Annual Report
for the year ended 30 June 2019
Pioneer Credit Limited ABN 44 103 003 505
Annual Report - 30 June 2019
Lodged with the ASX under Listing Rule 4.3A.
Contents
Results for announcement to the market
Financial Statements
i
27
These are the consolidated financial statements of Pioneer Credit Limited and its subsidiaries and are presented in
Australian currency. Pioneer Credit Limited is a Company limited by shares, incorporated and domiciled in Australia. Its
registered office is:
Level 6, 108 St Georges Terrace
Perth WA 6000
A description of the Company’s principal activities is included in the Review of Operations on page 3 and in the Directors'
Report on page 10 of this Annual Report, both of which are not part of these financial statements.
The financial statements were authorised for issue by the Board of Directors on 29 September 2019. The directors have
the authority to amend and reissue the financial statements.
Pioneer Credit Limited ABN 44 103 003 505
Appendix 4E
Preliminary Final Report
for the year ended 30 June 2019
(previous corresponding period 30 June 2018)
Results for announcement to the market
Key information
30 June
2019
$’000
30 June
2018
$’000
Change
$’000
%
Revenue from ordinary activities
Profit from ordinary activities after tax attributable to
members
Net profit for the period attributable to members
74,717
80,656
(5,939)
(7.36)%
4,281
4,281
17,600
17,600
(13,319)
(13,319)
(75.68)%
(75.68)%
Dividends per ordinary share / distributions
Final 2018 ordinary
Interim 2019 ordinary
Amount
per
security
(cents)
Franked
amount
per
security Record date
Paid /
Payable
date
7.71
4.31
100%
100%
28/09/2018 26/10/2018
01/04/2019 26/04/2019
There is no provision for a final dividend in respect of the year ended 30 June 2019. 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
once the dividend has been declared.
A Dividend Reinvestment Plan (DRP) was in operation from the final dividend for 2015 and applies for all subsequent
dividends unless notice is given for its suspension or termination.
Financial Statements
Released with this Appendix 4E are the following statements:
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
Commentary
In this financial year, Purchased Debt Portfolio financial assets have been measured at amortised cost. This transition
from fair value (FY18) is effective 1 July 2018.
Pioneer Credit Limited
30 June 2019
i
Key ratios
Net tangible assets per fully paid ordinary share
Basic earnings per fully paid ordinary share
No audit dispute or qualification on the financial statements
Results for announcement to the market
30 June 2019
(cents)
30 June 2018
(cents)
161.28
6.88
163.62
28.88
The Consolidated Financial Statements at 30 June 2019 and accompanying notes (‘the Statements’) have been audited
and are not subject to any qualifications. The Independent Auditor's Report has been provided with the Statements
released today.
Basis of preparation
Material Uncertainty Related to Going Concern
The financial statements have been prepared on a going concern basis.
On 26 August 2019, Pioneer advised the market that it was not in a position to confirm its financial results under the
amortised cost classification adopted for the year ended 30 June 2019 and noted it was possible that there would be a
material difference in the expected Net Profit after Taxation (“NPAT”) previously disclosed to the market. Due to the
complexities of the change in classification and measurement method of its Purchased Debt Portfolios (“PDPs”) and the
development of its financial model to calculate the value of its PDPs under amortised cost (“AC”), the Company had not
yet determined an appropriate carrying value and its auditors were not yet able to complete their audit.
During the completion of the financial statements for issue, the material difference in NPAT also flowed to the calculation
of Earnings before Interest and Tax (“EBIT”) for the period. The reported NPAT, and as a result this difference in EBIT
caused a breach of the interest cover financial covenant under the Company's Senior Financing Facility and resulted in
a cross default under the Medium Term Notes (“Notes”).
The Company’s securities have remained voluntarily suspended from the ASX for more than 5 consecutive trading days,
commencing 28 August 2019.
As a result, events of default have occurred and are subsisting under the Senior Financing Facility and the Notes.
While the Company has complied with the financial covenants of its Senior Financing Facility during FY19 except for the
interest cover financial covenant as previously disclosed, while a default subsists, the Senior Financiers may (subject to
the Standstill Agreement noted below) by notice to the Company do one or more of the following:
declare that the secured money is immediately due and payable;
declare that all or part of the outstanding amount is payable on demand;
terminate the Senior Financiers’ obligations; and/or
cancel all or any part of the facility limit with immediate effect.
The terms and conditions of the Notes (“Conditions”) provide that the rights of the Note Trustee, the Security Trustee and
each Noteholder to take action against the Company as the Note Issuer upon the occurrence of an event of default are
subject to the restrictions set out in the Finance Documents. The Intercreditor Deed between the Company's Senior
Financiers and the Noteholders provides that no Note Trustee or Noteholder is entitled to take any Enforcement Action
prior to the discharge date of the Senior Financing Facility. The Note Trust Deed similarly provides that the Note Trustee
must not take Enforcement Action unless, amongst other things, the action is permitted under the Finance Documents.
The Intercreditor Deed also provides for a drag-along mechanism binding the Noteholders in relation to amendments,
waivers, consents or approvals given under a Senior Finance Document, subject to certain exceptions. Under the current
circumstances outlined above, in the event the Senior Financiers take no action and the existing default is continuing, the
Noteholders are not able to take any Enforcement Action other than in a limited set of circumstances where various
conditions must first be satisfied. However, these conditions are largely dependent on the action of the Senior Financiers.
One instance where the Noteholders are able to take Enforcement Action is where a period of at least 180 days has
elapsed after an initial junior enforcement notice is issued plus at least a further 10 business days during which the default
can be remedied or waived.
Pioneer Credit Limited
30 June 2019
ii
Results for announcement to the market
Under the Note Trust Deed, Enforcement Action means any action to enforce the Notes or the Trust Note Deed and,
among other things, includes:
declaring amounts due and payable; and
taking action to wind-up the Issuer.
On 23 September 2019, the Company and various subsidiaries entered into a Standstill Agreement (“SA”) with its Senior
Financiers and the Security Trustee.
The Company continues to trade in the ordinary course of business, including the continued investment in its forward flow
debt portfolio programme from free cash flow.
The purpose of the SA includes providing time for the parties to continue their work together to agree a way forward for
Pioneer. Pioneer has engaged corporate advisors to seek and assess proposals which include:
a sale of the Company as a going concern;
pursuing financing options; and/or
realisation of value by way of sale of some of the assets.
The SA provides, among other things, that subject to compliance with its terms, the Senior Financiers will not take any
action in relation to the existing defaults, and will allow Pioneer to trade in the ordinary course of business, for a standstill
period that will conclude, unless extended, on 14 October 2019. In the lead up to this date, the parties intend to continue
discussions regarding the standstill period, including the time needed to implement the preferred solution(s) of the
Company.
Pioneer also confirms that during the present term of the SA, no principal repayments or default interest are required to
be paid to the Senior Financiers.
As noted above, following the voluntary ASX suspension of its securities for 5 consecutive trading days, an event of
default occurred on the Notes issued in March 2018. As there is no reason to believe that the Company will not be able
to meet its financial payment obligations under the Notes as and when they fall due, there is no expectation that any
penalty interest will be payable.
At 30 June 2019 the Group had net current liabilities of $64.9m (FY18: net current assets of $72.4m). The working capital
deficit was primarily caused by the classification of $169.4m of borrowings as current liabilities, due to the Senior Debt
Facility expiring on 31 March 2020 and Medium Term note event of default.
The Company has net assets of $102.7m which include $92.7m of current balance of PDPs ($249.8m in total carrying
amount) due from customers which are intended to be realised in cash over the next 12 months.
There can be no assurance that the Senior Financiers will extend the standstill period beyond 14 October 2019 in which
case the Company will remain in default of the Senior Financing Facility and subject to notice of the exercise of the rights
outlined.
There can be no assurance that the Noteholders do not exercise their Enforcement Rights as outlined above, provided
such rights are able to be exercised subject to the restrictions in the Finance Documents, which may result in the
declaration with required notice that the Notes become payable on demand.
Were this to occur, the cash flow forecast for the next 12 months demonstrates that without the ongoing successful
operational and financial performance and completion of a restructuring of its Senior Financing Facility and Notes and /
or recapitalisation through an equity capital raising and/or realisation of value by way of sale of some of the assets, the
Company would be unable to repay its commitments under the Senior Financing Facility and Notes.
The above matters represent a material uncertainty that may cast a significant doubt on the Group’s and the Company’s
ability to continue as a going concern, and therefore, the Group may not be able to realise its assets and discharge its
liabilities in the normal course of business.
The Directors believe that, as at the date of signing the financial statements, there are reasonable grounds to believe that
the Group will be able to achieve a restructuring of its debt and/or recapitalisation through an equity raising or realisation
of value by way of sale of some of the assets so that it will have sufficient funds to repay the Senior Financing Facility
and the Notes, interest and creditors and to meet the long term funding needs of the business.
Taking into account the underlying assumptions from the cash flow projections of the Group, as well as the Group’s
ongoing discussions with its major stakeholders, the Directors believe it is likely to achieve the outcomes stated above to
Pioneer Credit Limited
30 June 2019
iii
Results for announcement to the market
enable the Group and the Company to continue operations for the foreseeable future, and that the going concern basis
of preparation of the accompanying consolidated financial statements remains appropriate.
For completeness, the accompanying consolidated financial statements do not include any adjustments relating to
positive outcomes that may eventuate in connection with the assessment of proposals outlined above and nor do they
include adjustments relating to the realisation and classification of asset and liability amounts that may be necessary if
the Group is unable to continue as a going concern. If the going concern assumption is no longer appropriate, adjustments
may have to be made to reflect the situation that assets may need to be realised other than in the normal course of
business and at amounts which may differ significantly from the amounts at which they are currently recorded in the
statements of financial position. In addition, the Group and the Company may have to reclassify non-current assets and
liabilities as current assets and liabilities respectively. Such adjustments have not been made to these financial
statements.
The attached annual financial statements contain an independent auditor’s report which includes a reference to the
existence of a material uncertainty that may cast significant doubt on the Group’s ability to continue as a going concern.
Pioneer Credit Limited
30 June 2019
iv
Pioneer Credit Limited ABN 44 103 003 505
Annual Report
for the year ended 30 June 2019
Contents
Corporate Directory
Review of Operations
Directors’ Report
Corporate Governance Statement
Financial Statements
Independent Auditor’s Report to the Members
Shareholder Information
2
3
10
26
27
90
98
Pioneer Credit Limited
30 June 2019
1
Corporate Directory
Directors
Mr Michael Smith (Chairperson)
Mr Keith John
Mr Mark Dutton
Ms Andrea Hall
Ms Ann Robinson
Company Secretary
Ms Susan Symmons
Notice of Annual General Meeting
The Annual General Meeting of Pioneer Credit Limited
will be held at 10am on Monday 25 November 2019 at
Exchange Tower
Level 8, 2 The Esplanade
Perth WA
Principal Registered Office
Share Registrar
Auditor
Solicitors
Bankers
Level 6
108 St Georges Terrace
Perth WA 6000
Link Market Services Limited
Level 12
250 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
300 Murray Street
Perth WA 6000
+61 8 9369 5966
Westpac
109 St Georges Terrace
Perth WA 6000
+61 8 9426 2580
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 2019
2
Review of Operations
Key financial highlights for the year ended 30 June 2019 compared to the prior period equivalent¹ are:
Cash receipts of $120.8m, up 14.7%
Net Profit after Taxation of $4.3m down 75.7%
Purchased Debt Portfolios (PDPs) held at Amortised Cost of $249.8m up 11.23% on prior year PDPs held
at Fair Value through Profit or Loss (FVTPL)
EBIT2 of $13.2m down 54.1%
EBITDA3 of $63.4m up 16.7%
¹ Prior period is measured under the Fair Value through Profit or Loss classification (“FVTPL”)
2Pioneer reports EBIT, calculated as earnings before interest and tax, a non-IFRS measure, as by excluding interest and tax the measure focuses directly
on operating earnings. This alternative performance measure is reported in addition to, but not as a substitute for the performance measures reported in
accordance to IFRS.
3Pioneer uses cash EBITDA, a non-IFRS measure, as an alternative cash based operating performance measure to better reflect its operational business
performance and to enhance comparability between financial periods. This alternative performance measure is reported in addition to, but not as a substitute
for the performance measures reported in accordance to IFRS. EBITDA is Earnings Before Interest, Tax, Depreciation and Amortisation (including
Amoritisation of PDPs). The prior period cash EBITDA equivalent is measured using the net profit (earnings) reported under FVTPL with the Change in
Value as an adjustment item.
The Net Profit after Taxation for the year ended 30 June 2019 was $4.3m (when classified and measured using amortised
cost (AC)), compared to $17.6m (when classified and measured using fair value through profit or loss (FVTPL) for the
prior period equivalent).
The non-IFRS measures of EBITDA and EBIT annotated above are reconciled as follows:
Profit for the period from continuing operations
Interest earned on cash and cash equivalents
Interest paid/payable
Income tax expense
EBIT
Amortisation of PDPs
Change in value of PDPs at FVTPL
Depreciation and amortisation
EBITDA
Implementation of AASB 9 – Financial Instruments
2019
$000
4,281
(38)
6,673
2,316
13,232
47,257
-
2,937
63,426
2018
$000
17,600
(33)
3,860
7,390
28,817
-
23,893
1,625
54,335
AASB 9 – Financial Instruments replaced AASB 139 Financial Instruments: Recognition and Measurement effective for
the year ended 30 June 2019. Under AASB 139 Pioneer measured its PDPs at fair value through profit or loss (“FVTPL”).
As a result of the Company’s program to prepare for the implementation of AASB 9, the Company determined that
pursuant to AASB 9 PDP assets will continue to be designated at FVTPL. This was noted in our financial statements for
the year ended 30 June 2018.
For our half-year report for 31 December 2018, our auditors issued a qualified review opinion noting that at “…the date
of this report, sufficient and appropriate information is not yet available for us to determine whether the Group’s accounting
judgement to apply an accounting policy to recognise and subsequently measure PDPs at fair value through profit or loss
is appropriate or to assess the impact on the half year financial report of any adjustments that would be required if PDPs
were initially recognised at fair value and subsequently measured at amortised cost”.
Pioneer Credit Limited
30 June 2019
3
Further to this, and following the receipt of further technical advice, the Company announced that pursuant to AASB 9 it
would adopt amortised cost (“AC”) for the classification and subsequent measurement of its PDPs.
Given the complexity of transitioning from one classification to another for purchased or credit impaired assets such as
PDPs the Company engaged Deloitte to advise with respect to its interpretation of AASB 9 in the application and approach
to the calculations of AC, both at transition and on an ongoing basis (including statistical applications), and in preparing
our models to calculate AC.
Due to the complexities of the application of AC to our portfolio, in consultation with our auditors, further refinements to
our calculations were deemed appropriate at year end.
While the outcome at a statutory level is disappointing, the Company advises that there has been no diminution in the
Total Expected Liquidations which captures the expected timing and receipt of forecast cash flows from PDPs, but rather
is a result of an increase in the discount rates used to calculate the present value of the cash flows for the purposes of
determining the carrying amount (across both FVTPL and AC).
Our cash collections for the year remained strong and the growth metrics outlined below were not impacted by the change
in accounting classification of PDPs:
Cash Liquidations of $118.5m (up 16.5%) and representing a Cumulative Annual Growth Rate of 26%
EBITDA of $63.9m (up 17.6%) and representing a Cumulative Annual Growth Rate of 27%
Operations
Since the commencement of its business, the Company has been focussed on building a differentiated servicing platform
staffed with exceptional people, trying to achieve great outcomes for our customers. This approach has never wavered.
Over the past 10 years the Company has introduced a range of programmes into its business to increase the focus on
customer outcomes, including our Pioneer Principles and the measurement of NPS or Net Promoter Score. And during
the past few years we have noticed a change in community expectations where there is now greater emphasis and
demand on all businesses, and particularly those in the financial services industry, to have a customer-first focus.
This change in expectations, which was enforced in the findings of the Royal Commission into Misconduct in the Banking,
Superannuation and Financial Services Industry, has been good for Pioneer.
We have been engaged with more vendors through FY19 than ever before. We acquired customer accounts from several
different originators and we have had significant enquiry and engagement with potential new partners, which we expect
will provide further opportunities in FY20 and beyond. More so, we acquired these customer accounts at the lowest price
point in 8 years.
Capital management
The Company has net assets of $102.7m which include $92.7m of current PDPs (total carrying amount $249.8m) due
from customers which will be realised in cash over the next 12 months.
The Company increased its banking facilities during the year by $10m, on terms that were unchanged. At 30 June 2019
the Group had a cash advance facility limit of $130m with borrowings drawn of $129.7m.
The Group issued $40m in medium term notes on 22 March 2018. The notes have a maturity date of 22 March 2022 with
the option to repay the bond at 101% of par plus any accrued interest one year prior to maturity.
The basis of preparation note included in this report provides additional disclosures with respect the finance facilities.
Pioneer Credit Limited
30 June 2019
4
Culture and people
Pioneer’s culture is the foundation of its success. Not just in the way we clearly, honestly and openly communicate with
our stakeholders, but also with our vendors who know what we are doing as a business, how we perform and what they
can expect from us.
The Pioneer Principles form the core of what we expect from every one of our team. They are enacted in every interaction
and represent the behaviours and qualities used to recruit, recognise and retain our team.
The Net Promoter Score (NPS) system is used to measure our customer engagement and alignment to the Pioneer
Principles. NPS is measured on a customer’s willingness to recommend Pioneer to a friend or family member. This
survey is sent to customers at three key stages of their journey, including:-
1. At the completion of their first conversation with Pioneer;
2. When a customer first enters into a payment arrangement; and / or
3. When a customer has finalised their account with Pioneer.
This is our Pioneer Promise to customers and is used to improve our service offering to our customers and to recognise
our team members. With a positive score of +14 we consistently demonstrate that our customers genuinely value their
experience with Pioneer.
Employee Engagement
In August 2018 Pioneer introduced an Employee Wellness program. This program focusses on creating a thriving
workplace by encouraging our team to prioritise overall wellbeing and lead healthier lives. The program provides key
insights into employee wellbeing and the data obtained from this is being used to provide targeted wellbeing and
engagement programs for our team. We are also now starting to understand the data collected from these programmes
and their correlation between our NPS and customer satisfaction, compliance outcomes and operational performance.
Quality compliance and development framework
Pioneer’s compliance and development framework provides our team members with a clear path to producing positive
outcomes for our customer. This framework, our collegiate and respectful culture and our well established Pioneer
Principles, have been the key contributor to our unique compliance record of:
no negative outcomes at an Ombudsman level;
no reportable systemic issues; and
no regulatory enforceable undertakings.
Pioneer Credit Limited
30 June 2019
5
This framework includes a three-month induction program, including two weeks in a classroom environment, followed by
on-the-job training and support. Employee progress is measured and assessed throughout this period to ensure that our
people are strongly aligned to Pioneer and that our customers continue to experience exceptional levels of service.
Following completion of a six month probation period, every member of the team receives monthly development
opportunities, including the opportunity to participate in two nationally accredited programs; Certificate IV in Customer
Engagement, and/or Certificate IV in Leadership and Management.
The Company’s compliance team acts as a key business partner and support service centre to the business. It seeks to
ensure that best practice is achieved in the Operations area and its initiatives ensures that coaching opportunities are
identified and high quality outcomes for all stakeholders are delivered.
Community engagement
Pioneer continues its long term commitment to making a positive contribution to the community.
Pioneer is a Gold Partner of the Starlight Children’s Foundation. Starlight’s mission is ‘to brighten the lives of seriously
ill children and their families’. In addition to corporate sponsorship, Pioneer raises awareness among our team members
and facilitates volunteering opportunities.
In FY19 Pioneer entered a partnership with LifelineWA, who offer critical crisis support and suicide prevention services
in Western Australia. Our team receive specialist training from Lifeline counsellors which enables us to better assist our
customers, team mates and loved ones who may be experiencing mental health issues.
Pioneer sponsors the cancer fundraiser CAN4CANCER’s Tour de Cure cycling event. Since the Tour de Cure’s inception
in 2007, it has raised over $40m for cancer research, support and prevention projects.
Pioneer is also the proud naming rights supporter of the SF Super Series supporting Sanfilippo families and ToyBox
International, a Western Australian charity supporting families of disadvantaged children.
Pioneer runs an internal volunteer community group called Pioneer Hearts. This group of like-minded team members
offer their time to a range of volunteering opportunities including event support, support phone calls, administration and
much more.
In FY19 Pioneer invested almost $500,000 in its community engagement programme, along with the investment of
employee time, more than double its contributions in the previous year. Since listing the Company has now invested over
$1m directly in the charitable organisations it supports.
Business risk statement
Like all businesses, Pioneer faces uncertainties in the future. The ability to understand, manage and mitigate risk is a
source of Pioneer’s competitive advantage.
For example, there is the risk that our Solutions customers may not meet the expected level of repayments as they
manage their financial commitments.
Pioneer Credit Limited
30 June 2019
6
Our success in working with these customers over time is based on a number of factors that mitigates default risk with
customers who have experienced financial difficulty. These include:
Treating them with empathy, understanding and respect;
Offering expert help in getting over financial challenges;
A high investment in analytics to match effort and engagement method to a customer profile;
Our people, who are here to help, rather than chase, work in a culture of strong values where a premium is
Investing only in quality account portfolios from leading financial institutions; and
placed on customer service and empathy.
In our Connect business, the risk is that the repayment capacity of customers might change. While our responsible lending
policies and customer first approach aim to minimise risk, credit risk is influenced by many factors such as the
unemployment rate, relative income growth, consumer confidence and interest rates. The risk of default is ever-present.
Pioneer has an advantage in offering credit products to customers that they have grown to know well. In many cases, we
have been working with these customers for a number of years before offering them an appropriate lending solution.
We remain conscious that Pioneer needs to be able to purchase debt portfolios at appropriate prices and the risk is
influenced by a number of factors. Again, while acknowledging this risk, Pioneer’s investment approach is a source of
advantage:
Pioneer has been successfully buying quality portfolios for a long period of time;
Pioneer’s sympathetic approach to customers makes us a preferred buyer with major banks who are sensitive
to how their customers are treated;
Pioneer’s analytics operating with a combination of leading data scientists and a large statistical base informs
disciplined investment decisions; and
Pioneer’s success is evidenced by standing out of markets during periods of relatively high prices.
Overlaying this are the usual risks of regulatory changes, the impact of a strategy that is not well executed, the potential
failure to respond appropriately to changes in technology and the threat posed through competitor behaviours.
These are the source of regular attention and review by Pioneer’s leadership and Board of Directors.
Basis of preparation
Material Uncertainty Related to Going Concern
The financial statements have been prepared on a going concern basis.
