting these incremental cash flows at the original effective interest rate. Pioneer has adopted the fair value basis as it considers this more relevant to the users of the financial statements. Pioneer Credit Limited 30 June 2015 Page 53 The main inputs used by the Group in measuring the fair value of financial instruments are derived and evaluated as follows: onsolidated financial statements otes to the consolidated financial statements NNNNotes to the c onsolidated financial statements onsolidated financial statements otes to the c otes to the c • • • • Expected liquidation rate Face value Cash flow liquidation period Discount rate • Cost Product characteristics, payment and liquidation history and management experience with historic performance of comparable portfolios. Determined at the date the PDP was acquired. Periods range from six to ten years depending on liquidation history. Weighted average liquidation period is 2.6 years (2014: 2.1 years) indicating the majority of liquidation occurs in the earlier years. free rate and appropriate credit risk Incorporate a risk adjustment for risks not built into the underlying cash flows expected to be recovered. The weighted average discount rate used to calculate fair value is 20.9% (2014: 19.7%) noting that further risk adjustment is not required as the cash flows to which the rates are applied are appropriately risk adjusted. Recently acquired PDPs may be valued at cost, where it is considered to approximate fair value. Consistent with the manner in which the Group’s purchased debt portfolios are managed, performance is evaluated on a fair value basis. Separate validation of a discounted cash flow approach to fair value is also undertaken. The validation comprises a review of key elements contributing to movements in value including an analysis of the quantum, tenure and qualitative characteristics of the payment arrangements portfolio as well as an assessment of the performance of other key observable portfolio characteristics. c)c)c)c) Trade and other payables Trade and other payables Trade and other payables Trade and other payables 2015 2015 2015 2015 NonNonNonNon---- current current current current $’000 $’000 $’000 $’000 Total Total Total Total $’000 $’000 $’000 $’000 Current $’000 ---- ---- ---- ---- 3,851 3,851 3,851 3,851 195195195195 1,430 1,430 1,430 1,430 5,476 5,476 5,476 5,476 11,352 276 1,885 13,513 2014 Non- current $’000 - - - - Total $’000 11,352 276 1,885 13,513 Current Current Current Current $’000 $’000 $’000 $’000 3,851 3,851 3,851 3,851 195195195195 1,430 1,430 1,430 1,430 5,476 5,476 5,476 5,476 Trade payables Payroll tax & other statutory liabilities Other payables See note 8(d) for detail on current provisions. Trade payables at 30 June 2014 included $10.2m owing on purchased debt portfolios, consistent with the terms of their acquisition. The amount of this trade payable is unusual when compared to the current period. It was paid, in the normal course of business, during the first half of the financial year. Risk exposure Risk exposure Risk exposure Risk exposure Information about the Group's exposure to foreign exchange risk is provided in note 12. 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. Pioneer Credit Limited 30 June 2015 Page 54 d)d)d)d) Borrowings Borrowings Borrowings Borrowings Secured Secured Secured Secured Bank loans Other loans Unsecured Unsecured Unsecured Unsecured Other loans otes to the consolidated financial statements NNNNotes to the consolidated financial statements otes to the consolidated financial statements otes to the consolidated financial statements 2015 2015 2015 2015 NonNonNonNon---- current current current current $’000 $’000 $’000 $’000 Current Current Current Current $’000 $’000 $’000 $’000 Total Total Total Total $’000 $’000 $’000 $’000 Current $’000 2014 2014 20142014 Non- current $’000 7,7,7,7,063063063063 4,741 4,741 4,741 4,741 11,804 11,804 11,804 11,804 20,999 20,999 20,999 20,999 ---- 20,999 20,999 20,999 20,999 28,062 28,062 28,062 28,062 4,741 4,741 4,741 4,741 32,803 32,803 32,803 32,803 804 4,471 5,275 2,012 - 2,012 Total $’000 2,816 4,471 7,287 70707070 11,874 11,874 11,874 11,874 ---- 20,999 20,999 20,999 20,999 70707070 32,873 32,873 32,873 32,873 101 5,376 - 2,012 101 7,388 Further information relating to loans related to related parties and Key Management Personnel is set out in note 19. Secured liabilities and assets pledged as security Secured liabilities and assets pledged as security Secured liabilities and assets pledged as security Secured liabilities and assets pledged as security Security over all the assets and undertakings of each of Pioneer Credit Limited, Pioneer Credit Acquisition Services Pty Limited, Sphere Legal Pty Limited, Pioneer Credit (Philippines) Pty Limited and Pioneer Credit Financial Services Pty Ltd and unlimited cross guarantees and indemnities from each of these entities. All property of the Group comprises the Group total assets of $94,905,000 (2014: $70,301,000) See note 12(d) for details of the financing arrangements available to the Group to which the security relates. Compliance with loan covenants Compliance with loan covenants Compliance with loan covenants Compliance with loan covenants Pioneer Credit Limited has complied with the financial covenants of its borrowing facilities during the 2015 and 2014 reporting periods, see note 13 for details. Fair Value Fair Value Fair Value 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. Risk exposures Risk exposures Risk exposures Risk exposures Details of the Group’s exposure to risks arising from current and non-current borrowings are set out in note 12. Pioneer Credit Limited 30 June 2015 Page 55 otes to the consolidated financial statements NNNNotes to the consolidated financial statements otes to the consolidated financial statements otes to the consolidated financial statements 8)8)8)8) NonNonNonNon----financial assets and liabilities financial assets and liabilities financial assets and liabilities financial assets and liabilities This note provides information about the Group's non-financial assets and liabilities, including: • • • specific information about each type of non-financial asset and non-financial liability accounting policies information about determining the fair value of the assets and liabilities, including judgements and estimation uncertainty involved. a)a)a)a) Property, plant and equipment Property, plant and equipment Property, plant and equipment Property, plant and equipment At 1 July 2014 At 1 July 2014 At 1 July 2014 At 1 July 2014 Cost Accumulated depreciation Net book amount Year ended Year ended Year ended Year ended 30 June 2015 30 June 2015 30 June 2015 30 June 2015 Opening net book amount Additions Make good provision Depreciation charge Disposals Lease incentive Closing net book amount At 30 June 2015 At 30 June 2015 At 30 June 2015 At 30 June 2015 Cost Accumulated depreciation Net book amount At 1 July 2013 At 1 July 2013 At 1 July 2013 At 1 July 2013 Cost Accumulated depreciation Net book amount Year ended Year ended Year ended Year ended 30 June 2014 30 June 2014 30 June 2014 30 June 2014 Opening net book amount Additions Depreciation charge Lease incentive Closing net book amount At 30 June 2014 At 30 June 2014 At 30 June 2014 At 30 June 2014 Cost Accumulated depreciation Net book amount Plant and and Plant and and Plant Plant equipment equipment equipment equipment $’000 $’000 $’000 $’000 1,187 (510) 677677677677 677 579 - (394) - - 862862862862 1,766 (904) 862862862862 702 (296) 406406406406 406 485 (214) - 677677677677 1,187 (510) 677677677677 Furniture, Furniture, Furniture, Furniture, fittings & fittings & fittings & fittings & equipment equipment equipment equipment $’000 $’000 $’000 $’000 Machinery Machinery Machinery Machinery & vehicles & vehicles & vehicles & vehicles Leasehold Leasehold Leasehold Leasehold improvements improvements improvements improvements Total Total Total Total $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 145 (38) 107107107107 107 104 - (54) - - 157157157157 249 (92) 157157157157 111 (16) 95959595 95 34 (22) - 107107107107 145 (38) 107107107107 41 (30) 11111111 11 - - (2) (9) - ---- - - ---- 41 (28) 13131313 13 - (2) - 11111111 41 (30) 11111111 1,949 (207) 1,742 1,742 1,742 1,742 3,322 (785) 2,537 2,537 2,537 2,537 1,742 916 189 (366) - 835 3,316 3,316 3,316 3,316 2,537 1,599 189 (816) (9) 835 4,335 4,335 4,335 4,335 3,889 (573) 3,316 3,316 3,316 3,316 5,904 (1,569) 4,335 4,335 4,335 4,335 332 (131) 201201201201 1,186 (471) 715715715715 201 182 (76) 1,435 1,742 1,742 1,742 1,742 1,949 (207) 1,742 1,742 1,742 1,742 715 701 (314) 1,435 2,537 2,537 2,537 2,537 3,322 (785) 2,537 2,537 2,537 2,537 Pioneer Credit Limited 30 June 2015 Page 56 otes to the consolidated financial statements NNNNotes to the consolidated financial statements otes to the consolidated financial statements otes to the consolidated financial statements current assets pledged as security NonNonNonNon----current assets pledged as security current assets pledged as security current assets pledged as security Refer to note 7(d) for information on non-current assets pledged as security by the Group. Depreciation methods and useful lives Depreciation methods and useful lives Depreciation methods and useful lives 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. Leasehold improvements and certain leased plant and equipment are depreciated on a straight line basis over the term of the lease. - - - - - Plant and equipment Furniture, fittings and equipment Machinery and vehicles Leasehold improvements Lease incentive 15 - 66.7% 15 - 50% 25% 20 - 50% 9 years, being the term of the lease See note 26(f) for the other accounting policies relevant to property, plant and equipment. Lease incentive asset Lease incentive asset Lease incentive asset Lease incentive asset The lease incentive received relates to leasehold improvements in general received as an incentive to take on rental operating leases and has been accounted for as such, with a corresponding liability recognised in Other Liabilities. The lease incentive liability will be released on a straight line basis over the lease term and reduce the “rental expense” on the consolidated statement of comprehensive income. b)b)b)b) Deferred tax balances Deferred tax balances Deferred tax balances Deferred tax balances Deferred tax assets Deferred tax assets Deferred tax assets Deferred tax assets The