Media Release 25 February 2015 MOC records solid interim financial result Mortgage Choice grows settlements, loan book Mortgage Choice Limited (MOC) has today announced its financial results for the six months ending 31 December 2014. Today’s results are on par with last year, highlighting the company’s ongoing strength and ability to continue to deliver strong profit results while investing in network growth and its diversified businesses. Financial highlights for the six months to 31 December 2014* On an IFRS basis: Group net profit after tax (NPAT) was $10.0 million, up 3.3% on $9.7 million in 1H14. Earnings per share at 8.0 cents for continuing business compared to 7.9 cents in 1H14. Total group revenue was $97.0 million, up 11.0% on 1H14. NPAT on a cash basis was $9.0 million and equal to the result achieved in 1H14. Total loan book reached $48.4 billion. This was up 4.5% from $46.4 billion at 31 December 2013 and is poised to hit $50 billion by 1H16. $6.9 billion worth of housing loan approvals were written in the six months to 31 December 2014, up from $6.2 billion in 1H14. Annual share of new home loans remained at 3.9%, on par with 1H14. A fully franked interim dividend of 7.5 cents per share was declared by the Board, on par with 1H14. Mortgage Choice CEO Michael Russell said the results were incredibly pleasing and they highlighted the ongoing strength of the business as it continues down the path of diversification. “To achieve an interim profit result that is on par with last year is very pleasing, given that last year was our strongest interim profit result on record,” he said. “Over the last six months, we have significantly ramped up our investment in our personnel and technology across diversified businesses HelpMeChoose.com.au and Mortgage Choice Financial Planning. Thanks to this increased investment, HelpMeChoose.com.au is now well placed to take advantage of seasonal uplifts in 2H15 and Mortgage Choice Financial Planning is now ready and geared for further growth, with 40 financial advisers currently on board. “Moving forward, we will continue to focus on quality recruitment and expect to have 50 advisers fully operational by financial year’s end. For personal use only
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Media Release 25 February 2015
MOC records solid interim financial result Mortgage Choice grows settlements, loan book
Mortgage Choice Limited (MOC) has today announced its financial results for the six months ending 31
December 2014.
Today’s results are on par with last year, highlighting the company’s ongoing strength and ability to
continue to deliver strong profit results while investing in network growth and its diversified businesses.
Financial highlights for the six months to 31 December 2014*
On an IFRS basis:
Group net profit after tax (NPAT) was $10.0 million, up 3.3% on $9.7 million in 1H14.
Earnings per share at 8.0 cents for continuing business compared to 7.9 cents in 1H14.
Total group revenue was $97.0 million, up 11.0% on 1H14.
NPAT on a cash basis was $9.0 million and equal to the result achieved in 1H14.
Total loan book reached $48.4 billion. This was up 4.5% from $46.4 billion at 31 December 2013 and is poised to hit $50 billion by 1H16.
$6.9 billion worth of housing loan approvals were written in the six months to 31 December 2014, up from $6.2 billion in 1H14.
Annual share of new home loans remained at 3.9%, on par with 1H14.
A fully franked interim dividend of 7.5 cents per share was declared by the Board, on par with 1H14.
Mortgage Choice CEO Michael Russell said the results were incredibly pleasing and they highlighted the
ongoing strength of the business as it continues down the path of diversification.
“To achieve an interim profit result that is on par with last year is very pleasing, given that last year was
our strongest interim profit result on record,” he said.
“Over the last six months, we have significantly ramped up our investment in our personnel and
technology across diversified businesses HelpMeChoose.com.au and Mortgage Choice Financial Planning.
Thanks to this increased investment, HelpMeChoose.com.au is now well placed to take advantage of
seasonal uplifts in 2H15 and Mortgage Choice Financial Planning is now ready and geared for further
growth, with 40 financial advisers currently on board.
“Moving forward, we will continue to focus on quality recruitment and expect to have 50 advisers fully
operational by financial year’s end.
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“In addition to the increased investment in our diversified businesses, we have also increased the
commission share to our franchisees, allowing them to earn more commission than ever before. To be able
to reward our franchisees in this way and still manage a healthy $9 million NPAT on a cash basis is
immensely satisfying.”
Mr Russell said the ongoing strength of the company could be attributed to the productivity of the
company’s broker network.
“Over the last 12 months we have invested in recruitment incentive programs, enabling us to add 50 new
loan writers to our network. Despite the fact that we now have a number of new operators working within
the business, our network of brokers continue to achieve strong productivity levels, which has resulted in
approvals soaring 11.4 per cent and settlements growing by 9.0 per cent in comparison to 1H14. And with
low interest rates keeping heat in the property market, we expect our broker network to become even
busier in the months ahead.
