Australian Finance Group Ltd. · ASX:AFG
Australian Finance — Investor Presentation (May 2020)
35 slides from Australian Finance's investor presentation, May 13, 2020
Slide 1: Equity Raising
Equity Raising 13 May 2020
Slide 2: Importance notice and disclaimer
2020 Importance notice and disclaimer The following notice and disclaimer applies to this investor presentation (Presentation) and you are therefore advised to read this carefully before reading or making any other use of this Presentation or any information contained in this Presentation. By accept
Slide 3: Importance notice and disclaimer (continued)
2020 Importance notice and disclaimer (continued) The retail offer booklet for the Retail Entitlement Offer (Retail Offer Booklet) will be available following its lodgement with ASX. Any eligible retail shareholder in Australia or New Zealand who wishes to participate in the Retail Entitlement Offer
Slide 4: Importance notice and disclaimer (continued)
2020 Importance notice and disclaimer (continued) Future performance and forward-looking statements This Presentation contains certain "forward-looking statements". The words "expect", "anticipate", "estimate", "intend", "believe", "guidance", "should", "could", "may", "will", "predict", "plan" and
Slide 5: Executive Summary
2020 Executive Summary Equity Raising of $60m to strengthen the capital position, support future growth of AFG Securities and other ongoing growth initiatives • The March 2020 quarter was very active for AFG and the broader property market. AFG has also seen strong residential lodgements continue fo
Slide 6: Trading Update
Trading Update
Slide 7: Trading update
2020 Trading update AFG has experienced strong growth in lodgements, with the March quarter up 33% on the same period last year. This trend has continued into April although the settlement conversion ratio remains uncertain, it is expected to be lower March Quarter performance 6.1 5.5 5.2 • Total re
Slide 8: Financial impact of COVID-19
2020 Financial impact of COVID-19 AFG’s financial performance is expected to be impacted. AFG is implementing a number of initiatives to support the business and manage the disruption in the market Residential Mortgages Residential settlements are expected to fall in upcoming months, driven by: • Sl
Slide 9: COVID-19 Responses
2020 COVID-19 Responses AFG is committed to assisting its customers through COVID-19, as well as supporting brokers to manage the increase in inquiries, simplifying COVID-19 information requirements and providing hardship assistance for AFG Securities customers Category Overview • Majority of fundin
Slide 10: AFG Securities – portfolio composition
2020 AFG Securities – portfolio composition AFG has achieved strong growth in its loan portfolio while maintaining a quality loan composition – Relatively low LVRs, geographic diversification and low levels in arrears LVR1,2 Loan balance1 Geographic distribution1 • Arrears3 remain well below industr
Slide 11: Use of Funds & Offer Details
Use of Funds & Offer Details
Slide 12: Use of Funds
2020 Use of Funds Taking a longer term view on the growth of AFG, the majority of the proceeds are to strengthen the capital position, provide liquidity and support strategic growth in the AFG Securities lending book • An equity raising strengthens the capital position of the business and provides f
Slide 13: Capital management and funding
2020 Capital management and funding Completion of the Equity Raising will further strengthen AFG’s strong balance sheet which provides a robust platform for the future Corporate position Facility Limit Drawn • Pro-forma unrestricted cash and cash equivalents of $112m post completion of the Equity Ra
Slide 14: Offer details
2020 Offer details Offer size and • Fully underwritten Equity Raising of $60 million, comprising of: structure • An Institutional Placement of approximately $15 million (Placement) • A 1 for 5.5 pro-rata accelerated non-renounceable entitlement offer of approximately $45 million (Entitlement Offer),
Slide 15: Offer timetable
2020 Offer timetable Event Indicative date Equity Raising announcement and Placement and Institutional Entitlement Offer opens Wednesday, 13 May 2020 Placement and Institutional Entitlement Offer closes Wednesday, 13 May 2020 Trading in AFG shares resumes on an ex-entitlement basis Thursday, 14 May
Slide 16: AFG Investment Proposition
AFG Investment Proposition
Slide 17: Stable platform continues to support future growth
2020 Stable platform continues to support future growth More than half of overall profit now generated outside traditional aggregation, providing a stable platform for future growth Strengths of the business model: Established and diversified network with 2,975+ brokers across Australia, offering ov
Slide 18: Earnings diversified across the business
2020 Earnings diversified across the business Gross Profit by Line of Business AFG has strong visibility of forward cashflow with 81% of 1HFY20 gross Commercial profit relating to annuity type income that is realised over time /other including trail commission, net interest income and fees 13% AFGHL
Slide 19: AFG Securities momentum
