Australian Finance Group Ltd. · ASX:AFG
Australian Finance — FY2017 Earnings Presentation
35 slides from Australian Finance's earnings presentation, Aug 25, 2017
Slide 1: AFG 2017 Full-year financial results
AFG 2017 Full-year financial results
Slide 2: Delivering strong growth in a challenging market
FULL YEAR FINANCIAL RESULTS 2017 2 Delivering strong growth in a challenging market
Slide 3: FULL YEAR FINANCIAL RESULTS
FULL YEAR FINANCIAL RESULTS 2017 3
Slide 4: Full year financial results FY17 vs FY16
FULL YEAR FINANCIAL RESULTS 2017 4 FY17 FY16 FY17 FY16 $000’s $000’s $000’s $000’s Loan Book 133,322,084 120,402,698 11% NPAT (normalised) 30,164 22,644 33% Residential 126,538,191 114,737,484 10% Net Interest 14,630 13,563 8% Commercial 6,783,893 5,665,214 20% Net Interest Margin 135bp 132bp 2% Set
Slide 5: Strong culture, delivering our long term strategy focused on great customer outcomes
FULL YEAR FINANCIAL RESULTS 2017 5 Strong culture, delivering our long term strategy focused on great customer outcomes
Slide 6: Improved credit growth since Q1 FY17 despite regulatory headwinds
FULL YEAR FINANCIAL RESULTS 2017 6 Improved credit growth since Q1 FY17 despite regulatory headwinds, a strong suite of AFG branded products, an increasingly complex lending environment, recruitment and the AFG Business platform will drive future growth opportunities
Slide 7: Commercial broking platform soft launch in Q2 FY18
FULL YEAR FINANCIAL RESULTS 2017 7 Commercial broking platform soft launch in Q2 FY18 • Initially Commercial mortgages and expanding to include asset finance and unsecured finance throughout FY18 • Building an initial panel of up to 10 lenders aimed at the core SME finance market • Simple training a
Slide 8: Residential Products
FULL YEAR FINANCIAL RESULTS 2017 8 Residential Products 4,000 Increased regulatory intervention in the market has driven more complexity in the market and greater need for broker 3,500 expertise • In April 2015 over 1,450 individual products were available for 3,000 comparison in AFG’s software, tha
Slide 9: Operational update
AFG Operational update
Slide 10: AFGHL Portfolio
FULL YEAR FINANCIAL RESULTS 2017 10 AFGHL Portfolio 6.0 Billions • Strategy continues to deliver positive results with profit 5.0 before tax 142% above FY16 4.0 • Total settlements were $2.68 billion in FY17 up 38% from $1.94 billion in FY16 3.0 • AFG Home Loan book of $5.5 billion up 44% from $3.8
Slide 11: AFGHL Settlements
FULL YEAR FINANCIAL RESULTS 2017 11 AFGHL Settlements 3.0 • Successful launch of the Alpha product in Q2 FY17 provided further Billions consumer choice and an uptick in settlement volumes. All funders 2.5 contributed strongly to the growth in FY17 • Four core prime mortgage funders provide diversifi
Slide 12: Residential Settlements by State
FULL YEAR FINANCIAL RESULTS 2017 12 Strong growth in Victoria and signs of improved activity in Queensland. These have been offset by weaker economic conditions in Western Australia. Residential settlements were down 5.8% in Q1 FY17 due to changes in foreign investor lending, returning to growth of
Slide 13: Residential Portfolio by State
FULL YEAR FINANCIAL RESULTS 2017 13 The Residential portfolio grew from $114.7 billion to $126.5 billion during the year with growth in all States including Western Australia despite more challenging economic conditions. Re-weighting of the loan book continues with highest growth achieved in New Sou
Slide 14: Residential loan book growth versus Australian market
FULL YEAR FINANCIAL RESULTS 2017 14 AFG’s residential loan book continues to grow at a faster rate than the total Australian residential mortgage market. Since 2010 AFG’s CAGR of 11.1% compares very favourably against market growth of 6.1% 40 1,800 35 1,600 Total monthly lending commitments ($bn) To
Slide 15: Commercial and EF Settlements
FULL YEAR FINANCIAL RESULTS 2017 15 Asset finance settlements are up 20% in FY17. Commercial settlements up 3% with strong growth in New South Wales offset by continued tighter lending criteria in property development lending Commercial and EF Settlements Commercial Mortgages Settlements by State $3
Slide 16: Commercial Portfolio by State
FULL YEAR FINANCIAL RESULTS 2017 16 The Commercial portfolio grew by 20% to $6.8 billion generating ongoing trail commission Commercial Portfolio by State Commercial Loan Book Location $2.5 Billions $2.0 WA 16% NSW (18%) 26% $1.5 (21%) $1.0 VIC $0.5 32% QLD (34%) 21% SA (22%) - 4% SA WA QLD VIC NSW
Slide 17: Over 2,875 active brokers at June 2017
FULL YEAR FINANCIAL RESULTS 2017 17 Over 2,875 active brokers at 30 June 2017 as AFG continues to build a wide distribution network providing lending solutions, choice and competition to consumers Broker Numbers Broker Location 1,000 900 800 WA 700 18% NSW (19%) 26% 600 (25%) 500 400 300 VIC 200 30%
Slide 18: Comparison of July lodgements
FULL YEAR FINANCIAL RESULTS 2017 18 Comparison of July lodgements • Total Residential lodgements were $4.79 billion Change on July 2016 NSW 2% • AFG Home Loans maintained its strong momentum in July 2017 QLD (3%) SA 0% • On a like for like basis total residential lodgements were up 3% on July 2016 V