balance comprises temporary differences attributable to: The balance comprises temporary differences attributable to: temporary differences attributable to: temporary differences attributable to: The balance comprises The balance comprises Employee benefits (annual leave) Retirement benefit obligations (superannuation payable) Other Other expenses (audit, accounting, payroll tax) Share issue expenses Other (formation costs, blackhole costs) Prepayments Sub-total other Net deferred tax assets 2015 2015 2015 2015 $’000 $’000 $’000 $’000 2014 2014 20142014 $’000 $’000 $’000 $’000 128128128128 43434343 269269269269 657657657657 43434343 (11) (11) (11) (11) 958958958958 86 28 182 888 14 - 1,084 1,129 1,129 1,129 1,129 1,198 Pioneer Credit Limited 30 June 2015 Page 57 Movements Movements Movements Movements At 1 July 2014 At 1 July 2014 At 1 July 2014 At 1 July 2014 (Charged)/ credited - To profit or loss - Directly to equity At 30 June 2015 At 30 June 2015 At 30 June 2015 At 30 June 2015 At 1 July 2013 At 1 July 2013 At 1 July 2013 At 1 July 2013 (Charged)/ credited - To profit or loss - Directly to equity At 30 June 2014 At 30 June 2014 At 30 June 2014 At 30 June 2014 c)c)c)c) Intangible assets Intangible assets Intangible assets Intangible assets At 1 July 2014 At 1 July 2014 At 1 July 2014 At 1 July 2014 Cost Accumulated amortisation Net book amount Year ended Year ended Year ended Year ended 30 June 2015 30 June 2015 2015 2015 30 June 30 June Opening net book amount Additions Amortisation charge Closing net book amount At 30 June 2015 At 30 June 2015 At 30 June 2015 At 30 June 2015 Cost Accumulated amortisation Net book amount Year ended Year ended Year ended Year ended 30 June 2014 30 June 2014 30 June 2014 30 June 2014 Opening net book amount Additions Amortisation charge Closing net book amount At 30 June 2014 At 30 June 2014 At 30 June 2014 At 30 June 2014 Cost Accumulated amortisation Net book amount otes to the consolidated financial statements NNNNotes to the consolidated financial statements otes to the consolidated financial statements otes to the consolidated financial statements Employee Employee Employee Employee benefits benefits benefits benefits $’000 $’000 $’000 $’000 Retirement Retirement Retirement Retirement Benefit Benefit Benefit Benefit Obligation Obligation Obligation Obligation $’000 $’000 $’000 $’000 OtherOtherOtherOther $’000 $’000 $’000 $’000 Total Total Total Total $’000 $’000 $’000 $’000 86868686 42424242 ---- 128128128128 62626262 24242424 ---- 86868686 28 1,084 1,198 15 - 43 40 (12) - 28 (9) (117) 958 48 (117) 1,129 101 203 523 460 1,084 535 460 1,198 Software Software Software Software $’000 $’000 $’000 $’000 226226226226 (65) (65) (65) (65) 161161161161 161161161161 345345345345 (122) (122) (122) (122) 384384384384 571571571571 (187) (187) (187) (187) 384384384384 ---- 226226226226 (65) (65) (65) (65) 161161161161 226226226226 (65) (65) (65) (65) 161161161161 Pioneer Credit Limited 30 June 2015 Page 58 otes to the consolidated financial statements NNNNotes to the consolidated financial statements otes to the consolidated financial statements otes to the consolidated financial statements Amortisation methods and useful lives Amortisation methods and useful lives Amortisation methods and useful lives 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 26(g) for the other accounting policies relevant to intangible assets, and the Group’s policy regarding impairments. d)d)d)d) Provisions Provisions Provisions Provisions Employee benefits Lease make good Commercial claim 2015 2015 2015 2015 NonNonNonNon---- current current current current $’000 $’000 $’000 $’000 Current Current Current Current $’000 $’000 $’000 $’000 Total Total Total Total $’000 $’000 $’000 $’000 Current $’000 ---- ---- ---- ---- 180180180180 189189189189 ---- 369369369369 180180180180 189189189189 ---- 369369369369 - - 279 279 2014 2014 20142014 Non- current $’000 84 - - 84 Total $’000 84 - 279 363 Information about individual provisions and significant estimates Employee benefits Employee benefits Employee benefits Employee benefits Long service leave Long service leave Long service leave Long service leave The liabilities for long service 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. Re measurement as a result of experience adjustments and changes in actuarial assumptions are recognised in profit or loss. 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 12 months after the reporting date, regardless of when the actual settlement is expected to occur. Pioneer Credit Limited 30 June 2015 Page 59 otes to the consolidated financial statements NNNNotes to the consolidated financial statements otes to the consolidated financial statements otes to the consolidated financial statements Lease make good Lease make good Lease make good Lease make good Pioneer Credit Limited is required to restore the leased premises of 108 St Georges Terrace, Perth WA 6000, to their original condition at the end of the respective lease terms. A provision has been recognised for the present value of the estimated expenditure required to remove any leasehold improvements. These costs have been capitalised as part of the cost of leasehold improvements and are amortised over the shorter of the term of the lease or the useful life of the assets. Commercial claim Commercial claim Commercial claim Commercial claim See note 4 for details of the provision raised and subsequently settled during the reporting period relating to the commercial claim. Movements in provisions Movements in provisions Movements in provisions Movements in provisions At 1 July 2014 At 1 July 2014 At 1 July 2014 At 1 July 2014 Carrying amount at start of year Charged to profit or loss Capitalised to balance sheet Amounts used during the year At 30 June 2015 At 30 June 2015 At 30 June 2015 At 30 June 2015 At 1 July 2013 At 1 July 2013 At 1 July 2013 At 1 July 2013 Carrying amount at start of year Charged to profit or loss Amounts used during the year At 30 June 2014 At 30 June 2014 At 30 June 2014 At 30 June 2014 Employee Employee Employee Employee benefits benefits benefits benefits $’000 $’000 $’000 $’000 84 96 - - 180180180180 - 84 - 84848484 Lease Lease Lease Lease make make make make good good good good $’000 $’000 $’000 $’000 - - 189 - 189189189189 - - - ---- Commercial Commercial Commercial Commercial claimclaimclaimclaim $’000 $’000 $’000 $’000 279 166 - (445) ---- - 420 (141) 279279279279 Total Total Total Total $’000 $’000 $’000 $’000 363 262 189 (445) 369369369369 - 504 (141) 363363363363 settled within 12 months Amounts not expected to be settled within 12 months Amounts not expected to be settled within 12 months settled within 12 months Amounts not expected to be Amounts not expected to be No employee of the Group will be eligible to take long service leave within the next 12 months. 9)9)9)9) Equity Equity Equity Equity a)a)a)a) Contributed equity Contributed equity Contributed equity Contributed equity Share capital Share capital Share capital Share capital fully paid Ordinary shares –––– fully paid Ordinary shares fully paid fully paid Ordinary shares Ordinary shares 44,973,990 44,973,990 44,973,990 44,973,990 44,973,990 45,464 45,464 45,464 45,464 45,464 2015 2015 2015 2015 Shares Shares Shares Shares 2014 2014 20142014 Shares Shares Shares Shares 2015 2015 2015 2015 $’000 $’000 $’000 $’000 2014 2014 20142014 $’000 $’000 $’000 $’000 Pioneer Credit Limited 30 June 2015 Page 60 Movements in ordinary share capital Movements in ordinary share capital Movements in ordinary share capital Movements in ordinary share capital otes to the consolidated financial statements NNNNotes to the consolidated financial statements otes to the consolidated financial statements otes to the consolidated financial statements DateDateDateDate Details Details Details Details Number of shares Number of shares Number of shares Number of shares $’000 $’000 $’000 $’000 1 July 2014 1 July 2014 1 July 2014 1 July 2014 Opening balance Opening balance Opening balance Opening balance 30 June 2015 30 June 2015 30 June 2015 30 June 2015 Closing balance Closing balance Closing balance Closing balance 1 July 2013 1 July 2013 1 July 2013 1 July 2013 30 June 2014 30 June 2014 30 June 2014 30 June 2014 Opening balance Opening balance Opening balance 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 Closing balance Closing balance Closing balance Closing balance b)b)b)b) Ordinary shares Ordinary shares Ordinary shares Ordinary shares All authorised ordinary shares have been issued. 44,973,990 45,464 44,973,990 45,464 11,904,596 - 591,742 3,419,035 3,623,917 300,000 - 134,700 25,000,000 - 44,973,990 9,091 652 592 3,406 4,349 403 (11,070) 216 40,000 (2,175) 45,464 Ordinary shares have no par value and the Company does not have a limited amount of authorised capital. 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. 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. Pioneer Credit Limited 30 June 2015 Page 61 c)c)c)c) Treasury shares Treasury shares Treasury shares Treasury shares otes to the consolidated financial statements NNNNotes to the consolidated financial statements otes to the consolidated financial statements otes to the consolidated financial statements DateDateDateDate Details Details Details Details Number of shares Number of shares Number of shares Number of shares $’000 $’000 $’000 $’000 1 July 2014 1 July 2014 1 July 2014 1 July 2014 2015 30 June 2015 30 June 2015 2015 30 June 30 June Opening balance Opening balance Opening balance Opening balance Receipt on treasury shares Closing balance Closing balance Closing balance Closing balance 1 July 2013 1 July 2013 1 July 2013 1 July 2013 30 June 2014 30 June 2014 30 June 2014 30 June 2014 Opening balance Opening balance Opening balance Opening balance Management options Closing balance Closing balance Closing balance Closing balance d)d)d)d) Employee share scheme Employee share scheme Employee share scheme Employee share scheme 400,000 400,000 - 400,000 400,000 1,024 1,024 1,024 1,024 6666 1,030 1,030 1,030 1,030 ---- 1,024 1,024 1,024 1,024 1,024 1,024 1,024 1,024 Information relating to the employee share scheme of the previous financial year, including details of shares issued under the scheme, is set out in note 20. No new employee shares were issued during the period under review. e)e)e)e) Options Options Options 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 20. f)f)f)f) Other reserves Other reserves