Australian Finance Group Ltd. · ASX:AFG
Australian Finance — Investor Presentation (August 2022)
44 slides from Australian Finance's investor presentation, Aug 26, 2022
Slide 1: AFG Limited FY22 Results Presentation
AFG Limited FY22 Results Presentation 12 months to 30 June 2022
Slide 2: Contents
CONTENTS Highlights Operating Update Financials Business Strategy Outlook MFAA Aggregator Appendix of the Year 2022 2 FY22 RESULTS
Slide 3: FY22 results
FY22 results Strong trading results with overall volumes and key strategic investments delivering growth in underlying earnings and dividends - through changing market conditions • Earnings diversification delivered 20% growth in normalised NPATA to $61.3m • Reported NPAT of $38.8m after Volt and te
Slide 4: Highlights
HIGHLI GHTS FY22 results Strong growth in financials and strategic products 4 FY22 RESULTS
Slide 5: AFG investment highlights
AFG investment highlights TSR Building distribution FY15-FY22 3 Year 41% 3,700+ Brokers CAGR growth pa (inc Fintelligence) Normalised NPATA 22% 5 Year 98% Up from 2,394 at Jun 2015 Normalised EPS 18% AFG’s strategy of providing choice Dividend yield1 Capital light with a Growing AFG and competition
Slide 6: Operating Update
F U L L Y E AR R E S U LT S Operating Update
Slide 7: Settlements / Loan Books
Settlements / Loan Books FY2022 FY2022 FY2021 FY2021 Settlements Settlements $000s $000s $000s $000s Residential Residential 59,393,017 43,632,251 59,393,017 43,632,251 36%36% AFGHL AFGHL 5,585,547 3,450,481 5,585,547 3,450,481 62%62% 2 White White Label Label 2,865,864 2,104,947 2,865,864 2,104,947
Slide 8: AFG Securities Update
AFG Securities Update • AFG Securities is a key driver of AFG’s diversification strategy and earnings growth • Strong growth in volumes, with Lodgements and Settlements up 73% and 102% respectively in FY22 • Recent change in mix towards higher margin products (Link, Retro Lite and SMSF) provides som
Slide 9: Credit risk and margins
Credit risk and margins AFG Securities has a high-quality loan book • Robust credit assessment process, extensive industry experience and internally sourced data insights result in quality book performance • Loan book is 100% variable and can respond quickly to increases in benchmark rates or fundin
Slide 10: AFG Securities losses and arrears
AFG Securities losses and arrears Number of Loans Loss to AFG Losses since commencement in 2007 Total 35 $260,206 Legacy Loans 17 $228,115 • Historically, only $260k in losses incurred with the bulk originated in our initial warehouse, which Loans written Post-GFC 18 $32,091 funded predominantly low
Slide 11: White Label and Aggregation Update
White Label and Aggregation Update • Aggregation remains our largest business and continued to grow strongly throughout the year • $59.4 billion of settlements, up 36% • Loan book up by 9% to a record $182.2 billion • Best year for recruitment in over 10 years with over 200 groups recruited • Strong
Slide 12: Technology
Technology • AFG continued to actively invest in technology in FY22, through the acquisition of the Fintelligence and BrokerEngine businesses, and also through the development of our in-house lodgement platform • Acquisitions provided an opportunity to review and optimise technology development. • E
Slide 13: Our investments
Our investments Strategy around key investments delivering earnings growth and creating ongoing opportunity for further growth Thinktank • $28.2m carrying value • Earnings contribution up 16% to $6.1 million for the year • While label volumes up 84% to $239 million in FY22 Fintelligence • Earnings c
Slide 14: Financials
F U L L Y E AR R E S U LT S Financials
Slide 15: Financial Results
FY2022 FY2021 Financial Results Total Revenue $000s 955,533 $000s 767,138 25% • Revenue is up 25% with higher volumes across all Gross Profit 130,226 102,415 27% Normalised NPATA 61,310 51,304 20% key pillars of growth Normalised NPAT 60,129 51,304 17% • Net interest is 17% higher in FY22. Strong gr
Slide 16: Normalised and underlying results
FY2022 Normalised and Normalised Profit after tax Normalised NPATA excluding significant items ($m) 61.3 Amortisation of acquired intangible assets (1.2) underlying results Normalised NPAT excluding significant items Technology impairment 60.1 (6.3) Volt impairment (15.0) Underlying normalised NPATA
Slide 17: Transformation continues
Transformation continues • While aggregation remains the core asset of the business, our diversification strategy has resulted in the majority of gross profit now coming from other services and products delivered through the broker network • Aggregation payout ratios continue to rise as competition
Slide 18: Financial Strength
Financial Strength Underpinned by low risk annuity style cash flows from the aggregation and AFG Securities loan book, AFG continues to generate strong cash flows Strong balance sheet enables further growth through acquisition and investing in further strategic initiatives 1. Net unrestricted cash o
Slide 19: Summary Cash flow
FY2022 FY2021 $000s $000s Summary Cash flow Cash flows from Operating activities Cash receipts from customers 734,035 597,068 Cash paid to suppliers and employees (706,965) (558,825) Capital light business model with strong cash flow generation Interest received 2 108,847 90,242 Interest paid 2 (58,
Slide 20: Summary Balance Sheet
