Australian Finance Group Ltd. · ASX:AFG
Australian Finance — Investor Presentation (February 2022)
43 slides from Australian Finance's investor presentation, Feb 25, 2022
Slide 1: AFG Half-Year Results Presentation
AFG Half-Year Results ; Presentation 4 99 ZU ZdZ
Slide 2: HY22 results
HY22 results Diversified business model continuing to deliver growth in profitability and excellent shareholder returns • Strong financial performance for the half with growing confidence for the balance of the financial year • Excellent growth in our own branded products with a strong trend emergin
Slide 3: HY22 results highlights
H IG H L IG HTS HY22 results Compared to HY21 Delivering excellent growth across the business
Slide 4: Operating Update
H A L F Y E A R R E S U LT S Operating Update
Slide 5: Settlements / Loan Books
Settlements / Loan Books 1H22 1H21 Settlements $000’s $000’s Residential 30,773,638 20,915,896 47% AFGHL 2,798,428 1,474,237 90% White Label1 1,496,353 1,028,183 46% AFG Securities1 1,302,176 446,053 192% Commercial 1,771,327 966,562 83% • Residential settlements up 47% to $30.8 billion. Increasing
Slide 6: AFG Securities Update
AFG Securities Update • Record lodgements in November 2021 of $399 million • Continued focus on higher margin products (Link, Retro Lite and SMSF) providing some protection for NIM • Products have a gross margin approximately 40bps higher than a prime Retro full doc loan • Notwithstanding higher run
Slide 7: AFG Securities Portfolio
AFG Securities Portfolio Significant book growth achieved while maintaining overall credit quality 7 HY22 RESULTS
Slide 8: AFG Securities Operational
AFG Securities Operational Arrears performance remains excellent • At 31 December 2021 there were only 25 loans in arrears greater than 30 days out of 9,951 loans in the book. This demonstrates the quality of the book, our robust credit assessment process and extensive industry knowledge • Loans in
Slide 9: Technology
Technology • Enhanced AFG’s broker and customer proposition is central to our strategy. The build continues to progress, and we expect to accelerate the migration of brokers in H2 FY22. We anticipate continued investment in our Technology platform • BrokerEngine provides an advanced automated workfl
Slide 10: Financials
H A L F Y E A R R E S U LT S Financials
Slide 11: Financial Results
Financial Results 1H22 1H21 $000’s $000’s • Revenue is up 31% in HY22, with higher settlements Total Revenue 481,233 366,386 31% and growing loan books across product classes Gross Profit 61,298 49,686 23% NPAT reported 30,033 24,967 20% • Reported NPAT $4.1m higher than underlying NPAT NPAT underly
Slide 12: Transformation continues
Transformation continues • Profit mix shift from aggregation to higher-margin lending continues to drive growth. The future development of an Asset Finance lending product will accelerate this • Aggregation payout ratio is beginning to stabilise however the market remains competitive • Fees for brok
Slide 13: Financial Strength
Financial Strength Low risk/high value annuity style assets, aggregation and white label trail books and AFG Securities loan book providing strong cash flow Capital light business model, growth through acquisition with commensurate or measurable returns and a record of the acquisitions adding real e
Slide 14: Summary Cash flow
Summary Cash flow Cash flows from Operating activities 1H22 $000’s 1H21 $000’s AFG maintains a capital light business model with Cash receipts from customers 353,643 288,911 strong cash flow generation. Trail book and AFG Cash paid to suppliers and employees (350,523) (272,645) Securities growth sup
Slide 15: Summary Balance Sheet
Dec 2021 Dec 2020 Note $000’s $000’s Assets Unrestricted Cash 84,094 116,656 Summary Balance Sheet Restricted Cash Receivables and other assets 160,946 15,694 74,469 10,861 Financial Asset 1 15,000 - Well capitalised, net cash balance sheet with Contract Assets 2 1,121,021 1,005,824 unrestricted cas
Slide 16: Impact of Trail Book Accounting
Impact of Trail Book Accounting 1H22 1H21 $000’s $000’s Underlying profit 4% above HY21 excluding Operating Profit after Operating Profit after change in value of future trailing commissions Statutory income tax income tax Underlying results from continuing 399,323 25,964 326,024 24,880 1. Discount
Slide 17: Other Income
Other Income • Service fees increased 12% compared to HY21 due to broker numbers rising and increased take-up of additional aggregation services. Service fees include compliance, Professional Indemnity insurance and marketing services • Sponsorship and conferencing activity was higher in HY22 compar
Slide 18: Business strategy
H A L F Y E A R R E S U LT S Business strategy
Slide 19: AFG today
AFG today Diversified business model continuing to deliver growth in profitability and shareholder returns Income model Opportunity Margin driver Broker originated loans that are funded by lenders Increase monthly originations by AFG brokers Average Upfront net of clawbacks of Aggregation generate a
