Australian Finance Group Ltd. · ASX:AFG
Australian Finance — FY2019 Earnings Presentation
37 slides from Australian Finance's earnings presentation, Aug 23, 2019
Slide 1: 2019 Full-year financial results
2019 Full-year financial results
Slide 2: FY19 results – Highlights
FULL YEAR FINANCIAL RESULTS 2019 FY19 results – Highlights FY19 Residential AFG Home Loans now Settlements of $31.3B services over 23,000 retail customers with Residential trail book Asset Finance up 3% up 7% to $147.4B to $553M AFG Securities settlements up 108% to $1.06B with loan book up 50% to $
Slide 3: Financial results
Financial results • Total Revenue increased 7% to $660M driven by growth in AFG Securities and longer loan lives • Underlying profit increased by 2%, a strong result in a challenging market • Invested in growing the AFG Securities book in FY19, providing a strong platform for future earnings • Stron
Slide 4: Executing on AFG's earnings diversification strategy
FULL YEAR FINANCIAL RESULTS 2019 Executing on AFG’s earnings diversification strategy The Connective transaction is consistent with our long-term strategy, significantly grows the distribution network and allows AFG to increase the penetration of higher margin products such as AFG Securities, white
Slide 5: Strategic & market outlook
FULL YEAR FINANCIAL RESULTS 2019 Strategic & market outlook Well positioned for future growth opportunities Market outlook Underlying market dynamics continue to be supportive of Capital light, strong balance sheet with no debt the broker proposition • RBA implemented two interest rate decreases Est
Slide 6: Settlements & Loan Book
Settlements & Loan Book • Residential settlements are 11% lower than FY18, impacted by tightening in credit availability. Loan book growth remains solid, up 7% to over $147 billion • AFG Home Loans settlements were 2% lower, a good result compared to the Residential market. The AFG Home Loans trail
Slide 7: AFG Home Loans
FULL YEAR FINANCIAL RESULTS 2019 AFG Home Loans RETRO LINK ALPHA OPTIONS • AFG Home Loans’ book continued strong growth, up 25% to $9.2 billion Funded directly by AFG • Changing mix towards AFG funded Retro and Link, with white label lender appetites consistent with the overall market • Changing mix
Slide 8: AFG Securities
AFG Securities • AFG Securities is providing choice to customers in a complex market, including the near prime sector through the higher margin Link product • AFG Home Loans Link launched in 2018, with Lodgments of $345 million and Settlements of $171 million in FY19, up from $69 million lodged and
Slide 9: AFG Securities – Operational
AFG Securities – Operational • Strong growth achieved whilst maintaining the quality of the book • Half of the overall book has an LVR <70%, with all loans greater than 80% covered by LMI • At June 2019 there were only 13 loans in arrears greater than 30 days, demonstrating a measured approach to ex
Slide 10: AFG Commercial powered by Thinktank
2019 AFG Commercial COMMERCIAL Powered by powered by Thinktank • Settlements have increased to $89 million from $46 million in FY18 • Number of Brokers lodging AFG Commercial deals has grown from 50 in FY18 to 186 in FY19 • The Thinktank equity interest delivered earnings of $1.5 million in FY19. Th
Slide 11: AFG Business
2019 AFG Business 22 lenders on the panel across Mortgages and Asset Finance • Settlements across the platform increased from $12 million in FY18 to $130 million in FY19 • Expanding the panel delivers further choice and a wider product offering for brokers to meet their customers need. • Continue to
Slide 12: Continued investment in Technology
2019 Continued investment in Technology • Continuing to update core broker platform with the latest technology capabilities for brokers’ growth, efficiency and customer management • Support execution of the business strategy to attract & retain brokers and grow future product capabilities SUITE 12
Slide 13: Connective transaction/merger rationale (1 of 2)
2019 Connective transaction/merger rationale (1 of 2) • AFG to merge with the aggregation business of Connective Group in a transaction that values Connective at $120 Significant million on a cash-free, debt-free basis national mortgage aggregator and • A significant national broker distribution net
Slide 14: Connective transaction/merger rationale (2 of 2)
2019 Connective transaction/merger rationale (2 of 2) • Connective Group shareholders will receive $60 million in cash and 30.9 million AFG shares Consideration • AFG shares to be issued at $1.9426/share, being the 10-day VWAP up to and including 9 August 2019 • Cash consideration funded through a n
Slide 15: Who is Connective?