“Looking forward, our outlook for housing loan approvals for the remainder of FY15 and into FY16 remains
positive.”
If you want to learn more about your home loan options, call 13 6678. Or, visit
www.mortgagechoice.com.au, Facebook.com/MortgageChoice or Twitter.com/MortgageChoice.
*Prior year comparatives exclude discontinued operations For further information, photos of the new logo, or to arrange an interview, please contact: Lauren Booke Amity Harrold Mortgage Choice Corporate Affairs PPR (02) 8907 0502 / 0448 240 047 (02) 9818 9334 [email protected][email protected]
Important information
This article is for general information purposes only. It has been prepared without considering your objectives,
financial situation or needs. You should, before acting on the advice, consider its appropriateness to your
circumstances.
About Mortgage Choice
Mortgage Choice is an ASX listed company that seeks to help Australians with all of their financial needs.
Established in 1992, Mortgage Choice was originally established to help Australians improve their financial
situation by offering a choice of home loan providers, coupled with the expert advice of a mortgage professional.
Since that time, the company has grown and developed into a fully fledged financial services provider.
Today, Mortgage Choice helps customers source car loans, personal loans, credit cards, commercial loans, asset
finance, deposit bonds, and risk and general insurance.
Further, the company offers Australians access to real, relevant and affordable financial advice through our
qualified financial advisers.
Mortgage Choice has no balance sheet or funding risk, and consistently delivers strong profits and attractive yields.
It listed on the ASX in 2004 (MOC) and is a member of the Mortgage & Finance Association of Australia (MFAA).
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Mortgage Choice holds an Australian Credit Licence: no. 382869 and Mortgage Choice Financial Planning Pty
Limited holds an Australian Financial Services Licence: no. 422854. Both licences are issued by ASIC.
Recent recognition: 2014 Australian Broking Awards Best Diversification Program; 2013, 2012, 2011 Australian
Broking Awards Major Brokerage of the Year – Franchise; 2013, 2012 Australian Broking Awards Best Ethical/Social
Responsibility Program; 2012 Australian Broking Awards Best Training and Education; No.1 on The Adviser
magazine’s 2012, 2011, 2010 and 2009 Top 25 Brokerages list; 2012, 2010, 2009, 2008, 2006 and 2005 MFAA
Awards Retail Aggregator/Originator of the Year; 2011, 2010, 2009 and 2008 10 Thousand FEET Top 10 Franchise
list; 2010 Forbes Asia‐Pacific Best Under A Billion list.
Visit www.mortgagechoice.com.au or call customer service on 13 6678.
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Half Year ending Dec 2014
Half Yearly Results Presentation
Presented by Michael Russell (CEO) and Susan Mitchell (CFO)
25th February 2015
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Contents
1. Performance highlights 2. Economy and industry 3. Operations and strategy 4. Appendices
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PERFORMANCE HIGHLIGHTS
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1H15 performance highlights
*excludes discontinued operations in 1H14 ^includes residential, commercial loans and reverse mortgages
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1H15 1H14 1H15 vs 1H14
NPAT – cash* – continuing operations 9.0 m 9.0 m 0.0%
– IFRS* – continuing operations 10.0 m 9.7 m 3.3%
Loan book*^ 48.4 b 46.4 b 4.5%
Approvals* 6.9 b 6.2 b 11.4%
Settlements* 5.7 b 5.3 b 9.0%
Market Share (approvals)* 3.9 % 3.9 % 0.0%
Basic EPS – cash (Cps)* 7.2 c 7.3 c 1.4%
– IFRS (Cps)* 8.0 c 7.9 c 1.3%
DPS – ordinary (Cps) 7.5 c 7.5 c 0.0%
NPAT – cash (includes discontinued ops in 1H14) 9.0 m 10.3 m 13.0%
– IFRS (includes discontinued ops in 1H14) 10.0 m 11.0 m 9.4%
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MC settlements and loan book
• Highest 6 monthly settlements in Mortgage Choice’s history
• Loan book continues to grow at steady rate despite low rate environment encouraging borrowers to pay off mortgage sooner
^Cash is based on accruals accounting and excludes share based remuneration and the net present value of future trailing commissions receivable and payable. This is an extract from our audited accounts
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$m 1H15 Cash^
1H14 Cash^
% change
1H15 IFRS
1H14 IFRS
% change
Origination commission received 35.0 31.7 10% 35.0 31.7 10% Trailing commission received 44.3 43.9 1% 50.9 48.0 6%
*1H14 contains profit from discontinued operations which is excluded from the comparative EPS
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Payout
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• Loan writer recruitment incentives pushed payout ratio up on origination payments; incentive to finish at the end of FY15
