The Motley Fool

Why Pioneer Credit shares remain halted despite it reporting a full year profit

Controversial debt collector Pioneer Credit Ltd (ASX: PNC) reported a statutory net profit of $4.28 million revenue of $74.7 million for the financial year ending June 30 2019. The profit is down 76% from the $17.8 million reported in the prior year on the back of it being forced to use the ‘amortised cost’  accounting methodology in deriving its accounting profit. 

The changes and their consequences for the business are complex but effect when the company recognises profits from its estimated cash flows on purchased debt ledger books and discount rates used to estimate the future value of cash flows.

As a result of the changes the company has been forced to apply a higher discount rate, which reduces the present value of future cash flows and in turn net profit.

“Despite a disappointing NPAT outcome due to the application of Amortised Cost to our portfolio, we are pleased with the growth metrics not impacted by the accounting change, in particular the record EBITDA and cash liquidations, which have continued strongly through the start of FY20, allowing for continued PDP investment,” Chairman Michael Smith said.

The company reported $249.8 million in the carrying value of its purchased debt ledgers and EBITDA (operating income) of $63.4 million. 

The shares have been halted since August 23 though as the company is in breach of debt and other covenants partly because it has been forced to update its previously controversial accounting methods. 

Management reports it remains confident in a solution, but the lengthy trading halt is inauspicious.

Other far more successful businesses not related to Pioneer in the debt collection space include Collection House Limited (ASX: CLH) and Credit Corp Group Limited (ASX: CCP).

Our Top 3 Blue Chip Shares for 2019 – NOW AVAILABLE!

You’re invited! For a limited time, The Motley Fool Australia is giving away an urgent new investment report detailing our 3 TOP BLUE CHIP SHARES to own in 2019.

So if you like trustworthy, stable, high-performing companies that pay fat fully franked dividends – we’ve got you covered!

Stock #1 is a beloved old Australian company turning its attention to high-margin businesses... and rapidly returning cash to shareholders with its hefty dividend...

While Stock #2 is an online powerhouse that’s rapidly gaining market share all around the globe... poised for years (or even decades) of tremendous growth...

Even better, Stock #3 offers a whopping 6.5% grossed-up dividend! Which beats the rates on term deposits right out of the water – and offers the potential for capital gains, too.

You can discover all three shares inside our new report right now. To scoop up your FREE copy, simply click the link below right now. But you will want to hurry – this free report is available for a LIMITED TIME ONLY!

Simply CLICK HERE FOR YOUR FREE REPORT!

Motley Fool contributor Tom Richardson has no position in any of the stocks mentioned.

You can find Tom on Twitter @tommyr345

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

NEW. Five Cheap and Good Stocks to Buy in 2019…

Our Motley Fool experts have just released a brand new FREE report, detailing 5 dirt cheap shares that you can buy today.

One stock is an Australian internet darling with a rock solid reputation and an exciting new business line that promises years (or even decades) of growth… while trading at an ultra-low price…

Another is a diversified conglomerate trading near a 52-week low all while offering a 2.8% fully franked yield…

Plus 3 more cheap bets that could position you to profit over the next 12 months!

See for yourself now. Simply click the link below to scoop up your FREE copy and discover all 5 shares. But you will want to hurry – this free report is available for a brief time only.

CLICK HERE FOR YOUR FREE REPORT!