On 26 August 2019, Pioneer advised the market that it was not in a position to confirm its financial results under the
amortised cost classification adopted for the year ended 30 June 2019 and noted it was possible that there would be a
material difference in the expected Net Profit after Taxation (“NPAT”) previously disclosed to the market. Due to the
complexities of the change in classification and measurement method of its Purchased Debt Portfolios (“PDP’s”) and the
development of its financial model to calculate the value of its PDPs under amortised cost (“AC”), the Company had not
yet determined an appropriate carrying value and its auditors were not yet able to complete their audit.
During the completion of the financial statements for issue, the material difference in NPAT also flowed to the calculation
of Earnings before Interest and Tax (“EBIT”) for the period. The reported NPAT, and as a result this difference in EBIT
caused a breach of the interest cover financial covenant under the Company's Senior Financing Facility and resulted in
a cross default under the Medium Term Notes (“Notes”).
The Company’s securities have remained voluntarily suspended from the ASX for more than 5 consecutive trading days,
commencing 28 August 2019.
Pioneer Credit Limited
30 June 2019
7
As a result, events of default have occurred and are subsisting under the Senior Financing Facility and the Notes.
While the Company has complied with the financial covenants of its Senior Financing Facility during FY19 except for the
interest cover financial covenant as previously disclosed, while a default subsists, the Senior Financiers may (subject to
the Standstill Agreement noted below) by notice to the Company do one or more of the following:
declare that the secured money is immediately due and payable;
declare that all or part of the outstanding amount is payable on demand;
terminate the Senior Financiers’ obligations; and/or
cancel all or any part of the facility limit with immediate effect.
The terms and conditions of the Notes (“Conditions”) provide that the rights of the Note Trustee, the Security Trustee and
each Noteholder to take action against the Company as the Note Issuer upon the occurrence of an event of default are
subject to the restrictions set out in the Finance Documents. The Intercreditor Deed between the Company's Senior
Financiers and the Noteholders provides that no Note Trustee or Noteholder is entitled to take any Enforcement Action
prior to the discharge date of the Senior Financing Facility. The Note Trust Deed similarly provides that the Note Trustee
must not take Enforcement Action unless, amongst other things, the action is permitted under the Finance Documents.
The Intercreditor Deed also provides for a drag-along mechanism binding the Noteholders in relation to amendments,
waivers, consents or approvals given under a Senior Finance Document, subject to certain exceptions. Under the current
circumstances outlined above, in the event the Senior Financiers take no action and the existing default is continuing, the
Noteholders are not able to take any Enforcement Action other than in a limited set of circumstances where various
conditions must first be satisfied. However, these conditions are largely dependent on the action of the Senior Financiers.
One instance where the Noteholders are able to take Enforcement Action is where a period of at least 180 days has
elapsed after an initial junior enforcement notice is issued plus at least a further 10 business days during which the default
can be remedied or waived.
Under the Note Trust Deed, Enforcement Action means any action to enforce the Notes or the Trust Note Deed and,
among other things, includes:
declaring amounts due and payable; and
taking action to wind-up the Issuer.
On 23 September 2019, the Company and various subsidiaries entered into a Standstill Agreement (“SA”) with its Senior
Financiers and the Security Trustee.
The Company continues to trade in the ordinary course of business, including the continued investment in its forward flow
debt portfolio programme from free cash flow.
The purpose of the SA includes providing time for the parties to continue their work together to agree a way forward for
Pioneer. Pioneer has engaged corporate advisors to seek and assess proposals which include:
a sale of the Company as a going concern;
pursuing financing options; and/or
realisation of value by way of sale of some of the assets.
The SA provides, among other things, that subject to compliance with its terms, the Senior Financiers will not take any
action in relation to the existing defaults, and will allow Pioneer to trade in the ordinary course of business, for a standstill
period that will conclude, unless extended, on 14 October 2019. In the lead up to this date, the parties intend to continue
discussions regarding the standstill period, including the time needed to implement the preferred solution(s) of the
Company.
Pioneer also confirms that during the present term of the SA, no principal repayments or default interest are required to
be paid to the Senior Financiers.
As noted above, following the voluntary ASX suspension of its securities for 5 consecutive trading days, an event of
default occurred on the Notes issued in March 2018. As there is no reason to believe that the Company will not be able
to meet its financial payment obligations under the Notes as and when they fall due, there is no expectation that any
penalty interest will be payable.
Pioneer Credit Limited
30 June 2019
8
At 30 June 2019 the Group had net current liabilities of $64.9m (FY18: net current assets of $72.4m). The working capital
deficit was primarily caused by the classification of $169.4m of borrowings as current liabilities, due to the Senior Debt
Facility expiring on 31 March 2020 and Medium Term note event of default.
The Company has net assets of $102.7m which include $92.7m of current balance of PDPs ($249.8m in total carrying
amount) due from customers which are intended to be realised in cash over the next 12 months.
There can be no assurance that the Senior Financiers will extend the standstill period beyond 14 October 2019 in which
case the Company will remain in default of the Senior Financing Facility and subject to notice of the exercise of the rights
outlined.
There can be no assurance that the Noteholders do not exercise their Enforcement Rights as outlined above, provided
such rights are able to be exercised subject to the restrictions in the Finance Documents, which may result in the
declaration with required notice that the Notes become payable on demand.
Were this to occur, the cash flow forecast for the next 12 months demonstrates that without the ongoing successful
operational and financial performance and completion of a restructuring of its Senior Financing Facility and Notes and /
or recapitalisation through an equity capital raising and/or realisation of value by way of sale of some of the assets, the
Company would be unable to repay its commitments under the Senior Financing Facility and Notes.
The above matters represent a material uncertainty that may cast a significant doubt on the Group’s and the Company’s
ability to continue as a going concern, and therefore, the Group may not be able to realise its assets and discharge its
liabilities in the normal course of business.
The Directors believe that, as at the date of signing the financial statements, there are reasonable grounds to believe that
the Group will be able to achieve a restructuring of its debt and/or recapitalisation through an equity raising or realisation
of value by way of sale of some of the assets so that it will have sufficient funds to repay the Senior Financing Facility
and the Notes, interest and creditors and to meet the long term funding needs of the business.
Taking into account the underlying assumptions from the cash flow projections of the Group, as well as the Group’s
ongoing discussions with its major stakeholders, the Directors believe it is likely to achieve the outcomes stated above to
enable the Group and the Company to continue operations for the foreseeable future, and that the going concern basis
of preparation of the accompanying consolidated financial statements remains appropriate.
For completeness, the accompanying consolidated financial statements do not include any adjustments relating to
positive outcomes that may eventuate in connection with the assessment of proposals outlined above and nor do they
include adjustments relating to the realisation and classification of asset and liability amounts that may be necessary if
the Group is unable to continue as a going concern. If the going concern assumption is no longer appropriate, adjustments
may have to be made to reflect the situation that assets may need to be realised other than in the normal course of
business and at amounts which may differ significantly from the amounts at which they are currently recorded in the
statements of financial position. In addition, the Group and the Company may have to reclassify non-current assets and
liabilities as current assets and liabilities respectively. Such adjustments have not been made to these financial
statements.
Pioneer Credit Limited
30 June 2019
9
Directors’ Report
The Board of Directors present their report on the Consolidated Entity (‘the Group’ or ‘the Company’) consisting of Pioneer
Credit Limited and the entities it controlled at or during the year ended 30 June 2019.
Directors
The following people were Directors of Pioneer Credit Limited during the financial year and at the date of this report:
Mr Michael Smith (Chairperson)
Mr Keith John
Mr Mark Dutton
Ms Andrea Hall
Ms Ann Robinson
Principal activities
Pioneer is a financial services provider that specialises in acquiring and servicing unsecured retail debt portfolios.
Pioneer provides high quality, flexible financial services support to help everyday Australians out of financial difficulty.
Pioneer has the trust of long-term vendor partners to do the right thing and respectfully support customers to achieve
their financial independence. Pioneer focuses on driving customer loyalty through our organisational values - the Pioneer
Principles.
Dividends
Dividends or distributions paid to members during the year were as follows:
Ordinary shares – Declared and paid during the year 2019
Total
Date of payment
Dividend on fully paid ordinary shares held at 28 September 2018
Dividend on fully paid ordinary shares held at 1 April 2019
$4,752,521
$2,723,619
26/10/2018
26/04/2019
Since the end of the financial year the Directors have not declared a final dividend.
Review of operations
The Review of Operations is set out on page 3 of this Annual Report.
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
Sale of Consumer Loan Portfolio
During the second half of the financial year Pioneer made the decision to cease lending under the Consumer Loan product
offering given the regulatory uncertainty emerging late 1H19 and determined to manage the portfolio of customers to their
loan maturities as contracted. Subsequent to 30 June 2019, Pioneer has made the decision to sell the Consumer Loan
portfolio and has initiated a formal sales process with an Information Memorandum released on 18 September 2019. This
decision to sell the Consumer Loan portfolio means that subsequent to year end, the portfolio is no longer held within a
business model to collect contractual cash flows or held within a business model to collect contractual cash flows and sell
financial assets. For this change in business model, the Consumer Loans portfolio would no longer meet the criteria to
be measured at amortised cost or at fair value through other comprehensive income and would be reclassified to fair
value through profit or loss. At 30 June 2019 the carrying value of the portfolio under amortised cost is $8.2m. As the
outcomes arising are indicative of conditions that arose after reporting date there is no reclassification recognised at 30
June 2019 and the impact will be reported in the 2020 financial year.
Pioneer Credit Limited
30 June 2019
10
The Basis of Preparation note outlines the events and impacts arising with respect to the Groups financing facility and
the Directors’ assessment of the going concern basis of preparation.
No other matter has arisen since 30 June 2019 that significantly affects the Group’s operations, results or state of affairs
or that may do so in future years.
Environmental regulation
The Company is not affected by any significant environmental regulations.
Information on Directors
Mr Michael Smith
Independent Non-Executive Chairman
Experience and expertise
Listed Company Directorships
including those held at any time in
the previous 3 years
Special responsibilities
Mr Smith was appointed Chairman of Pioneer in February 2014.
Mr Smith is the Managing Director of strategic marketing consultancy Black
House, Non-Executive Chairman of 7-Eleven Stores Pty Ltd, Lionel Samson
Sadleir Group and Starbucks Australia.
Mr Smith is a Fellow of AICD and a D. Litt. (Hon) from UWA for his contribution
to business and the arts.
Mr Smith’s previous roles include Deputy Chairman of Automotive Holdings
Group Limited and Chairman of iiNet Limited, Synergy, Verve, Perth
International Arts Festival, West Coast Eagles and Scotch College.
iiNet Limited
Automotive Holdings Group Ltd
19 Sep 2007 to 7 Sep 2015
6 May 2010 to 20 Nov 2015
Chairman of the Board
Chairman of Nomination Committee
Member of Remuneration Committee
Member of Audit and Risk Management Committee
Interests in shares and options
Ordinary Shares
695,940
Mr Keith John
Managing Director
Experience and expertise
Listed Company Directorships
including those held at any time in
the previous 3 years
Mr John has over 25 years’ experience in the financial services industry, is the
founder of Pioneer Credit and is widely regarded as an expert in the impaired
credit sector in Australia.
Goldfields Money Limited
27 May 2016 to 13 March 2018
Special responsibilities
Managing Director
Interests in shares and rights
Ordinary Shares
Indeterminate rights
Medium Term Notes
5,236,624
1,022,500
40,000
Pioneer Credit Limited
30 June 2019
11
Mr Mark Dutton
Independent Non-Executive Director
Experience and expertise
Mr Dutton was appointed a Director of Pioneer in May 2010.
The founder of Banksia Capital, Mr Dutton was previously a Director of Mineral
Resources Limited, Foundation Capital, BancBoston Capital, and a partner at
Navis Capital. Mr Dutton has also worked in Audit and Corporate Finance at
PricewaterhouseCoopers in the UK and Russia.
Mr Dutton is a chartered accountant and a member of the Institute of
Chartered Accountants of England & Wales. Mr Dutton holds an MA in
Management Studies and Natural Sciences from Cambridge.
Listed Company Directorships
including those held at any time in
the previous 3 years
Nil
Special responsibilities
Member of Nomination Committee
Member of Remuneration Committee
Member of Audit and Risk Management Committee
Interests in shares
Ordinary Shares
122,330
Ms Andrea Hall
Independent Non-Executive Director
Experience and expertise
Ms Hall was appointed a Director of Pioneer in November 2016.
Ms Hall is a director of Evolution Mining Limited, Automotive Holdings Group
Limited, Insurance Commission of WA, Fremantle Football Club and C-Wise.
Ms Hall has a Bachelor of Commerce from UWA, a Masters of Applied
Finance, is a Fellow of the Institute of Chartered Accountants Australia and
New Zealand and a former chair of the WA Council of Chartered Accountants
Australia and New Zealand.
Ms Hall was a Risk Consulting Partner at KPMG and has over 20 years
experience in governance and risk management, financial management,
internal audit and external audit.
Listed Company Directorships
including those held at any time in
the previous 3 years
Tap Oil Limited
18 Oct 2016 to 31 Jan 2018
Evolution Mining Limited
from 1 October 2017
Automotive Holdings Group Limited
from 3 May 2018
Special responsibilities
Member of Nomination Committee
Member of Remuneration Committee
Chair of Audit and Risk Management Committee
Interests in shares
Ordinary Shares
Nil
Pioneer Credit Limited
30 June 2019
12
Ms Ann Robinson
Independent Non-Executive Director
Experience and expertise
Ms Robinson was appointed a Director of Pioneer in February 2018.
Ms Robinson’s experience includes management consulting to clients in
Australia and overseas. She also has extensive experience in mergers and
integration, commercial management and
acquisitions, post-merger
governance, from her executive roles at Wesfarmers Limited.
Ms Robinson is a director of the Lionel Samson Sadleir Group, a member of
the Rottnest Island Authority Board and a member of the Curtin University
Audit, Risk and Compliance Committee..
Ms Robinson holds a Bachelor of Arts, Bachelor of Psychology and Graduate
Diploma in Applied Finance and Investment, and is a graduate of the AICD.
Listed Company Directorships
including those held at any time in
the previous 3 years
Nil
Special responsibilities
Member of Nomination Committee
Chair of Remuneration Committee
Member of Audit and Risk Management Committee
Interests in shares
Ordinary Shares
15,000
Meeting of Directors
The number of meetings held, and attended, by the Directors during the year ended 30 June 2019 was:
Name
Board Meetings
Committee Meetings
Mr Michael Smith
Mr Keith John
Mr Mark Dutton
Ms Andrea Hall
Ms Ann Robinson
Attended Held Attended Held Attended
Held Attended Held
Audit and Risk
Remuneration
Nomination
24
26
26
25
26
26
26
26
26
26
5
5
5
5
5
5
5
5
5
5
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
Number of meetings held during the year, in the time the Director held office or was a committee member
Company Secretary
Ms Susan Symmons joined Pioneer as Company Secretary on 1 October 2015. Ms Symmons has over 25 years’
corporate experience including positions with Heytesbury Pty Ltd, Evans & Tate Limited, Automotive Holdings Group
Limited and Helloworld Limited. Ms Symmons holds a Bachelor of Commerce from Curtin University and a Master of
Business Law from UNSW and is a member of the Institute of Company Directors and Governance Institute of Australia.
Pioneer Credit Limited
30 June 2019
13
Remuneration Report
1
2
3
4
5
6
7
8
9
Overview
Remuneration Governance
Executive Remuneration
Non-Executive Director Arrangements
Statutory Remuneration Disclosures
Equity Instruments held by KMP
Terms and Conditions of Share-Based Payment Arrangements
Executive Share Plan
Other transactions with KMP
14
15
16
18
19
21
23
23
23
This Remuneration Report explains the Board’s approach to executive remuneration and the remuneration outcomes for
the Company’s Key Management Personnel for the year ended 30 June 2019.
Overview
Key Management Personnel (‘KMP’)
KMP includes all directors and executives who have responsibility for planning, directing and controlling material activities
of the Company. In this report ‘senior executives’ refers to KMP excluding Non-Executive Directors.
The information in this remuneration report has been audited under the Corporations Act 2001 S 308(3C).
List of KMP
Directors
Mr Michael Smith
Mr Keith John
Mr Mark Dutton
Ms Andrea Hall
Ms Ann Robinson
Senior Executives
Ms Lisa Stedman2
Mr Leslie Crockett
Mr Anthony Bird¹
Ms Susan Symmons
Independent Non-Executive Chairman
Managing Director
Independent Non-Executive Director
Independent Non-Executive Director
Independent Non-Executive Director
Chief Operating Officer
Chief Financial Officer
Chief Risk Officer
Company Secretary
¹Anthony Bird resigned as Chief Risk Officer effective 28 September 2018
² Lisa Stedman resigned as Chief Operating Officer effective 9 July 2019
Remuneration policy and link to performance
In setting the Company’s remuneration strategy, the Remuneration Committee makes recommendations which:
a) motivate senior executives to deliver long term sustainable growth within an appropriate control framework;
b) demonstrate a clear and strong correlation between performance and remuneration; and
c) align the interests of senior executives with those of the Company’s shareholders.
Structuring employee remuneration to better align with the life of the assets Pioneer acquires is consistent with Pioneer’s
differentiated approach and reflects the Board’s commitment to maintaining an executive and senior management team
that is focused on making decisions for the long-term health and growth of the Company.
Pioneer Credit Limited
30 June 2019
14
To achieve this, the Board has determined that the Company will not award Short Term Incentives (“STIs”) to any part of
the management group, with the exception of Pioneer’s Operations team.
The Operations team are still required to comply with the Pioneer Principles and strategic goals as part of ongoing
employment. This part of the Pioneer team is particularly focused on the effective liquidation of our customer portfolios
on a daily basis and given this operational time frame it is appropriate that they are incentivised with STIs reflecting annual
targets. These annual targets are set to support the achievement of strong returns across Pioneer's portfolio and
business.
These terms of the Rights are as follows:
1. Rights vest on service conditions only, to align with the life of the assets Pioneer acquired
2. Rights vest over a period of 3 to 5 years
3. Rights are issued for Nil consideration
4. Performance Rights convert to ordinary shares in the capital of Pioneer on a one-for-one basis
5.
Indeterminate Rights may convert to ordinary shares in the capital of Pioneer on a one-for-one basis or,
alternatively, the Board may determine in its absolute discretion that a vested Indeterminate Right will be satisfied
by the Company making a cash payment in lieu of allocating Shares at the 5 days Volume Weighted Average
Price (“VWAP”) prior to each vesting date.
The following table shows the statutory key performance indicators of the group over the last five years
Profit for the year attributable to owners of the Group
Basic earnings per share (cents)
Dividend payments paid in financial year
-
-
Paid and relating to prior years 2H performance
Paid and relating to current year 1H performance
Dividend payout ratio1
Increase/(decrease) in share price
2019
$000
4,281
6.88
7,476
4,752
2,724
2018
$000
17,600
28.88
7,273
3,219
4,054
N/A
(14.8)%
50%
33.2%
2017
$000
10,753
20.77
5,169
3,071
2,098
49%
38.1%
2016
$000
9,450
20.36
4,736
3,085
1,651
50%
8.1%
2015
$000
7,441
16.40
2,201
1,407
794
52%
1.3%
1 Dividend payout ratio for FY18 and prior is calculated based on dividends paid as a ratio to the reported profit for the
financial year performance from which the dividend was declared.
For FY19 the dividend payment of $2.7m was declared based on the half year reported profit of $5.5m. The dividend
payout ratio was therefore 50% for this payment and it is not meaningful to present this for the full year profit as now
reported.
Remuneration governance
Role of the Remuneration Committee
The Remuneration Committee is a committee of the Board responsible for making recommendations to the Board on:
a) Base salaries for executives and Board and Committee fees for non-executive Directors;
b) Short term incentives for senior executives; and
incentive and equity-based remuneration plans.
c)
The Corporate Governance Statement and the Remuneration Committee Charter provide further information on the role
of this Committee. These documents are available on the Company’s website.
The Committee reviews its remuneration strategy at least annually to ensure that the Company’s remuneration structures
are fair and support the attraction and retention of quality people who are aligned to the Company’s goal of sustainable
long-term earnings growth.
The Managing Director and senior executives do not participate in any decision relating to their own remuneration nor
that of their peers.
Pioneer Credit Limited
30 June 2019
15
Use of remuneration consultants
To ensure the Remuneration Committee is fully informed when making decisions it will periodically seek external advice.
Any appointment is made in accordance with the ASX Corporate Governance Principles and Recommendations and is
made free from influence from KMP.
The Company sought external remuneration advice for senior executive remuneration during the financial year.
Pioneer Credit’s securities trading policy
The Securities Trading Policy imposes trading restrictions on all employees, contractors and consultants who are
considered to be in possession of market sensitive information and restrictions in the form of closed periods for KMP who
are prohibited from trading in the Company’s securities, except in a 30 days trading window period commencing 7 days
after the release of the final and half yearly financial results and after the Annual General Meeting.
During this financial year there was no trading window period after the release of the half year financial results and a
trading policy prohibition on trading the Company’s securities remained in place.
KMP are prohibited from entering into contracts to hedge their exposure to any securities held in the Company.
Executive remuneration
Executive remuneration strategy
The Board recognises that satisfying appropriate remuneration expectations is important in attracting and retaining quality
people and does this through its remuneration strategy.
Due to the nature of Pioneer’s business, as an acquirer of assets that typically liquidate over a period of up to 10 years,
the Board recognises the importance of appropriately incentivising employees such that they are accountable for the most
significant part of tenure of acquired assets. In that regard, executives and senior management are primarily incentivised
with long term performance or indeterminate rights and no executive was paid any Short term incentive (STI).
Structuring employee remuneration to align with the life of the assets Pioneer acquires is consistent with Pioneer’s
differentiated approach and reflects the Board’s commitment to maintaining an executive team that is focused on making
decisions for the long-term health and growth of the Company.
Executives are provided Long term incentives (LTIs) through the issue of performance and indeterminate rights in the
Company, vesting on service conditions only, over a period commencing at 3 years after the grant of the award and up
to five years from that date. This structure ensures executives are incentivised to continue delivering sustainable long-
term earnings of the business.
Fixed remuneration
Fixed remuneration consists of base salary and superannuation as per the Superannuation Guarantee (Administration)
Act 1992.
The Managing Director reviews the performance of his executives by meeting each at least quarterly to discuss their
performance and then separately assesses the performance of the executive team as a whole. The review process is
consultative in nature and contains a subjective assessment of the executive’s performance and responsibilities and the
setting of future expectations.
The Chair of the Remuneration Committee meets regularly with the Managing Director to discuss a number of objectives
including individual performance, strategy, leadership, management and financial performance. The Chair also obtains
feedback from other Directors on the performance of the Managing Director, at least twice per year and provides that
feedback back to him. The Nomination Committee completes a formal performance evaluation of the Managing Director
at least annually against the stated objectives.