Slide 19: Financial information
AFG Financial information
Slide 20: Normalised profit for FY17 was $30.2 million, up 33%
FULL YEAR FINANCIAL RESULTS 2017 20 • Normalised profit for FY17 was $30.2 million, up 33% from $22.6m in FY16. FY17 FY17 FY16 The normalised profit figure is calculated by removing the impact of the initial $000's Reported Normalised Reported recognition of the value of AFGHL white label trail book
Slide 21: Net cash flows from operating activities
FULL YEAR FINANCIAL RESULTS 2017 21 Net cash flows from operating activities are $26.5 million in Jun 2017 Jun 2016 FY17. Adjusting for the following factors net cash flows from $000's $000's Cash receipts from customers 462,454 440,572 operating activities remain strong: Cash paid to suppliers and
Slide 22: Balance sheet
FULL YEAR FINANCIAL RESULTS 2017 22 Jun 2017 Jun 2016 $000's $000's Assets Points to note: Cash1 124,801 130,665 1. Cash includes restricted cash of $34.0 million (FY16: $44.7 Receivables 2 737,611 650,108 million) Loans and advances 3 1,152,171 1,046,412 Property, plant and equipment4 1,898 2,379 2
Slide 23: Other Income
FULL YEAR FINANCIAL RESULTS 2017 23 Other Income $18 Millions • 15% growth in service fees during FY17 following 20% $16 growth in FY16 continues to demonstrate the value of the AFG brand and technology proposition $14 $12 • Growth in services fees is due to increased broker numbers and enhanced tec
Slide 24: FY17 delivered strong growth for shareholders
FULL YEAR FINANCIAL RESULTS 2017 24 FY17 delivered strong growth for shareholders despite what is a somewhat challenging residential and commercial lending market The group is well placed to continue to provide positive future growth Customers continue to preference brokers as a means of providing c
Slide 25: Appendices
AFG Appendices
Slide 26: Regulatory activity continues to impact product mix
FULL YEAR FINANCIAL RESULTS 2017 26 Regulatory activity continues to impact product mix Types of Lodgements 45% 40% 35% 30% 25% 20% 15% 10% 5% - Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 FY13 FY14 FY15 FY16 FY17 Inv % First Home Buyers % Refinance % Upgrader %
Slide 27: Major v Non-Major market share and average loan size
FULL YEAR FINANCIAL RESULTS 2017 27 Non-majors increased market share in the last quarter of the calendar year, average loan size has stabilised Major v Non-Major National average loan size 100% $700 Thousands 90% $600 80% 70% $500 60% $400 50% 40% $300 30% $200 20% $100 10% - - Q1 Q2 Q3 Q4 Q1 Q2 Q3
Slide 28: Regulatory changes to investor lending have stabilised volumes
FULL YEAR FINANCIAL RESULTS 2017 28 Regulatory changes to investor lending have stabilised volumes as a percentage of overall product mix Investor Loans % Investor Loans % per State 60% 60% 50% 50% 40% 40% 30% 30% 20% 20% 10% 10% - - Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
Slide 29: Statement of financial position
FULL YEAR FINANCIAL RESULTS 2017 29 Jun 2017 Jun 2016 Jun 2017 Jun 2016 $000's $000's $000's $000's Assets Liabilities Cash and cash equivalents 124,801 130,665 Interest-bearing liabilities 1,164,478 1,072,215 Trade and other receivables 737,580 650,059 Trade and other payables 715,803 646,113 Loans
Slide 30: Statement of comprehensive income
FULL YEAR FINANCIAL RESULTS 2017 30 Jun 2017 Jun 2016 Jun 2017 Jun 2016 $000's $000's $000's $000's Continuing Operations Commission and other income 539,759 482,331 Other comprehensive income Securitisation interest income 46,342 46,597 Items that may be reclassified subsequently Operating income 5
Slide 31: Cash reconciliation and cash flows
FULL YEAR FINANCIAL RESULTS 2017 31 Jun 2017 Jun 2016 $000's $000's Cashflows from Operating activities Cash receipts from customers 462,454 440,572 Cash paid to suppliers and employees (439,031) (410,148) Interest received 46,341 46,598 Cash reconciliation Jun 2017 Jun 2016 Interest paid (31,711) (
Slide 32: Pro forma balance sheet with SPVs
FULL YEAR FINANCIAL RESULTS 2017 32 The proforma balance sheet below 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 AFG SPV's AFG ex SPV's Re-classifications AFG Limited $00
Slide 33: Underlying results reconciliation and key assumptions
FULL YEAR FINANCIAL RESULTS 2017 33 Jun 2017 Jun 2016 $000’s $000’s Operating Profit Operating Profit Statutory income After Tax income After Tax Underlying results from continuing operations 499,020 26,160 472,602 22,466 Change in the carrying value of trailing commission 88,531 13,959 56,326 178 r
Slide 34: Q&A Thank you
AFG Q&A Thank you
Slide 35: Disclaimer
FULL YEAR FINANCIAL RESULTS 2017 35 This presentation contains general information which is current as at 25 August 2017. The information is intended to be a summary of Australian Finance Group Limited (AFG) and it its activities as at 30 June 2017, and does not purport to be complete in any respect
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