Other reserves Other reserves The following table shows a breakdown of the balance sheet line item ‘other reserves’ and the movements in these reserves during the period under review. A description of the nature and purpose of each reserve is provided below the table. Share based payments Share based payments Share based payments Share based payments At 1 July 2014 At 1 July 2014 At 1 July 2014 At 1 July 2014 Opening balance Chairman’s options Treasury shares At 30 June 2015 At 30 June 2015 At 30 June 2015 At 30 June 2015 At 1 July 2013 At 1 July 2013 At 1 July 2013 At 1 July 2013 Opening balance Chairman’s options Management options At 30 June 2014 At 30 June 2014 At 30 June 2014 At 30 June 2014 1,037 30 6 1,073 1,073 1,073 1,073 - 13 1,024 1,037 1,037 1,037 1,037 based payments Nature and purpose of other reserves share----based payments Nature and purpose of other reserves share based payments based payments Nature and purpose of other reserves share Nature and purpose of other reserves share 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 2015 Page 62 g)g)g)g) Retained earnin Retained earningsgsgsgs Retained earnin Retained earnin Movements in retained earnings were as follows: Notes to the consolidated financial statements Notes to the consolidated financial statements Notes to the consolidated financial statements Notes to the consolidated financial statements Balance 1 July Balance 1 July Balance 1 July Balance 1 July Net profit for the year Dividends Balance 30 June Balance 30 June Balance 30 June Balance 30 June 2015 2015 2015 2015 $’000 $’000 $’000 $’000 1,101 1,101 1,101 1,101 7,441 7,441 7,441 7,441 (2,201) (2,201) (2,201) (2,201) 6,341 6,341 6,341 6,341 10)10)10)10) Cash flow information Cash flow information Cash flow information Cash flow information a)a)a)a) Reconciliation of profit after income tax to net cash inflow from operating activities Reconciliation of profit after income tax to net cash inflow from operating activities after income tax to net cash inflow from operating activities after income tax to net cash inflow from operating activities Reconciliation of profit Reconciliation of profit Profit for the period Depreciation and amortisation Non-cash employee benefits expense – share-based payments Net profit on sale of assets previously written off Share of profit of associate accounted or using the equity method Accrued interest on convertible redeemable preference shares Change in value of purchased debt portfolios Capital raising costs disclosed in financing activities Change in operating assets and liabilities: - Decrease (increase) in trade receivables - (Increase) decrease in deferred tax assets through profit or loss - Increase (decrease) in trade payables - Increase (decrease) in provision for income taxes payable - (Decrease) Increase in accruals and other liabilities Net cash flow inflow from operating activities b)b)b)b) NonNonNonNon----cash investing and financing activities cash investing and financing activities financing activities financing activities cash investing and cash investing and Non-cash investing and financing activities Employee share scheme Make good provision Lease incentive liability released Lease incentive recognised 2014 2014 20142014 $’000 $’000 $’000 $’000 3,984 1,047 (3,930) 1,101 2014 2014 20142014 $’000 $’000 $’000 $’000 1,047 379 808 - - 520 11,814 2,058 (1,729) (535) (609) (1,354) 1,243 13,642 2015 2015 2015 2015 $’000 $’000 $’000 $’000 7,441 7,441 7,441 7,441 938938938938 30303030 (8) (8) (8) (8) (8) (8) (8) (8) ---- 16,702 16,702 16,702 16,702 ---- 240240240240 (48) (48) (48) (48) 2,125 2,125 2,125 2,125 1,643 1,643 1,643 1,643 (879) (879) (879) (879) 28,176 28,176 28,176 28,176 2015 2015 2015 2015 $’000 $’000 $’000 $’000 ---- 189189189189 (159) (159) (159) (159) 835835835835 2014 2014 20142014 $’000 $’000 $’000 $’000 91 - - 1,435 Pioneer Credit Limited 30 June 2015 Page 63 RiskRiskRiskRisk Notes to the consolidated financial statements Notes to the consolidated financial statements Notes to the consolidated financial statements Notes to the consolidated financial statements 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. 11 Critical accounting estimates and judgements 12 Financial risk management 13 Capital management 65 65 69 Pioneer Credit Limited 30 June 2015 Page 64 Notes to the consolidated financial statements Notes to the consolidated financial statements Notes to the consolidated financial statements Notes to the consolidated financial statements 11)11)11)11) Critical accounting estimates and judgements Critical accounting estimates and judgements Critical accounting estimates and judgements 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 Critical accounting estimates and assumptions Critical accounting estimates and assumptions 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 Fair value measurement of financial instruments Fair value measurement of financial instruments 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 7(b). Investment in associate Investment in associate Investment in associate Investment in associate The Group’s assessment is that the investment in Goldfields Money Limited represents an investment in associate, to be accounted for using the equity method of accounting, as the Group can demonstrate significant influence. The Group’s assessment at the end of the reporting period is that there is no objective evidence that this equity-accounted investment is impaired. Goldfields Money Limited is a publically traded entity and at the time of approval of this Annual Report, publically available information as at 30 June 2015 was not available on Goldfields Money Limited. Management has exercised judgement in determining the share of equity income from this associate. Selected information has been presented based on information readily available to the Group. See note 15 for more information on the Investment in associate. 12)12)12)12) Financial risk management Financial risk management management management Financial risk Financial risk 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 programme 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 ageing analysis for credit risk and projected cash flow analysis across the portfolio to manage the risk associated with the purchased debt portfolio. Pioneer Credit Limited 30 June 2015 Page 65 Notes to the consolidated financial statements Notes to the consolidated financial statements Notes to the consolidated financial statements Notes to the consolidated financial statements Risk management is the responsibility of Key Management Personnel. Policies under approval by the Board of Directors 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. a)a)a)a) Summarised sensitivity analysis interest rate risk Summarised sensitivity analysis –––– interest rate risk interest rate risk interest rate risk Summarised sensitivity analysis Summarised sensitivity analysis 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. At 30 June 2015 At 30 June 2015 At 30 June 2015 At 30 June 2015 Financial liabilities Borrowings At 30 June 2014 At 30 June 2014 At 30 June 2014 At 30 June 2014 Financial liabilities Borrowings Carrying Carrying Carrying Carrying amount amount amount amount $’000 $’000 $’000 $’000 ----100 bps 100 bps 100 bps 100 bps Profit Profit Profit Profit $’000 $’000 $’000 $’000 +100 bps bps bps bps +100 +100 +100 Profit Profit Profit Profit $’000 $’000 $’000 $’000 28,210 199 (199) 3,039 136 (136) Financial assets sensitive to interest rate risk comprise cash and cash equivalents only and their sensitivity to interest rate risk has not been included as the expense is not significant. b)b)b)b) Market risk Market risk Market risk 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; Foreign exchange risk Foreign exchange risk Foreign exchange risk Foreign exchange risk The Group has no financial instruments exposed to foreign currencies and as such there is no risk associated with fluctuations in foreign exchange rates. Pioneer Credit Limited 30 June 2015 Page 66 Notes to the consolidated financial statements Notes to the consolidated financial statements Notes to the consolidated financial statements Notes to the consolidated financial statements e risk and fair value interest rate risk ash flow and fair value interest rat CCCCash flow e risk e risk and fair value interest rat and fair value interest rat ash flow ash flow 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 Instruments used by the Group Instruments used by the Group Instruments used by the Group Bank overdrafts and bank loans 30 June 2015 30 June 2015 30 June 2015 30 June 2015 Weighted Weighted Weighted Weighted average average average average interest rate interest rate interest rate interest rate %%%% 4.56% Balance Balance Balance Balance $’000 $’000 $’000 $’000 28,210 30 June 2014 30 June 2014 30 June 2014 30 June 2014 Weighted Weighted Weighted Weighted average average average average interest rate interest rate interest rate interest rate %%%% 5.13% Balance Balance Balance Balance $’000 $’000 $’000 $’000 3,039 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. Price risk Price risk Price risk Price risk The Group has no financial instruments exposed 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)c)c)c) Credit risk Credit risk Credit risk Credit risk Credit risk arises from cash and cash equivalents, credit exposures to customers, including outstanding receivables and committed transactions. Risk management Risk management Risk management 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. Pioneer Credit Limited 30 June 2015 Page 67 Notes to the consolidated financial statements Notes to the consolidated financial statements Notes to the consolidated financial statements Notes to the consolidated financial statements Impaired trade receivables Impaired trade receivables Impaired trade receivables Impaired trade receivables As at 30 June 2015, no current trade receivables of the Group were impaired, nor overdue. d)d)d)d) Liquidity risk Liquidity risk Liquidity risk 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. Financing arrangements Financing arrangements Financing arrangements Financing arrangements The Group had access to a Senior Debt Facility of $54,060,000 at the end of the financial year (2014: $54,060,000). The facility comprises a cash advance facility to fund the acquisition of purchased debt 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 2015 and the undrawn limit on the cash advance facility was $18,791,000 at 30 June 2015 (2014: $43,963,000). 