Remuneration for all executives is reviewed at least annually. There is no guaranteed increase in any executive’s
employment contract. Any remuneration reviews are determined independent of any performance review.
Pioneer Credit Limited
30 June 2019
16
Short term incentive
No executive was paid a Short term incentive during FY19.
Long term incentives
At the Annual General Meeting held on 29 October 2014, shareholders approved the Pioneer Credit Equity Incentive Plan
(‘the Plan’). At the 2017 Annual General Meeting the Company refreshed the Plan under ASX Listing Rule 7.2 (Exception
9(b)) with minor referencing amendments made.
Objective
The Plan provides participants with an equity incentive that recognises their contribution to the achievement by the
Company of its strategic goals and to provide a means of attracting, rewarding and retaining skilled employees. Proposed
grants of LTI are awarded retrospectively after considering the performance of the executives over the previous 12 months
and then considered with the executives’ relative value to the business in the future.
Participation
Participation in the Plan is at the sole discretion of the Board.
Assessment of performance
The Board reviews and approves the performance assessment and any LTI award for each eligible executive. The grant
approved in the financial year recognised performance and contribution of the participants in delivering shareholder value
for FY19 evidenced by sustainable earnings growth through disciplined PDP purchasing and operational excellence in
customer service.
Sustained performance is required by senior executives over the life of the assets the Company acquires and is consistent
with the Board’s commitment to maintaining an executive that is focused on making decisions for the long term health
and growth of the Company.
Payment method
LTI awards are provided in grants of performance rights, which vest into shares on the achievement of service conditions.
Indeterminate rights exist where the Board, in their absolute discretion, determine for the rights to vest into shares on the
achievement of service conditions or to make a cash payment equivalent to the value of vested rights.
3.4.1.
Long term incentive awards in place during the year
LTI awards were made under the Plan on 28 September 2018 and 29 November 2018 as follows:
Instrument
Quantum
Grant Date
Key performance measures
Performance period
Dividends
Fair value, vesting date and
vesting period schedule
Instrument
Quantum
Grant Date
Key performance measures
Performance period
Dividends
Fair value, vesting date and
vesting period schedule
Performance rights for ordinary shares
380,000 performance rights
28 September 2018
Employment at vesting date
28 September 2018 to 1 July 2023
No dividends are paid on performance rights yet to vest
$2.83
$2.69
$2.55
1 July 2021
1 July 2022
1 July 2023
Indeterminate rights for ordinary shares
500,000 indeterminate rights
29 November 2018
Employment at vesting date
29 November 2018 to 1 July 2023
No dividends are paid on indeterminate rights yet to vest
$2.53
$2.40
$2.27
1 July 2021
1 July 2022
1 July 2023
15%
25%
60%
25%
60%
15%
Pioneer Credit Limited
30 June 2019
17
Performance rights and indeterminate rights by their nature do not have an exercise price. None of the above performance
or indeterminate rights have vested during FY19.
500,000 Indeterminate rights were awarded following shareholder approval at the 27 October 2017 AGM. None of those
Indeterminate Rights have vested to date.
150,000 Indeterminate rights were awarded following shareholder approval at the 29 October 2014 AGM. All of these
rights have vested as follows:
90,000 vested on 1 July 2017 and the Board, in their absolute discretion made a cash payment to Mr John at
the 5 day VWAP prior to 1 July 2017, which was $2.2864/share.
37,500 vested on 1 July 2018 and the Board, in their absolute discretion issued fully paid ordinary shares.
22,500 vested on 1 July 2019 and the Board, in their absolute discretion issued fully paid ordinary shares.
Non-Executive Director arrangements
On appointment to the Board each Non-Executive Director enters into an agreement with the Company which sets out
the policy to remunerate Non-Executive Directors at a fixed fee for time and responsibilities not linked to individual
performance.
Fees paid to Non-Executive Directors were considered during the year and no increase was recommended for FY19.
Non-Executive Directors fees for FY19 were:
Non-Executive Director Fee
Chairman Fee
$100,000 (plus Superannuation)
$160,000 (plus Superannuation)
No committee fees were payable under the above structure.
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.
The maximum pool of non-executive director fees approved by shareholders at the AGM was $800,000.
Pioneer Credit Limited
30 June 2019
18
Statutory remuneration disclosures
The following table details KMP remuneration in accordance with applicable accounting standards.
Statutory remuneration tables
Non-Executive Directors
Year
Cash
salary
Non-
monetary
benefits
Fixed remuneration
Annual and
long
service
leave
Variable remuneration
Post-
employment
benefits
Cash
bonus
Post-
employment
benefits
Options
Total
Mr Michael Smith
2019
2018
160,000
150,000
Mr Mark Dutton
2019
2018
100,000
92,500
Ms Andrea Hall
2019
2018
100,000
94,625
Ms Ann Robinson
2019
2018
Total
2019
2018
100,000
34,231
460,000
371,356
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
15,200
14,250
9,500
8,788
9,500
8,989
9,500
3,252
43,700
35,279
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
175,200
164,250
109,500
101,288
109,500
103,614
109,500
37,483
503,700
406,635
Executive Directors
Year
Fixed remuneration
Variable remuneration
Cash
salary
Non-
monetary
benefits
Annual
and long
service
leave
Post-
employment
benefits
Cash
bonus
Post-
employment
benefits
Indeterminate
Rights
Total
Mr Keith John
2019
2018
671,119
585,050
11,844
11,820
87,996
30,398
25,000
25,000
-
-
-
-
576,358
1,372,317
264,296
916,564
Pioneer Credit Limited
30 June 2019
19
Executive Key Management Personnel
Year
Fixed remuneration
Variable remuneration
Cash
salary
Non-
monetary
benefits
Annual
and long
service
leave
Post-
employment
benefits
Cash
bonus
Post-
employment
benefits
Performance
Rights
Total
Ms Lisa Stedman1
2019
2018
339,711
324,178
11,844
11,820
25,100
13,065
25,000
-
-
20,576
22,150
90,000
2,850
297,562
422,231
761,625
Mr Leslie Crockett
2019
2018
411,779
374,999
11,844
11,820
23,773
37,035
25,000
24,607
Mr Anthony Bird2
2019
2018
110,625
308,000
-
-
6,642
13,202
5,743
25,000
Ms Susan Symmons
244,788
11,844
233,923
5,178
5,107
6,688
22,485
22,227
2019
2018
Total
2019
2018
-
-
-
-
-
-
-
-
-
-
-
-
-
382,095
293,216
854,491
741,677
-
116,368
80,053
432,897
187,489
190,585
471,713
458,601
- 1,166,518
3,237,120
1,778,022
1,826,150
47,376
47,280
141,976
100,388
103,228
118,984
90,000
2,850 1,125,712
3,311,364
Total KMP remuneration expensed
Year
Fixed remuneration
Variable remuneration
Cash
salary
Non-
monetary
benefits
Annual
and long
service
leave
Post-
employment
benefits
Cash
bonus
Post-
employment
benefits
Total
Indeterminate
and
performance
Rights
2019
2018
2,238,022
2,197,506
47,376
47,280
141,976
100,388
146,928
-
- 1,166,518
3,740,820
154,263
90,000
2,850 1,125,712
3,717,999
1 Lisa Stedman resigned as Chief Operating Officer effective 9 July 2019
2 Anthony Bird resigned as Chief Risk Officer effective 28 September 2018
Pioneer Credit Limited
30 June 2019
20
Proportion of fixed and variable remuneration
The following table shows the proportion of remuneration that is fixed and that which is linked to performance.
Name
Executive Director
Mr Keith John
Executive Key Management Personnel
Ms Lisa Stedman
Mr Leslie Crockett
Ms Susan Symmons
2019
2019
2019
2019
Fixed remuneration
At risk – STI
At risk – LTI
58%
95%
55%
60%
-
0%
-
-
42%
5%
45%
40%
Contractual arrangements with senior executives
The terms of employment for the Company’s executives are formalised in service agreements. There are no benefits
payable to any executive on termination. The significant provisions of each service agreement are set out below.
Employee
Position
Salary
Mr Keith John
Managing Director
Ms Lisa Stedman1
Chief Operating Officer
Mr Leslie Crockett
Chief Financial Officer
Ms Susan Symmons
Company Secretary
$672,807 per annum plus
superannuation
$340,000 per annum plus
superannuation
$412,500 per annum plus
superannuation
$245,000 per annum plus
superannuation
Term of agreement and
notice period
Continuing agreement with 12
months’ notice by either party
Continuing agreement with 6
months’ notice by either party
Continuing agreement with 6
months’ notice by either party
Continuing agreement with 3
months’ notice by either party
Mr Anthony Bird²
Chief Risk Officer
$308,000 per annum plus
superannuation
Continuing agreement with 6
months’ notice by either party
1 Lisa Stedman resigned as Chief Operating Officer effective 9 July 2019
² Anthony Bird resigned as Chief Risk Officer effective 28 September 2018
Equity instruments held by KMP
The tables below show the number of options over ordinary shares, performance rights or indeterminate rights and shares
in the Company held during the financial year by KMP, including their close family members and entities related to them.
There were no shares or options granted during the reporting period as compensation.
Option holdings
Name
Mr Michael Smith
Issued
balance at
the start
of the year
250,000
Granted as
compensation
Vested Exercised
-
250,000
(250,000)
Balance
at the
end of
the year
-
Vested
and
exercise-
able
-
Unvested
-
On 7 February 2014, the company established a share option scheme that entitled the holder to purchase 300,000 shares
in the company at an exercise price of $1.92. 50,000 Options, with a vesting date of 4 April 2016, were exercised in FY18,
the remaining 250,000 options, with a vesting date of 4 April 2017, were exercised during the period. The share price on
4 April 2016 was $1.69 and on 4 April 2017 was $2.10.
Pioneer Credit Limited
30 June 2019
21
Performance rights or indeterminate rights
Name
Issued
balance at
the start
of the year
Granted as
compensation
Vested
and
exercised
Balance
at the
end of
the year
Unvested
560,000
Indeterminate Rights
Executive Director
Mr Keith John
Performance Rights
Executive Key Management Personnel
Ms Lisa Stedman
Mr Leslie Crockett
Mr Anthony Bird
Ms Susan
Symmons
Total - Performance
rights
310,000
310,000
7,500
150,000
777,500
500,000
(37,500)
1,022,500
1,022,500
100,000
250,000
-
30,000
(67,500)
(50,000)
(7,500)
(12,500)
342,500
510,000
-
167,500
342,500
510,000
-
167,500
380,000
(137,500)
1,020,000
1,020,000
Total
1,337,500
880,000
(175,000)
2,042,500
2,042,500
No performance or indeterminate rights are held nominally.
Performance rights and indeterminate rights by their nature do not have an exercise price.
Refer to 3.4.1 for additional information with regards to vesting dates and fair value.
Executive Share Plan
Name
Issued balance at
the start of the year
Granted as
compensation
Repaid during the
year
Balance at
the end of
the year
Executive Share Plan
Executive Key Management Personnel
Ms Lisa Stedman
Mr Leslie Crockett
Mr Anthony Bird
Ms Susan Symmons
Total
250,000
250,000
250,000
250,000
1,000,000
-
-
-
-
-
-
-
(250,000)
-
(250,000)
250,000
250,000
-
250,000
750,000
Shareholdings
Name
Balance at the start
of the year
Other changes
during the year
Balance at the end
of the year
Held
nominally
Non-Executive Directors
Mr Michael Smith
Mr Mark Dutton
Ms Ann Robinson
Total – Non-Executive Directors
Executive Director
Mr Keith John
Executive Key Management Personnel
Ms Lisa Stedman1
Mr Leslie Crockett
Mr Anthony Bird2
Ms Susan Symmons
Total – Executive Key
Management Personnel
Total
415,634
117,003
15,000
547,637
5,199,124
323,080
509,417
307,767
275,063
1,415,327
7,162,088
1 Lisa Stedman resigned as Chief Operating Officer effective 9 July 2019
² Anthony Bird resigned as Chief Risk Officer effective 28 September 2018
280,306
5,327
-
285,633
37,500
67,500
50,000
(307,767)
12,894
(177,373)
695,940
122,330
15,000
833,270
382,282
122,330
15,000
519,612
5,236,624
5,199,124
390,580
559,417
-
287,957
1,237,954
-
404,684
-
9,058
413,742
145,760
7,307,848
6,132,478
Pioneer Credit Limited
30 June 2019
22
Terms and conditions of share-based payment arrangements
Unlisted options
250,000 options vested during FY19.
No options were on issue at 30 June 2019.
Executive share plan
1,000,000 shares were issued to executives (excluding the Managing Director) under a share purchase facility on 18 July
2017 (“Loan”). The key terms are:
a) The price of each share issued was equal to the 5 day VWAP as at 1 July 2017 (namely $2.2864);
b) The facility accrues interest at normal commercial rates;
c) The shares are secured for the benefit of the Company;
d) All dividends paid on any shares owned by the executive will be applied in full against the facility;
If the executive is not employed by Pioneer, the facility balance is payable immediately; and
e)
f) The facility is not recognised as a loan as the Company only has recourse to the value of the shares.
One executive left the Company in FY19 and settled their share purchase facility. 750,000 shares remain on issue under
the Loan.
On 18 March 2019 the Loan Facility Agreement was modified by the Board for one Executive who had resigned, to extend
the term of their Loan given the circumstances which had resulted in no trading windows being available to Restricted
Persons. On 29 May 2019 the Loan Facility Agreement was amended by the Board to clarify its intention that annual loan
repayment requirements would be satisfied by the dividends paid on the shares during the term of the loan.
Other transactions with KMP
Leases entered into with related parties
Mr Keith John is the Sole Director and Secretary of Avy Nominees Pty Limited, the trustee of The John Family Primary
Investments Trust (“JFPIT”). JFPIT is the owner of 190 Bennett Street, East Perth which is leased by the Company. The
lease expires on 1 January 2022, is at arm’s length terms and for the year ended 30 June 2019 the total amount of
$78,912 was paid to JFPIT in respect of the lease. No amount was owing to the related party at 30 June 2019.
Shares issued on the exercise of options
250,000 shares were issued to KMP during the reporting period on the exercise of options at the exercise price of $1.92.
The Company has no further options on issue.
Insurance of officers
During the year the Company paid a premium of $65,988 to insure its Directors and Secretaries.
The exposures insured include legal costs that may be incurred in defending proceedings that may be brought against
people in their capacity as officers of the Group, and any other payments arising from liabilities incurred in connection
with such proceedings. This does not include such liabilities that arise from conduct involving a wilful breach of duty or
the improper use of their position or of information to gain advantage for themselves or someone else or to cause
detriment to the Company. It is not possible to apportion the premium between amounts relating to the insurance against
legal costs and those relating to other liabilities.
Indemnity of auditors
The Company 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 the
Company will meet the full amount of any such liabilities including a reasonable amount of legal costs.
Proceedings on behalf of the Company
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on
behalf of the Company, or to intervene in any proceedings to which the Company is a party, for the purpose of taking
responsibility on behalf of the Company for all or part of those proceedings.
Pioneer Credit Limited
30 June 2019
23
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.
Non-audit services
The Company may decide to engage the auditor for matters additional to their statutory audit duties.
The Board has considered advice received from the Audit and Risk Management Committee, and 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 because:
a) all non-audit services have been reviewed by the Audit and Risk Management Committee to ensure they do not
impact the impartiality and objectivity of the auditor; and
b) none of the services undermine the general principles relating to auditor independence as set out in APES 110
Code of Ethics for Professional Accountants.
During the year the following fees were paid or payable for non-audit services.
Taxation services
PricewaterhouseCoopers Australia
Tax compliance services
Total remuneration for taxation services
Other services
PricewaterhouseCoopers Australia
Compliance and accounting advice
International Network firms of PricewaterhouseCoopers Australia
Payroll and registration services
Total remuneration for other services
Total remuneration for non-audit services
2019
$
-
-
-
2018
$
1,683
1,683
110,000
11,345
11,345
56,785
166,785
11,345
168,468
A copy of the Auditor’s Independence Declaration under section 307C of the Corporations Act 2001 is on page 25.
Rounding of amounts
The Company is of a kind referred to in ASIC Corporations Instrument 2016/191 (Rounding in Financial/Directors’
Reports) relating to the ‘rounding off’ of amounts in the Directors’ Report. Amounts in the Directors’ Report have been
rounded off in accordance with that instrument 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
Managing Director
Perth
29 September 2019
Pioneer Credit Limited
30 June 2019
24
Auditor’s Independence Declaration
As lead auditor for the audit of Pioneer Credit Limited for the year ended 30 June 2019, 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.
Justin Carroll
Partner
PricewaterhouseCoopers
Perth
29 September 2019
PricewaterhouseCoopers, ABN 52 780 433 757
Brookfield Place, 125 St Georges Terrace, PERTH WA 6000, GPO Box D198, PERTH WA 6840 25
T: +61 8 9238 3000, F: +61 8 9238 3999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
Corporate Governance Statement
The Board of Directors is committed to achieving the highest standards of corporate governance and has reviewed its
corporate governance practices against the Corporate Governance Principles and Recommendations (4th edition)
published by the ASX Corporate Governance Council.
The 2019 Corporate Governance Statement is dated 30 June 2019 and reflects the corporate governance practices in
place throughout the 2019 financial year and was approved by the Board on 29 July 2019. The Group's Corporate
Governance Statement can be viewed at: https://corporate.pioneercredit.com.au/wp-content/uploads/2019/07/Corporate-
Governance-Statement-Final.pdf.
Pioneer Credit Limited
30 June 2019
26
Financial Statements
Pioneer Credit Limited ABN 44 103 003 505
Annual Report - 30 June 2019
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
28
29
30
31
32
89
90
These are the consolidated financial statements of Pioneer Credit Limited and its subsidiaries and are presented in
Australian currency. Pioneer Credit Limited is a Company limited by shares, incorporated and domiciled in Australia. Its
registered office is:
Level 6, 108 St Georges Terrace
Perth WA 6000
The financial statements were authorised for issue by the Board of Directors on 29 September 2019. The Directors have
the authority to amend and reissue the financial statements.
Pioneer Credit Limited
30 June 2019
27
Consolidated statement of comprehensive income
Interest income at amortised cost
Fair value gain on PDPs at FVTPL
Net impairment gains / losses on PDPs at amortised cost
Net gains on derecognition of assets at amortised cost
Other income
Employee expenses
Finance expenses
Information technology and communications
Direct expenses
Rental expenses
Depreciation and amortisation
Other expenses
Professional expenses
Impairment of intangible assets
Travel and entertainment
Net impairment losses on financial assets
Share of net loss of associate accounted for using the equity method
Profit before income tax
Income tax expense
Profit for the period from continuing operations
Note
3
3
3
3
3
4
4
5
2019
$’000
58,072
-
12,014
2,154
3,072
75,312
(39,916)
(8,422)
(4,235)
(3,515)
(3,340)
(2,937)
(2,578)
(2,114)
(855)
(650)
(153)
-
6,597
(2,316)
4,281
2018
$’000
45
77,780
-
-
3,722
81,547
(35,441)
(5,236)
(3,276)
(3,679)
(2,892)
(1,625)
(1,828)
(1,563)
-
(670)
(287)
(60)
24,990
(7,390)
17,600
Total comprehensive income for the year is attributable to:
Owners of Pioneer Credit Limited
4,281
17,600
Earnings per share for profit attributable to the ordinary equity holders
of the Company:
Basic earnings per share
Diluted earnings per share
22(a)
22(b)
6.88
6.54
28.88
27.72
The consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.
Pioneer Credit Limited
30 June 2019
28
Consolidated balance sheet
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Consumer loans
Other current assets
Assets classified as held for sale
Current tax asset
PDP Financial assets
Total current assets
Non-current assets
Consumer loans
Property, plant and equipment
Deferred tax assets
Intangible assets
Other non-current assets
PDP Financial assets
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Borrowings
Current tax liabilities
Provisions
Accruals and other liabilities
Total current liabilities
Non-current liabilities
Borrowings
Provisions
Other liabilities
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Contributed equity
Reserves
Retained earnings
Capital and reserves attributable to the owners of Pioneer Credit Limited
Total equity
Note
2019
$’000
2018
$’000
6
7(a)
7(a)
7(a)
7(b)
7(a)
8(a)
8(b)
8(c)
7(a)
7(b)
7(c)
7(d)
8(d)
7(c)
7(d)
8(d)
9(a)
9(g)
9(h)
11,184
2,185
1,472
762
-
5,404
92,711
113,718
6,738
4,054
212
1,502
720
157,065
170,291
3,410
3,065
747
1,328
704
-
76,461
85,715
2,065
4,785
1,319
2,296
518
148,100
159,083
284,009
244,798
4,356
169,394
-
373
4,586
178,709
3,935
2,172
2,109
278
4,854
13,348
-
841
1,720
2,561
126,862
716
2,158
129,736
181,270
143,084
102,739
101,714
78,131
4,032
20,576
102,739
71,779
2,969
26,966
101,714
102,739
101,714
The consolidated balance sheet should be read in conjunction with the accompanying notes.
Pioneer Credit Limited
30 June 2019
29
Consolidated statement of changes in equity
Contributed
Equity
$’000
Note
Share
Based
Payment
Reserve
$’000
Retained
Earnings
$’000
Total
Equity
$’000
Balance at 1 July 2018
71,779
2,969
26,966
101,714
Impact of adopting AASB 9 (net of tax)
-
-
(3,195)
(3,195)
Total comprehensive income for the year
-
71,779
-
2,969
4,281
28,052
4,281
102,800
Transactions with owners in their capacity as
owners
Contributions of equity, net of transaction costs
Acquisition of treasury shares
Employee share scheme
Dividend reinvestment plan
Treasury shares and share based payments
Issue of treasury shares to employees
Equity plans
Dividends declared and paid
9(a)
9(a)
9(a)
9(a)
9(g)
9(g)
9(a)
13(b)
166
(550)
61
4,830
-
793
1,052
-
6,352
-
-
-
-
1,856
(793)
-
-
1,063
-
-
-
-
-
-
-
(7,476)
(7,476)
166
(550)
61
4,830
1,856
-
1,052
(7,476)
(61)
Balance at 30 June 2019
78,131
4,032
20,576
102,739
Balance at 1 July 2017
71,255
2,394
16,639
90,288
Total comprehensive income for the year
-
71,255
-
2,394
17,600
34,239
17,600
107,888
Transactions with owners in their capacity as
owners
Contributions of equity, net of transaction costs
Acquisition of treasury shares
Employee share scheme
Dividend reinvestment plan
Treasury shares and share based payments
Issue of treasury shares to employees
Options exercised
Dividends declared and paid
9(a)
9(a)
9(a)
9(a)
9(g)
9(g)
9(a)
13(b)
138
(1,650)
104
1,017
-
819
96
-
524
-
-
-
-
1,394
(819)
-
-
575
-
-
-
-
-
-
-
(7,273)
(7,273)
138
(1,650)
104
1,017
1,394
-
96
(7,273)
(6,174)
Balance at 30 June 2018
71,779
2,969
26,966
101,714
The consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
Pioneer Credit Limited
30 June 2019
30
Consolidated statement of cash flows
Note
2019
$’000
2018
$’000
Cash flows from operating activities
Receipts from liquidations of PDPs and services (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
Net cash inflow from operating activities before changes in
operating assets
3
10(a)
Changes in operating assets arising from cash flow
movements
Net consumer loans advanced
Interest received on consumer loans
Net cash inflow from operating activities
Cash flows from investing activities
Payments for property, plant and equipment
Receipts for property, plant and equipment
Payments for intangible assets
Acquisitions of PDP financial assets
Net receipts from other investments
Net cash outflow from investing activities
Cash flows from financing activities
Payments for shares acquired by the Incentive Plan Trust
Proceeds from borrowings
Repayment of borrowings
Bond transaction costs
Dividends paid to Company’s shareholders
Proceeds from issue of ordinary shares and DRP
Treasury shares and KMP loan repayments
Net cash inflow from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Cash and cash equivalents at the end of the year
9(a)
13(b)
120,842
105,328
(55,271)
(47,296)
65,571
38
(6,678)
(7,353)
51,578
58,032
33
(3,584)
(5,972)
48,509
(5,455)
963
(4,492)
(3,058)
33
(3,025)
47,086
45,484
(524)
782
(1,724)
(76,643)
937
(77,172)
(550)
40,923
(1,053)
(17)
(7,476)
5,312
721
37,860
7,774
3,410
11,184
(1,756)
-
(1,743)
(84,431)
2,007
(85,923)
(1,650)
87,265
(37,612)
(1,278)
(7,273)
1,258
-
40,710
271
3,139
3,410
The consolidated statement of cash flows should be read in conjunction with the accompanying notes.