2019 Who is Connective? Connective has a network of 3,600+ brokers, Pro forma FY19 underlying and offering services across residential, commercial and 128 Full-time Employees reported NPAT of $9.4M2,4 and asset finance and its own range of white label home 5 Offices (HQ in Melbourne) $10.9M4,6 respe
Slide 16: Summary cash flow
Summary cash flow • Net cash flows from operating activities were $27.8 million in FY19, in line with underlying profit. FY18 included a positive impact of working capital movement driven by timing of commission payments • AFG Securities loan book grew by 50% to $2.06 billion, however net interest c
Slide 17: Summary balance sheet
Summary balance sheet AFG maintains a strong, debt-free balance sheet which provides the platform for future investment in organic or inorganic growth opportunities Points to note: 1. Includes restricted cash of $47.2 million ($39.1 million at June 2018) 2. Trail book accounting including Residentia
Slide 18: Impact of trail book accounting
FULL YEAR FINANCIAL RESULTS 2019 Impact of trail book accounting • Underlying profit in FY19 is 2% above FY18, excluding change in value of future trailing commissions • Loan lives have extended with tightening credit conditions 1 Discount rates once set are not adjusted during the life of the loan.
Slide 19: Other income
Other income • Service fees and other income increased 7% in FY19, largely driven by an increase in broker services, including compliance, marketing services and other processing fees • Sponsorship income also increased compared to FY18, which predominately relates to the timing of conferences held
Slide 20: July 2019 trading
July 2019 trading • Total residential lodgements $4.95 billion, up 6% on July 2018 • Despite AFG Home Loans lodgements being down 9% on July 2018, AFG Securities lodgements are up 49% • Residential lodgement growth across all states 20
Slide 21: In conclusion
FULL YEAR FINANCIAL RESULTS 2019 In conclusion FY19 result demonstrates the robust nature of the business in a challenging market Focus on investing to grow the AFGS loan book will continue while maintaining quality - providing a strong platform for future earnings AFG Business platform is gaining t
Slide 22: Q&A Thank you
AFG Q&A Thank you
Slide 23: Appendices
AFG Appendices
Slide 24: Residential settlements
FULL YEAR FINANCIAL RESULTS 2019 Residential settlements 24
Slide 25: Residential portfolio – June 2019
FULL YEAR FINANCIAL RESULTS 2019 Residential portfolio – June 2019 25
Slide 26: Commercial and Asset Finance aggregation settlements
FULL YEAR FINANCIAL RESULTS 2019 Commercial and Asset Finance aggregation settlements 26
Slide 27: Commercial portfolio – June 2019
FULL YEAR FINANCIAL RESULTS 2019 Commercial portfolio – June 2019 27
Slide 28: Types of lodgements
FULL YEAR FINANCIAL RESULTS 2019 Types of lodgements 28
Slide 29: Lending activity
FULL YEAR FINANCIAL RESULTS 2019 Lending activity 29
Slide 30: Investor loans
FULL YEAR FINANCIAL RESULTS 2019 Investor loans 30
Slide 31: Lender market share
FULL YEAR FINANCIAL RESULTS 2019 Lender market share 31
Slide 32: Summary P&L
Summary P&L Commision = Interest on trail commission income receivable Mortgage management services Securitisation transaction fees ‘Securitisation interest income Operating income Securitisation interst expense Interest on trail commission payable Other cost of sales (266,529) Gross Profit 75,235 O
Slide 33: Consolidated income statement
Consolidated income statement 33 Extracted from Appendix 4E
Slide 34: Balance sheet
FULL YEAR FINANCIAL RESULTS 2019 Balance sheet 34 Extracted from Appendix 4E
Slide 35: Cash flows
Cash flows 35 Extracted from Appendix 4E
Slide 36: Impact of securitisation SPVs on balance sheet
FULL YEAR FINANCIAL RESULTS 2019 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: 1.
Slide 37: Important disclaimer
FULL YEAR FINANCIAL RESULTS 2019 Important disclaimer This presentation contains general information which is current as at 23 August 2019. The information is intended to be a summary of Australian Finance Group Limited (AFG) and it its activities as at 30 June 2019, and does not purport to be compl
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