Australian Finance Group Ltd. · ASX:AFG
Australian Finance — H1 FY2019 Earnings Presentation
39 slides from Australian Finance's earnings presentation, Feb 22, 2019
Slide 1: 2019 Half-year financial results
For personal use only 2019 Half-year financial results
Slide 2: H1 FY19 results – Highlights
HALF YEAR FINANCIAL RESULTS 2019 H1 FY19 results – Highlights For personal use only 2
Slide 3: Keeping choice and competition alive for consumers
HALF YEAR FINANCIAL RESULTS 2019 Keeping choice and competition alive for consumers For personal use only AFG provides significant value to consumers and lenders – large and small. Consumers have shown a strong preference for the channel and lenders have clearly found broker a more cost effective cu
Slide 4: Royal Commission
Royal Commission For personal use only Final Report released Final report outcomes that might impact Brokers Implications for the market and AFG • Following the Royal Commission recommendation, the • The complexity of the Australian mortgage market is more difficult to Government has proposed ending
Slide 5: Royal Commission & regulatory reviews
HALF YEAR FINANCIAL RESULTS 2019 Royal Commission & regulatory reviews For personal use only Extensive reviews by the Productivity Commission, Sedgwick (commissioned by lenders), the Combined Industry Forum and ASIC have been performed. The consensus from all is that fee for service would negatively
Slide 6: Brokers Benefit Customers & Competition
Brokers Benefit Customers For personal use only & Competition • Mortgage brokers play a vital role in delivering competition and • It is vital a constructive process be entered into that ensures creating choice and lower costs for borrowers competition and consumer choice are not at risk. A well-reg
Slide 7: Strategic & market outlook
HALF YEAR FINANCIAL RESULTS 2019 Strategic & market outlook For personal use only Consumers are increasingly using brokers – demonstrating the clear value that brokers bring. AFG will work with stakeholders to ensure that the value our core brokers bring to the market is heard as well as continuing
Slide 8: AFG's earnings diversification strategy
HALF YEAR FINANCIAL RESULTS 2019 AFG’s earnings diversification strategy For personal use only Strong culture delivering our long term strategy, focused on great consumer outcomes. AFGS and AFG Commercial powered by Thinktank provide improved margin and a strong platform for future years. Opportunit
Slide 9: H1 FY19 results – actual
HALF YEAR FINANCIAL RESULTS 2019 H1 FY19 results – actual For personal use only 9
Slide 10: AFG Business
2019 AFG Business For personal use only Platform continues to build its lodgement pipeline through the half • Lodgements to the platform have increased 215% in H1 FY19 compared to H2 FY18, with settlements of $56.2 million in the half completed by 71 brokers • Commercial mortgage panel of 19 lenders
Slide 11: AFG Commercial powered by Thinktank
2019 AFG Commercial powered by Thinktank For personal use only • National roll-out of the AFG Commercial product now complete • Settlements for Thinktank/AFG Commercial up 60% on H1 FY18 to $38.7 million • Straight forward, set and forget commercial property solution. Loans available from $100k up t
Slide 12: For personal use only
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Slide 13: AFG Home Loans
AFG Home Loans For personal use only • Continues to provide an alternative to borrowers in a challenging market • Growth of 6% overall compared to H1 FY18 with strong growth in AFG Securities • AFG Home Loans’ book up 30% to $8.4 billion • Three white label funders and an expanded AFG Securities off
Slide 14: AFG Securities
AFG Securities For personal use only • Settlements of $473 million and lodgements of $795 million were up 173% and 148% on H1 FY18 • Growth driven by considered product improvements, with arrears remaining well below industry averages • AFG Home Loans Link launched in 2018, with Lodgements and Settl
Slide 15: AFG Securities – Arrears and default management
HALF YEAR FINANCIAL RESULTS 2019 AFG Securities – Arrears and default management For personal use only • AFG Securities’ total portfolio over $1.65 billion at December 2018 • At December 2018 there were only 10 loans in arrears greater than 30 days demonstrating a measured approach to expanding prod
Slide 16: Residential settlements
HALF YEAR FINANCIAL RESULTS 2019 Residential settlements For personal use only • Tightening credit conditions have impacted settlements, down 7% on H1 FY18 • Victoria and New Sales Wales both experienced decreases driven by slowing market conditions following strong sustained growth in these states
Slide 17: Residential portfolio – December 2018
HALF YEAR FINANCIAL RESULTS 2019 Residential portfolio – December 2018 For personal use only • Despite regulatory intervention and tightening impacting settlements, the residential loan book grew 8% to $143.9 billion 17
Slide 18: Commercial and Asset Finance aggregation settlements
HALF YEAR FINANCIAL RESULTS 2019 Commercial and Asset Finance aggregation settlements For personal use only • Commercial mortgages down by 12% compared to H1 FY18, reflecting the challenging lending conditions in NSW and VIC • Equipment finance settlements were up 5% to $290 million 18