Pioneer Credit Limited
30 June 2019
31
Contents of the notes to the consolidated financial statements
Note Page
How numbers are calculated
1
2
3
4
5
6
7
8
9
10
Risk
11
12
13
Basis of preparation
Segment information
Revenue
Other expense items
Income tax expense
Cash and cash equivalents
Financial assets and financial liabilities
Non-financial assets and liabilities
Equity
Cash flow information
Critical accounting estimates and judgements
Financial risk management
Capital management
Group structure
14
15
Subsidiaries
Associates
Unrecognised items
16
17
18
Contingencies
Commitments
Events occurring after the reporting period
Other information
19
20
21
22
23
24
25
26
Related party transactions
Share-based payments
Remuneration of auditors
Earnings per share
Deed of cross guarantee
Assets pledged as security
Parent entity financial information
Summary of significant accounting policies
34
42
42
43
44
45
46
54
59
64
67
68
71
73
73
75
75
76
76
77
78
79
80
80
80
82
Pioneer Credit Limited
30 June 2019
32
Notes to the consolidated financial statements
How numbers are calculated
This section provides additional information about those individual line items in the financial statements that the Directors
consider most relevant in the context of the operations of the entity, including:
accounting policies that are relevant for an understanding of the items recognised in the financial statements;
analysis and sub-totals; and
information about estimates and judgements made in relation to particular items.
Note Page
1
2
3
4
5
6
7
8
9
10
Basis of preparation
Segment information
Revenue
Other expense items
Income tax expense
Cash and cash equivalents
Financial assets and financial liabilities
Non-financial assets and liabilities
Equity
Cash flow information
34
42
42
43
44
45
46
54
59
64
Pioneer Credit Limited
30 June 2019
33
Notes to the consolidated financial statements
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
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).
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.
At 30 June 2019 the Group had net current liabilities of $64.9m (FY18: net current assets of $72.4m). The working capital
deficit was primarily caused by the classification of $169.4m of borrowings as current liabilities, due to the Senior Debt
Facility expiring on 31 March 2020 and Medium Term note event of default.
Material Uncertainty Related to Going Concern
The financial statements have been prepared on a going concern basis.
On 26 August 2019, Pioneer advised the market that it was not in a position to confirm its financial results under the
amortised cost classification adopted for the year ended 30 June 2019 and noted it was possible that there would be a
material difference in the expected Net Profit after Taxation (“NPAT”) previously disclosed to the market. Due to the
complexities of the change in classification and measurement method of its Purchased Debt Portfolios (“PDPs”) and the
development of its financial model to calculate the value of its PDPs under amortised cost (“AC”), the Company had not
yet determined an appropriate carrying value and its auditors were not yet able to complete their audit.
During the completion of the financial statements for issue, the material difference in NPAT also flowed to the calculation
of Earnings before Interest and Tax (“EBIT”) for the period. The reported NPAT, and as a result this difference in EBIT
caused a breach of the interest cover financial covenant under the Company's Senior Financing Facility and resulted in
a cross default under the Medium Term Notes (“Notes”).
The Company’s securities have remained voluntarily suspended from the ASX for more than 5 consecutive trading days,
commencing 28 August 2019.
As a result, events of default have occurred and are subsisting under the Senior Financing Facility and the Notes.
While the Company has complied with the financial covenants of its Senior Financing Facility during FY19 except for the
interest cover financial covenant as previously disclosed, while a default subsists, the Senior Financiers may (subject to
the Standstill Agreement noted below) by notice to the Company do one or more of the following:
declare that the secured money is immediately due and payable;
declare that all or part of the outstanding amount is payable on demand;
terminate the Senior Financiers’ obligations; and/or
cancel all or any part of the facility limit with immediate effect.
The terms and conditions of the Notes (“Conditions”) provide that the rights of the Note Trustee, the Security Trustee and
each Noteholder to take action against the Company as the Note Issuer upon the occurrence of an event of default are
subject to the restrictions set out in the Finance Documents. The Intercreditor Deed between the Company's Senior
Financiers and the Noteholders provides that no Note Trustee or Noteholder is entitled to take any Enforcement Action
prior to the discharge date of the Senior Financing Facility. The Note Trust Deed similarly provides that the Note Trustee
must not take Enforcement Action unless, amongst other things, the action is permitted under the Finance Documents.
The Intercreditor Deed also provides for a drag-along mechanism binding the Noteholders in relation to amendments,
waivers, consents or approvals given under a Senior Finance Document, subject to certain exceptions. Under the current
circumstances outlined above, in the event the Senior Financiers take no action and the existing default is continuing, the
Noteholders are not able to take any Enforcement Action other than in a limited set of circumstances where various
conditions must first be satisfied. However, these conditions are largely dependent on the action of the Senior Financiers.
One instance where the Noteholders are able to take Enforcement Action is where a period of at least 180 days has
elapsed after an initial junior enforcement notice is issued plus at least a further 10 business days during which the default
can be remedied or waived.
Pioneer Credit Limited
30 June 2019
34
Notes to the consolidated financial statements
Under the Note Trust Deed, Enforcement Action means any action to enforce the Notes or the Trust Note Deed and,
among other things, includes:
declaring amounts due and payable; and
taking action to wind-up the Issuer.
On 23 September 2019, the Company and various subsidiaries entered into a Standstill Agreement (“SA”) with its Senior
Financiers and the Security Trustee.
The Company continues to trade in the ordinary course of business, including the continued investment in its forward flow
debt portfolio programme from free cashflow.
The purpose of the SA includes providing time for the parties to continue their work together to agree a way forward for
Pioneer. Pioneer has engaged corporate advisors to seek and assess proposals which include:
a sale of the Company as a going concern;
pursuing financing options; and/or
realisation of value by way of sale of some of the assets.
The SA provides, among other things, that subject to compliance with its terms, the Senior Financiers will not take any
action in relation to the existing defaults, and will allow Pioneer to trade in the ordinary course of business, for a standstill
period that will conclude, unless extended, on 14 October 2019. In the lead up to this date, the parties intend to continue
discussions regarding the standstill period, including the time needed to implement the preferred solutions of the
Company.
Pioneer also confirms that during the present term of the SA, no principal repayments or default interest are required to
be paid to the Senior Financiers.
As noted above, following the voluntary ASX suspension of its securities for 5 consecutive trading days, an event of
default occurred on the Notes issued in March 2018. As there is no reason to believe that the Company will not be able
to meet its financial payment obligations under the Notes as and when they fall due, there is no expectation that any
penalty interest will be payable.
At 30 June 2019 the Group had net current liabilities of $64.9m (FY18: net current assets of $72.4m). The working capital
deficit was primarily caused by the classification of $169.4m of borrowings as current liabilities, due to the Senior Debt
Facility expiring on 31 March 2020 and Medium Term note event of default.
The Company has net assets of $102.7m which include $92.7m of current balance of PDPs ($249.8m in total carrying
amount) due from customers which are intended to be realised in cash over the next 12 months.
There can be no assurance that the Senior Financiers will extend the standstill period beyond 14 October 2019 in which
case the Company will remain in default of the Senior Financing Facility and subject to notice of the exercise of the rights
outlined.
There can be no assurance that the Noteholders do not exercise their Enforcement Rights as outlined above, provided
such rights are able to be exercised subject to the restrictions in the Finance Documents, which may result in the
declaration with required notice that the Notes become payable on demand.
Were this to occur, the cashflow forecast for the next 12 months demonstrates that without the ongoing successful
operational and financial performance and completion of a restructuring of its Senior Financing Facility and Notes and /
or recapitalisation through an equity capital raising and/or realisation of value by way of sale of some of the assets, the
Company would be unable to repay its commitments under the Senior Financing Facility and Notes.
The above matters represent a material uncertainty that may cast a significant doubt on the Group’s and the Company’s
ability to continue as a going concern, and therefore, the Group may not be able to realise its assets and discharge its
liabilities in the normal course of business.
The Directors believe that, as at the date of signing the financial statements, there are reasonable grounds to believe that
the Group will be able to achieve a restructuring of its debt and/or recapitalisation through an equity raising or realisation
of value by way of sale of some of the assets so that it will have sufficient funds to repay the Senior Financing Facility
and the Notes, interest and creditors and to meet the long term funding needs of the business.
Taking into account the underlying assumptions from the cash flow projections of the Group, as well as the Group’s
ongoing discussions with its major stakeholders, the Directors believe it is likely to achieve the outcomes stated above to
enable the Group and the Company to continue operations for the foreseeable future, and that the going concern basis
of preparation of the accompanying consolidated financial statements remains appropriate.
Pioneer Credit Limited
30 June 2019
35
Notes to the consolidated financial statements
For completeness, the accompanying consolidated financial statements do not include any adjustments relating to
positive outcomes that may eventuate in connection with the assessment of proposals outlined above and nor do they
include adjustments relating to the realisation and classification of asset and liability amounts that may be necessary if
the Group is unable to continue as a going concern. If the going concern assumption is no longer appropriate, adjustments
may have to be made to reflect the situation that assets may need to be realised other than in the normal course of
business and at amounts which may differ significantly from the amounts at which they are currently recorded in the
statements of financial position. In addition, the Group and the Company may have to reclassify non-current assets and
liabilities as current assets and liabilities respectively. Such adjustments have not been made to these financial
statements.
Functional and presentation currency
The consolidated financial statements are presented in Australian dollars.
Critical accounting estimates
The preparation of financial statements requires the use of certain critical accounting estimates. It also requires the Board
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
Certain classifications on the consolidated statement of comprehensive income, consolidated balance sheet,
consolidated statement of changes in equity, consolidated statement of cash flows and notes to the consolidated financial
statements have been reclassified. The Group believes that this will provide more relevant information to stakeholders.
The comparative information has been reclassified accordingly.
The accounting policies adopted are consistent with those of the previous financial year and corresponding interim
reporting period, except for the adoption of new and amended standards as set out below.
New standards and interpretations adopted
A number of new or amended standards became applicable for the current reporting period and the Group had to change
its accounting policies as a result of adopting the following standards:
AASB 9 Financial Instruments
AASB 9 Financial Instruments is applicable to annual reporting periods commencing on or after 1 January 2018, and has
been adopted by the Group with effect from 1 July 2018.
AASB 9 replaces AASB 139 and addresses classification, measurement and derecognition of financial assets and
liabilities, the impairment of financial assets measured at amortised cost or fair value through other comprehensive
income, expected credit loss (“ECL”) provisions for loan commitments and financial guarantee contracts and general
hedge accounting.
AASB 9 requires financial assets to be classified into one of the following measurement categories: fair value through
profit or loss, fair value through other comprehensive income or amortised cost. Classification is made on the basis of
the objectives of the entity’s business model for managing its financial assets and the contractual cash flow characteristics
of the instruments. The standard also retains most of the requirements for financial liabilities except for those designated
at fair value through profit or loss whereby that part of the fair value change attributable to the entity’s own credit risk is
recorded in other comprehensive income.
AASB 9 replaces the AASB 139 ‘incurred loss’ impairment approach with an ‘expected credit loss’ approach. The revised
approach applies to financial assets recorded at amortised cost or fair value through other comprehensive income. The
expected credit loss approach requires an allowance to be established upon initial recognition of an asset reflecting the
level of losses anticipated after having regard to, amongst other things, expected future economic conditions.
Subsequently the amount of the allowance is affected by changes in the expectations of loss driven by changes in
associated credit risk. Purchased or originated credit-impaired financial assets (“POCI”) are financial assets classified at
amortised cost that are purchased or originated at a deep discount that reflects incurred credit losses. At initial recognition,
POCI assets do not carry a separate impairment allowance; instead, lifetime expected credit losses are incorporated into
the calculation of the effective interest rate. All changes in lifetime expected credit losses subsequent to the assets’ initial
recognition are recognised as an impairment change.
Pioneer Credit Limited
30 June 2019
36
Notes to the consolidated financial statements
In adopting AASB 9, the Group has reclassified purchased debt portfolios from financial assets at fair value through profit
or loss to financial assets measured at amortised cost, resulting in a corresponding decrease in the carrying value
recorded at 1 July 2018 of $4.6m compared to the amount previously reported at 30 June 2018. In accordance with the
transition requirements of AASB 9, comparative information for FY18 has not been restated and transitional adjustments
have been accounted for through retained earnings as at 1 July 2018, the date of initial application; and as a result
shareholders’ equity decreased by $3.2m and deferred tax assets increased by $1.4m, following the reclassification of
purchased debt portfolios to be measured at amortised cost. The adoption of AASB 9 also impacts income tax and
deferred tax, both at transition and ongoing.
PDP assets are considered to be 'purchased or originated credit impaired' under AASB 9 and, as such, the impairment
charge on these assets is, on initial recognition, captured within the carrying amount of the asset. Any additional
impairment movement is recognised only for the cumulative changes in lifetime expected credit losses since initial
recognition against the asset's carrying amount.
In calculating the carrying value of the assets based on expected future cash flows, inclusive of an impairment charge,
Pioneer make a probability-weighted estimate by evaluating a range of possible outcomes and taking into account the
time value of money, past events, current and future economic conditions. All PDP assets are considered at a tranche
level as these are relatively homogoneous based on shared credit risk characteristics exhibited by purchased credit-
impaired debt.
The carrying value of an asset incorporates credit risk factors to project future cash flows of each future month of the
exposure's expected life. There are a number of key risk characteristics that are considered in forecasting future cash
flows. The impact of these variables on forecasted cash flows is based upon observed and analysed historical data that
has been used in the development of internal models. Management incorporates forward-looking macroeconomic
calibration in calculating the forecast cash flows. Management, is responsible for the identification and determination of
the impact of economic factors which are approved by the ARMC and Board. Research material is drawn from multiple
sources with key material made available to Pioneer by the CBA Economics Research team as well as Westpac
Economics team, including the extensive material made available through the Westpac IQ research forum. The Westpac-
Melbourne Institute of Economic Research continues to be an important source of commentary and supporting statistics
on the highly relevant consumer sentiment index.
Write-off policy
When the Group has exhausted all practical recovery methods, and there is no reasonable expectation of recovering
cash flows from the financial asset, the financial asset is written off, either partially or in full. Recovery methods include
implementation and management of payment plans and mutliple attempted communication with the customer to tailor an
appropriate outcome. The portfolio is regularly reviewed for accounts that have become statute barred and these are
written off. Recovery methods are considered to be exhausted when all methods have been attempted without success.
The majority of assets are unsecured, where possible consideration is given to collateral recovery.
The Group holds preference shares which are not traded in an active market. The shares, which were convertible notes
at 30 June 2018, were previously accounted for at cost consistent with the application of the requirements of AASB 139.
Under AASB 9, the preference shares have been reassessed and the asset does not give rise to cash flows on specified
dates that are solely payments of principal and interest on the principal amount outstanding. Consequently as an equity
instrument it is now measured at fair value through profit or loss.
Pioneer Credit Limited
30 June 2019
37
Notes to the consolidated financial statements
Consumer Loan products are carried at amortised cost under AASB 9.
The accounting for financial liabilities remains largely unchanged.
Impairment
Where a financial asset is measured at either amortised cost or fair value through other comprehensive income, an entity
shall recognise an allowance for expected credit losses.
Impairment of these types of financial assets has been based on an expected loss model based on unbiased forward
looking information replacing the previous incurred loss model which only recognised impairment if there was objective
evidence that a loss had incurred.
The Group has two types of financial assets that are subject to AASB 9’s new expected credit loss model:
receivables from consumer loans; and
trade receivables from the provision of services.
The Group assesses on a forward-looking basis the expected credit losses associated with its financial assets carried at
amortised cost. The Group recognises a loss allowance for such losses at each reporting date.
The Group was required to revise its impairment methodology under AASB 9 for each of these classes of assets. Based
on the assessment performed, no adjustment is required to the Group’s opening equity.
Consumer loans1
$’000
Trade and other
receivables
$’000
Closing loss allowance as at 30 June 2018 – AASB 139
Amounts restated through opening retained earnings
Opening loss allowance as at 1 July 2018 – AASB 9
Increase in loss allowance recognised in profit or loss
during the year
Recoveries
Closing loss allowance as at 30 June 2019 – AASB 9
258
-
258
144
-
402
89
-
89
65
(89)
65
Total
$’000
347
-
347
209
(89)
467
1 A consumer loan is in default when the counterparty fails to make a contractual payment within 90 days of when they
fall due.
The impairment methodology is described below
Receivables from consumer loans
The estimation of credit exposure for risk management purposes is complex and requires the use of models, as the
exposure varies with changes in market conditions, expected cash flows and the passage of time. The assessment of
credit risk of a portfolio of assets entails further estimations as to the likelihood of defaults occurring, of the associated
loss ratios and of default correlations between counterparties. The Group measures credit risk using probability of default
and loss given default as per the requirements of AASB 9. For consumer loans the Group recognises a lifetime expected
credit loss when there has been a significant increase in credit risk since initial recognition. If, on the other hand, the credit
risk on the financial instrument has not increased significantly since initial recognition, the Group measures the loss
allowance for that financial instrument at an amount equal to 12 months of the expected credit loss. The assessment of
whether a lifetime expected credit loss should be recognised is based on significant increases in the likelihood or risk of
a default occurring since initial recognition instead of evidence of a financial asset being credit-impaired at the reporting
date or an actual default occurring.
Lifetime expected credit loss represents the expected credit losses that will result from all possible default events over
the expected life of a financial instrument. In contrast, 12 months expected credit loss represents the portion of lifetime
expected credit loss that is expected to result from default events on a financial instrument that are possible within 12
months after the reporting date.
Pioneer Credit Limited
30 June 2019
38
Notes to the consolidated financial statements
Significant increase in credit risk
In assessing whether the credit risk on a financial instrument has increased significantly since initial recognition, the Group
compares the risk of a default occurring on the financial instrument as at the reporting date with the risk of a default
occurring on the financial instrument as at the date of initial recognition. In making this assessment, the Group considers
both quantitative and qualitative information that is reasonable and supportable, including historical experience and
forward-looking information that is available without undue cost or effort.
The Group uses internal credit risk gradings that reflect its assessment of probability of default of individual counterparties.
Borrower and loan specific information collected at the time of application (such as disposable income) is captured by
this rating model. The credit grades are calibrated such that the risk of default increase exponentially at each higher risk
grade.
The Group has performed historical analysis and identified economic variables such as unemployment rate as well as
various external sources of actual and forecast economic information, impacting credit risk and expected losses for each
portfolio
The assumption that a significant increase in credit risk occurs after 30 days past due has not been applied. This is
because historical payments have proved that 30 days past due of non-payment is mainly due to administrative oversight
rather than resulting from financial difficulty of the borrowers. As such there is no indication of a significant increase in
credit risk based on 30 days past due presumption.
Definition of default
A consumer loan is in default when the counterparty fails to make a contractual payment within 90 days of when they fall
due.
Trade receivables from the provision of services
The Group recognises a lifetime expected credit loss for trade receivables. The expected credit losses on these financial
assets are estimated using a provision matrix based on the Group’s historical credit loss experience, adjusted for factors
that are specific to the debtors, general economic conditions and an assessment of both the current as well as the forecast
direction of conditions at the reporting date, including time value of money where appropriate. To measure the expected
credit losses, trade receivables have been grouped based on shared credit risk characteristics and the days past due.
The loss allowance policy as at 30 June 2019 relies on two grids, where grid one represents a group of customers with a
higher credit risk profile than the latter.
Current
$’000
> 30 days
past due
$’000
>60 days >90 days
past due
past due
$’000
$’000
>120 days
past due
$’000
Total
Grid 11
Grid 22
Gross carrying amount – Grid 1
Gross carrying amount – Grid 2
Total Loss allowance
1.1%
1.1%
965
736
18
1.1%
1.1%
37.9%
7.2%
39.6%
26.9%
100%
26.9%
4
11
-
3
3
1
29
1
12
28
20
34
1,030
771
65
1 Grid 1 contains those assets with a poor repayment history, with repeated incidents of defaults experienced.
2 Grid 2 contains those assets that have a positive repayment history, with very low levels of late payments experienced.
Trade receivables are written off when there is no reasonable expectation of recovery. Indicators that there is no
reasonable expectation of recovery include, amongst others, the failure of a debtor to engage in a repayment plan with
the Group.
Pioneer Credit Limited
30 June 2019
39
Notes to the consolidated financial statements
Sensitivity analysis
The most significant assumptions affecting the ECL allowances are as follows:
Personal loan portfolio
(i) Unemployment rate, given its impact on secured and unsecured borrowers’ ability to meet their contractual
repayments.
Account receivables
(i) Interest rate, given its impact on companies’ likelihood of default.
Set out below are the changes to the ECL as at 30 June 2019 that would result from reasonably possible changes in
these parameters from the actual assumptions used in the Group’s economic variable assumptions.
Consumer loan portfolio
Expected credit loss
Trade receivables
Expected credit loss
[-5%]1
$’000
397
[-50%]2
$’000
63
Unemployment
No change
$’000
402
Interest rates
No change
$’000
65
[+5%]1
$’000
407
[+50%]2
$’000
67
1 Average unemployment rate in FY19 is 5.1% (FY18: 5.5%). If the probability of occurrence of unemployment rate were
to change by ±5%, the expected credit loss would change by $5,484 in a downside scenario and $5,484 in an upside
scenario.