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. cial liabilities Maturities of financial liabilities Maturities of finan cial liabilities cial liabilities Maturities of finan Maturities of finan 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 2015 At 30 June 2015 At 30 June 2015 At 30 June 2015 Trade payables Borrowings Accruals, provisions and other liabilities At 30 June 2014 At 30 June 2014 At 30 June 2014 At 30 June 2014 Trade payables Borrowings Accruals, provisions and other liabilities Within 1 Within 1 Within 1 Within 1 year year year year $’000 $’000 $’000 $’000 3,851 13,002 1,624 18,477 11,352 5,479 2,440 19,271 Between Between Between Between 1 and 2 1 and 2 1 and 2 1 and 2 years years years years $’000 $’000 $’000 $’000 Between Between Between Between 2 and 5 2 and 5 2 and 5 2 and 5 years years years years $’000 $’000 $’000 $’000 Carrying Carrying Carrying Carrying amount amount amount amount $’000 $’000 $’000 $’000 - 7,935 - 7,935 - 812 - 812 - 14,558 369 14,927 - 1,514 84 1,598 3,851 32,873 1,993 38,717 11,352 7,388 2,524 21,264 Trade payables at 30 June 2014 included $10.2m owing on purchased debt portfolios, consistent with the terms of their acquisition. The amount of this trade payable is unusual when compared to the current period. It was paid, in the normal course of business, during the first half of the financial year. Pioneer Credit Limited 30 June 2015 Page 68 Notes to the consolidated financial statements Notes to the consolidated financial statements Notes to the consolidated financial statements Notes to the consolidated financial statements 13)13)13)13) Capital management Capital management Capital management Capital management a)a)a)a) Risk management Risk management Risk management Risk management The Group's objectives when managing capital are to; • 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)b)b)b) Dividends Dividends Dividends Dividends Ordinary shares Ordinary shares Ordinary shares Ordinary shares Special dividend on fully paid ordinary shares held on 30 April 2014 of 19.415 cents per share paid on 16 June 2014 2H FY14 dividend on fully paid ordinary shares held on 30 September 2014 of 3.10 cents per share paid on 17 October 2014 1H FY15 dividend on fully paid ordinary shares held on 31 March 2015 of 1.75 cents per share paid on 17 April 2015 Return of capital Return of capital Return of capital Return of capital 2015 2015 2015 2015 $’000 $’000 $’000 $’000 2014 $’000 - 3,930 1,407 1,407 1,407 1,407 794794794794 2,201 2,201 2,201 2,201 - - 3,930 2015 2015 2015 2015 $’000 $’000 $’000 $’000 2014 $’000 Return of capital on fully paid ordinary shares held on 30 April 2014 of 54.698 cents per share paid on 17 June 2014 - 11,070 Dividends not recognised at the end of the reporting period Dividends not recognised at the end of the reporting period Dividends not recognised at the end of the reporting period Dividends not recognised at the end of the reporting period Since year end the Directors have recommended the payment of a final dividend of 6.80 cents per fully paid ordinary share (2014 – 3.10), fully franked based on tax paid at 30%. The aggregate amount of the proposed dividend expected to be paid on 30 October 2015 out of retained earnings at 30 June 2015, but not recognised as a liability at year end is Franking dividends Franking dividends Franking dividends Franking dividends 2015 2015 2015 2015 $’000 $’000 $’000 $’000 2014 $’000 3,03,03,03,085858585 1,407 The franked portions of the final dividends recommended after 30 June 2015 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 2016. Franking credits available for subsequent reporting periods based on a tax rate of 30.0% (2014 – 30.0%) 2,408 2,408 2,408 2,408 1,454 2015 2015 2015 2015 $’000 $’000 $’000 $’000 2014 $’000 Pioneer Credit Limited 30 June 2015 Page 69 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. Notes to the consolidated financial statements Notes to the consolidated financial statements Notes to the consolidated financial statements Notes to the consolidated financial statements c)c)c)c) Capital risk management Capital risk management Capital risk management 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 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 cash flow, 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 12(d). Under the terms of the Senior Debt Facility, the Group is required to comply with financial covenants at all times, tested monthly. The Group has met all covenant obligations of the financier at all times during the current and prior years. Pioneer Credit Limited 30 June 2015 Page 70 Notes to the consolidated financial statements Notes to the consolidated financial statements Notes to the consolidated financial statements Notes to the consolidated financial statements Group Structure Group Structure Group Structure 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. 14 Subsidiaries 15 Associates 72 73 Pioneer Credit Limited 30 June 2015 Page 71 Notes to the consolidated financial statements Notes to the consolidated financial statements Notes to the consolidated financial statements Notes to the consolidated financial statements 14)14)14)14) Subsidiaries Subsidiaries Subsidiaries Subsidiaries Significant investments in subsidiaries Significant investments in subsidiaries Significant investments in 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 26(b). Name of entity Name of entity Name of entity Name of entity Country of Country of Country of Country of incorporation incorporation incorporation incorporation Class of Class of Class of Class of shares shares shares shares Pioneer Credit Acquisition Services Pty Limited Sphere Legal Pty Limited Pioneer Credit (Philippines) Pty Limited Pioneer Credit Financial Services Pty Limited* Pioneer Credit Broking Services Pty Limited** Pioneer Credit Acquisition Services (UK) Limited*** Australia Australia Australia Australia Australia United Kingdom Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Equity holding Equity holding Equity holding Equity holding 2014 2014 2015 2015 20142014 2015 2015 %%%% %%%% 100 100 100 100 100 100 - 100 - 100 100 100 * ** *** Pioneer Credit Financial Services Pty Limited was incorporated on 1 April 2015 and holds the Investment in associate. Pioneer Credit Broking Services Pty Limited was incorporated on 28 May 2015 and has not conducted any business since inception to the date of this report. Pioneer Credit Acquisition Services (UK) Limited is an entity incorporated in the United Kingdom and has not conducted any business since inception to the date of this report. The principal activities of the other subsidiaries listed above is the same as that of the holding Company, namely, specialising in acquiring and servicing unsecured retail debt portfolios. Pioneer Credit Limited 30 June 2015 Page 72 Notes to the consolidated financial statements Notes to the consolidated financial statements Notes to the consolidated financial statements Notes to the consolidated financial statements 15)15)15)15) AAAAssociates ssociates ssociates ssociates in associate Investment in associate Investment in associate in associate Investment Investment Set out below is the investment in an associate of the Group as at 30 June 2015. The entity listed below has share capital consisting solely of ordinary shares, which are held directly by the Group. The country of incorporation or registration is also the principal place of business, and the proportion of ownership interest is the same as the proportion of voting rights held. Name of entity Name of entity Name of entity Name of entity Place of business/ country Place of business/ country Place of business/ country Place of business/ country of incorporation of incorporation of incorporation of incorporation % of ownership % of ownership % of ownership % of ownership interest interest interest interest Nature of Nature of Nature of Nature of relationship relationship relationship relationship Measurement Measurement Measurement Measurement method method method method Goldfields Money Limited Australia 30 June 30 June 30 June 30 June 2015 2015 2015 2015 14.13 30 June 30 June 30 June 30 June 2014 2014 20142014 - Associate Equity method Goldfields Money Limited (GMY) is an ASX listed Authorised Deposit-taking Institution (ADI) and offers a variety of loan products including home, personal and commercial loans with various features to the public. GMY also offers a variety of savings and investments, including transaction and saving accounts and term deposits. Historically, GMY focused on providing financial services for individuals and businesses within the Goldfields region. The Group acquired the holding during the last quarter of the financial year. At 30 June 2015, the Group’s share of the quoted market value of GMY was $1.882m while the carrying value, inclusive of transaction costs and equity method accounting is $2.321m. The Australian Prudential Regulation Authority (APRA) imposes a 15% cap on any one’s individual equity holding in an ADI. The Group’s holding is near that limit. There are no restrictions on the Group’s ability to dispose of its holding in GMY. The Group acquired this associate holding as part of the strategic growth strategy of the Group. The Group’s assessment at the end of the reporting period is that there is no objective evidence that the equity-accounted investment is impaired. There were no transactions with the associate during the financial year. The Group is not aware of any contingent liabilities that may or may not exist within Goldfield Money at 30 June 2015. Pioneer Credit Limited 30 June 2015 Page 73 Summarised financial information for the associate Summarised financial information for the associate Summarised financial information for the associate Summarised financial information for the associate Goldfields Money is a publically traded entity and at the time of approval of this annual report, publically available information as at 30 June 2015 for Goldfields Money was not available. Notes to the consolidated financial statements Notes to the consolidated financial statements Notes to the consolidated financial statements Notes to the consolidated financial statements Summarised statement of financial position Summarised statement of financial position Summarised statement of financial