Slide 20: 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 financial choice for Australians by fairer
Slide 21: Continuing to deliver value for shareholders
• Key strategy to diversify earnings by building distribution and margin-enhancing activities is Continuing to deliver • delivering results Opportunity to grow residential distribution remains strong • Investment in our own technology and recent fintech acquisitions position us to maximise growth an
Slide 22: Our investments
Our investments Strategic investments have expanded our aggregation, technology, distribution and lending capabilities, and will continue to drive growth for shareholders Commercial Mortgage Alternative residential Better customer Leading Asset Finance Advanced workflow lending products aggregation
Slide 23: Outlook
H A L F Y E A R R E S U LT S Outlook
Slide 24: Outlook – Aggregation
Outlook – Aggregation • Residential mortgage market remains strong • Performance of AFG through the residential mortgage cycle is proven • Both political parties have expressed support for the retention of the existing broker remuneration model • Competition remains high but AFG’s offering is compel
Slide 25: Outlook – Manufacturing and Lending
Outlook – Manufacturing and Lending • Funding markets remain open and attractive, we expect they will continue to function normally. Recent term transaction translates into greater warehouse capacity • AFG products continue to gain traction in the market • Product development in residential and othe
Slide 26: January 2022 Trading
January 2022 Trading • Residential lodgements slightly above January 2021 at $4.86 billion • AFG Home Loans lodgements up 33% compared to January 2021 11% • AFG Securities lodgements 72% higher than January 2021. Settlements 122% higher 6% (3%) (3%) • Further growth in residential volumes in Queensl
Slide 27: AFG investment highlights
AFG investment highlights 1. Calculated using 11 February 2022 share price 27 HY22 RESULTS
Slide 28: In conclusion
In conclusion Continued financial growth with HY22 NPAT Our business model generates strong cash flows up 20% on HY21. Settlement growth across from a capital light balance sheet which further the business as well as the success of AFG’s enhances our capability to maintain an excellent earnings dive
Slide 29: Appendices
H A L F Y E A R R E S U LT S Appendices
Slide 30: Residential Settlements
Residential Settlements 30 HY22 RESULTS
Slide 31: Residential Portfolio – December 2021
Residential Portfolio – December 2021 31 HY22 RESULTS
Slide 32: Commercial and Asset Finance Aggregation Settlements
Commercial and Asset Finance Aggregation Settlements 32 HY22 RESULTS
Slide 33: Commercial Portfolio – December 2021
Commercial Portfolio – December 2021 33 HY22 RESULTS
Slide 34: Types of Lodgements
Types of Lodgements 34 HY22 RESULTS
Slide 35: Lending Activity
Lending Activity 35 HY22 RESULTS
Slide 36: Investor Loans
Investor Loans 36 HY22 RESULTS
Slide 37: Lending Activity
Lending Activity 37 HY22 RESULTS
Slide 38: Summary P&L
Summary P&L 1H22 1H21 $000’s $000’s Commissions 375,934 281,585 Interest on trail commission income receivable 40,697 29,157 Mortgage management services 194 90 Customer transaction fees 2,223 1,338 Securitisation interest income 1 50,682 45,079 Total Revenue 469,731 357,249 Securitisation interest
Slide 39: Consolidated Income Statement
Consolidated Income Statement 1H22 1H21 1H22 1H21 $000’s $000’s $000’s $000’s Continuing Operations Profit attributable to Commission and other income 419,049 312,170 Equity holders of the Company 30,033 24,967 Securitisation interest income 50,682 45,079 Other comprehensive profit for the year, net
Slide 40: Cash flows
1H22 1H21 $000’s $000’s Cash flows from operating activities Cash flows Cash receipts from customers Cash paid to suppliers and employees 353,643 (350,523) 288,911 (272,645) Interest received 50,681 45,078 Interest paid (25,563) (23,661) Income taxes paid (13,343) (11,895) Net cash from operating ac
Slide 41: Fintelligence Acquisition Accountant Summary
Fair value recognised on acquisition Note $000’s Assets Fintelligence Acquisition Cash and cash equivalents Trade and other receivables 4,090 1,605 Accountant Summary Other current assets Property, plant and equipment 1,443 27 Right of Use asset 332 Customer related intangibles (broker network) 1 17
Slide 42: Impact of Securitisation on SPVs on Balance Sheet
Impact of Securitisation on AFG SPV’s AFG ex SPV’s Re- classification AFG Limited SPVs on Balance Sheet Assets Cash 157,907 87,133 - 245,040 Receivables - 7,462 - 7,462 Financial asset - 15,000 - 15,000 The proforma balance sheet shows the Group’s Contract assets - 1,121,021 - 1,121,021 balance shee
Slide 43: Important Disclaimer
Important Disclaimer This presentation contains general information which is current as at 24 February 2022. The information is intended to be a summary of Australian Finance Group Ltd (AFG) and its activities as at 31 December 2021, and does not purport to be complete in any respect. The informatio
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