2 Average interest rate in FY19 is 1.48% (FY18: 1.5%). If interest rate forecasts were to change by ±50%, the expected
credit loss would change by $1,851 in a downside scenario and $1,851 in an upside scenario.
Consumer loan
Stage 1
12-month
ECL
$’000
Stage 2
Lifetime
ECL
$’000
Stage 3
Lifetime
ECL
$’000
Loss allowance as at 1 July 2018
Movement with P&L impact
New Financial assets originated or purchased
Changes in PDs/LGDs/EADs
Total net P&L charge during the period
258
261
(117)
402
-
-
-
-
-
-
-
-
Total
$’000
258
261
(117)
402
There has been no significant change in the estimation techniques or significant assumptions made from the initial
application of revised impairment methodology and during the current reporting period.
Pioneer Credit Limited
30 June 2019
40
Notes to the consolidated financial statements
AASB 15 Revenue from Contracts with Customers
AASB 15 Revenue from Contracts with Customers amends revenue recognition requirements and establishes principles
for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts
with customers. The standard replaces AASB 118 Revenue and AASB 111 Construction Contracts and related
interpretations.
The Group implemented the new standard on 1 July 2018. Based on assessments performed, the Group has determined
there to be no impact on the Group’s accounting or its current business activities. The effect of initially applying the
standard was that no adjustments are required to net profit or opening retained earnings at 1 July 2018.
New standards and interpretations not yet adopted
AASB 16 Leases
AASB 16 Leases is applicable to annual reporting periods commencing on or after 1 January 2019, and unless early
adopted will be effective for the 30 June 2020 year end. The Group has not early adopted the new standard and will follow
the modified retrospective approach when the new standard becomes applicable.
AASB 16 amends the accounting for leases and will replace AASB 117 Leases. Lessees will be required to bring both
operating and finance leases on balance sheet as a right of use asset along with the associated lease liability. The only
exceptions are short-term and low-value leases. Interest expense will be recognised in profit or loss using the effective
interest rate method and the right of use asset will be depreciated.
The Group has set up a team to review all of the Group’s leasing arrangements in light of the new lease accounting rules
in AASB 16. The standard will affect primarily the accounting of the Group’s non-cancellable operating leases, see note
17(a).
The Group has performed a preliminary assessment and has estimated that on 1 July 2019, leases will impact the balance
sheet with approximately $10m additional assets and liabilities if an option to extend one of the leases is not exercised or
$23m if the option to extend is exercised, opening reserves will be adjusted by approximately $0.414m or $0.223m
depending on the option selected.
The Group has calculated the incremental borrowing rate for each material class of operating leases and has applied
these rates in the AASB 16 calculations.
Amendments to References to Conceptual Framework in IFRS Standards
The Conceptual Framework for Financial Reporting is the foundation on which the IASB develops new accounting
standards. It covers all aspects of standard setting from the objective of financial reporting, to presentation and
disclosures. The Conceptual Framework may be used as a reference for selecting accounting policies in the absence of
specific IFRS requirements.
The changes are applicable to annual reporting periods commencing on or after 1 January 2020 and would be effective
for the 30 June 2021 year end. The potential impacts to the Group have not yet been determined.
Other amendments to existing standards that are not yet effective are not expected to result in significant changes to the
Group’s accounting policies.
Pioneer Credit Limited
30 June 2019
41
Notes to the consolidated financial statements
Segment information
The Group is organised into business segments for which discrete financial information is produced to allow regular
review of operating results by key management personnel and to provide a basis for allocation of resources and
assessment of performance.
While the current financial thresholds of these segments are quantitatively too low to provide meaningful disclosure to
evaluate their nature and financial effect in the context of the economic environment in which they operate, the Group will
continue to monitor the appropriateness of segment reporting.
Revenue
From continuing operations
Interest income from PDPs and consumer loans at amortised cost
Net impairment gain / loss from PDPs at amortised cost
Gains on derecognition of assets at amortised cost
Losses on derecognition of assets at amortised cost
Liquidations of PDPs at FVTPL
Change in value of PDPs at FVTPL
Revenue from operations
Revenue recognition
2019
$’000
58,072
12,014
4,565
(2,411)
-
-
72,240
2018
$’000
45
-
-
-
101,673
(23,893)
77,825
Revenue from purchased debt portfolios represents the yield from acquired portfolio investments.
Interest income on PDPs is measured using the credit-adjusted effective interest rate method. The credit-adjusted
effective interest rate method calculates the amortised cost of a financial instrument and allocates the interest income
over the expected life of the financial instrument after considering all contractual terms of the financial asset and expected
credit losses.
Interest income on consumer loans is measured using the effective interest rate method. The effective interest rate
method calculates the amortised cost of a financial instrument and allocates the interest income over the expected life of
the financial instrument.
Fees, transaction costs and issue costs integral to the financial assets are capitalised and included in the interest
recognised over the expected life of the instrument.
Impairment gains / losses are the net changes to the carrying value of purchased debt portfolios, discounted at the credit-
adjusted effective interest rate as a result of reassessments of their estimated future cash flows and are recognised in
the line item ‘Net impairment gain / loss from PDPs at amortised cost.
During the period, the Group derecognised non-core and other PDPs for strategic reasons that contributed a net $2.2m
to revenue from operations, comprising gains of $4.6m and losses of $2.4m.
Pioneer Credit Limited
30 June 2019
42
Other income
Notes to the consolidated financial statements
Legal and broking services
Interest earned on cash and cash equivalents
Profit on sale of asset held for sale
Other income and FVTPL movement
2019
$’000
2,477
38
233
324
3,072
2018
$’000
2,876
33
813
-
3,722
Services income and interest on cash and cash equivalents
Revenue from services is recognised as income when the service performance obligation is fulfilled.
Interest earned on cash and cash equivalents is measured using the effective interest method. The profit on sale of the
asset held for sale is recognised based on the reliably measured economic benefits that have flowed to the Group.
Other expense items
This note provides a breakdown of specific costs included in profit before income tax.
Finance expenses
Bank fees and borrowing expenses
Interest and finance charges paid / payable for financial liabilities not at fair value
through profit and loss
Employee benefits expense
Share based payments
Depreciation and amortisation
Depreciation
Amortisation
2019
$’000
1,749
6,673
8,422
1,874
1,874
1,274
1,663
2,937
2018
$’000
1,376
3,860
5,236
1,492
1,492
817
808
1,625
Pioneer Credit Limited
30 June 2019
43
Notes to the consolidated financial statements
Income tax expense
This note provides an analysis of the Group’s income tax expense, 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
Current tax on profits for the year
Adjustments for current tax of prior periods
Deferred tax expense (income)
Income tax expense
Income tax is attributable to:
Profit from continuing operations
Deferred income tax expense / (income) included in income tax expense comprises:
Increase / (decrease) direct to equity
Increase / (decrease) in deferred tax assets of prior years
Increase / (decrease) in deferred tax assets
2019
$’000
(119)
(41)
2,476
2,316
2018
$’000
7,699
7
(316)
7,390
6,597
24,990
1,369
49
1,058
2,476
(186)
-
(130)
(316)
See note 11 for critical accounting estimates and judgements on the taxation estimation related to PDPs under amortised
cost.
Numerical reconciliation of income tax expense to prima facie tax payable
Profit from continuing operations before income tax expense
Tax at the Australian tax rate of 30.0% (FY18: 30.0%)
Non-deductible entertainment costs
Non-deductible share based payments
Employee share trust funding contribution
Under / (over) provision for prior year taxation
Employee share scheme
Indeterminate rights settled
Other non-deductible expenses and assessable income
Income tax expense
2019
$’000
6,597
1,979
21
562
(165)
(41)
(50)
-
10
2,316
2018
$’000
24,990
7,497
34
448
(495)
7
(41)
(60)
-
7,390
Pioneer Credit Limited
30 June 2019
44
Amounts recognised directly in equity
Notes to the consolidated financial statements
Aggregate current and deferred tax arising in the reporting period and not
recognised in net profit or loss or other comprehensive income but directly
debited or credited to equity:
Current tax – credited directly to equity
Deferred tax – credited / (debited) directly to equity
Net current and deferred tax – credited directly to equity
Cash and cash equivalents
Cash at bank and in hand
2019
$’000
2018
$’000
-
1,369
1,369
186
(186)
-
2019
$’000
11,184
2018
$’000
3,410
Pioneer Credit Limited
30 June 2019
45
Notes to the consolidated financial statements
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; and
information on determining the fair value of instruments, including estimation uncertainty involved.
The Group holds the following financial instruments:
Financial assets
2019
Cash and cash equivalents
Trade and other receivables1
Consumer loans
Investment at FVTPL2
Financial assets at amortised cost
2018
Cash and cash equivalents
Trade and other receivables1
Consumer loans
Convertible note
Financial assets at FVTPL2
1excluding prepayments
2 fair value through profit or loss
Financial liabilities
2019
Trade and other payables3
Borrowings
Accruals, provisions and other liabilities
2018
Trade and other payables3
Borrowings
Accruals, provisions and other liabilities
3excluding non-financial liabilities
Note
Assets at
FVTPL1
$’000
-
-
-
667
-
667
-
-
-
-
224,561
224,561
7(a)
7(a)
7(a)
7(b)
7(a)
7(a)
7(a)
7(b)
Note
7(c)
7(d)
7(c)
7(d)
Financial
assets at
amortised
cost
$’000
11,184
2,185
8,210
-
249,776
271,355
3,410
3,065
2,812
500
-
9,787
Financial
Liabilities at
amortised
cost
$’000
4,356
169,394
5,342
179,092
3,935
129,034
5,410
138,379
Total
$’000
11,184
2,185
8,210
667
249,776
272,022
3,410
3,065
2,812
500
224,561
234,348
Total
$’000
4,356
169,394
5,342
179,092
3,935
129,034
5,410
138,379
The Group’s exposure to risks associated with financial instruments is discussed in note 12.
Pioneer Credit Limited
30 June 2019
46
Trade and other receivables
Notes to the consolidated financial statements
Trade receivables
Other receivables
Consumer loans
Prepayments
Investment at FVTPL
Other lease asset
2019
Non-
current
$’000
-
-
6,738
53
667
-
7,458
Current
$’000
1,704
481
1,472
762
-
-
4,419
Total
$’000
Current
$’000
1,704
481
8,210
815
667
-
11,877
2,529
536
747
995
-
333
5,140
2018
Non-
current
$’000
-
-
2,065
18
500
-
2,583
Total
$’000
2,529
536
2,812
1,013
500
333
7,723
Classification as trade and other receivables
Trade receivables are amounts due for services performed in the ordinary course of business. Consumer loans and other
receivables are held with the objective to collect the contractual cash flows and are therefore measured at amortised cost
under AASB 9, which is consistent with their treatment in prior years. If recovery of an amount is expected in one year or
less it is classified as a current asset. If not, it is presented as a non-current asset. The Group’s impairment and other
accounting policies for trade and other receivables are outlined in notes 12(c) and 26(d) respectively.
Consumer loans
In February 2018 the Group commenced issuing secured and unsecured Consumer loans. These loans and other
receivables are initially recognised at their fair value plus directly attributable transaction costs. Subsequent to initial
recognition, loans and other receivables are measured at amortised cost using the effective interest rate method and are
presented net of provisions for impairment.
Loans and other receivables are presented net of impairment losses, with increases or decreases in the provision amount
recognised in the Statement of Comprehensive Income. At 30 June 2019, a loss provision of $402,658 (FY18: $258,050)
has been recognised. The amount is equivalent to 4.9% of the balance outstanding.
The loan balance is categorised into current and non-current loans according to the due date within the contracted loan
terms. Amounts due within 12 months are classified as current assets, with the remainder classified as non-current assets.
Their carrying amount approximates their fair value (Level 3).
Fair value of trade and other receivables
Due to the short-term nature of the current receivables, their carrying amount is assumed to be the same as their fair
value (Level 3) and for the majority of the non-current receivables, the fair values (Level 3) are also not significantly
different to their carrying amounts.
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 receivables are overdue.
Pioneer Credit Limited
30 June 2019
47
Financial assets at amortised cost (previously FVTPL)
Financial assets at amortised cost (comparative is at FVTPL) include the following:
Notes to the consolidated financial statements
PDPs
Current
Non-current
2019
$’000
2018
$’000
92,711
157,065
249,776
76,461
148,100
224,561
Movement on financial assets at amortised cost (comparative is at FVTPL) is as follows:
Current and non-current
At beginning of period
Impact of adopting AASB 9 on 1 July 2018
Brought forward after AASB 9 opening adjustment
Additions for the period
Liquidations of PDPs
Net gain on financial assets from PDPs
Interest accrual
Net impairment gain
Gains on derecognition of assets
Losses on derecognition of assets
2019
$’000
2018
$’000
224,561
(4,564)
219,997
77,036
(118,466)
71,209
57,041
12,014
4,565
(2,411)
249,776
164,461
-
164,461
83,993
(101,673)
77,780
224,561
The impact of adopting AASB 9 Financial Instruments shown above is pre-tax. The post-tax impact can be seen in the
statement of changes in equity.
i)
Classification of financial assets at amortised cost
Financial assets are classified as measured at amortised cost, fair value through other comprehensive income or fair
value through profit or loss, depending on the Group’s business model for managing the financial assets and whether the
cash flows represent solely payments of principal and interest. The Group assesses its business models at a portfolio
level based on its objectives for the relevant portfolio, how the performance of the portfolio is managed and reported, and
the frequency and significance of asset sales. Financial assets that are held to collect contractual cash flows where those
cash flows represent solely payments of principal and interest are measured at amortised cost. Financial assets measured
at amortised cost at reporting period date include purchased debt portfolios and consumer loans.
Financial assets are derecognised when the contractual right to receive cash flows from those assets has expired or
when the Group has transferred its contractual right to receive the cash flows from the assets and either: substantially all
of the risks and rewards of ownership have been transferred; or the Group has neither retained nor transferred
substantially all of the risks and rewards, but has transferred control.
Purchased debt portfolios are recognised initially at fair value at the date of purchase and are subsequently measured at
amortised cost according to the credit-adjusted effective interest method. Purchased debt portfolios are reported in
accordance with the rules for purchased or originated credit–impaired assets, that is, at amortised cost applying the credit-
adjusted effective interest method with the expected credit loss established at inception included in the calculation. This
credit-adjusted effective interest rate is the rate that exactly discounts the estimated future cash receipts of the purchased
portfolio asset to the net carrying amount at initial recognition (i.e. the price paid to acquire the portfolio). Cash flow
projections are made at the portfolio level, since each portfolio of receivables consists of a small number of homogeneous
amounts.
Pioneer Credit Limited
30 June 2019
48
Notes to the consolidated financial statements
The carrying amount of each portfolio is determined at each reporting period by discounting projecting future cash flows
to present value using the credit-adjusted effective interest rate as at the date the portfolio was acquired. Changes in
expected cash flow are adjusted in the carrying amount and are recognised in the profit or loss as income or expense in
‘Net impairment gain / loss from PDPs at amortised cost’.
The weighted average credit-adjusted effective interest rate (weighted by investment values at initial recognition) on the
date of initial application is 22.71%.
The weighted average credit-adjusted effective interest rate (weighted by investment values at initial recognition) at 30
June 2019 is 30.75%.
Fair value comparative disclosure
PDPs are classified and measured at amortised cost.
The comparative disclosure of the fair value of PDPs at 30 June 2019 is $275.6m (Level 3). The net FVTPL gain on PDP
financial assets that would have been recognised in profit or loss if PDPs had not been reclassified for 2019 is $92.5m.
The weighted average discount rate (weighted by investment values at initial recognition) applied to future expected cash
flows to estimate fair value is 20.73% (FY18: 20.11%).
Under both methods, the requirement to estimate cash flows including the estimation of their timing is the same. However
the two approaches differ in how discount rates are determined which will result in different recognition patterns of returns.
During FY19, the Group purchased several significant portfolios at prices lower than the long term historical average
(percentages of debt face value), and expects these portfolios to deliver returns on the customer accounts at least in line
with long term historical averages. Under AC, the CAEIRs set in the manner outlined above are higher on these portfolios
than as determined using FVTPL.
Consistent with the treatment applied and disclosed in prior years under the FVTPL classification the discount rates to
determine the comparative fair value disclosed here are derived from observed rates of return for comparable assets that
are informed by observed PDP transactions in the market and reviewed at each reporting period. The Group believes
that these best represent the discount rates that market participants would use at the reporting dates to estimate the fair
value.
ii) Classification of financial assets at fair value through profit or loss
During the prior period, under AASB 139 Financial Instruments: Recognition and Measurement, purchased debt portfolios
(PDPs) were classified as financial assets at fair value through profit or loss (“FVTPL”).
During the current period comparative disclosure of the fair value of PDPs by way of note is provided and is reported
consistent with the fair value methodology required under AASB 13 Fair Value Measurement, as was applied in prior
years and as is described below.
For the prior period, fair value net gains or losses on PDPs are disclosed in the consolidated statement of comprehensive
income as Liquidations of PDPs, net of any change in value. Liquidations of PDPs are the recognised flow of economic
benefits from the acquisition and servicing of PDPs including all cash flow sources from each portfolio’s respective
purchase agreement.
The present value of the amount of the PDPs that are expected to be realised within 12 months was classified as a current
asset, with the remainder included as a non-current asset.
During the current period under AASB 9 the Group holds preference shares which are not traded in an active market.
The shares, which were convertible notes at 30 June 2018, were previously accounted for at cost consistent with the
application of the requirements of AASB 139. Under AASB 9, the preference shares have been reassessed and the asset
does not give rise to cash flows on specified dates that are solely payments of principal and interest on the principal
amount outstanding. Consequently as an equity instrument it is now measured at fair value through profit or loss.
iii) Amounts recognised in profit or loss
Changes in the fair value of financial assets at fair value through profit or loss were recorded as part of revenue.
Pioneer Credit Limited
30 June 2019
49
Notes to the consolidated financial statements
iv) Fair value and fair value measurements
Fair value hierarchy
To provide an indication about the reliability of the inputs used in determining fair value, the Group has classified PDPs
into the three levels prescribed under the accounting standards. An explanation of each level follows underneath the
table.
30 June 2019
Financial assets at FVTPL
30 June 2018
Financial assets at FVTPL
There were no transfers between levels in 2019 or 2018.
Level 1:
Level 1
$’000
Level 2
$’000
Level 3
$’000
Total
$’000
-
-
-
667
667
-
224,561
224,561
The fair value of financial instruments traded in active markets (such as publicly traded derivatives, and trading and
available-for-sale securities) is based on quoted market prices at the end of the reporting period.
Level 2:
The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives)
is determined using valuation techniques which maximise the use of observable market data and rely as little as possible
on entity specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is
included in Level 2.
Level 3:
If one or more of the significant inputs is not based on observable market data (unobservable inputs), the instrument is
included in Level 3.
Fair value is best evidenced as a quoted market price in an active market. As there is not a quoted active market for
PDPs and because one or more of the significant inputs is not based on observable market data, the PDP valuation was
classified at Level 3 and valuation techniques were used based on current market conditions. The valuation techniques
maximised the use of relevant observable inputs and minimised the use of unobservable inputs.
The valuation techniques used to determine the fair value measurement reflected the price that would be received to sell
the asset in an orderly transaction between market participants at the measurement date under current market conditions.
The Group, under AASB 13 Fair Value Measurement utilised the income valuation approach, a technique that converts
forecasted cash flows to a present value amount (also known as a discounted cash flow). Forecast cash flows are
actuarially determined using predictive models based on evidenced historical performance.
The fair value of PDPs requires estimation of:
a)
b)
c)
the expected future cash flows;
the expected timing of receipt of those cash flows; and
discount rates derived from observed rates of return for comparable assets that are traded in the market
and reviewed at each reporting period.
Pioneer Credit Limited
30 June 2019
50
Notes to the consolidated financial statements
Valuation inputs are derived and extrapolated where possible from observable characteristics that market participants
would take into account when pricing the asset at the measurement date. Assumptions used are those that market
participants would use when pricing, assuming that market participants act in their economic best interest. Inputs are
calibrated against current market assumptions, historic transactions and economic models, where available.
Unobservable inputs for which market data is not available are developed using the best information available about the
assumptions that market participants would use when pricing the asset, as can be the case for PDPs.
The main inputs used by the Group in measuring the fair value of financial instruments in FY18 were evaluated as follows:
Description Variable incorporated
Face value
Sum of contractual customer account
value of the PDPs
Expressed as a percentage of the face
value over
the
assessment of most likely forecast cash
flows
The period over which cash
liquidate
time and represents
flows
free
Incorporates a
rate and
risk
appropriate credit risk adjustment and is
derived from observed rates of return for
comparable assets that are traded in the
market
Acquisition cost of acquired PDPs
(transaction costs expensed as incurred)
Application to fair value
Determined at the date the PDP was acquired based on
amounts contractually assigned in full to Pioneer
Predictive analysis considers product characteristics,
liquidation history, evidenced experience with comparable
portfolios and directly relevant market observable inputs
Cash flow forecast period capped at up to ten years
depending on liquidation history.
The weighted average discount rate used to calculate fair
value is 20.73% (FY18: 20.11%)
Cost is considered to best represent fair value at initial
recognition
Expected
liquidation
rate
flow
Cash
liquidation
period
Discount
rate
Cost
Model Risk
Valuation model risk arises where key judgements may impact on the appropriateness of model outputs and reports used.
Commensurate with the complexity, materiality and business use of the model, the Group mitigated and controlled model
risk through:
effective challenge and critical analysis involving objective, qualified and experienced parties in the line of
business in which the model is used; and
output verification to ensure that the model performed as expected in line with design objectives and business
use.
Additional analysis is performed through back testing, stability testing and sensitivity analysis. The results, outcomes and
actions affirmed the conceptual soundness of the models.
Given that unobservable inputs are those where market data is not available, and the inherent limitations of historic
information predicting future liquidations, additional model risk mitigation is achieved through appropriate cautious
downward calibration of the expected future cash flows.
The Group validated the valuation outcome by reviewing the key elements contributing to movements in value including
an analysis of the quantum, tenure and qualitative characteristics of the payment arrangements portfolio and an
assessment of other key portfolio performance characteristics.