Jun 2022 Jun 2021 $000s $000s Summary Balance Sheet Assets Unrestricted Cash Note 84,681 106,930 Restricted Cash 183,904 119,118 Well capitalised with strong financial assets. Trade and other receivables 13,472 5,645 Unrestricted cash, trail book assets, financial Other Assets - 15,000 Contract Asse
Slide 21: Other Income
Other Income • Service fees increased 8% compared to FY22 due to an increase in broker numbers and higher take-up of additional services. Service fees include compliance, professional indemnity insurance and marketing services • Sponsorship and conferencing activity was higher in FY22 compared to FY
Slide 22: Business strategy
F U L L Y E AR R E S U LT S Business strategy
Slide 23: AFG strategy for growth
AFG strategy for growth Diversified business model built on a strategy of growing broker market share across a number of asset classes, and growing margins through expanding upstream into lending be it direct, white label or investment 3 Direct lending RMBS AFG Securities loans generate a Net $4.8 b
Slide 24: Outlook
F U L L Y E AR R E S U LT S Outlook
Slide 25: AFG is well positioned as rates rise
AFG is well positioned as rates rise • A key player in lending market – 1 in 10 Australian mortgages written by an AFG broker Broker and lending market • Australian broker market share up to 69.5% at Mar 2022, up from 57% in Dec 2016 • Home ground advantage with extensive industry knowledge • AFG ha
Slide 26: Outlook – Aggregation
Outlook – Aggregation • The RBA has commenced increasing interest rates to more neutral level • Rates and unemployment levels remain at historically low levels and continue to support demand for mortgage broking and lending services. • Performance of AFG through the residential mortgage cycle is pro
Slide 27: Outlook – Manufacturing and Lending
Outlook – Manufacturing and Lending • Recent term transactions as well as increased warehouse capacity provides certainty for continuing to fund AFG Securities growth whilst the funding market settles following the recent RBA rate rises • Lenders have predominately responded to the rate rises by pas
Slide 28: July 2022 Trading
July 2022 Trading • RBA interest rate rises have had the intended impact of slowing the market • Residential lodgements below July 2021 at $6.63 billion • AFG Home Loans lodgements down 2% 12% compared to July 2021 • AFG Securities lodgements 3% higher in July 2022, while settlements were 37% higher
Slide 29: In conclusion
In conclusion Leading aggregation platform and an Growing distribution across a number of asset ability to continue to invest in new classes with an increasing demonstration of technology and services generating margin over and above distribution margins • 3,700+ Brokers inc Fintelligence, up from 2
Slide 30: Appendices
F U L L Y E AR R E S U LT S Appendices
Slide 31: AFG's purpose and ambition
AFG’s purpose and ambition Our purpose Our ambition • To be the aggregator of choice for brokers and Brokering a better future their customers, and for lenders. To lead the • We exist to create competition and charge and challenge the status quo to create a fairer financial future for all Australian
Slide 32: Residential Settlements
Residential Settlements 32 FY22 RESULTS
Slide 33: Residential Portfolio – June 2022
Residential Portfolio – June 2022 33 FY22 RESULTS
Slide 34: Commercial and Asset Finance Aggregation Settlements
Commercial and Asset Finance Aggregation Settlements 34 FY22 RESULTS
Slide 35: Commercial Portfolio – June 2022
Commercial Portfolio – June 2022 35 FY22 RESULTS
Slide 36: Types of Lodgements
Types of Lodgements 36 FY22 RESULTS
Slide 37: Lending Activity
Lending Activity 37 FY22 RESULTS
Slide 38: Investor Loans
Investor Loans 38 FY22 RESULTS
Slide 39: Lending Activity
Lending Activity 39 FY22 RESULTS
Slide 40: Summary P&L
FY2022 FY2021 $000s $000s Summary P&L Commissions Interest on trail commission income receivable 730,119 82,219 585,758 67,491 Mortgage management services 488 254 Customer transaction fees 4,664 3,298 Securitisation interest income 108,847 90,242 Subscription income 1,689 - Other income 954 - Total
Slide 41: Consolidated Income Statement
Consolidated Income Statement FY2022 FY2022 FY2021 FY2022 FY2021 $000s $000s $000s $000s $000s Commissionand Commission andother otherincome income 820,133 820,133 656,801 Profit attributable to: Securitisationinterest Securitisation interestincome income 108,847 108,847 90,242 Equity holders of the
Slide 42: Cash flows
FY2022 FY2021 $000s $000s Cash flows from operating activities Cash flows Cash receipts from customers 734,035 597,068 Cash paid to suppliers and employees (706,965) (558,825) Interest received 108,847 90,242 Interest paid (58,635) (46,520) Income taxes paid (25,379) (23,363) Net cash from operating
Slide 43: Impact of Securitisation on SPVs on Balance Sheet
Impact of Securitisation on SPVs on Balance Sheet AFG AFG ex SPVs Reclassification AFG Limited Assets The proforma balance sheet shows the Group’s Cash 180,169 88,416 - 268,585 balance sheet with the ‘non-recourse’ special purpose Receivables - 13,472 - 13,472 vehicles (SPVs) relating to the securit
Slide 44: Important Disclaimer
Important Disclaimer This presentation contains general information which is current as at 25 August 2022. The information is intended to be a summary of Australian Finance Group Ltd (AFG) and its activities as at 30 June 2022, and does not purport to be complete in any respect. The information in t
Australian Finance Group — Investor Presentation (August 2022) on 6ix