position Summarised statement of financial position Total assets Total liabilities Net assets Movement in net assets Opening net assets Profit / (loss) for the period Equity raising costs Other comprehensive income Closing net assets Group’s share of net assets in % Group’s share of net assets in $ Summarised statement of comprehensive income Summarised statement of comprehensive income Summarised statement of comprehensive income Summarised statement of comprehensive income Interest revenue Interest expense Non-interest revenue Other expenses Income tax benefit Profit from continuing operations Other comprehensive income Total comprehensive income Dividends received from associates Summarised commitments Summarised commitments Summarised commitments Summarised commitments Outstanding loan commitments Outstanding overdraft commitments Lease commitments Due not later than one year Due later than one year and not later than five years 30 June 2015 30 June 2015 30 June 2015 30 June 2015 $’000 $’000 $’000 $’000 30 June 2014 $’000 158, 158,984984984984 158, 158, 144,077 144,077 144,077 144,077 14,907 14,907 14,907 14,907 14,838 14,838 14,838 14,838 140140140140 (71(71(71(71)))) ---- 14,907 14,907 14,907 14,907 14.13% 14.13% 14.13% 14.13% 2,102,102,102,106666 143,067 128,229 14,838 14,683 190 (71) 36 14,838 - - 30 June 2015 30 June 2015 30 June 2015 30 June 2015 $’000 $’000 $’000 $’000 30 June 2014 $’000 7,259 7,259 7,259 7,259 (4,319) (4,319) (4,319) (4,319) 404404404404 (3,2(3,2(3,2(3,254545454)))) 50505050 140140140140 ---- 140140140140 ---- 6,196 (3,612) 392 (2,817) 30 190 36 226 - 30 June 2015 30 June 2015 30 June 2015 30 June 2015 $’000 $’000 $’000 $’000 30 June 2014 $’000 10,185 10,185 10,185 10,185 449449449449 53535353 58585858 111111111111 9,025 586 87 29 116 Pioneer Credit Limited 30 June 2015 Page 74 Unrecognised items Unrecognised items Unrecognised items 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. Notes to the consolidated financial statements Notes to the consolidated financial statements Notes to the consolidated financial statements Notes to the consolidated financial statements 16 Contingencies 17 Commitments 18 Events occurring after the reporting period 76 76 76 Pioneer Credit Limited 30 June 2015 Page 75 16)16)16)16) Contingencies Contingencies Contingencies Contingencies The Directors are of the opinion that no contingent liabilities or contingent assets exist as at the date of this report. Notes to the consolidated financial statements Notes to the consolidated financial statements Notes to the consolidated financial statements Notes to the consolidated financial statements 17)17)17)17) Commitments Commitments Commitments Commitments a)a)a)a) NonNonNonNon----cancellable operating leases cancellable operating leases cancellable operating leases cancellable operating leases The Group leases various offices under non-cancellable operating leases expiring within one to eight 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 Commitments for minimum lease payments in relation to non----cancellable cancellable cancellable Commitments for minimum lease payments in relation to non Commitments for minimum lease payments in relation to non operating leases are payable as follows: operating leases are payable as follows: follows: follows: operating leases are payable as operating leases are payable as Within one year Later than one year but not later than five years Later than five years 2015 2015 2015 2015 $’000 $’000 $’000 $’000 2014 $’000 2,025 2,025 2,025 2,025 8,340 8,340 8,340 8,340 7,053 7,053 7,053 7,053 17,418 17,418 17,418 17,418 1,347 5,075 5,628 12,050 The 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)b)b)b) Service contract Service contract Service contract Service contract The Group has entered into a services contract ending in August 2016, with an option to extend for a further three years. cancellable Commitments for minimum service payments in relation to non----cancellable Commitments for minimum service payments in relation to non cancellable cancellable Commitments for minimum service payments in relation to non Commitments for minimum service payments in relation to non are payable as follows: contracts are payable as follows: contracts contracts are payable as follows: are payable as follows: contracts Within one year Later than one year but not later than five years 2015 2015 2015 2015 $’000 $’000 $’000 $’000 2014 $’000 1,551 1,551 1,551 1,551 204204204204 1,755 1,755 1,755 1,755 1,483 1,770 3,253 18)18)18)18) Events occurring after the reporting period Events occurring after the reporting period Events occurring after the reporting period 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 2015 Page 76 Notes to the consolidated financial statements Notes to the consolidated financial statements Notes to the consolidated financial statements Notes to the consolidated financial statements Other information Other information Other information 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. Related party transactions 19 Share-based payments 20 Remuneration of auditors 21 22 Earnings per share 23 Deed of cross guarantee 24 25 26 Assets pledged as security Parent entity financial information Summary of significant accounting policies 78 80 82 83 84 84 84 85 Pioneer Credit Limited 30 June 2015 Page 77 to the consolidated financial statements Notes to the consolidated financial statements Notes to the consolidated financial statements to the consolidated financial statements Notes Notes 19)19)19)19) Related party transactions Related party transactions Related party transactions Related party transactions a)a)a)a) Parent entity Parent entity Parent entity Parent entity The Parent entity within the Group is Pioneer Credit Limited. b)b)b)b) Subsidiaries Subsidiaries Subsidiaries Subsidiaries Interests in subsidiaries are set out in note 14. c)c)c)c) Associates Associates Associates Associates Interests in associates are set out in note 15. There were no transactions with associates in the current period. d)d)d)d) Key Management Personnel Key Management Personnel Key Management Personnel Key Management Personnel Short-term employee benefits Post-employment benefits Long-term benefits Share-based payments 2015 2015 2015 2015 $$$$ 2014 $ 1,426,530 1,426,530 1,426,530 1,426,530 127,948 127,948 127,948 127,948 40,210 40,210 40,210 40,210 30,068 30,068 30,068 30,068 1,624,756 1,624,756 1,624,756 1,624,756 1,048,886 95,977 17,509 311,028 1,473,400 Detailed remuneration disclosures are provided in the Remuneration Report on pages 15 to 28. e)e)e)e) Transactions with other related parties Transactions with other related parties Transactions with other related parties Transactions with other related parties The following transactions occurred with related parties: Rental expenses and other services Other related parties Superannuation contributions Contributions to superannuation funds on behalf of Directors Other transactions Remuneration paid to Directors of the ultimate Australian parent entity 2015 2015 2015 2015 $$$$ 2014 $ 490,917 490,917 490,917 490,917 382,842 67,751 67,751 67,751 67,751 53,660 801,817 801,817 801,817 801,817 592,635 Pioneer Credit Limited 30 June 2015 Page 78 f)f)f)f) Loans from related parties Loans from related parties Loans from related parties Loans from related parties Notes to the consolidated financial statements Notes to the consolidated financial statements Notes to the consolidated financial statements Notes to the consolidated financial statements Beginning of the year Loans from related parties Loan repayments to related parties 2015 2015 2015 2015 $$$$ ---- ---- ---- ---- 2014 $ (54,055) (1,566,843) 1,620,898 - During the previous financial year, the Group benefited from a short term rolling credit facility from a related party. This was unsecured and did not accrue interest. g)g)g)g) Investment in associate Investment in associate Investment in associate Investment in associate At a meeting of the Board of the Company on 26 March 2015, the Board (with Mr Keith John abstaining) approved the Company presenting an offer to Midbridge Investments Pty Ltd (MB) to acquire all of its shareholding in ASX listed Goldfields Money Limited in an off-market transaction at a price of $1.04 per share. The shareholding represented approximately 14.1% of the issued equity in Goldfields Money Limited. MB is a private investment vehicle of the Company’s Managing Director Mr Keith John. On the 8th April 2015 the Company formally presented its offer to MB which was accepted. The offer was for an amount of $2,302,972.88. The sum was paid by instalments and settled in full during the reporting period. Neither MB, Mr Keith John or any associate of those parties received any interest, financial accommodation or benefit as a result of being paid by instalment. h)h)h)h) Contributed capital held by related parties Contributed capital held by related parties Contributed capital held by related parties Contributed capital held by related parties The movements during the reporting period in the value of ordinary shares in the Parent entity held directly, indirectly or beneficially by Key Management Personnel, including their related parties are: Ordinary shares acquired Modification of employee share option scheme Conversion of convertible redeemable preference shares 2015 2015 2015 2015 $$$$ 2014 $ ---- ---- ---- ---- 405,869 189,000 12,320,215 12,915,084 i)i)i)i) Convertible redeemable preference shares held by related parties Convertible redeemable preference shares held by related parties Convertible redeemable preference shares held by related parties Convertible redeemable preference shares held by related parties There are and were no convertible redeemable preference shares held by related parties during the financial year. In the previous financial year, the Company was admitted to the official list of the ASX Limited and completed on the conversion of all classes of convertible redeemable preference shares and reclassification to fully paid ordinary shares. Pioneer Credit Limited 30 June 2015 Page 79 Prior to this conversion and reclassification, the movements during the reporting period in the value of convertible redeemable preference shares in the Parent entity held directly, indirectly or beneficially by Key Management Personnel, including their related parties are: olidated financial statements Notes to the consolidated financial statements Notes to the cons olidated financial statements olidated financial statements Notes to the cons Notes to the cons 2015 2015 2015 2015 $$$$ 2014 $ ---- ---- ---- 562,307 41,781 604,088 CRPS A CRPS B j)j)j)j) Terms and conditions Terms and conditions Terms and conditions Terms and conditions See note 9(b) for general terms and conditions on ordinary shares. 