Australian Finance Group Ltd. · ASX:AFG
Australian Finance — FY2020 Earnings Presentation
35 slides from Australian Finance's earnings presentation, Aug 28, 2020
Slide 1: Full Year Results Presentation 2020
2020 FULL YEAR RESULTS PRESENTATION
Slide 2: FY20 results - Highlights
FY20 results - Highlights FY18 $33.3M FY18 $28.1M FY19 $33.0M FY19 $28.6M AFG Home Loans FY20 Residential services over settlements FY20 $38.1M FY20 $36.3M up 9% to 25,000 Reported NPAT up 15% to $38.1M Underlying NPAT up 27% to $36.3M $34.1B retail customers 4.7 5.7 FY18 AFG Securities 4.7 5.9 FY19
Slide 3: Financial Results
Operating Cashflow v NPAT Underlying Financial Results 40 30 Millions FY2020 FY2019 20 $000’s $000’s 10 Total revenue 697,611 659,999 6% Gross profit 90,585 75,235 20% - FY17 FY18 FY19 FY20 NPAT reported 38,078 33,029 15% NPAT underlying 36,266 28,565 27% NPAT underlying Operating cashflow Net cash
Slide 4: Settlements & Loan Book
Settlements & Residential Portfolio AFGHL Portfolio Loan Book $138B $147B $155B $9.2B $10.5B $7.4B FY2020 FY2019 Settlements $000’s $000’s Residential 34,065,322 31,280,639 9% AFGHL 3,141,246 3,153,426 (0%) FY18 FY19 FY20 FY18 FY19 FY20 White Label 1 1,786,747 2,093,914 (15%) White Label AFG Securit
Slide 5: Trading Update
Trading Update Residential Lodgements 7 6 5 Billions 4 Jan Feb Mar Apr May Jun Jul 3 Lodge # 7,203 9,945 11,196 9,405 11,269 10,406 12,417 2 Lodge Vol ($m) 3,764 5,491 6,148 5,218 6,127 5,565 6,340 1 Average loan size 522,578 552,153 549,084 554,800 543,741 534,771 510,591 - Jan Mar Mar Apr May Jun
Slide 6: Strategic & Market outlook
Strategic & Market outlook Strategic outlook Market outlook COVID-19 - Changing ways of working COVID-19 – Uncertainty remains • More bank branches are closing, brokers are crucial to competition and • Full scale of the likely disruption to lending markets is very difficult to the distribution of fi
Slide 7: AFG Home Loans
AFGHL Settlements AFG Home Loans $3.5 $3.0 $2.5 $2.0 $1.5 $1.0 $0.5 • AFG Home Loans trail book up 14% to $10.5 billion • Overall settlement volumes consistent with FY19 however FY16 FY17 FY18 FY19 FY20 the mix continued to shift towards AFG funded Retro and Link products in the first three quarters
Slide 8: AFG Securities
AFG Securities $1.6 Settlements $1.4 $1.2 $1.0 • Settlements of $1.35 billion, an increase of 28% $0.8 • Activity slowed in April 2020 as the business reacted to the $0.6 COVID-19 pandemic. As clarity returned to the markets AFG $0.4 resumed lending with lodgements improving to $116 million in $0.2
Slide 9: AFG Securities
LVR Loan Balance Geographic Distribution AFG Securities 1% 3% 8% 11% 9% 14% • $700 million term transaction completed 11% 31% 11% in July 2020 to create additional warehouse capacity for FY21. In addition 50% there was a $500 million issue in H1 FY20 43% 18% • Renegotiated limit for a warehouse to 3
Slide 10: AFG Securities - Operational
AFG Securities 4.0% 31 - 60 DPD Non-Bank SPIN 61 - 90 DPD Major Bank SPIN 91+ DPD 91+ DPD AFGS Morgage Book 3,500 - Operational 3.5% 3.0% 3,000 2,500 2.5% 2,000 • At 30 June 2020 in a book of 7,543 2.0% loans, there were only 19 loans in arrears 1,500 greater than 30 days. The low number 1.5% 1,000
Slide 11: AFG Business
AFG Business 29 lenders on the panel. Mortgages, short term, • Growth in settlements across the platform to $346 million, up trade receivable and from $130 million in FY19 asset finance products • Expansion of the lender panel continues to provide choice and competition for brokers and commercial cu