Slide 19: Commercial aggregation portfolio – December 2018
HALF YEAR FINANCIAL RESULTS 2019 Commercial aggregation portfolio – December 2018 For personal use only • Commercial portfolio experienced growth in all states in H1 FY19 despite decreased settlements, demonstrating longer loan lives • The overall book grew by 8% to $7.8 billion compared to December
Slide 20: Distribution network
HALF YEAR FINANCIAL RESULTS 2019 Distribution network For personal use only • AFG’s national distribution network at December 2018 now has over 2,975 active brokers • Growth has slowed in New South Wales and Victoria reflective of the residential property market, while others states have returned to
Slide 21: Financial information
For personal use only AFG Financial information
Slide 22: Summary P&L
Summary P&L For personal use only • Despite significant headwinds, H1 FY19 Profit after tax of $16.7 million was in line with H1 FY18 reporting profit • Change in mix of AFGHL settlements with greater focus on building the AFGS book. AFG’s securitisation programme delivered $300 million increase in
Slide 23: Summary cash flow
HALF YEAR FINANCIAL RESULTS 2019 Summary cash flow For personal use only • Net cash flows from operating activities were $12.5 million in H1 FY19. This is predominately impacted by timing of broker education sponsorship receipts and commission receipt and payment • AFG Securities loan book grew by 1
Slide 24: Summary balance sheet
Summary balance sheet For personal use only Points to note: 1. Includes restricted cash of $43.2 million ($36.7 million at December 2017) 2. Predominantly related to trail book accounting including AFG Home Loans trail book 3. AFG Securities residential mortgages 4. Investment in Thinktank 5. AFG co
Slide 25: Impact of trail book accounting
HALF YEAR FINANCIAL RESULTS 2019 Impact of trail book accounting For personal use only • Underlying profit in H1 FY19 is 2% above H1 FY18, excluding change in value of future trailing commissions • The change in trailing commissions net receivable in H1 FY19 includes the growth of the AFG Home Loans
Slide 26: Other income
Other income For personal use only • Service fees and other income increased 11% compared to H1 FY19 driven by organic broker growth as well as increasing take-up of additional services • AFG’s continues to invest to create further value to our broker proposition • Sponsorship and incentive income i
Slide 27: January trading
January trading For personal use only • Total residential lodgements $3.01 billion, down 12% on January 2018 • AFG Home Loans slightly below January 2018 although AFG Securities lodgements are 279% above • Regulatory and lending tightening is evident across all states, particularly impacting NSW and
Slide 28: In conclusion
HALF YEAR FINANCIAL RESULTS 2019 In conclusion For personal use only Scale and earnings diversification have provided resilience in a challenging environment Our strategic investment in Thinktank is beginning to contribute to earnings and growing the AFGS loan book will provide a strong earnings pla
Slide 29: Q&A
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Slide 30: For personal use only
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Slide 31: Types of lodgements
HALF YEAR FINANCIAL RESULTS 2019 Types of lodgements For personal use only • Refinance volume has stabilised, though remaining well below historical averages • Increase in first home buyers and the percentage of upgraders increased marginally 31
Slide 32: Market share
HALF YEAR FINANCIAL RESULTS 2019 Market share For personal use only • Non-major market share grew again in H1, with non-major market share reaching 42.1% in Q2. It is the highest level in over 5 years, demonstrating the important role of brokers and smaller lenders of which AFG is one • Non-bank len
Slide 33: Lending activity
HALF YEAR FINANCIAL RESULTS 2019 Lending activity For personal use only 33
Slide 34: Investor loans
HALF YEAR FINANCIAL RESULTS 2019 Investor loans For personal use only • Investor loans continue to decrease, now below 27% in H1 FY19 • Recent changes to APRA regulations may begin to reverse this trend 34
Slide 35: Balance sheet
HALF YEAR FINANCIAL RESULTS 2019 Balance sheet For personal use only 35 Extracted from Appendix 4D
Slide 36: Consolidated income statement
HALF YEAR FINANCIAL RESULTS 2019 Consolidated income statement For personal use only 36 Extracted from Appendix 4D
Slide 37: Cash flows
HALF YEAR FINANCIAL RESULTS 2019 Cash flows For personal use only 37 Extracted from Appendix 4D
Slide 38: Impact of securitisation SPVs on balance sheet
HALF YEAR FINANCIAL RESULTS 2019 Impact of securitisation SPVs on balance sheet For personal use only 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 separate
Slide 39: Important disclaimer
HALF YEAR FINANCIAL RESULTS 2019 Important disclaimer For personal use only This presentation contains general information which is current as at 21 February 2019. The information is intended to be a summary of Australian Finance Group Limited (AFG) and it its activities as at 31 December 2018, and
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