20)20)20)20) Share based payments Share----based payments based payments based payments Share Share a)a)a)a) Chairman’s options Chairman’s options Chairman’s options Chairman’s options At both 30 June 2015, and 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 at grant dateateateate Fair value of options granted –––– fair value at grant d Fair value of options granted fair value at grant d fair value at grant d Fair value of options granted 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 Tranche 1 Tranche 1 Tranche 1 Tranche 2 Tranche 2 Tranche 2 Tranche 2 $0.28 $0.28 $0.28 $0.28 $1.60 $1.60 $1.60 $1.60 $1.92 $1.92 $1.92 $1.92 35%35%35%35% 4.224.224.224.22 years years years years 4.5%4.5%4.5%4.5% 3.041% 3.041% 3.041% 3.041% $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 2015 Page 80 Notes to the consolidated financial statements Notes to the consolidated financial statements Notes to the consolidated financial statements Notes to the consolidated financial statements b)b)b)b) Management options Management options Management options Management options No management options were granted or vested during the financial year. During the previous financial year, in advance of the completion of the Initial Public Offer, and in recognition of certain eligible employees’ performance since joining the Company up to and including the date of admission to the ASX on 1 May 2014, the Board determined that all 700,000 unvested options would 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. The eligible employees immediately exercised the vested options to acquire Non-Ordinary Management (NOM) Shares, that were funded through a non-recourse loan. The NOM were ultimately converted to Ordinary Shares. The non-recourse 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. This scheme was accounted for as a ‘share option scheme’, accordingly the non-recourse loans are not recognised in the financial statements and shares not yet fully paid are recognised as Treasury Shares. At both the current and previous balance date, three non-recourse loans remained outstanding. c)c)c)c) Employee Share Scheme Employee Share Scheme Employee Share Scheme Employee Share Scheme There was no Employee Share Scheme in the current financial year. During the previous financial year, to encourage broad based employee share ownership through the period up to Initial Public Offer, 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 may 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 are held under a trading lock, but otherwise carry the same rights and entitlements of fully paid ordinary Shares, including dividend and voting rights. Pioneer Credit Limited 30 June 2015 Page 81 lidated financial statements Notes to the consolidated financial statements Notes to the conso lidated financial statements lidated financial statements Notes to the conso Notes to the conso d)d)d)d) Expenses arising from share based payment transactions Expenses arising from share----based payment transactions based payment transactions based payment transactions Expenses arising from share Expenses arising from share 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 21)21)21)21) Remuneration of auditors Remuneration of auditors Remuneration of auditors Remuneration of auditors 2015 2015 2015 2015 $’000 $’000 $’000 $’000 2014 $’000 30303030 ---- ---- 30303030 13 704 91 808 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)a)a)a) PricewaterhouseCoopers Australia PricewaterhouseCoopers Australia PricewaterhouseCoopers Australia PricewaterhouseCoopers Australia i) Audit and other assurance services Audit and other assurance services Audit and other assurance services Audit and other assurance services Audit and review of financial statements Total remuneration of PricewaterhouseCoopers Australia Total remuneration of PricewaterhouseCoopers Australia Total remuneration of PricewaterhouseCoopers Australia Total remuneration of PricewaterhouseCoopers Australia i) b)b)b)b) Network firms of PricewaterhouseCoopers Australia Network firms of PricewaterhouseCoopers Australia Network firms of PricewaterhouseCoopers Australia Network firms of PricewaterhouseCoopers Australia Audit and other assurance services Audit and other assurance services Audit and other assurance services Audit and other assurance services Initial Public Offering professional services Other services Other services Other services Other services Other compliance and accounting advice ii) Network firms of PricewaterhouseCoopers Australia Total remuneration of Network firms of PricewaterhouseCoopers Australia Total remuneration of Network firms of PricewaterhouseCoopers Australia Network firms of PricewaterhouseCoopers Australia Total remuneration of Total remuneration of i) c)c)c)c) NonNonNonNon----PricewaterhouseCoopers Australia related audit firms PricewaterhouseCoopers Australia related audit firms PricewaterhouseCoopers Australia related audit firms PricewaterhouseCoopers Australia related audit firms Audit and other assurance services Audit and other assurance services Audit and other assurance services Audit and other assurance services Initial Public Offering professional services Other services Other services Other services Other services Other tax, compliance and accounting advice ii) PricewaterhouseCoopers Australia related firms Total remuneration of non----PricewaterhouseCoopers Australia related firms Total remuneration of non PricewaterhouseCoopers Australia related firms PricewaterhouseCoopers Australia related firms Total remuneration of non Total remuneration of non 2015 2015 2015 2015 $$$$ 2014 $ 255,914 255,914 255,914 255,914 194,743 255,914 255,914 255,914 255,914 194,743 ---- 62,943 171,191 171,191 171,191 171,191 171,191 171,191 171,191 171,191 25,964 88,907 ---- 324,469 117,179 117,179 117,179 117,179 117,179 117,179 117,179 117,179 544,284 544,284 544,284 544,284 89,909 414,378 698,028 Pioneer Credit Limited 30 June 2015 Page 82 22)22)22)22) Earnings per share Earnings per share Earnings per share Earnings per share a)a)a)a) Basic earnings per share Basic earnings per share Basic earnings per share Basic earnings per share Notes to the consolidated financial statements Notes to the consolidated financial statements Notes to the consolidated financial statements Notes to the consolidated financial statements 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)b)b)b) Diluted earnings per share Diluted earnings per share share share Diluted earnings per Diluted earnings per 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)c)c)c) Reconciliation of earnings used in calculating earnings per share Reconciliation of earnings used in calculating earnings per share of earnings used in calculating earnings per share of earnings used in calculating earnings per share Reconciliation Reconciliation Basic earnings per share Basic earnings per share Basic 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 Diluted earnings per share Diluted earnings per share Diluted earnings per share Profit from continuing operations attributable to the ordinary equity holders of the Company Used in calculating diluted earnings per share d)d)d)d) Weighted average number of shares used as the denominator Weighted average number of shares used as the denominator the denominator the denominator Weighted average number of shares used as Weighted average number of shares used as 2015 2015 2015 2015 Cents Cents Cents Cents 16.40 16.40 16.40 16.40 16.40 16.40 16.40 16.40 2014 Cents 7.97 7.97 2015 2015 2015 2015 Cents Cents Cents Cents 16.40 16.40 16.40 16.40 16.40 16.40 16.40 16.40 2014 Cents 7.97 7.97 2015 2015 2015 2015 $’000 $’000 $’000 $’000 2014 $’000 7,441 7,441 7,441 7,441 1,047 7,441 7,441 7,441 7,441 1,047 Weighted average number of ordinary shares used as the denominator in calculating basic earnings per share Weighted average number of ordinary and potential shares used as the denominator in calculating diluted earnings per share 2015 2015 2015 2015 Number Number Number Number 2014 Number 45,373,990 45,373,990 45,373,990 45,373,990 13,129,482 45,373,990 45,373,990 45,373,990 45,373,990 13,129,482 Pioneer Credit Limited 30 June 2015 Page 83 Notes to the consolidated financial statements Notes to the consolidated financial statements Notes to the consolidated financial statements Notes to the consolidated financial statements 23)23)23)23) Deed of cross guarantee Deed of cross guarantee Deed of cross guarantee Deed of cross guarantee Pioneer Credit Limited, Pioneer Credit Acquisition Services Pty Limited, Sphere Legal Pty Limited, Pioneer Credit (Philippines) Pty Limited, Pioneer Credit Financial Services Pty Limited and Pioneer Credit Broking Services Pty Limited parties to a deed of cross guarantee, entered into on 25 June 2015, 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 14 to these consolidated financial statements. Of these, Pioneer Credit Acquisition Services (UK) 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 Pioneer Credit Acquisition Services (UK) Limited is not a reporting entity. At 30 June 2015, Pioneer Credit Acquisition Services (UK) Limited has total assets of $6.00 and generated no revenue. Costs incurred are insignificant and relate to regulatory reporting requirements in the United Kingdom. 24)24)24)24) Assets pledged as security Assets pledged as security Assets pledged as security Assets pledged as security The carrying amount of assets pledged as security is disclosed in note 7(d). 