Slide 12: Thinktank
Thinktank Settlements $160M $89M White label - AFG Commercial powered by FY19 FY20 Thinktank • Settlements have increased to $160 million from $89 million in FY19 Equity Investment • Number of brokers lodging AFG Commercial deals has Contribution to Earnings grown to 261 from 186 in FY19 Equity inve
Slide 13: Continued Investment in Technology
Continued Investment in Technology • COVID-19 has shown the ability and willingness of brokers, customers and lenders to operate in a new way. Technology is central to this • Our current technology build is being enhanced to drive increased recruitment of brokers and a higher level of efficiency for
Slide 14: Summary Cash Flow
Summary Cash Flow AFG continues to generate strong cash flows and maintains a capital light business model allowing both ongoing investment to generate future growth and a • Net cash flow from operating activities $40.3 million in FY20, 44% above FY19. Historical trail book growth flowing through to
Slide 15: Summary Balance Sheet
Summary Balance Sheet AFG maintains a strong, debt-free balance sheet which Jun 2020 Jun 2019 $000’s $000’s provides the platform for future investment in both organic Assets Note and inorganic growth opportunities Cash 1 161,528 96,818 Receivables 5,446 5,409 Contract Assets 2 974,599 899,727 Notes
Slide 16: Impact of Trail Book Accounting
Impact of Trail Book Accounting FY2020 FY2019 $000’s $000’s Operating Profit Operating Profit Statutory Underlying profit 27% above FY19 excluding change in income after tax income after tax value of future trailing commissions Underlying results from continuing 607,311 36,266 548,235 28,565 operati
Slide 17: Other Income
Other Income Other Income 18 • Service fees have increased 2% in FY20, driven by an increase in broker services such as compliance and 16 marketing 14 • Sponsorship income has decreased predominately relating 12 to the timing of conferences held which were postponed due to COVID-19 restrictions. The
Slide 18: July 2020 Trading
Comparison of July Lodgements July 2020 Trading QLD arrow-alt-up 26% • Record month in July 2020, with total residential lodgements of $6.3 billion, up 28% on July 2019, and settlements of $3.6 billion WA SA NSW • AFG Home Loans lodgements up 8% arrow-alt-up 49% on July 2019 • AFG Securities lodgeme
Slide 19: In Conclusion
In Conclusion The FY20 result represents a very successful The ability of brokers and willingness of customers year driven by growth across the business and to embrace technology was reinforced during various a continuation of AFG’s earnings diversification lockdowns. Investment in technology remain
Slide 20: Q&A Thank you
AFG Q&A Thank you
Slide 21: Appendices
AFG Appendices
Slide 22: Diverse platform continues to support AFG's earnings growth
Diverse platform continues to support AFG’s earnings growth More than half of overall profit now generated outside traditional aggregation, Strengths of the business model: • Established and diversified network with providing a stable platform for future growth 2,975+ brokers across Australia, offer
Slide 23: Residential Settlements
Residential Settlements Residential Settlements Residential Settlements by State 40 14 35 12 30 10 25 8 20 6 15 4 10 5 2 FY16 FY17 FY18 FY19 FY20 SA WA QLD VIC NSW FY18 FY19 FY20 23
Slide 24: Residential Portfolio - June 2020