• Increased settlements triggered payment model to share more trail with franchisees, encouraging further business investment on their part
1H15 1H14 % Change Origination commission received 34,980 31,722
Origination commission paid 25,530 23,052
Net origination income 9,450 8,671
Origination Payout 73.0% 72.7% 0.3%
Loan writer recruitment incentive paid 298 33
Net origination income 9,152 8,638
Origination Payout 73.8% 72.8% 1.1%
Trailing commission received 44,273 43,942 Trailing commission paid 26,654 25,893
Net trail income 17,619 18,049
Trail Payout (inc MOC book) 60.2% 58.9% 1.3%
Trail Payout (exc MOC book) 62.4% 60.7% 1.7%
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Continue to invest in diversification and growth in broker numbers
• Increase in personnel expense for HMC and FP. FP’s additional support staff positions business for further growth; HMC positioned to take advantage of seasonal uplifts in 2H15
• Loan writer incentives estimated to be $250k in second half and finish by 30th June 2015
• Operating expenses in total expected to be lower by 8 to 10% as national and high flyer conferences are held in the first half of the financial year
$000
12,764
298
1,197 96 158
373
993
843
138 12,616
1H14 Cash NPBT MC Gross Profit (excl LoanWriter
Recruitment Incentives)
MC LoanWriter Recruitment Incentive
HMC & FP Gross Profit HMC & FP Personnel Expenses
HMC & FP Other Expenses
MC Marketing Expense MC Other Expense LoanKit 1H15 Cash NPBT
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Gross revenue mix
• Percentage of gross revenue from diversified sources now accounts for 11.5% of total revenue despite the strong growth in broking commission from increased settlements. These results reflect our success in growing the core business but still diversifying
• Over the past five years the percentage of gross revenue from diversification has increased from 1.4% for FY09 to 11.5% for 1H15
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88.5%
3.5%
2.6% 2.7% 2.7%
Gross Revenue (1H15)
MC Broking
Diversified Products
HMC
Financial Planning
Others 91.1%
3.2%
2.0% 1.2% 2.5%
Gross Revenue (1H14)
MC Broking
Diversified Products
HMC
Financial Planning
Others
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Divisional results
• Growth of 2% in cash profits from core broking business – benefits from increased settlements have been reined in due to increase in payout ratio
• HMC cash gross profit up by 48% on PCP. Cash NPAT reflects investment in scale to capitalise on the upcoming seasonal uplift, which should push HMC into profit
• Financial Planning build complete, gross profit to grow in second half and FY16. Breakeven on a monthly basis pushed out to FY16 as adviser recruitment driven by quality
• Consistent interim result of 8 greenfields and 4 sales of existing franchises
• Full year greenfield recruitment expected to reach 25 as approved pipeline high, demonstrating the strong commercial viability of our franchise system
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405 405
413 412 412
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1 2
Opening Balance
Recruitment Re-activated Terminated Closing
Franchise Movement
8 11 9 8
15
6 8 13
4
6
13
8 12
5
14 5
11
8
1H11 2H11 1H12 2H12 1H13 2H13 1H14 2H14 1H15
Sale of greenfields and existing franchises
Greenfields Sales of existing to new
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Mortgage Choice broking network snapshot – state performance
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NSW / ACT 35%
VIC / TAS 21%
QLD 26%
SA / NT 8%
WA 10%
States contribution to settlements
Settlements ($m) 1H15 % 1H14 % Growth
NSW / ACT 2,017 35% 1,869 36% 8%
VIC / TAS 1,226 21% 1,116 21% 10%
QLD 1,508 26% 1,300 25% 16%
SA / NT 428 8% 438 8% (2%)
WA 557 10% 537 10% 4%
5,736 100% 5,260 100% 9%
16%
10% 8%
4%
(2%) -5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
QLD VIC / TAS NSW / ACT WA SA / NT
Settlements growth 1H15 / 1H14
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MCFP adviser numbers are growing
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• We continue to search for quality advisers with target adjusted to 50 at 30 June 2015 with continued recruitment expected in FY16
In-force Premium ($m) FUA ($m) Funds Under Advice and In force Premium
Inforce Premium Fund Under Advice For
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An external review gives MCFP a tick of approval Now that MCFP has completed it’s start up phase, it seemed prudent to commission an external review of our compliance obligations as an AFS Licence holder. Not only that, we are aiming for best practice in everything we do in this space - from compliance, to adviser support, to the customer experience. So in January 2015, we commissioned specialist legal firm The Fold Compliance Pty Limited to complete an external view. The results were very pleasing and are best summarised by the quotes below from the final report.