Pioneer Credit Limited
30 June 2019
51
Notes to the consolidated financial statements
Valuation inputs, relationship to fair value and sensitivity
The following table summarises the quantitative impact on those elements of the valuation that are sensitive to the
significant unobservable inputs used in Level 3 fair value measurements in relation to FY18:
30 June
2018
Fair value
$’000
Valuation
technique
Unobservable
inputs
Range of
inputs
30 June 2018
Relationship to Fair Value
$224,561 Discounted
cash flow
Expected
liquidation rate
1% change in
liquidation
rate
A reduction in liquidation rate by 1%
resulted in a decrease in fair value
by $2.4m, an increase resulted in an
increase in fair value of $2.4m
Description
Financial
Assets at
Fair Value
Through
Profit or
Loss
Expected
liquidation rate
3% change in
liquidation
rate
flow
Cash
liquidation
period
Discount rate
Discount rate
Impact of a
nine
year
liquidation
period versus
a
year
ten
liquidation
period
Variance
risk-adjusted
discount
by 100 bps
rate
in
in
Variance
risk-adjusted
discount
by 300 bps
rate
A reduction in liquidation rate by 3%
resulted in a decrease in fair value
by $7.3m, an increase resulted in an
increase in fair value of $7.3m
Reducing
to
expected liquidations resulted in a
decrease in fair value of $0.4m
the cap applied
The higher the risk-adjusted rate the
lower the fair value. A reduction in
rate by 100 bps resulted in an
increase in fair value by $4.4m, an
increase resulted in a decrease in
fair value of $4.2m
The higher the risk-adjusted rate the
lower the fair value. A reduction in
rate by 300 bps resulted in an
increase in fair value by $12.2m, an
increase resulted in a decrease in
fair value of $13.8m
Pioneer Credit Limited
30 June 2019
52
Trade and other payables
Current
Trade payables
Payroll tax and other statutory liabilities
Other payables
Risk exposure
Information about the Group's exposure is provided in note 12.
Fair Value
Notes to the consolidated financial statements
2019
$’000
4,356
496
4,090
8,942
2018
$’000
3,935
640
4,214
8,789
The carrying amounts of trade and other liabilities are assumed to be the same as their fair values (Level 3), due to their
short term nature.
Borrowings
Secured
Bank loans
Medium term notes
Lease liabilities
Other loans
Unsecured
Other loans
2019
Non-
current
$’000
Total
$’000
Current
$’000
2018
Non-
current
$’000
Total
$’000
-
-
-
-
-
-
-
129,725
39,128
-
342
169,195
-
-
464
1,575
2,039
87,718
39,144
-
-
126,862
87,718
39,144
464
1,575
128,901
199
169,394
133
2,172
-
126,862
133
129,034
Current
$’000
129,725
39,128
-
342
169,195
199
169,394
Secured liabilities and assets pledged as security
Security over all the assets and undertakings of each of Pioneer Credit Limited, Pioneer Credit Solutions Pty Limited,
Sphere Legal Pty Limited, Pioneer Credit (Philippines) Pty Limited, Pioneer Credit Connect Pty Ltd, Pioneer Credit Broking
Services Pty Ltd, Credit Place Pty Ltd and Switchmyloan Pty Ltd and unlimited cross guarantees and indemnities from
each of these entities.
All property of the Group comprises the Group total assets of $284,009,000 (FY18: $244,798,000).
See note 12(d) for details of the financing arrangements available to the Group to which the security relates.
Accrued interest on borrowings, included in other payables, is $477,051 at 30 June 2019 (FY18: $481,938)
Medium term notes
The Group issued $40m in medium term notes on 22 March 2018. The notes have a maturity date of 22 March 2022 with
the option to repay the bond at 101% of par plus any accrued interest one year prior to maturity.
Compliance with bank loan and medium term note covenants
Note 1 provided additional disclosures with respect to compliance with bank loan and medium term note covenants.
Pioneer Credit Limited
30 June 2019
53
Notes to the consolidated financial statements
Fair Value
For all of the borrowings, the fair values (Level 3) are not materially different to their carrying amounts, since the interest
payable is either close to current market rates or the borrowings are of a short-term nature.
Risk exposure
Details of the Group’s exposure to risks arising from current and non-current borrowings are set out in note 12.
Finance lease
Commitments in relation to the finance lease are payable as follows:
Within one year
Later than one year but not later than two years
Minimum lease payments
Future finance charges
Total lease liabilities
The present value of finance lease liabilities is as follows:
Within one year
Later than one year but not later than two years
Minimum lease payments
Non-financial assets and liabilities
2019
$’000
2018
$’000
-
-
-
-
-
-
-
-
476
-
476
(12)
464
464
-
464
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; and
information about determining the fair value of the assets and liabilities, including judgements and estimation
uncertainty involved.
Pioneer Credit Limited
30 June 2019
54
Property, plant and equipment
Notes to the consolidated financial statements
Plant and
equipment
$’000
Furniture,
fittings &
equipment
$’000
Leasehold
improvements
$’000
2019
At 1 July 2018
Cost
Accumulated depreciation
Net book amount
Year ended 30 June 2019
Opening net book amount
Additions
Depreciation charge
Closing net book amount
At 30 June 2019
Cost
Accumulated depreciation
Net book amount
2018
At 1 July 2017
Cost
Accumulated depreciation
Net book amount
Year ended 30 June 2018
Opening net book amount
Additions
Depreciation charge
Closing net book amount
At 30 June 2018
Cost
Accumulated depreciation
Net book amount
2,438
(1,626)
812
812
396
(419)
789
2,834
(2,045)
789
1,962
(1,398)
564
564
476
(228)
812
2,438
(1,626)
812
587
(201)
386
386
78
(120)
344
665
(321)
344
306
(150)
156
156
281
(51)
386
587
(201)
386
Total
$’000
8,619
(3,834)
4,785
4,785
543
(1,274)
4,054
9,162
(5,108)
4,054
5,594
(2,007)
3,587
3,587
69
(735)
2,921
5,663
(2,742)
2,921
4,205
(1,469)
2,736
6,473
(3,017)
3,456
2,736
1,389
(538)
3,587
3,456
2,146
(817)
4,785
5,594
(2,007)
3,587
8,619
(3,834)
4,785
Pioneer Credit Limited
30 June 2019
55
Notes to the consolidated financial statements
Non-current assets pledged as security
Refer to note 7(d) for information on assets pledged as security by the Group.
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. Certain leasehold improvements and
leased plant and equipment are depreciated on a straight line basis over the term of the lease.
Plant and equipment
Furniture, fittings and equipment
Leasehold improvements
15% - 66.7%
15% - 50%
20% - 50%
See note 26(f) for the other accounting policies relevant to property, plant and equipment.
Deferred tax balances
Deferred tax assets
The balance comprises temporary differences attributable to:
Employee benefits (annual leave)
Retirement benefit obligations (superannuation payable)
Other
Other expenses (audit, accounting, payroll tax)
Share issue expenses
Other (formation costs, black hole costs, fixed and intangible timings)
Prepayments
Provision for impairment (PDPs)
Revenue tax losses
2019
$’000
2018
$’000
327
63
390
280
123
593
(18)
(3,605)
2,449
(178)
269
59
328
500
191
319
(19)
-
-
991
212
1,319
Net deferred tax assets
Movements
At 1 July 2018
(Charged) / credited
-
To profit or loss
- Directly to equity
At 30 June 2019
At 1 July 2017
(Charged) / credited
-
To profit or loss
- Directly to equity
At 30 June 2018
Employee
benefits
$’000
Retirement
Benefit
Obligation
$’000
269
58
-
327
207
62
-
269
59
4
-
63
65
(6)
-
59
Provision
for
impairment
(PDPs)
$’000
Revenue
tax
losses
$’000
Total
$’000
-
-
1,319
(3,605)
-
(3,605)
1,080
1,369
2,449
(2,476)
1,369
212
-
-
-
-
-
-
-
-
1,189
316
(186)
1,319
Other
$’000
991
(13)
978
917
260
(186)
991
Pioneer Credit Limited
30 June 2019
56
Intangible assets
2019
At 1 July 2018
Cost
Accumulated amortisation
Net book amount
Year ended 30 June 2019
Opening net book amount
Additions
Impairment charge
Amortisation charge
Closing net book amount
At 30 June 2019
Cost
Accumulated amortisation and impairment
Net book amount
2018
At 1 July 2017
Cost
Accumulated amortisation
Net book amount
Year ended 30 June 2018
Opening net book amount
Additions
Amortisation charge
Closing net book amount
At 30 June 2018
Cost
Accumulated amortisation
Net book amount
Notes to the consolidated financial statements
Goodwill
$’000
Software and
licenses
$’000
Total
$’000
4,031
(1,735)
2,296
2,296
1,724
(855)
(1,663)
1,502
4,900
(3,398)
1,502
2,266
(927)
1,339
1,339
1,765
(808)
2,296
3,891
(1,735)
2,156
2,156
1,724
(715)
(1,663)
1,502
4,900
(3,398)
1,502
2,126
(927)
1,199
1,199
1,765
(808)
2,156
3,891
(1,735)
2,156
4,031
(1,735)
2,296
140
-
140
140
-
(140)
-
-
-
-
-
140
-
140
140
-
-
140
140
-
140
Amortisation methods and useful lives
The Group amortises intangible assets with a limited useful life using the straight-line method over:
Software and licenses
1-3 years
See note 26(g) for other accounting policies relevant to intangible assets and the policy regarding impairments.
Finance lease
See note 7(d) for information on the finance lease with respect to software licences acquired. The finance lease was
settled during the year.
Goodwill
Goodwill was attributable to the acquisition of Switchmyloan Pty Limited in March 2016 and has been impaired at 30 June
2019.
Pioneer Credit Limited
30 June 2019
57
Provisions
Employee benefits
Lease make good
Notes to the consolidated financial statements
2019
Non-
current
$’000
Total
$’000
Current
$’000
383
458
841
756
458
1,214
278
-
278
2018
Non-
current
$’000
278
438
716
Current
$’000
373
-
373
Total
$’000
556
438
994
Employee benefits - Long service leave
The liabilities for long service leave are not generally expected to be settled wholly within 12 months after the end of the
period in which the employees render the related service. They are recognised in the provision for employee benefits and
measured as the present value of expected future payments to be made 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 rates published in the ‘Group of 100
Discount Rate Report and Discount Curve’. 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.
Lease make good
The Group is required to make good each of its leased premises to their original condition at the end of each lease, 30
June 2023. A provision has been recognised for the present value of the estimated expenditure required. 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.
Movements in provisions
At 1 July 2018
Carrying amount at start of year
Charged to profit or loss
Capitalised to balance sheet
At 30 June 2019
At 1 July 2017
Carrying amount at start of year
Charged to profit or loss
Capitalised to balance sheet
At 30 June 2018
Employee benefits Lease make good
$’000
$’000
10(b)
10(b)
556
200
-
756
345
211
-
556
438
20
-
458
337
(2)
103
438
Total
$’000
994
220
-
1,214
682
209
103
994
Pioneer Credit Limited
30 June 2019
58
Equity
Contributed equity
Share capital
Ordinary shares – fully paid
(Treasury shares see note 9(c))
Movements in ordinary share capital
Date
1 July 2018
30 June 2019
1 July 2017
30 June 2018
Opening balance
Dividend reinvestment plan
Employee share scheme
Acquisition of treasury shares
Treasury shares issued to employees
Options exercised
Executive share plan
Closing balance
Opening balance
Dividend reinvestment plan
Employee share scheme
Acquisition of treasury shares
Treasury shares issued to employees
Options exercised
Executive share plan
Closing balance
Ordinary shares
Notes to the consolidated financial statements
2019
Shares
2018
Shares
2019
$’000
2018
$’000
62,370,655
60,362,442
78,131
71,779
Number of shares
$’000
60,362,442
1,597,309
76,404
(200,000)
284,500
250,000
-
62,370,655
58,950,198
375,201
105,599
(496,556)
378,000
50,000
1,000,000
60,362,442
71,779
4,830
227
(550)
793
480
572
78,131
71,255
1,017
242
(1,650)
819
96
-
71,779
All authorised ordinary shares have been issued, 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 has one vote; and on a poll every shareholder who
is present 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 2019
59
Treasury shares
Date
1 July 2018
30 June 2019
1 July 2017
30 June 2018
Opening balance
Receipt on treasury shares
Treasury shares acquired
Treasury shares issued to employees
Closing balance
Opening balance
Receipt on treasury shares
Treasury shares acquired
Treasury shares issued to employees
Closing balance
Notes to the consolidated financial statements
Number of shares
$’000
1,028,556
-
200,000
(284,500)
944,056
910,000
-
496,556
(378,000)
1,028,556
3,297
148
550
(793)
3,202
2,221
245
1,650
(819)
3,297
Treasury shares acquired in 2019 and 2018 are shares in Pioneer Credit Limited that are held by the Pioneer Credit
Limited Equity Incentive Plan Trust for the purpose of issuing shares under the Pioneer Credit Limited Equity Incentive
Plan. Shares issued to employees are recognised on a first-in-first-out basis. The shares are acquired on market and are
held as treasury shares until such time as they are vested. Forfeited shares are reallocated in subsequent grants. Under
the terms of the trust deed, Pioneer Credit Limited is required to provide the trust with the necessary funding for the
acquisition of the shares. Included within the balance of treasury shares are 400,000 management shares that were
initially recognised in March 2014.
Employee share scheme
On 30 November 2018 the Company issued 76,404 fully paid ordinary shares to eligible employees under the $1,000
exempt plan and the $5,000 salary sacrifice scheme.
56,802 ordinary shares were issued to eligible employees for no consideration and 19,602 ordinary shares were acquired
by eligible employees by way of salary sacrifice. The employee offer shares were valued at $3.1114 each and the shares
issued for no consideration are an expense to the Company.
Options
Information relating to Options is set out in note 20(a).
Equity incentive plan
Scheme 1
At the Annual General Meeting on 29 October 2014, the Company approved an employee incentive plan whereby certain
eligible employees would be granted performance rights. Each Right entitles the holder to one fully paid ordinary share
for no consideration, subject to vesting conditions being met.
The performance conditions for these Rights were met on the 20 August 2015 and 780,000 Rights were granted on 1
September 2015 which will vest in accordance with the following schedule (each a ‘Vesting Date’):
• 1 July 2017: 60% Rights vested;
• 1 July 2018: 25% Rights vested; and
• 1 July 2019: 15% Rights will vest,
provided the holder of the Rights remains employed by the Group at the Vesting Date.
The terms of each tranche of Rights and assumptions used to determine fair value, are summarised in the table below.
Fair value at grant date
Grant date
Share price at grant date
Expiration period (years)
Dividend yield
Vesting date
Exercise price
Tranche 1
$1.6009
1-Sep-15
$1.77
1.83
5.48%
1-Jul-17
Nil
Tranche 2
$1.5155
1-Sep-15
$1.77
2.83
5.48%
1-Jul-18
Nil
Tranche 3
$1.4347
1-Sep-15
$1.77
3.83
5.48%
1-Jul-19
Nil
Pioneer Credit Limited
30 June 2019
60
Notes to the consolidated financial statements
4,500 Performance rights lapsed during FY19. 112,500 Performance rights had not vested at the end of the period.
Scheme 2
On 1 July 2016, the Board approved a grant of Performance Rights with a tenure based vesting condition. Each Right
entitles the holder to one fully paid ordinary share for no consideration, subject to vesting conditions being met.
320,000 Performance Rights were granted on 1 July 2016 which will vest in accordance with the following schedule (each
a “Vesting Date”):
• 1 July 2018: 28% Rights vested;
• 1 July 2019: 46% Rights will vest; and
• 1 July 2020: 26% Rights will vest,
provided the holder of the Rights remains employed by the Group at the Vesting Date.
The terms of each tranche of Rights and assumptions used to determine fair value, are summarised in the table below.
Fair value at grant date
Grant date
Share price at grant date
Expiration period (years)
Dividend yield
Vesting date
Exercise price
Tranche 1
$1.51
1-Jul-16
$1.71
2
6.2%
1-Jul-18
Nil
Tranche 2
$1.42
1-Jul-16
$1.71
3
6.2%
1-Jul-19
Nil
Tranche 3
$1.33
1-Jul-16
$1.71
4
6.2%
1-Jul-20
Nil
65,000 Performance rights lapsed during FY19. 165,500Performance rights had not vested at the end of the period.
Scheme 3
On 1 July 2017, the Board approved the grant of Rights with a tenure based vesting condition. Each Right entitles the
holder to one fully paid ordinary share for no consideration, subject to vesting conditions being met.
1,170,000 Performance Rights were granted on 1 July 2017 which will vest in accordance with the following schedule
(each a “Vesting Date”):
• 1 July 2019: 22% Rights will vest;
• 1 July 2020: 43% Rights will vest; and
• 1 July 2021: 35% Rights will vest,
provided the holder of the Rights remains employed by the Group at the Vesting Date.
The terms of each tranche of Rights and assumptions used to determine fair value, are summarised in the table below.
Fair value at grant date
Grant date
Share price at grant date
Expiration period (years)
Dividend yield
Vesting date
Exercise price
Tranche 1
$2.1317
1-Jul-17
$2.38
2
5.5%
1-Jul-19
Nil
Tranche 2
$2.0171
1-Jul-17
$2.38
3
5.5%
1-Jul-20
Nil
Tranche 3
$1.9092
1-Jul-17
$2.38
4
5.5%
1-Jul-21
Nil
310,000 Performance rights lapsed during FY19. 860,000 Performance rights had not vested at the end of the period.
500,000 Indeterminate Rights were granted on 27 October 2017 (following AGM approval) which will vest in accordance
with the following schedule (each a “Vesting Date”):
• 1 July 2020: 25% Rights will vest;
• 1 July 2021: 60% Rights will vest; and
• 1 July 2022: 15% Rights will vest,
provided the holder of the Rights remains employed by the Group at the Vesting Date.
Pioneer Credit Limited
30 June 2019
61
Notes to the consolidated financial statements
The terms of each tranche of Rights are summarised in the table below.
Fair value at grant date
Grant date
Share price at grant date
Expiration period (years)
Dividend yield
Vesting date
Exercise price
Tranche 1
$2.5300
27-Oct-17
$2.86
2.68
4.58%
1-Jul-20
Nil
Tranche 2
$2.4200
27-Oct-17
$2.86
3.68
4.58%
1-Jul-21
Nil
Tranche 3
$2.3100
27-Oct-17
$2.86
4.68
4.58%
1-Jul-22
Nil
No Indeterminate rights lapsed during FY19. 500,000 Indeterminate rights had not vested at the end of the period.
Scheme 4
On 11 September 2018, the Board approved the grant of Rights with a tenure based vesting condition. Each Right entitles
the holder to one fully paid ordinary share for no consideration, subject to vesting conditions being met.
710,000 Performance Rights were granted on 28 September 2018 which will vest in accordance with the following
schedule (each a “Vesting Date”):
• 1 July 2021: 15% Rights will vest;
• 1 July 2022: 25% Rights will vest; and
• 1 July 2023: 60% Rights will vest,
provided the holder of the Rights remains employed by the Group at the Vesting Date.
The terms of each tranche of Rights and assumptions used to determine fair value, are summarised in the table below.
Fair value at grant date
Grant date
Share price at grant date
Expiration period (years)
Dividend yield
Vesting date
Exercise price
Tranche 1
$2.8300
28-Sep-18
$3.28
2.76
5.30%
1-Jul-21
Nil
Tranche 2
$2.6900
28-Sep-18
$3.28
3.76
5.30%
1-Jul-22
Nil
Tranche 3
$2.5500
28-Sep-18
$3.28
4.76
5.30%
1-Jul-23
Nil
30,000 Performance rights lapsed during FY19. 680,000 Performance rights had not vested at the end of the period.
500,000 Indeterminate Rights were granted on 29 November 2018 (following AGM approval) which will vest in accordance
with the following schedule (each a “Vesting Date”):
• 1 July 2021: 25% Rights will vest;
• 1 July 2022: 60% Rights will vest; and
• 1 July 2023: 15% Rights will vest,
provided the holder of the Rights remains employed by the Group at the Vesting Date.
The terms of each tranche of Rights and assumptions used to determine fair value, are summarised in the table below.
Fair value at grant date
Grant date
Share price at grant date
Expiration period (years)
Dividend yield
Vesting date
Exercise price
Tranche 1
$2.5300
29-Nov-18
$2.90
2.59
5.30%
1-Jul-21
Nil
Tranche 2
$2.4000
29-Nov-18
$2.90
3.59
5.30%
1-Jul-22
Nil
Tranche 3
$2.2700
29-Nov-18
$2.90
4.59
5.30%
1-Jul-23
Nil
No Indeterminate rights lapsed during FY19. 500,000 Indeterminate rights had not vested at the end of the period.
Pioneer Credit Limited
30 June 2019
62
Other reserves
The following table shows a breakdown of the Statement of Changes in Equity line item Share Based Payments Reserve
and the movements in this reserve during the period under review. A description of the nature and purpose of the reserve
is provided below the table.
Notes to the consolidated financial statements
Share based payment reserve
At 1 July
Opening balance
Share based payment expense
Treasury shares loan repayments
Performance rights vested
At 30 June
2019
$’000
2,969
1,708
148
(793)
4,032
2018
$’000
2,394
1,149
245
(819)
2,969
Nature and purpose of the share-based payments reserve
The share based payments reserve is used to recognise the grant date fair value of options and rights issued but not
exercised, over the vesting period.
Employee share trust funding
On 12 April 2017 the Company commenced funding the Pioneer Credit Limited Equity Incentive Plan Trust (‘the Trust’)
for the purpose of acquiring fully paid ordinary shares on market to satisfy rights that vest on or after 1 July 2017 under
the Pioneer Credit Limited Equity Incentive Plan. As at 30 June 2019 the Trust held 544,056 shares (2018: 628,556
shares) acquired at an average price of $2.75 per share (2018: $3.37 per share).
