Australian Finance Group Ltd. · ASX:AFG
Australian Finance — FY2018 Earnings Presentation
40 slides from Australian Finance's earnings presentation, Aug 24, 2018
Slide 1: Full-year financial results
AFG 2018 Full-year financial results
Slide 2: FY18 full-year financial results – Highlights
FULL YEAR FINANCIAL RESULTS 2018 2 FY18 full-year financial results – Highlights Strong returns to shareholders underpinned by AFG’s earning diversification strategy and continuing core growth
Slide 3: FY18 results – actual
FULL YEAR FINANCIAL RESULTS 2018 3 FY18 results – actual
Slide 4: Providing choice and competition to consumers
FULL YEAR FINANCIAL RESULTS 2018 4 Providing choice and competition to consumers
Slide 5: Strategic & market outlook
FULL YEAR FINANCIAL RESULTS 2018 5 Strategic & market outlook Consumers and lenders have been voting with their feet for over 20 years and increasingly use brokers. Competition and choice have been the beneficiaries with AFG flows to non-majors climbing to 41% in Q4 FY18
Slide 6: AFG's growth strategy
FULL YEAR FINANCIAL RESULTS 2018 6 AFG’s growth strategy Strong culture delivering our long term strategy, focused on great consumer outcomes, whilst maintaining a capital light business model
Slide 7: Investing in technology
7 Investing in technology AFG continues to invest in technology to deliver efficient digital platforms for our brokers and their clients in a competitive environment. • AFG Suite is a streamlined platform incorporating a range of technology tools for the broker including summary dashboard, education
Slide 8: AFG Business
8 AFG Business The new AFG Business platform momentum continues to build • First settlements processed and lodgement pipeline growing • Focus on expanding Commercial broking market through training and support of brokers • Expanded Commercial mortgage panel to 15 lenders to provide a wide variety of
Slide 9: AFG Commercial Powered by Thinktank
9 AFG Commercial Powered by Thinktank • New commercial white label product funded by Thinktank launched in pilot mode in NSW in August 2018 with national roll-out to commence October 2018 • Straight forward, set and forget commercial property solution. Loans available from $100k up to $3 million • D
Slide 10: AFG Home Loans – Link
FULL YEAR FINANCIAL RESULTS 2018 10 AFG Home Loans – Link Funded by AFG Securities, Link was launched in 2018 and offers a range of market leading products in the near-prime lending space An opportunity to expand AFG Securities product offering Filling the void left by the majors Bringing competitio
Slide 11: Market and Regulatory Observations
11 • At 55% of the market, increased regulatory oversight is expected. Market and Regulatory ASIC, Financial Services Royal Commission, Productivity Commission and ACCC review of mortgage pricing reflect this focus Observations • ASIC is the main regulator of our sector. CIF is responding to the ASI
Slide 12: Operational update
AFG Operational update
Slide 13: AFG Home Loans
13 AFG Home Loans • Growth of 20% overall compared to FY17 with strong performance from all funders • AFG Securities (Retro and Link) finished the year up 33% • AFG Home Loans’ book $7.4 billion (up 34% compared to June 2017) • Four core prime mortgage funders and an expanded AFG Securities offering
Slide 14: AFG Securities
14 AFG Securities • Total settlements of $510 million and lodgements of $1 billion were up 33% and 59% on FY17. This growth was driven by product improvements in H2 FY18 • Net interest margin in AFG Securities impacted by APS 120 and BBSW rates during H2 FY18 • AFG 2013-1 and 2014-1 have now been fi
Slide 15: AFG Securities – Arrears and default management
FULL YEAR FINANCIAL RESULTS 2018 15 AFG Securities – Arrears and default management • AFG Securities’ total portfolio over $1.37 billion at June 2018 • At June 2018 only 10 loans in arrears greater than 30 days demonstrating a proactive approach taken to the collections cycle • No losses incurred on
Slide 16: Residential settlements
FULL YEAR FINANCIAL RESULTS 2018 16 Residential settlements • Residential settlements up 3% against FY17 overall • Victoria continued to achieve strong growth with New South Wales and SA both slightly positive compared to FY17 • Western Australia’s decline mirrored economic conditions however now im
Slide 17: Residential portfolio – June 2018
FULL YEAR FINANCIAL RESULTS 2018 17 Residential portfolio – June 2018 • Residential loan book grew 9% to $137.8 billion at June 2018 • NSW and VIC experienced strong growth driven by settlements and longer loan lives due to continued regulatory intervention • Western Australia and Queensland both gr
Slide 18: Commercial settlements
FULL YEAR FINANCIAL RESULTS 2018 18 Commercial settlements • Commercial mortgages down by 8% compared to FY17 predominately driven by the tightening of large development lending in NSW • Commercial mortgage settlements <$5 million are in line with FY17 • Asset finance settlements continued their str
Slide 19: Commercial portfolio – June 2018
FULL YEAR FINANCIAL RESULTS 2018 19 Commercial portfolio – June 2018 • Commercial portfolio experienced positive growth in all states in FY18 with decreased settlements offset by longer loan lives • The overall book grew by 12% to $7.6 billion
Slide 20: Distribution network
FULL YEAR FINANCIAL RESULTS 2018 20 Distribution network • AFG’s national distribution network at June 2018 now has over 2,950 active brokers • Growth continues to be strong in New South Wales and Victoria in particular. Western Australia is showing signs of stabilizing
Slide 21: Financial information
AFG Financial information
Slide 22: Summary P&L
FULL YEAR FINANCIAL RESULTS 2018 22 Summary P&L • FY18 Profit after tax of $33.3 million, up 10% compared to FY17 normalised profit • Positive growth driven by AFG Home Loans’ 20% increase in settlements to $3.2 billion • AFG’s securitisation programme delivered $125.8 million increase in settlement
Slide 23: Summary cash flow
FULL YEAR FINANCIAL RESULTS 2018 23 Summary cash flow • Net cash flows from operating activities increased by 23% to $32.5 million in FY18 compared to FY17. This is largely attributable to the growth in profit driven by the success of AFG Home Loans and a positive working capital movement compared t
Slide 24: Summary balance sheet
FULL YEAR FINANCIAL RESULTS 2018 24 Summary balance sheet Points to note: 1. Includes restricted cash of $39 million ($34 million at June 2017) 2. Predominantly related to trail book accounting including AFG Home Loans trail book 3. AFG Securities residential mortgages 4. Investment in Thinktank 5.