2020 AFG Securities momentum AFGS remains committed to delivering choice and competition to Australian borrowers. Additional capital to be deployed to enable growth in a considered manner whilst providing optionality surrounding the funding mix AFG Securities loan book • Strong momentum with book gr
Slide 20: Pillars for growth
2020 Pillars for growth Whilst noting the uncertainty promoted by the COVID-19 crisis, AFG remains confident about the opportunities which may evolve because of this. Successful completion of the Equity Raising will ensure AFG is well positioned to deliver on its long term multi-tiered approach for
Slide 21: Strategic & market outlook
2020 Strategic & market outlook AFG is well positioned to capture future growth opportunities. Disruption from COVID-19 will likely result in some market disruption in the short term, with the government implementing a number of initiatives to support lenders through the pandemic Well positioned for
Slide 22: Key Risks
Key Risks
Slide 23: Key risks
2020 Key risks Introduction This section describes the key business risks of investing in AFG together with the risks relating to participation in the Offer which may affect the value of AFG shares. It does not describe all the risks of an investment. Investors should consult their own professional,
Slide 24: Key risks – key business risks
2020 Key risks – key business risks Economy and the impact of the COVID-19 pandemic, including increasing hardship applications The events relating to the COVID-19 pandemic have recently resulted in significant market falls and volatility including in the prices of securities trading on the Australi
Slide 25: Key risks – key business risks (continued)
2020 Key risks – key business risks (continued) In recent years, responsible lending practices have been scrutinised by ASIC. ASIC has been increasingly concerned with the extent to which lenders undertake independent verification of a potential customer’s income, verification of customers living ex
Slide 26: Key risks – key business risks (continued)
2020 Key risks – key business risks (continued) Reliance on lenders pursuing third party distribution channels AFG’s business depends on lenders originating loans through mortgage brokers rather than directly (for example, through a lender’s own branches or other distribution platforms such as mobil
Slide 27: Key risks – key business risks (continued)
2020 Key risks – key business risks (continued) Conduct of brokers AFG faces a number of risks arising from the conduct of the brokers, including additional risks associated with brokers who are AFG credit representatives operating under AFG’s Australian Credit Licence. AFG currently has over 1,360
Slide 28: Key risks – key business risks (continued)
2020 Key risks – key business risks (continued) Interest rates Australian consumers and residential borrowers currently enjoy historically low interest rates which have contributed to the growth of AFG. In the event interest rates significantly increase, potential borrowers’ willingness and ability
Slide 29: Key risks – key business risks (continued)
2020 Key risks – key business risks (continued) Loan underwriting and credit risk In relation to AFG Securities, in the event of a default and subsequent foreclosure, AFG would also bear the associated costs of the default and loss of interest revenue in addition to potential principal loss, after a
Slide 30: Key risks – offer and general risks
2020 Key risks – offer and general risks Investment in equity capital and the COVID-19 pandemic There are general risks associated with investments in equity capital. The trading price of AFG's shares on ASX may fluctuate with movements in equity capital markets in Australia and internationally. Thi
Slide 31: Key risks – offer and general risks (continued)
2020 Key risks – offer and general risks (continued) Equity raising risk AFG has entered into an underwriting agreement with the Lead Manager (Underwriting Agreement), pursuant to which the Lead Manager has agreed to fully underwrite the Offer on the terms and conditions of the Underwriting Agreemen
Slide 32: Key risks – offer and general risks (continued)
2020 Key risks – offer and general risks (continued) Changes to legal, accounting and regulatory requirements An investment in shares may be adversely affected by legal, accounting and regulatory changes or requirements, and actions pursuant to such requirements. Potential changes to existing laws o
Slide 33: International Offer Restrictions
International Offer Restrictions
Slide 34: International Offer Restrictions
2020 International Offer Restrictions This document does not constitute an offer of New Shares of the Company in any jurisdiction in which it would be unlawful. In particular, this document may not be distributed to any person, and the New Shares may not be offered or sold in the institutional entit
Slide 35: International Offer Restrictions (continued)
2020 International Offer Restrictions (continued) Singapore This document and any other materials relating to the New Shares have not been, and will not be, lodged or registered as a prospectus in Singapore with the Monetary Authority of Singapore. Accordingly, this document and any other document o
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