Retained earnings
Movements in retained earnings were as follows:
Balance 1 July
Impact of adopting AASB 9 (net of tax)
Net profit for the year
Dividends
Balance 30 June
2019
$’000
26,966
(3,195)
4,281
(7,476)
20,576
2018
$’000
16,639
-
17,600
(7,273)
26,966
Pioneer Credit Limited
30 June 2019
63
Cash flow information
Reconciliation of profit after income tax to net cash inflow from operating activities
Notes to the consolidated financial statements
Profit for the period
Profit on non-current asset held for sale
Depreciation and amortisation
Non-cash employee benefits expense – share-based payments
Non-cash rental expense
Consumer loan loss provision
Consumer loan interest accrual
Increase in value of investment
Impairment of intangible assets
Share of loss of associate accounted for using the equity method
Change in value of PDPs at FVTPL
Amortisation of PDPs1
Foreign currency translation
Non-cash financing amortisation
Change in operating assets and liabilities:
(Increase) / decrease in trade receivables
Decrease / (increase) in deferred tax assets through profit or loss
Increase in trade payables
(Decrease) / increase in income tax payable
(Decrease) / increase in accruals and other liabilities
Net cash flow inflow from operating activities before changes in operating
assets
Note
4
20(c)
3
2019
$’000
4,281
(233)
2,937
1,874
302
145
(1,051)
(167)
855
-
-
47,257
(99)
507
(237)
1,089
706
(6,115)
(473)
51,578
2018
$’000
17,600
(813)
1,625
1,492
56
258
(45)
-
-
60
23,893
-
100
264
824
(96)
241
1,515
1,535
48,509
1 Amortisation of PDPs is the excess of Liquidations of PDPs over the net gain on financial assets from PDPs.
Liquidations of PDPs
Revenue from operations (net of consumer loans)
Amortisation of PDPs
Non-cash investing and financing activities
Make good provision
Note
7(b)
3
2019
$’000
2018
$’000
118,466
(71,209)
47,257
-
-
-
2019
$’000
2018
$’000
-
103
Pioneer Credit Limited
30 June 2019
64
Net debt reconciliation
Notes to the consolidated financial statements
Cash and cash equivalents
Borrowings
Lease liabilities
Cash and cash equivalents
Borrowings
Lease liabilities
Opening
balance at 1
July 2018
3,410
(128,570)
(464)
(125,624)
Opening
balance at 1
July 2017
Cash flow
Other non-
cash flow
7,774
(40,317)
464
(32,079)
-
(507)
-
(507)
Cash flow
Other non-
cash flow
3,139
(79,569)
(825)
(77,255)
271
(48,737)
361
(48,105)
-
(264)
-
(264)
Closing
Balance at 30
June 2019
11,184
(169,394)
-
(158,210)
Closing
Balance at 30
June 2018
3,410
(128,570)
(464)
(125,624)
Pioneer Credit Limited
30 June 2019
65
Notes to the consolidated financial statements
Risk
This section of the notes discusses the Group’s exposure to various risks and shows how these could affect the Group’s
financial position and performance.
Note Page
11 Critical accounting estimates and judgements
12
13 Capital management
Financial risk management
67
68
71
Pioneer Credit Limited
30 June 2019
66
Notes to the consolidated financial statements
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 Group 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. The Group also exercises judgement in applying the Group’s accounting policies.
Uncertainty about the assumptions and estimates could result in outcomes that require a material adjustment to the
carrying amount of assets or liabilities affected in future periods. Estimates and judgements are continually evaluated and
are based on historical experience and other factors, including expectations of future events that are believed to be
reasonable under the circumstances.
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition,
seldom equal 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.
Purchased debt portfolios
Classifying purchased debt portfolios at amortised cost and the use of the credit-adjusted effective interest rate method
requires the Group to estimate future cash flows from purchased debt portfolios loans at purchase date and at each
balance sheet date.
Estimating the timing and amount of cash flows for both the calculation of credit-adjusted effective interest rates
(“CAEIRs”) and subsequent remeasurement of the carrying amount of PDPs requires significant management judgement
regarding key assumptions. The underlying estimates that form the basis for amortised cost accounting depends on
variables including such as how the customer accounts were originated and managed and by which financial institution;
the quality and depth of information on the customer; how much time has elapsed since a payment was made against
the accounts; amounts due; the time elapsed since acquisition and the personal circumstances and character of the
customers. As described in the financial assets note 7(b), the Group adjusts the carrying amount of the portfolios to reflect
the revised estimated cash flows. Events or changes in assumptions and management’s judgement will affect the
recognition of revenue in the period.
The Group uses information and data obtained from vendors at acquisition and observation of PDP attributes in the month
of acquisition to determine expected cash flow forecasts for the calculation of CAEIRs. These cash flow forecasts are
reviewed by management, with model overlays used to address modelling anomalies observed. Any changes to PDP
attributes following the determination of CAEIRs when additional information and data is sourced or becomes available,
will result in changes to cash flow forecasts and impairment gains or losses. The Group has a policy of continually
reviewing its estimation of CAEIRs and cash flow forecasts.
Cash flow forecasts are generated using statistical models incorporating a number of factors, including predictions of
probability to pay, which is informed by customer and account level data, credit agency data and our historical experience
with accounts which have similar key attributes. Operational factors, that may impact future estimated cash flows, are
also considered such as improved collections processes and systems.
Management also review the model on a portfolio basis to take into account external factors, which have impacted
historical, or will impact future performance and where necessary portfolios are calibrated to take into account these
known factors. The assumptions and estimates made are specific to the particular characteristics of each portfolio.
If cash flow forecasts forecasts were to change by ±5%, the carrying value of PDPs at 30 June 2019 of $249.8m would
change by $12.5m in a downside scenario and $12.5m in an upside scenario. If resolution of any uncertainty results in
an increase or decrease in carrying value of PDPs, this is recognised in the income statement at that point in time. The
estimated future cash flows are most sensitive to observed payment history, as well as timing of future cash flow receipt.
Total undiscounted expected credit losses at initial recognition of PDPs recognised during the period is $425.6m. This
figure is the difference between the outstanding debt amount of PDPs acquired by the Group and the Total Expected
Liquidations of those portfolios at 30 June 2019.
Accounting for taxation
Following the adoption of AASB 9 Financial Instruments from 1 July 2018, the income tax treatment of purchased debt
portfolios may change. Previously, gains and losses for both accounting and tax purposes were treated in a similar
manner under the Taxation of Financial Arrangement rules contained within the Income Tax Assessment Act 1997. From
1 July 2018, these rules may require that interest income accrued under the amortised cost methodology and impairment
gains and losses from purchased debt portfolios are included in the calculation of income tax when received or realised.
Pioneer Credit Limited
30 June 2019
67
Notes to the consolidated financial statements
The Group is required to exercise judgement in the determination of income tax payable in accordance with the changed
rules. Deferred tax assets and liabilities attributable to differences in the tax and accounting cost bases of purchased debt
portfolios also arise as a consequence of the changes brought by the rules.
Financial risk management
The Group's activities expose it to a variety of risks and its 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.
Risk management is the responsibility of Key Management Personnel. Policies approved by the Board ensure that total
risk exposure is consistent with the Group strategy, is in line with covenants and is within internal risk tolerance guidelines.
To manage interest rate and credit risk arising from the investment in PDPs, the Group undertakes pricing analysis prior
to committing to any investment. This analysis includes consideration of information supplied under due diligence, as well
as macro and micro economic elements to which senior executives’ experience and judgement is applied. In many
instances there is knowledge of the performance of portfolios with similar characteristics.
The Group uses different methods to measure the different types of risk to which it is exposed which include sensitivity
analysis 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 financial assets and liabilities.
During the previous financial year the Group commenced originating consumer loans. Under the Board approved Risk
Appetite Statement regular reporting and review of key lending metrics ensures visibility is maintained over the credit
framework including highlighting any emerging trends indicating a need to revisit and amend the risk appetite. Lending
ceased in January 2019.
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.
Summarised sensitivity analysis – interest rate risk
The following table summarises the sensitivity of the Group's financial assets and financial liabilities to interest rate risk,
which 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 2019
Financial liabilities
Borrowings
At 30 June 2018
Financial liabilities
Borrowings
Carrying
amount
$’000
-100 bps
Profit
$’000
+100 bps
Profit
$’000
168,853
1,501
(1,501)
126,862
1,282
(1,282)
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 impact on profit is not significant.
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
New Zealand operations expose the Group to foreign exchange risk. This may result in the fair value of financial assets
and liabilities fluctuating due to movements in exchange rates. Fluctuations in the New Zealand dollar relative to the
Australian dollar may impact the Group’s financial results, though the impact of reasonably foreseeable exchange rate
movements are unlikely to be material.
Pioneer Credit Limited
30 June 2019
68
Notes to the consolidated financial statements
Cash flow and fair value interest rate risk
The Group’s main interest rate risk arises from long term loans and borrowings issued at variable interest rates. The
Group’s fixed rate consumer loans, borrowings, purchased debt portfolios and receivables are carried at amortised cost
and not subject to interest rate risk.
As at the end of the reporting period the Group had the following variable rate loans and borrowings outstanding:
Instruments used by the Group
30 June 2019
30 June 2018
Weighted average Balance Weighted average
interest rate %
interest rate %
$’000
Balance
$’000
Bank overdrafts and bank loans
Bond (before transaction costs)
3.77%
7.80%
129,725
40,000
3.71%
7.36%
87,718
40,000
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
The Group has no financial instruments exposed to market prices and as such there is no risk associated with fluctuations
in market prices.
Credit risk
Credit risk arises from cash and cash equivalents, credit exposure to customers, including outstanding receivables and
committed transactions.
Risk management
Credit risk is managed on a Group basis. For corporate customers, management assesses the credit quality of the
customer. Individual risk limits are set by the Board.
There are no significant concentrations of credit risk, whether through exposure to individual customers, specific industry
sectors and / or regions. The Group is exposed to investment credit risk from the significant investment in PDPs. Risk
limits are set based on internal ratings in accordance with limits set by the Board which is regularly monitored by
management.
Purchased debt portfolios in the balance sheet, consists of portfolios of delinquent consumer debts purchased significantly
below nominal value, reflecting incurred and expected credit losses.
Credit risk related to Consumer Loans is monitored in relation to Pioneer’s Risk Appetite Statement. A loss provision has
been recognised at year end.
Impaired trade receivables
As at 30 June 2019 there were no material trade receivables that were past due and there are no trade receivables that
are in default. The Group’s trade receivables and consumer loans are subject to AASB 9’s expected credit loss (“ECL”)
model for recognising and measuring impairment of financial assets. The Group’s impairment and other accounting
policies for trade and other receivables is outlined in note 26(d).
Pioneer Credit Limited
30 June 2019
69
Notes to the consolidated financial statements
Liquidity risk
Prudent liquidity risk management requires maintaining sufficient cash reserves and debt funding to meet obligations
when due and through maintaining a reputable credit profile.
Management monitors 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.
Financing arrangements
The Group had access to a Senior Debt Facility of $138,500,000 at the end of the financial year (30 June 2018:
$128,500,000) comprising a cash advance facility of $130,000,000 to partially fund the acquisition of PDPs, a bank
guarantee facility of $3,250,000, an overdraft facility of $2,500,000, a direct debit authority facility of $2,500,000 and a
credit card facility of $250,000.
The overdraft facility was unused at 30 June 2019 and the undrawn limit on the cash advance facility was $274,505 (30
June 2018: $32,200,405). The facility will expire on 30 March 2020.
The Group issued $40 million in medium term notes on 22 March 2018. The notes have a maturity date of 22 March 2022
with the option to repay the bond at 101% of par plus any accrued interest one year prior to maturity.
These financing arrangements are subject to the Group meeting a number of financial undertakings, included in note 1
are additional disclosures with respect the financing arrangements at reporting date.
Maturities of financial liabilities
The following table reflects an undiscounted contractual maturity analysis for financial liabilities. The timing of cash flows
represented in the table to settle financial liabilities reflects the earliest contractual settlement dates and does not reflect
the fact that the facilities were extended subsequent to the end of the financial year.
At 30 June 2019
Trade payables
Borrowings
Provisions
Accruals and other liabilities
At 30 June 2018
Trade payables
Borrowings
Provisions
Accruals and other liabilities
Within 1
year
$’000
4,356
177,024
373
4,586
186,339
3,935
8,884
278
4,416
17,513
Between
1 and 2
years
$’000
Between
2 and 5
years
$’000
Carrying
amount
$’000
-
-
-
-
-
-
92,097
-
-
92,097
-
-
841
-
841
-
45,149
716
-
45,865
4,356
169,394
1,214
4,586
179,550
3,935
129,034
994
4,416
138,379
Pioneer Credit Limited
30 June 2019
70
Notes to the consolidated financial statements
Capital management
Risk management
The Group's objectives when managing capital are to:
safeguard its ability to continue as a going concern; and
maintain an optimal capital structure to reduce the cost of capital.
Dividends
Ordinary shares
2H18 dividend on fully paid ordinary shares held on 28 September 2018 of 7.71 cents
per share (2H17: 5.28 cents per share) paid on 26 October 2018
1H19 dividend on fully paid ordinary shares held on 1 April 2019 of 4.31 cents per
share (1H18: 6.62 cents per share) paid on 26 April 2019
Dividends not recognised at the end of the reporting period
2019
$’000
2018
$’000
4,752
3,219
2,724
7,476
4,054
7,273
2019
$’000
2018
$’000
For the current financial year, the Directors have not recommended a divided since
year end.
-
4,745
Franking dividends
The franked portions of the final dividends recommended after 30 June 2019 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 2020.
2019
$’000
2018
$’000
Franking credits available for subsequent reporting periods on a tax rate of 30.0%
14,382
10,234
The above amounts are calculated from the balance of the franking account as at the end of the reporting period.
Capital risk management
Although the Group is not subject to any externally imposed regulatory requirement with respect to its capital position, it
maintains a conservative and proactive capital management strategy which includes taking 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.
The Board 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.
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 are met.
Details of financing facilities are set out in note 12(d).
Pioneer Credit Limited
30 June 2019
71
Notes to the consolidated financial statements
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.
Note Page
14 Subsidiaries
15 Associates
73
73
Pioneer Credit Limited
30 June 2019
72
Notes to the consolidated financial statements
Subsidiaries
Significant investments in subsidiaries
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in
accordance with the accounting policy described in note 26(a).
Name of entity
Country of
incorporation
Class of
shares
Equity holding
2019
%
2018
%
Pioneer Credit Solutions Pty Limited
Sphere Legal Pty Limited
Pioneer Credit (Philippines) Pty Limited
Pioneer Credit Connect Pty Limited
Pioneer Credit Broking Services Pty Limited
Switchmyloan Pty Limited
Credit Place Pty Limited
Pioneer Credit Acquisition Services (UK) Limited
Pioneer Credit Solutions (NZ) Limited
Pioneer Credit Connect (Fund 1) Pty Ltd
Pioneer Credit Connect (Personal Loans) Pty Ltd
Pioneer Credit Limited Equity Incentive Plan Trust
Australia
Australia
Australia
Australia
Australia
Australia
Australia
United Kingdom
New Zealand
Australia
Australia
Australia
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
N/A
1
2
3
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
1 Pioneer Credit Acquisition Services (UK) Limited is an entity incorporated in the United Kingdom and has not
2
3
conducted any business since inception to the date of this report.
Pioneer Credit Connect (Fund 1) Pty Ltd was incorporated on 15 January 2018 and has not conducted any
business since inception to the date of this report.
Pioneer Credit Connect (Personal Loans) Pty Ltd was incorporated on 15 January 2018 and has not conducted
any business since inception to the date of this report.
Associates
Investment in associate
In December 2017 management committed to a plan to sell the shares held in an associate of the Group. The investment
in associate was classified as an asset held for sale at 30 June 2018.
During the year the Group sold the remaining holding in GMY for $0.98m (FY18: $2.5m) and a profit before tax of $0.2m
(FY18: $0.8m) was recognised in the statement of comprehensive income.
There were no significant transactions with the associate during the financial year.
Pioneer Credit Limited
30 June 2019
73
Notes to the consolidated financial statements
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.
Note Page
16 Contingencies
17 Commitments
18 Events occurring after the reporting period
75
75
76
Pioneer Credit Limited
30 June 2019
74
Notes to the consolidated financial statements
Contingencies
The Group had contingent liabilities at 30 June 2019 in respect of:
A claim for unspecified damages was lodged against the Group in relation to alleged non-performance under a software
service agreement contract. The Group has disclaimed liability and is defending the action. It is not practical to estimate
the potential effect of this claim but legal advice indicates that it is not probable that a significant liability will arise.
Commitments
Non-cancellable operating leases
The Group leases various offices under non-cancellable operating leases expiring within five years. The leases have
varying terms, escalation clauses and renewal rights. On renewal, the terms of the leases are renegotiated.
Commitments for minimum lease payments in relation to non-cancellable
operating leases are payable as follows:
Within one year
Later than one year but not later than five years
Later than five years
2019
$’000
2018
$’000
2,755
8,741
-
11,496
2,303
11,360
-
13,663
Some lease agreements include a financial incentive which is generally used to fund premise fitouts. The assets acquired
under these incentives 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.
Service contract
The Group has a services contract for the operation of its Philippines facility that ends August 2022 and a WAN services
contract that ends October 2021. The minimum contractual commitments resulting from this agreement are outlined
below.
Commitments for minimum service payments in relation to non-cancellable
contracts are payable as follows:
Within one year
Later than one year but not later than five years
2019
$’000
2,207
4,739
6,946
2018
$’000
1,734
291
2,025
Pioneer Credit Limited
30 June 2019
75
Notes to the consolidated financial statements
Events occurring after the reporting period
Sale of Consumer Loan Portfolio
During the second half of the financial year Pioneer made the decision to cease lending under the Consumer Loan product
offering given the regulatory uncertainty emerging late 1H19 and determined to manage the portfolio of customers to their
loan maturities as contracted. Subsequent to 30 June 2019, Pioneer has made the decision to sell the Consumer Loan
portfolio and has initiated a formal sales process with an Information Memorandum released on 18 September 2019. This
decision to sell the Consumer Loan portfolio means that subsequent to year end, the portfolio is no longer held within a
business model to collect contractual cash flows or held within a business model to collect contractual cash flows and sell
financial assets. For this change in business model, the Consumer Loans portfolio would no longer meet the criteria to
be measured at amortised cost or at fair value through other comprehensive income and would be reclassified to fair
value through profit or loss. At 30 June 2019 the carrying value of the portfolio under amortised cost is $8.2m. As the
outcomes arising are indicative of conditions that arose after reporting date there is no reclassification recognised at 30
June 2019 and the impact will be reported in the 2020 financial year.
The Basis of Preparation note outlines the events and impacts arising with respect the Groups financing facility and the
Directors’ assessment of the going concern basis of preparation.
No other matter has arisen since 30 June 2019 that significantly affects the Group’s operations, results or state of affairs
or that may do so in future years.
Related party transactions
Parent entity
The Parent entity within the Group is Pioneer Credit Limited.
Subsidiaries
Interests in subsidiaries are set out in note 14.
Key Management Personnel
Short-term employee benefits
Post-employment benefits
Long-term benefits
Share-based payments
Transactions with other related parties
The following transactions occurred with related parties:
Rental expenses and other services
Entities owned or controlled by KMP
Superannuation contributions
Contributions to superannuation funds on behalf of Directors
Other transactions
Remuneration paid to Directors of the ultimate Australian parent entity
2019
$
2018
$
2,285,398
146,928
141,976
1,166,518
3,740,820
2,334,786
157,113
100,388
1,125,712
3,717,999
2019
$
2018
$
78,912
137,320
68,700
60,279
1,707,477
1,220,702
Pioneer Credit Limited
30 June 2019
76
Loans from related parties
Loans from key management personnel
Beginning of the year
Loans advanced
Loan repayments received
Interest charged
Interest paid
End of year
Notes to the consolidated financial statements
2019
$
2018
$
500,000
-
-
36,367
(36,367)
500,000
-
500,000
-
9,118
(9,118)
500,000
The loan comprises participation in the medium term note issue described in note 7(d) all of which has occurred on an
arm’s length basis.
Executive Share Plan
1,000,000 shares were issued to executives (excluding the Managing Director) under a share purchase facility on 18 July
2017. The key terms are:
The price of each share issued was equal to the 5 day VWAP as at 1 July 2017 (namely $2.2864);
The facility accrues interest at normal commercial rates;
The shares are secured for the benefit of the Company;
All dividends paid on any shares owned by the executive will be applied in full against the facility;
If the executive is not employed by Pioneer, the facility balance is payable immediately; and
The facility is not recognised as a loan as the Company only has recourse to the value of the shares.
Terms and conditions
See note 9(b) for general terms and conditions on ordinary shares.
Share-based payments
Options
On 7 February 2014, the Company established a share option scheme that entitles the holder to purchase 300,000 shares
in the Company at an exercise price of $1.92. 250,000 Options were exercised during the year.
The Options have been fully expensed by the Company at 30 June 2019.
Fair value at grant date
Expected IPO price at grant date
Exercise price
Date vested
Vesting expiry date (2 years after vesting)
Tranche 1
Tranche 2
$0.28
$1.60
$1.92
4 April 2016
4 April 2018
$0.31
$1.60
$1.92
4 April 2017
4 April 2019
Pioneer Credit Limited
30 June 2019
77
Notes to the consolidated financial statements
Equity Incentive Plan
See note 9(d) and 9(f) for details of the Equity Incentive Plan.
Expenses arising from share-based payment transactions
Total expenses arising from share-based payments recognised during the period were:
Employee equity incentive plan
Remuneration of auditors
2019
$’000
1,874
1,874
2018
$’000
1,492
1,492
During the year the following fees were paid or are payable for services provided by the auditor of the Group, its related
practices and non-related audit firms:
PricewaterhouseCoopers Australia
Audit and other assurance services
Audit and review of financial statements
Total remuneration of PricewaterhouseCoopers Australia
Network firms of PricewaterhouseCoopers Australia
Other services
Other compliance and accounting advice
Total remuneration of Network firms of PricewaterhouseCoopers Australia
2019
$
2018
$
518,393
518,393
224,444
224,444
11,345
11,345
168,468
168,468
529,738
392,912
Amounts disclosed for auditor’s remuneration are inclusive of GST that is not recoverable from the tax authority. See
note 26(n).
Pioneer Credit Limited
30 June 2019
78
Earnings per share
Basic earnings per share
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
Diluted earnings per share
From continuing operations attributable to the ordinary equity holders of the Company
Total diluted earnings per share attributable to the ordinary equity holders of the
Company
Reconciliation of earnings used in calculating earnings per share
2019
Cents
6.88
6.88
2018
Cents
28.88
28.88
2019
Cents
6.54
6.54
2018
Cents
27.72
27.72
2019
$’000
2018
$’000
Basic earnings per share
Profit attributable to the ordinary equity holders of the Company used in calculating basic
earnings per share:
From continuing operations
4,281
17,600
Diluted earnings per share
Profit from continuing operations attributable to the ordinary equity holders of the Company
Used in calculating diluted earnings per share
4,281
17,600
Weighted average number of shares used as the denominator
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
62,210,718 60,945,086
65,438,218 63,497,086
2019
Number
2018
Number
Pioneer Credit Limited
30 June 2019
79
Notes to the consolidated financial statements
Deed of cross guarantee
Pioneer Credit Limited, Pioneer Credit Solutions Pty Limited, Sphere Legal Pty Limited, Pioneer Credit (Philippines) Pty
Limited, Pioneer Credit Connect Pty Limited, Switchmyloan Pty Limited, Pioneer Credit Broking Services Pty Limited and
Credit Place Pty Limited are parties to a deed of cross guarantee, entered into on 25 June 2015. Credit Place Pty Limited
was joined to this deed of cross guarantee on 26 June 2017. Under the deed each company guarantees the debts of the
others. By entering into the deed, these entities have been relieved from the requirement to prepare a financial report and
Directors' report under ASIC Corporations (Wholly-owned Companies) Instrument 2016/785 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.