Your business model, processes and structure are a standout example of a financial planning business model that has successfully adopted the Future of Financial Advice (FOFA) approach to financial services compliance. Your compliance arrangements are robust, pragmatic and well managed. We applaud you on the support services and tools you have available to your advisers. This is often an area where many licensees fail leading to poor and inappropriate advice. It is clear…that much investment has gone into ensuring that your advisers have the systems in place to deliver appropriate advice that is in the best interests of the client. For
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Update on Project One
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• Project One will implement an enterprise wide, trusted off-the-shelf CRM platform with an industry leading broker front end. They will combine to provide our franchisees with a web based platform rich in functionality to improve productivity and customer experience
• Phase 1 to implement new CRM will be rolled out company wide by 30th June 2015
• Phase 2 to deliver broker front end will be rolled out in 1H16 as planned
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Summary
• Increased broker numbers in place to capture more of the buoyant property market
• Increasing settlements trend
• Loan book poised to hit $50b
• FP model implemented and continued focus on quality recruitment
• HMC investment to put additional scale in place for 2H15 seasonal push
• Cash profit steady with 1H14 despite increased HMC and FP investment
After tax gain on Loankit sale - - - - - - - - 1.34 - -
Cash PAT inclu. Gain on sale 7.79 7.04 8.84 7.08 6.50 8.52 7.82 7.95 10.31 9.74 8.97 IFRS PAT inclu. Gain on sale 9.76 13.72 8.79 18.67 6.44 12.02 7.51 11.20 11.00 8.80 9.97
Cash e.p.s. 6.5 c 5.9 c 7.3 c 6.0 c 5.4 c 7.1 c 6.4 c 6.5 c 8.3 c 7.9 c 7.2 c IFRS e.p.s. 8.2 c 11.5 c 7.3 c 15.6 c 5.4 c 10 c 6.2 c 9 c 8.9 c 7.1 c 8.0 c Div p.s. 5.5 c 6.5 c 6.0 c 7.0 c 6.0 c 7.0 c 6.0 c 7.0 c 7.5 c 8.0 c 7.5 c
ASSETS Current assets Cash and cash equivalents 6,264 12,445 Trade and other receivables 97,936 98,876 Total current assets 104,200 111,321
Non-current assets Receivables 242,976 238,244 Property, plant and equipment 905 907 Intangible assets 5,249 2,349 Total non-current assets 249,130 241,500
Total assets 353,330 352,821
LIABILITIES Current liabilities Trade and other payables 64,112 66,702 Current tax liabilities 865 2,418 Provisions 1,143 1,103 Total current liabilities 66,120 70,223
Non-current liabilities Trade and other payables 146,090 142,900 Deferred tax liabilities 38,082 36,605 Provisions 826 762 Total non-current liabilities 184,998 180,267
Marketing area capacities are assessed quarterly using an external benchmarking model that takes into account geographic data, ABS data and franchise settlements
In 132 marketing areas, 118 greenfield sites are available
We have capacity to increase our franchise footprint from 412 to 586
* Information based on Dec14 Quarter Broker Resource Model
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3 4 4 2 1
39 31
21
13 14
NSW VIC QLD SA WA
Marketing Areas
Closed Open
153
88 89
30 52
62
45 28
17
22
NSW VIC QLD SA WA
Franchises
Potential Existing
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Disclaimer
The information contained in this presentation is intended to be a general summary of Mortgage Choice Limited
(Mortgage Choice) and its activities as at 31 December 2014, and does not purport to be complete in any respect.
The information in this presentation is not advice about shares in Mortgage Choice (or any other financial product),
nor is it intended to influence, or be relied upon by, any person in making a decision in relation to Mortgage Choice
shares (or any other financial product). This presentation does not take into account the objectives, financial situation
or needs of any particular individual. You should consider your own objectives, financial situation and needs when
considering this presentation and seek independent investment, legal, tax, accounting or such other advice as you find
appropriate before making any financial or investment decision.
This presentation contains some forward looking statements. Such statements only reflect views held by Mortgage
Choice as at the date of this presentation and are subject to certain risks, uncertainties and assumptions. Actual events
and results may vary from the events or results expressed or implied in these statements. You should not place undue
reliance on any of these statements.
No representation or warranty is made in respect of the accuracy or completeness of any information in this
presentation, or the likelihood of any of the forward looking statements in the presentation being fulfilled.
For further information visit www.mortgagechoice.com.au
or contact Jessica Darnbrough– Head of Corporate Affairs