Slide 25: July trading
FULL YEAR FINANCIAL RESULTS 2018 25 July trading • Total residential lodgements $4.68 billion, down 2% on July 2017 • AFG Home Loans continued strong positive growth, 2% above July 2017 • AFG Securities lodgements are 134% above July 2017, continuing positive trend from H2 FY18 • Western Australia s
Slide 26: Impact of trail book accounting
FULL YEAR FINANCIAL RESULTS 2018 26 Impact of trail book accounting • Underlying profit in FY18 is 7% above FY17, excluding change in value of future trailing commissions • The change in trailing commissions net receivable in FY18 includes the growth of the AFG Home Loans and residential loan books
Slide 27: Other income
FULL YEAR FINANCIAL RESULTS 2018 27 Other income • Service fees and other income grew by 9% in FY18 driven by our growing broker network and increased take-up of services. The investment in AFG Suite and Pipeline will provide additional value to our broker proposition • Sponsorship and incentive inc
Slide 28: In conclusion
28 Significant scale, financially robust and well positioned to take advantage of opportunities In conclusion Earnings diversification strategy continues to evolve FY18 delivered strong growth in key financial metrics despite a The cash flow generation abilities of the business will continue to chal
Slide 29: Q&A Thank you
AFG Q&A Thank you
Slide 30: Appendices
AFG Appendices
Slide 31: Types of lodgements
FULL YEAR FINANCIAL RESULTS 2018 31 Types of lodgements • Regulatory activity continues to impact product mix with investor and refinance volumes continuing to fall through the year • Increase in first home buyers and the percentage of upgraders continuing to increase in FY18
Slide 32: Market share
FULL YEAR FINANCIAL RESULTS 2018 32 Market share • Non-major market share grew throughout FY18 with Q4 showing non-major market share at 40.7% • Non-bank lenders drove the majority of the increase which continues to demonstrate the choice and competition provided by brokers
Slide 33: Lending activity
FULL YEAR FINANCIAL RESULTS 2018 33 Lending activity • National average loan size has increased in FY18 following a decrease in Q4 FY17 predominantly driven by VIC and NSW
Slide 34: AFG Securities home loan serviceability comparisons
FULL YEAR FINANCIAL RESULTS 2018 34 AFG Securities home loan serviceability comparisons Scenarios based on weighted maximum loan size trends (A$ thousands) by lending group
Slide 35: Investor loans
FULL YEAR FINANCIAL RESULTS 2018 35 Investor loans • Regulatory intervention has continued to impact investor loans which have now fallen below 30% nationally • Investor share has stabilized over the last 3 quarters
Slide 36: Balance sheet
FULL YEAR FINANCIAL RESULTS 2018 36 Balance sheet Extracted from Appendix 4E
Slide 37: Consolidated income statement
FULL YEAR FINANCIAL RESULTS 2018 37 Consolidated income statement Extracted from Appendix 4E
Slide 38: Cash flows
FULL YEAR FINANCIAL RESULTS 2018 38 Cash flows Extracted from Appendix 4E
Slide 39: Impact of securitisation SPVs on balance sheet
FULL YEAR FINANCIAL RESULTS 2018 39 Impact of securitisation SPVs on balance sheet The proforma balance sheet shows the Group’s balance sheet with the ‘non-recourse’ special purpose vehicles (SPVs) relating to the securitisation business and the balance sheet of the Group separately Points to note:
Slide 40: Important disclaimer
FULL YEAR FINANCIAL RESULTS 2018 40 Important disclaimer This presentation contains general information which is current as at 23 August 2018. The information is intended to be a summary of Australian Finance Group Limited (AFG) and it its activities as at 30 June 2018, and does not purport to be co
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