Residential Portfolio - June 2020 Residential Portfolio by State Residential Loan Book Location 50 45 17% 40 (18%) 6% 30% 35 (6%) (30%) 30 25 20 21% 15 (21%) 10 5 26% (25%) SA WA QLD VIC NSW FY18 FY19 FY20 NSW VIC QLD SA WA 24
Slide 25: Commercial and Asset Finance aggregation Settlements
Commercial and Asset Finance aggregation Settlements Commercial and Asset Finance Settlements Commercial Settlements by State 3.0 1.0 0.9 2.5 0.8 2.0 0.7 0.6 1.5 0.5 0.4 1.0 0.3 0.5 0.2 0.1 FY16 FY17 FY18 FY19 FY20 SA WA QLD VIC NSW Asset finance Commercial mortgages FY18 FY19 FY20 25
Slide 26: Commercial Portfolio - June 2020
Commercial Portfolio - June 2020 Commercial Porfolio by State Commercial Loan Book Location 3.0 4% 2.5 13% (4%) (15%) 29% 2.0 (27%) 1.5 22% (22%) 1.0 0.5 32% (32%) SA WA QLD VIC NSW FY18 FY19 FY20 NSW VIC QLD SA WA 26
Slide 27: Types of Lodgements
50% 45% 40% 35% 30% 25% Types of Lodgements 20% 15% 10% 5% - Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 FY16 FY17 FY18 FY19 FY20 Inv % First Home Buyers % Refinance % Upgrader % 27
Slide 28: Lending Activity
Lending Activity National Average Loan Size National Loan to Value Ratio 800 76% 74% 700 72% 600 70% 500 68% 66% 400 64% 300 62% 60% 200 58% 100 56% 54% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 FY16 FY17 FY18 FY19 FY20 FY
Slide 29: Investor Loans
Investor Loans Investor Loans % Investor Loans % per State 60% 50% 45% 50% 40% 35% 40% 30% 30% 25% 20% 20% 15% 10% 10% 5% 0% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 FY16 FY17 FY18 FY19 FY20 FY16 FY17 FY18 FY19 FY20 Inves
Slide 30: Lending Activity
Lending Activity Major vs Non-Major Non-major market share 100% 50% 90% 45% 80% 40% 70% 35% 60% 30% 50% 25% 40% 20% 30% 15% 20% 10% 10% 5% - - Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 FY16 FY17 FY18 FY19 FY20 FY16 FY17 FY
Slide 31: Summary P&L
FY2020 FY2019 $000’s $000’s Commissions 530,654 514,124 Interest on trail commission income receivable 55,785 53,466 Mortgage management services 268 213 Securitisation transaction fees 2,635 1,899 Securitisation interest income 92,841 73,137 Total Revenue 682,183 642,839 Securitisation interest exp
Slide 32: Consolidated Income Statement
Consolidated Income Statement FY2020 FY2019 FY2020 FY2019 $000’s $000’s $000’s $000’s Continuing Operations Profit attributable to: Commission and other income 589,342 569,702 Equity holders of the Company 38,078 33,029 Securitisation interest income 92,841 73,137 Non-controlling interests - - Opera
Slide 33: Cash Flows
FY2020 FY2019 $000’s $000’s Cash flows from operating activities Cash Flows Cash receipts from customers 521,491 483,933 Cash paid to suppliers and employees (506,401) (463,541) Interest received 92,841 73,137 Interest paid (53,317) (53,513) Income taxes paid (14,298) (11,926) Net cash from operatin
Slide 34: Impact of Securitisation SPVs on Balance Sheet
Impact of Assets AFG SPVs AFG ex SPVs Re-classification AFG Limited Securitisation SPVs Cash Receivables 51,155 - 110,373 5,446 - - 161,528 5,446 on Balance Sheet Contract assets Loans and advances - 2,908,103 974,599 12,670 - - 974,599 2,920,773 Right of use Asset - 6,323 - 6,323 The proforma balan
Slide 35: Important Disclaimer
Important Disclaimer This presentation contains general information which is current as at 27 August 2020. The information is intended to be a summary of Australian Finance Group Ltd (AFG) and it its activities as at 30 June 2020, and does not purport to be complete in any respect. The information i
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