Pioneer Credit Solutions (NZ) Limited, Pioneer Credit Acquisition Services (UK) Limited, Pioneer Credit Connect (Fund
1) Pty Ltd and Pioneer Credit Connect (Personal Loans) Pty Ltd are not party to the deed of cross guarantee. They are
stand-alone wholly-owned companies. The Directors have determined that Pioneer Credit Solutions (NZ) Limited,
Pioneer Credit Acquisition Services (UK) Limited, Pioneer Credit Connect (Fund 1) Pty Ltd and Pioneer Credit Connect
(Personal Loans) Pty Ltd are not reporting entities.
As at 30 June 2019:
Pioneer Credit Solutions (NZ) Limited has assets of $2.435m, liabilities of $1.342m of which $1.331m relates to
amounts due to Group entities and contributed $0.420m to Group profit before income tax; and
Pioneer Credit Acquisition Services (UK) Limited has assets of $6 and no liabilities. The UK entity generates no
revenue.
Assets pledged as security
The carrying amount of assets pledged as security is disclosed in note 7(d).
Parent entity financial information
Summary financial information
The individual financial statements for the Parent entity show the following aggregate amounts:
Balance sheet
Current assets
Total assets
Current liabilities1
Total liabilities
Shareholders’ equity
Issued capital
Share based payment reserve
Accumulated profits
Profit for the year
Total comprehensive income
1Current liabilities exceed current assets – refer to Note 1 on basis of preparation.
2019
$’000
2018
$’000
6,292
263,567
2,895
224,390
176,775
179,335
7,841
137,660
79,821
2,339
2,072
84,232
5,859
5,859
73,712
1,033
11,985
86,730
6,762
6,762
Pioneer Credit Limited
30 June 2019
80
Notes to the consolidated financial statements
Guarantees entered into by the Parent entity
The Parent entity is bound by an unlimited guarantee and indemnity as part of the Group, with security held over all
property.
Contingent liabilities of the Parent entity
A claim for unspecified damages was lodged against the Parent entity in relation to alleged non-performance under a
software service agreement contract. The Group has disclaimed liability and is defending the action. It is not practical to
estimate the potential effect of this claim but legal advice indicates that it is not probable that a significant liability will
arise.
Contractual commitments for the acquisition of property, plant or equipment
The Parent entity has no contractual commitments for the acquisition of property, plant or equipment at 30 June 2019.
Pioneer Credit Limited
30 June 2019
81
Notes to the consolidated financial statements
Summary of significant accounting policies
This note provides a list of all significant accounting policies adopted in the preparation of these consolidated financial
statements and have been consistently applied to all the years presented, unless otherwise stated.
Contents of the summary of significant accounting policies
Note Page
Income tax
Intangible assets
a) Principles of consolidation
b)
c) Cash and cash equivalents
d) Trade & other receivables
e) Consumer Loans
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
r) Foreign currency translation
83
84
84
84
85
85
85
85
86
86
86
86
86
87
87
87
87
88
Pioneer Credit Limited
30 June 2019
82
Notes to the consolidated financial statements
Principles of consolidation
Subsidiaries
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Pioneer Credit Limited as
at 30 June 2019. Pioneer Credit Limited and its subsidiaries together are referred to in this financial report as the Group
or the Company.
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.
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 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% to 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
Under the equity method of accounting, 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 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 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 investee 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 may also be 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).
Pioneer Credit Limited
30 June 2019
83
Notes to the consolidated financial statements
Income tax
The income tax expense for the period is the tax payable on the current period's income based on the applicable income
tax rate adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax
losses.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of
the reporting period. Management periodically evaluates positions taken in tax returns with respect to situations in which
applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts
expected to be paid to the tax authorities.
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases
of assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred tax
liabilities are not recognised if they arise from the initial recognition of goodwill. Deferred income tax is also not accounted
for if it arises from the initial recognition of an asset or liability in a transaction other than a business combination, that at
the time of the transaction, affects neither accounting nor taxable profit or loss. Deferred income tax is determined using
tax rates (and laws) that have been enacted or substantially enacted by the end of the reporting period and are expected
to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that
future taxable amounts will be available to utilise those temporary differences and losses.
The Group has implemented the tax consolidation legislation and its entities are taxed as a single entity and the deferred
tax assets and liabilities of these entities are offset 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. Judgement has been applied on the uncertain tax treatment resulting from the transition
of PDP financial assets from fair value to classified as measured at amortised cost. Tax advice has been commissioned
to gain certainty on tax treatment for the FY19 tax return.
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.
Trade and other receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective
interest rate method, less loss allowance. Trade receivables are generally due for settlement within 30 days, apart from
certain Legal customers on extended terms not exceeding 120 days. They are presented as current assets unless
collection is not expected for more than 12 months after the reporting date.
The group applies the AASB 9 simplified approach to measuring expected credit losses which uses a lifetime expected
loss allowance for all trade receivables.
To measure the expected credit losses, trade receivables have been grouped based on shared credit risk characteristics
and the days past due.
The expected loss rates are based on the payment profiles over a period before 30 June 2019 and the corresponding
credit losses experienced within this period. The historical loss rates are adjusted to reflect the current and forward looking
information on macroeconomic factors affecting the ability of the customers to settle the receivables.
The closing loss allowances for trade receivables as at 30 June 2018 in accordance with AASB 139 is significantly the
same as the opening balance at 1 July 2018 in accordance with AASB 9 and therefore no additional disclosure is made
in this regard.
Trade receivables are written off when there is no reasonable expectation of recovery. Impairment losses are presented
as net impairment losses within operating profit. Subsequent recoveries of amounts previously written off are credited
against the same line item.
Pioneer Credit Limited
30 June 2019
84
Notes to the consolidated financial statements
Consumer loans
Consumer loans are initially recognised at fair value. Subsequent to initial recognition, consumer loans are measured at
amortised cost and are presented net of impairment losses.
Interest is calculated using the effective interest method and is recognised in the statement of profit or loss as part of
revenue from continuing operations.
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).
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
and 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.
Intangible assets
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
Refer to note 8(c) for details about amortisation methods and periods used by the Group for intangible assets.
Goodwill
Goodwill is measured as described in note 8(c). Goodwill on acquisitions of subsidiaries is included in intangible assets.
Goodwill is not amortised but it is tested for impairment annually or more frequently if events or changes in circumstances
indicate that it might be impaired, and is carried at cost less accumulated impairment losses. Gains and losses on the
disposal of an entity include the carrying amount of goodwill relating to the entity sold.
Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-
generating units or groups of cash-generating units that are expected to benefit from the business combination in which
the goodwill arose. The units or groups of units are identified at the lowest level at which goodwill is monitored for internal
management purposes.
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 and are unsecured and are usually paid within 30 days of recognition. Trade and other payables are presented
as current liabilities unless payment is not due within 12 months from the reporting date.
Pioneer Credit Limited
30 June 2019
85
Notes to the consolidated financial statements
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 borrowings and interest are measured at amortised cost using
the effective interest rate 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.
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.
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.
Employee benefits
Short term obligations
Liabilities for wages and salaries, including non-monetary benefits such as annual 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 is recognised in the provision for employee benefits. All other short-
term employee benefit obligations are presented as payables.
Share-based payments
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.
Contributed equity
Ordinary shares are classified as equity.
Where Pioneer Credit Limited purchases the Company’s equity instruments as a result of a share-based payment plan,
the consideration paid, including any directly attributable incremental costs (net of income taxes) is deducted from equity
attributable to the owners of Pioneer Credit Limited as treasury shares. Shares held in Pioneer Credit Limited Equity
Incentive Plan Trust are disclosed as treasury shares and deducted from contributed equity.
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; and
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.
Pioneer Credit Limited
30 June 2019
86
Diluted earnings per share
Notes to the consolidated financial statements
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.
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 which 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.
Rounding of amounts
The Company is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument
2016/191 relating to the ‘rounding off’ of amounts in the financial statements. Amounts in the financial statements have
been rounded off in accordance with that Instrument to the nearest thousand dollars, or in certain cases, the nearest
dollar.
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.
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 as described in 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 2019
87
Notes to the consolidated financial statements
Foreign Currency translation
Functional and presentation currency
Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary
economic environment in which the entity operates (‘the functional currency’). The consolidated financial statements are
presented in Australian dollar, which is the Group’s functional and presentation currency.
Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of the
transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the
translation of monetary assets and liabilities denominated in foreign currencies at year end exchange rates are generally
recognised in profit or loss. They are deferred in equity if they relate to qualifying cash flow hedges and qualifying net
investment hedges or are attributable to part of the net investment in a foreign operation.
Foreign exchange gains and losses that relate to borrowings are presented in the statement of profit or loss, within finance
costs. All other foreign exchange gains and losses are presented in the statement of profit or loss on a net basis within
other income or other expenses.
Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the
date when the fair value was determined. Translation differences on assets and liabilities carried at fair value are reported
as part of the fair value gain or loss.
Group companies
The results and financial position of foreign operations (none of which has the currency of a hyperinflationary economy)
that have a functional currency different from the presentation currency are translated into the presentation currency as
follows:
assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that
balance sheet;
income and expenses for each statement of profit or loss and statement of comprehensive income are translated
at average exchange rates (unless this is not a reasonable approximation of the cumulative effect of the rates
prevailing on the transaction dates, in which case income and expenses are translated at the dates of the
transactions); and
all significant resulting exchange differences are recognised in other comprehensive income.
On consolidation, exchange differences arising from the translation of any net investment in foreign entities and of
borrowings and other financial instruments designated as hedges of such investments are recognised in other
comprehensive income.
Pioneer Credit Limited
30 June 2019
88
Directors’ declaration
In the Directors' opinion:
a)
the financial statements and notes set out on pages 27 to 88 are in accordance with the Corporations Act 2001,
including:
i)
complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory
professional reporting requirements; and
ii) giving a true and fair view of the Consolidated Entity's financial position as at 30 June 2019 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,
liable by virtue of the deed of cross guarantee described in note 23.
Note 1 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.
Keith John
Managing Director
Perth
29 September 2019
Pioneer Credit Limited
30 June 2019
89
Independent auditor’s report
To the members of Pioneer Credit Limited
Report on the audit of the financial report
Our opinion
In our opinion:
The accompanying financial report of Pioneer Credit Limited (the Company) and its controlled entities
(together the Group) is in accordance with the Corporations Act 2001, including:
(a) giving a true and fair view of the Group's financial position as at 30 June 2019 and of its financial
performance for the year then ended
(b) complying with Australian Accounting Standards and the Corporations Regulations 2001.
What we have audited
The Group financial report comprises:
●
●
●
●
●
●
the consolidated balance sheet as at 30 June 2019
the consolidated statement of comprehensive income for the year then ended
the consolidated statement of changes in equity for the year then ended
the consolidated statement of cash flows for the year then ended
the notes to the consolidated financial statements, which include a summary of significant
accounting policies
the directors’ declaration.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s responsibilities for the audit of the financial report
section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Independence
We are independent of the Group in accordance with the auditor independence requirements of the
Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical
Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to
our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in
accordance with the Code.
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.
90
Material uncertainty related to going concern
We draw attention to Note 1 in the financial report, which discloses that the Group’s current liabilities
exceeded its current assets by $64,991,000 following the reclassification of all the Group’s borrowings to
current liabilities following a breach of a financing facility covenant resulting in events of default as at 30
June 2019. The Group is consequently dependent on extending, refinancing or otherwise restructuring its
financing facilities and/or capital structure in order to meet its ongoing financial commitments. These
conditions, along with other matters set forth in Note 1, indicate that a material uncertainty exists that
may cast significant doubt on the Group’s ability to continue as a going concern. Our opinion is not
modified in respect of this matter.
Our audit approach
An audit is designed to provide reasonable assurance about whether the financial report is free from
material misstatement. Misstatements may arise due to fraud or error. They are considered material if
individually or in aggregate, they could reasonably be expected to influence the economic decisions of
users taken on the basis of the financial report.
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion
on the financial report as a whole, taking into account the geographic and management structure of the
Group, its accounting processes and controls and the industry in which it operates.
Materiality
● For the purpose of our audit we used overall Group materiality of $766,000 (2018:$1,208,000) which
represents approximately 5% of the three year average profit before tax of the Group for the current and two
previous years.
● We applied this threshold, together with qualitative considerations, to determine the scope of our audit and
the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements on the
financial report as a whole.
● We chose profit before tax as the benchmark because, in our view, it is the metric against which the
performance of the Group is most commonly measured, and is a generally accepted benchmark. We applied a
three year average to address the potential volatility that arises as a consequence of changes in the accounting
method for purchased debt portfolios.
● We selected 5% based on our professional judgement noting that it is also within the range of commonly
accepted quantitative thresholds for audit purposes.
91
Audit Scope
● Our audit focused on where the Group made subjective judgements; for example, significant accounting
estimates involving assumptions and inherently uncertain future events.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our
audit of the financial report for the current period. The key audit matters were addressed in the context of
our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a
separate opinion on these matters. Further, any commentary on the outcomes of a particular audit
procedure is made in that context. We communicated the key audit matters to the Audit and Risk
Committee.
In addition to the matters described in the Material uncertainty related to going concern section, we
have determined the matters described below to be the key audit matters to be communicated in our
report.
Key audit matter
How our audit addressed the key audit matter
Classification and measurement of purchased
debt portfolios (PDPs)
(Refer to Note 7) [$249,776,000]
As set out in Note 7 of the financial report, Pioneer
Credit has adopted the amortised cost method of
accounting for PDPs following the adoption of
Australian Accounting Standard AASB 9 Financial
Instruments (AASB 9), effective 1 July 2018.
The Group had previously accounted for these assets at
fair value under the previous Australian Accounting
Standard AASB 139 Financial Instruments:
Recognition and Measurement (AASB 139).
The measurement of the PDPs is estimated by the
Group using internally-developed statistical regression
analysis and cash flow models (the models).
Complexity arises in respect of the accounting for PDPs
due to the following:
●
consideration of the appropriate accounting
method for PDPs requires significant
judgement in interpreting the requirements of
AASB 9 relating to the classification and
measurement of these assets
The focus of our audit procedures, assisted in selected
aspects by PwC actuarial experts, included, amongst
others:
●
Accounting method - evaluation of the
Group’s assessment of the appropriate
accounting method for PDPs in accordance
with AASB 9
● Model design - whether the structure of the
model is appropriate for determining both
CAEIRs and subsequent cash flow forecasts
● Model inputs - testing the reasonableness of
the information used within the model
• Model outputs - assessing whether the model
outputs met our expectations and were
appropriately recognised in the financial
report, and
•
Transition adjustments - whether the
calculations and disclosures included in the
financial report appropriately reflected the
transition from fair value to amortised cost
accounting.
92
Key audit matter
How our audit addressed the key audit matter
●
●
●
the requirement to calculate credit-adjusted
effective interest rates (CAEIRs) when PDPs
are acquired involves significant judgement in
estimating the amount and timing of future
expected cash flows. In particular, judgement
is required in estimating the credit risk
attributes of PDPs that underpin modelled
cash flow forecasts on acquisition
re-estimating future cash flows for PDPs at
the end of each period results in impairment
gains/losses which also require significant
judgement and reliance on internally-
developed statistical regression analysis and
cash flow models, and
the requirement to calculate the CAEIRs at
inception for existing PDPs and the amortised
cost in accordance with AASB 9 and
recognising the adjustments required on
transition from fair value under AASB 139.
Our detailed procedures included:
Accounting method
We performed the following procedures, amongst
others:
•
•
•
evaluated external advice received by the
Group in respect of the classification and
subsequent measurement of PDPs
considered the Group’s assessment of the
classification of PDPs based on the business
model for managing PDPs and their
contractual cash flow characteristics, and
considered alternative methods for the
recognition and measurement of PDPs.
Model design
We performed the following procedures, amongst
others:
The carrying amount of PDPs and related interest
income and impairment gains/losses are material to
the financial statements and involve significant
judgement and complexity, meaning it is a key audit
matter.
•
●
●
●
●
developed an understanding and critically
assessed the statistical and actuarial analysis
used by the Group to determine the
construction of the cash flow models
considered if the model design appropriately
included the significant factors that impact
the amounts and timing of cash flows from
customers
assessed the reasonableness of model
parameters such as the period of cash flow
forecasts and adjustments to reflect model
risk
re-performed a selection of mathematical
calculations in the models, and
considered the adequacy of the scope of work
and qualifications of the Group’s external
experts who assisted in the design of the
models.
Model inputs
We performed the following procedures, amongst
others:
●
assessed the reasonableness of the
assumptions and predictive factors used in the
model with reference to historical experience
93
Key audit matter
How our audit addressed the key audit matter
●
●
●
tested a sample of customer account
characteristics to source documentation or
system information to assess the existence,
accuracy and completeness of the model data
recalculated a sample of CAEIRs produced by
the model, and
performed sensitivity analysis and challenged
the Group on cash flow forecast assumptions
having a significant impact on model outputs,
such as liquidations, settlements and sales.
Model outputs
We performed the following procedures, amongst
others:
● considered the reasonableness of PDP interest
income and impairment gains/losses
calculated by the Group’s models and whether
these were consistent with our expectations
● tested the mathematical accuracy of the model
output for a sample of customer account
tranches, and
● agreed the model outputs to accounting
entries recorded in the Group’s financial
report.
Transition adjustments
We performed the following procedures, amongst
others:
● evaluated the adjustments to transition from
fair value to amortised cost with reference to
the Group’s models used to calculate CAEIRs,
and opening amortised cost balances for PDPs
recognised at 1 July 2018, and
● assessed whether the disclosures included in
the financial report were in accordance with
the requirements of AASB 9
We noted that the models used by the Group remain
sensitive to the inherent uncertainty of predicting
future cash flows, both at acquisition date (for the
calculation of CAEIRs) and at period end. In some
instances, these cash flow forecasts are based on
historical information that is for periods shorter than
those modelled.
94
Key audit matter
How our audit addressed the key audit matter
Taxation of financial arrangements
(Refer to Note 11)
As set out in Note 11, the change in accounting for
PDPs from fair value to amortised cost has changed the
way in which income, gains and losses derived from
PDPs are treated for income tax purposes.
Previously, fair value gains and losses arising from
PDPs were treated consistently for both accounting and
tax purposes. Following the transition to amortised
cost accounting from 1 July 2018, the Group has
determined that gains and losses on PDPs (ie. interest
income and impairment gains/losses) are now
recognised when received or realised for tax purposes
in accordance with the Taxation of Financial
Arrangement rules contained within the Income Tax
Assessment Act 1997.
This gives rise to changes in the way tax expense, tax
payable and deferred tax balances are calculated in the
financial report.
The significance of these balances and the complexity
and judgment needed to interpret the taxation
requirements results in this being a key audit matter.
Other information
We developed an understanding of the Group’s
processes for identifying and assessing the impact of
changes to the taxation arrangements for PDPs.
We considered, with assistance from PwC taxation
experts, external advice received by the Group relating
to the change in taxation method and transition
arrangements, as well as assessing whether the external
adviser was appropriately qualified to provide the
advice.
We re-performed selected calculations and assessed the
overall reasonableness of the tax expense, tax payable
and deferred tax amounts recorded in the financial
report.
For adjustments relating to the transitional
arrangements associated with the changes in taxation
treatment for PDPs, we considered whether these
adjustments had been calculated in accordance with
the external advice received and using methods that we
considered reasonable in these circumstances.
The directors are responsible for the other information. The other information comprises the information
included in the annual report for the year ended 30 June 2019, but does not include the financial report
and our auditor’s report thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not
express any form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit, or otherwise appears to be materially misstated.
If, based on the work we have performed on the other information that we obtained prior to the date of
this auditor’s report, we conclude that there is a material misstatement of this other information, we are
required to report that fact. We have nothing to report in this regard.
95
Responsibilities of the directors for the financial report
The directors of the Company are responsible for the preparation of the financial report that gives a true
and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for
such internal control as the directors determine is necessary to enable the preparation of the financial
report that gives a true and fair view and is free from material misstatement, whether due to fraud or
error.
In preparing the financial report, the directors are responsible for assessing the ability of the Group to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes
our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material if,
individually or in the aggregate, they could reasonably be expected to influence the economic decisions of
users taken on the basis of the financial report.
A further description of our responsibilities for the audit of the financial report is located at the Auditing
and Assurance Standards Board website at: http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf.
This description forms part of our auditor's report.
Report on the remuneration report
Our opinion on the remuneration report
We have audited the remuneration report included in pages 14 to 23 of the directors’ report for the year
ended 30 June 2019.
In our opinion, the remuneration report of Pioneer Credit Limited for the year ended 30 June 2019
complies with section 300A of the Corporations Act 2001.
96
Responsibilities
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.
PricewaterhouseCoopers
Justin Carroll
Partner
Perth
29 September 2019
97
Shareholder information
Shareholder information
The shareholder information set out below was applicable as at 28 August 2019.
Distribution of securities
a)
Analysis of numbers of equity security holders by size of holding
Holding
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Holders
779
963
439
663
78
2,922
Ordinary shares
354,171
2,682,675
3,414,372
18,629,045
38,317,986
63,398,249
There were 158 holders of less than a marketable parcel of ordinary shares.
b)
Equity security holders
Twenty largest quoted equity security holders
The names of the twenty largest holders of quoted securities are:
Name
Mr Keith R John
OC Funds Mgt
Australian Capital Equity
State Street Global Markets
Private Clients of HUB 24 Custodial Services
Regal Funds Mgt
Mr & Mrs Rodney M Jones
USB Securities
PNC Employee Sub Register
Mr Steve Lambert
MicroEquities
Dimensional Fund Advisors
Mr Michael J Smith
Katana Capital
Mr Leslie Crockett
JPMorgan Securities Australia
Bank of America Merrill Lynch
Totus Capital
Me Kelvin E Flynn
Ms Carole Vines
Ordinary shares
Number held
5,259,124
4,675,000
3,389,298
2,022,086
1,868,344
1,245,153
1,155,228
965,988
898,545
825,000
745,000
714,158
695,940
692,131
661,917
647,600
567,681
531,586
474,612
450,574
Percentage of
issued shares
8.30%
7.37%
5.35%
3.19%
2.95%
1.96%
1.82%
1.52%
1.42%
1.30%
1.18%
1.13%
1.10%
1.09%
1.04%
1.02%
0.90%
0.84%
0.75%
0.71%
Pioneer Credit Limited
30 June 2019
98
c)
Unquoted equity securities
Name
Mr Keith R John
Name
Employee Incentive Plan
d)
Substantial holders
Substantial holders in the Company are set out below:
Name
Mr Keith R John
OC Funds Mgt
Australian Capital Equity
Securities subject to voluntary escrow
Escrow ends
30 November 2019
18 July 2020
30 November 2021
e)
Voting rights
Indeterminate rights
Number held
1,000,000
Number of
holders
1
Performance rights
Number held
1,723,000
Number of
holders
12
Number held
5,259,124
4,675,000
3,389,298
Percentage of
issued shares
8.30%
7.37%
5.35%
Class
Ordinary shares
Ordinary shares
Ordinary shares
Number of
shares
17,031
38,032
47,908
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 2019
99