25)25)25)25) Parent entity financial information Parent entity financial information entity financial information entity financial information Parent Parent a)a)a)a) Summary financial information Summary financial information Summary financial information Summary financial information The individual financial statements for the Parent entity show the following aggregate amounts: Balance sheet Balance sheet Balance sheet Balance sheet Current assets Total assets Current liabilities Total liabilities Shareholders’ equity Shareholders’ equity Shareholders’ equity Shareholders’ equity Issued capital Share based payment reserve Accumulated profits (losses) Profit (loss) for the year Total comprehensive income 2015 2015 2015 2015 $’000 $’000 $’000 $’000 1,205 1,205 1,205 1,205 61,247 61,247 61,247 61,247 6,711 6,711 6,711 6,711 9,001 9,001 9,001 9,001 45,445,445,445,459595959 1,073 1,073 1,073 1,073 5,714 5,714 5,714 5,714 52,246 52,246 52,246 52,246 8,968 8,968 8,968 8,968 8,968 8,968 8,968 8,968 2014 $’000 2,297 48,613 1,810 3,170 45,459 1,037 (1,053) 45,443 6,313 6,313 Pioneer Credit Limited 30 June 2015 Page 84 Notes to the consolidated financial statements Notes to the consolidated financial statements Notes to the consolidated financial statements Notes to the consolidated financial statements b)b)b)b) Guarantees entered into by the Parent entity Guarantees entered into by the Parent entity Guarantees entered into by the Parent entity 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)c)c)c) Contingent liabilities of the Parent entity Contingent liabilities of the Parent entity Contingent liabilities of the Parent entity Contingent liabilities of the Parent entity The Parent entity did not have any contingent liabilities as at 30 June 2015 or 30 June 2014. d)d)d)d) Contractual commitments for the acquisition of property, plant or e quipment Contractual commitments for the acquisition of property, plant or equipment quipment quipment Contractual commitments for the acquisition of property, plant or e Contractual commitments for the acquisition of property, plant or e The Parent entity has no contractual commitments for the acquisition of property, plant or equipment at 30 June 2015 (2014: Nil) 26)26)26)26) Summary of significant accounting policies Summary of significant accounting policies Summary of significant accounting policies Summary of significant accounting policies This note provides a list of all significant accounting policies adopted in the preparation of these consolidated financial statements. These policies have been consistently applied to all the years presented, unless otherwise stated. The financial statements are for the Group consisting of Pioneer Credit Limited and its subsidiaries. Contents of the summary of significant accounting policies Contents of the summary of significant accounting policies Contents of the summary of significant accounting policies Contents of the summary of significant accounting policies Income tax Intangible assets a) Basis of preparation b) Principles of consolidation c) d) Cash and cash equivalents e) Trade & other receivables f) Property, plant and equipment g) h) Trade and other payables i) Borrowings j) Provisions k) Employee benefits l) Contributed equity m) Earnings per share n) Goods and Services Tax (GST) o) Rounding of amounts p) Impairment of assets q) Leases 86 87 88 89 89 89 90 90 90 91 91 92 92 92 92 93 93 Pioneer Credit Limited 30 June 2015 Page 85 Notes to the consolidated financial statements Notes to the consolidated financial statements Notes to the consolidated financial statements Notes to the consolidated financial statements a)a)a)a) Basis of preparation Basis of preparation Basis of preparation 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. Compliance with IFRS Compliance with IFRS Compliance with IFRS 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). measurement Basis of measurement Basis of measurement measurement Basis of Basis of 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. Functional and presentation currency Functional and presentation currency Functional and presentation currency Functional and presentation currency The consolidated financial statements are presented in Australian dollars, which is Pioneer Credit Limited's functional and presentation currency. Critical accounting estimates Critical accounting estimates Critical accounting estimates 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 11. Changes to presentation Changes to presentation Changes to presentation Changes to presentation Certain classifications on the consolidated statement of comprehensive income, consolidated balance sheet and consolidated statement of cash flows 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. ew and amended standards adopted by the Group NNNNew and amended standards adopted by the Group ew and amended standards adopted by the Group ew and amended standards adopted by the Group The Group has applied the following standard and amendment for the first time for their annual reporting period commencing 1 July 2014: • AASB 2014-1 Amendments to Australian Accounting Standards The adoption of this standard did not have any impact on the current period or any prior period and is not likely to affect future periods. The adoption of these standards only affected the disclosures in the notes to the financial statements. Pioneer Credit Limited 30 June 2015 Page 86 Notes to the consolidated financial statements Notes to the consolidated financial statements Notes to the consolidated financial statements Notes to the consolidated financial statements New standards and interpretations not yet adopted New standards and interpretations not yet adopted New standards and interpretations not yet adopted New standards and interpretations not yet adopted Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2015 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. Mandatory application date/ Date Mandatory application date/ Date Mandatory application date/ Date Mandatory application date/ Date of adoption by Group of adoption by Group of adoption by Group of adoption by Group Must be applied for financial years commencing on or after 1 January 2018. Based on the transitional provisions in the completed IFRS 9, early adoption in phases was only permitted for annual reporting periods beginning before 1 February 2015. After that date, the new rules must be adopted in their entirety. Mandatory for financial years commencing on or after 1 January 2017. Expected date of adoption by the Group: 1 July 2018. Impact Impact Impact Impact The potential financial impact to the Group, if any, has not yet been assessed or determined. Management is currently assessing the impact of the new rules, and at this stage the Group does not anticipate there will be any significant impact. Title of Title of Title of Title of standard standard standard standard AASB 9 Financial Instruments AASB 15 Revenue from Contracts with Customers Nature of change Nature of change Nature of change Nature of change AASB 9 addresses the classification, measurement and de recognition of financial assets and financial liabilities and introduces new rules for hedge accounting. In December 2014, the AASB made further changes to the classification and measurement rules and also introduced a new impairment model. These latest amendments now complete the new financial instruments standard. The AASB has issued a new standard for the recognition of revenue. This will replace AASB 118 which covers contracts for goods and services and AASB 111 which covers construction contracts. The new standard is based on the principle that revenue is recognised when control of a good or service transfers to a customer – so the notion of control replaces the existing notion of risks and rewards. The standard permits a modified retrospective approach for the adoption. Under this approach entities will recognise transitional adjustments in retained earnings on the date of initial application (eg 1 July 2017), ie without restating the comparative period. They will only need to apply the new rules to contracts that are not completed as of the date of initial application. 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)b)b)b) Principles of consolidation Principles of consolidation Principles of consolidation Principles of consolidation aries Subsidiaries Subsidi aries aries Subsidi Subsidi The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Pioneer Credit Limited ('Company' or 'Parent entity') as at 30 June 2015 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 de-consolidated from the date that control ceases. Pioneer Credit Limited 30 June 2015 Page 87 Notes to the consolidated financial statements Notes to the consolidated financial statements Notes to the consolidated financial statements Notes to the consolidated financial statements The acquisition method of accounting is used to account for business combinations undertaken 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. Associates Associates Associates Associates Associates are all entities over which the Group has significant influence but not control or joint control. This is generally the case where the Group holds between 20% and 50% of the voting rights or otherwise demonstrates significant influence. Investments in associates are accounted for using the equity method of accounting (described below), after initially being recognised at cost. Equity method Equity method Equity method Equity method Under the equity method of accounting, the investments are initially recognised at cost and adjusted thereafter to recognise the Group’s share of the post-acquisition profits or losses of the investee in profit or loss, and the Group’s share of movements in other comprehensive income of the investee in other comprehensive income. Dividends received or receivable from associates and joint ventures are recognised as a reduction in the carrying amount of the investment. When the Group’s share of losses in an equity-accounted investment equals or exceeds its interest in the entity, including any other unsecured long-term receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the other entity. Unrealised gains on transactions between the Group and its associates and joint ventures are eliminated to the extent of the Group’s interest in these entities. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of equity accounted investees have been changed where necessary to ensure consistency with the policies adopted by the Group. The Group assesses at the end of each reporting period whether there is any objective evidence that the equity-accounted investment is impaired. Objective evidence of impairment for an investment in an equity instrument includes information about significant changes with an adverse effect that have taken place in the technological, market, economic or legal environment in which the issuer operates, and indicates that the cost of the investment in the equity instrument may not be recovered. A significant or prolonged decline in the fair value of an investment in an equity instrument below its cost is also objective evidence of impairment. Where there is objective evidence based on observable data that there may be an impairment, the carrying amount of the equity-accounted investment is tested in accordance with the policy described in note 26(p). c)c)c)c) Income tax Income tax Income tax 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. Pioneer Credit Limited 30 June 2015 Page 88 Notes to the consolidated financial statements Notes to the consolidated financial statements Notes to the consolidated financial statements Notes to the consolidated financial statements 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)d)d)d) Cash and cash equivalents Cash and cash equivalents Cash and cash equivalents 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)e)e)e) Trade & other receivables Trade & other receivables Trade & other receivables 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. 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)f)f)f) Property, plant and equipment Property, plant and equipment Property, plant and equipment 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 8(a). Pioneer Credit Limited 30 June 2015 Page 89 Notes to the consolidated financial statements Notes to the consolidated financial statements Notes to the consolidated financial statements Notes to the consolidated financial statements 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)g)g)g) gible assets Intangible assets Intan gible assets gible assets Intan Intan Software Software Software 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. Amortisation methods and periods Amortisation methods and periods Amortisation methods and periods Amortisation methods and periods Refer to note 8(c) for details about amortisation methods and periods used by the Group for intangible assets. h)h)h)h) Trade and other payables Trade and other payables Trade and other payables 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. i)i)i)i) Borrowings Borrowings Borrowings 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. Pioneer Credit Limited 30 June 2015 Page 90 Notes to the consolidated financial statements Notes to the consolidated financial statements Notes to the consolidated financial statements Notes to the consolidated financial statements 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)j)j)j) Provisions Provisions Provisions 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)k)k)k) Employee benefits Employee benefits Employee benefits Employee benefits Short term obligationsnsnsns Short term obligatio Short term obligatio Short term obligatio 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 employees’ 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. Chairman’s Options based payments –––– Chairman’s Options Share----based payments Share Chairman’s Options Chairman’s Options based payments based payments Share Share 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. Management Options based payments –––– Management Options Share----based payments Share Management Options Management Options based payments based payments Share Share 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. Pioneer Credit Limited 30 June 2015 Page 91 Notes to the consolidated financial statementsmentsmentsments Notes to the consolidated financial state Notes to the consolidated financial state Notes to the consolidated financial state 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)l)l)l) Contributed equity Contributed equity Contributed equity Contributed equity Ordinary shares are classified as equity. m)m)m)m) Earnings per share Earnings per share Earnings per share Earnings per share Basic earnings per share Basic earnings per share Basic earnings per share 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. 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)n)n)n) Goods and Services Tax (GST) Goods and Services Tax (GST) Goods and Services Tax (GST) 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)o)o)o) Rounding of amounts Rounding of amounts Rounding of amounts 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 2015 Page 92 Notes to the consolidated financial statements Notes to the consolidated financial statements Notes to the consolidated financial statements Notes to the consolidated financial statements p)p)p)p) Impairment of assets Impairment of assets Impairment of assets 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)q)q)q) Leases Leases Leases 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 17). 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 2015 Page 93 Directors’ declaration Directors’ declaration Directors’ declaration Directors’ declaration In the Directors' opinion: a) the financial statements and notes set out on pages 33 to 93 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 2015 and of its performance for the year ended on that date, and b) 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 c) at the date of this declaration, there are reasonable grounds to believe that the members of the extended closed Group identified in note 23 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 23. Note 26(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 managing director and chief financial officer required by section 295A of the Corporations Act 2001. This declaration is made in accordance with a resolution of Directors. John Keith John Keith John John KeithKeith Managing Director Perth 20 August 2015 Pioneer Credit Limited 30 June 2015 Page 94 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 2015, 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, the Corporations Act 2001 and Report on the Remuneration Report 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 26 (a), 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. Page 95 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 2015 and of its performance for the year ended on that date; and complying with Australian Accounting Standards (including the Australian Accounting Interpretations), the Corporations Regulations 2001 and Report on the Remuneration Report. (b) the financial report and notes also comply with International Financial Reporting Standards as disclosed in Note 26 (a). Report on the Remuneration Report We have audited the remuneration report included in pages 15 to 28 of the directors’ report for the year ended 30 June 2015. 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 2015 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 the Pioneer Credit Limited for the year ended 30 June 2015, which are available 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 20 August 2015 Page 96 Shareholder information Shareholder information Shareholder information Shareholder information The shareholder information set out below was applicable as at 31 July 2015. a)a)a)a) Distribution of equity securities Distribution of equity securities Distribution of equity securities Distribution of equity securities Analysis of numbers of equity security holders by size of holding: Holding Holding Holding Holding 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 and over Holders Holders Holders Holders 205 249 140 283 48 925 Ordinary shares Ordinary shares Ordinary shares Ordinary shares 114,541 734,988 1,116,107 8,702,841 34,705,513 45,373,990 There were zero holders of less than a marketable parcel of ordinary shares. b)b)b)b) Equity security holders Equity security holders holders holders Equity security Equity security Twenty largest quoted equity security holders Twenty largest quoted equity security holders Twenty largest quoted equity security holders Twenty largest quoted equity security holders The names of the twenty largest holders of quoted equity securities are listed below: Name Name NameName Alana Natasha John Banksia Management Pty Limited National Nominees Limited BC Fund II Pty Limited RBC Investor Services Australia Nominees Pty Limited Citicorp Nominees Pty Limited J P Morgan Nominees Australia Limited BNP Paribas Nominees Pty Limited Bernard Jocelyn Patrick Prefumo Niribi Pty Limited HSBC Custody Nominees (Australia) Limited Sharlin Nominees Pty Limited Avy Nominees Pty Limited James Arthur Singh & Kristy Nicole Milward Hoperidge Enterprises Pty Limited Escor Investments Pty Limited Mr Stephen James Lambert & Mrs Ruth Lynette Lambert & Mr Simon Lee Lambert Coolah Holdings Pty Limited Midbridge Investments Pty Limited Sandini Pty Limited Ordinary shares Ordinary shares Ordinary shares Ordinary shares Number held Number held Number held Number held 7,168,186 5,612,634 5,053,012 2,033,915 1,167,177 1,144,701 1,028,830 910,000 903,706 593,872 546,750 519,558 450,574 436,887 425,000 412,500 400,000 350,000 337,470 310,000 Percentage Percentage Percentage Percentage of issued shares of issued shares of issued shares of issued shares 15.80 12.37 11.14 4.48 2.57 2.52 2.27 2.01 1.99 1.31 1.20 1.15 0.99 0.96 0.94 0.91 0.88 0.77 0.74 0.68 Pioneer Credit Limited 30 June 2015 Page 97 Unquoted equity securities Unquoted equity securities Unquoted equity securities Unquoted equity securities Name Name NameName Michael Smith c)c)c)c) Substantial holders Substantial holders Substantial holders Substantial holders Substantial holders in the Company are set out below: Options Options Options Options Number held Number held Number held Number held 300,000 Percentage Percentage Percentage Percentage of issued options options of issued options options of issued of issued 100 Name Name NameName Alana Natasha John Banksia Management Pty Limited & BC Fund II Pty Limited Discovery Asset Management Pty Limited Number held Number held Number held Number held 8,213,216 7,646,549 3,769,408 Percentage Percentage Percentage Percentage 18.10% 16.85% 8.31% d)d)d)d) Securities subject to voluntary escrow Securities subject to voluntary escrow Securities subject to voluntary escrow Securities subject to voluntary escrow Escrow ends Escrow ends Escrow ends Escrow ends 10 days after release to ASX of 30 June 2015 results 1 May 2016 1 May 2017 ClassClassClassClass Ordinary shares Ordinary shares Ordinary shares Number of shares Number of shares Number of shares Number of shares 20,239,290 62,500 39,380 e)e)e)e) Voting rights Voting rights Voting rights Voting rights 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 30 June 2015 Page 98 

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