Tag: Mortgage Choice

Mortgage Choice reports 29% fall in commissions revenue

Mortgage Choice released its full-year results, reporting a $2.1-billion hit to its mortgage volumes. Via The Adviser.

Mortgage Choice has published its results for the 2019 financial year (FY19), recording a 40 per cent decline in its cash net profit after tax, from $23.4 million in FY18 to $14 million.

The decline was driven by an 18 per cent ($2.1 billion) fall in its home loan settlement volumes, down from $11.5 billion to $9.4 billion.

The brokerage’s loan book also contracted, slipping by approximately $300 million from $54.6 billion to $54.3 billion.

Mortgage Choice CEO Susan Mitchell attributed the fall in home loan volumes to subdued market activity in response to weaker housing market conditions and increased scrutiny on mortgage applications.

“Settlements for the year were lower than we expected, given a tightening of credit and lending processes for residential mortgages and a continued softening of the housing market in the wake of the [banking] royal commission, especially in the second half,” Ms Mitchell said.

As a result of the fall in mortgage settlements, the total value of commissions received by Mortgage Choice fell by 6 per cent ($11.2 million), from $168.5 million to $157.7 million.

However, the total value of commissions paid by Mortgage Choice to its broker network increased by 6 per cent from $108.8 million to $115.5 million, reflecting changes to the brokerage’s remuneration model, which also weighed on its underlying financial performance.

The total value of Mortgage Choice’s net core commissions fell by 29 per cent, from $59.7 million to $42.2 million.  

The withdrawal of its white-label partnership with Macquarie Bank and increased IT expenditure also reduced its pre-tax earnings by approximately $700,000 and $600,000, respectively.  

The revenue losses were partly offset by an above-target reduction in operating expenses of 17 per cent ($6 million).

Speaking to the media following the release of the financial results, Ms Mitchell said she expects settlement volumes to increase in the coming financial year, improving the brokerage’s financial position. 

Ms Mitchell stated that the brokerage has experienced a rise in mortgage applications in response to the Reserve Bank of Australia’s (RBA) back-to-back cuts to the cash rate and the Australian Prudential Regulation Authority’s (APRA) new lending guidance.  

“We have seen our loan applications rise significantly since June 30. I think everyone has seen that,” she said.

“The feedback I’ve gotten from the banks is that they are as busy as they’ve ever been. 

“There’s a lot of activity, and I think we still need to see that activity come through into settlement results, which will obviously take another few months.”

Franchise numbers drop  

Mortgage Choice has also reported a 13 per cent decline in its franchise network, down from 449 as at the close of FY18 to 381.

The number of brokers operating under the Mortgage Choice brand also slipped, down 9 per cent from 619 to 562 over the same period.

However, the brokerage described the reduction as a “one-off” adjustment that came in response to its new franchise remuneration model, which resulted in 29 franchise mergers and 26 buybacks, with a further 11 franchises listed as “inactive”.

During FY19, Mortgage Choice recruited seven new franchisees but hopes to expand its network over the coming financial year with a renewed focus on recruitment as a means of mitigating risks associated with market volatility.

“We believe that our focus on recruitment will help us weather what’s coming, should there be some uncertainty in settlements going forward,” Ms Mitchell told The Adviser.

The brokerage CEO also told The Adviser that Mortgage Choice’s new franchise remuneration structure – which increased the average commission payout rate from 65 per cent to 74 per cent – would help drive investment from franchisees and lift settlement volumes.  

“We believe our remuneration model has put money in the pockets of our franchisees that will allow them to invest in our businesses in the form of broker marketing and administrative functions as well as adding loan writers to their businesses,” she said.

According to Ms Mitchell, the new model has received positive feedback from franchisees, who she said are ready to capitalise on recent market developments, making particular reference to the outcome of the federal election, which signalled the defeat of the Labor opposition’s proposed ban on trailing commissions and property tax reforms.

“Our remuneration model and our IT platform changes were very well received by our network over the past year and our network is ready to get back to work now that we’ve had the result of the federal election back in May,” she said.

‘Devil’s in the detail’

Ms Mitchell was also asked whether she expects the banking royal commission’s proposed best interests duty for brokers to resemble obligations in the financial advice industry.

The Mortgage Choice CEO said she would reserve judgement into a draft bill but expressed support for a “principles-based” duty.  

“They haven’t released draft legislation and, of course, for something like this, the devil is always in the detail,” she said.

“I suspect it will be principles-based – the financial planning best interests duty is actually enshrined in law very specifically – and I’m hoping that the broker’s best interests duty will be more principles-based.”

She concluded: “I would expect it to be very much in line [with what] brokers do today but with more documentation and more definition as to why a broker has chosen a particular product and how it meets the requirements of a borrower.”

The best interests duty is due for consultation, with legislation to be introduced before the end of the year ahead of expected implementation in July 2020

Brokerage settlements down 7% in “flat market”

Mortgage Choice saw its net profit after tax (NPAT) rise by an annualised 3.3% to $23.4m in FY2017, according to the firm’s latest financial results, released Tuesday, via Australian Broker.

The firm’s core broking business posted a cash NPAT of $22.75m, up 4% year-on-year. Its loan book at the end of June reached $54.6bn (a 2.3% growth), however, settlements – which reached $11.5bn –  were down 7%.

“[D]espite the strength of our brand and customer offering, settlements in FY2018 declined in a flat market and we are not growing our franchisee numbers,” Mortgage Choice CEO Susan Mitchell said.

“Through a thorough consultation process with franchisees it became very clear we needed a more competitive remuneration structure and needed to adjust the way we deliver our services, so that we can grow our network and market share,” Mitchell added.

In June, an investigation by Fairfax and ABC revealed many franchisees had been left finically worse off due to low commissions and unrealistic targets. Further, 170 – almost half the network – were considering legal action.

The CEO believes Mortgage Choice’s new hybrid broker remuneration model, introduced in July, will provide franchisees with higher pay and reduce their “income volatility”. She said this will enable them to invest in their businesses while attracting new, high quality brokers. Mitchell also revealed that more than 80% of broker franchisees have already adopted the new model.

This 2018, the firm invested $3.4 million in its new broker platform, which will enter pilot phase before its roll-out to franchisees by the next fiscal year.

“Our new broker platform was built by our in-house team of talented technology professionals to meet the specific requirements of the business and will enable our network to operate more efficiently while improving the overall customer experience,” said Mitchell.

Looking ahead, Mortgage Choice maintains a sound outlook for the mortgage broking industry amid a “complex lending environment” arising from an increase in wholesale funding costs, regulatory changes and tightening lending policies, as borrowers seek advice from qualified professionals.

“As we head into FY2019, we are confident the changes we have introduced will see us grow settlement volumes and market share over the medium to long-term. Having a greater share of revenue should enable our network to invest in their businesses while attracting new, high quality franchisees and loan writers to the network. At the same time, we continue to look at ways in which we can improve efficiencies,” said Mitchell.

“More than half of all home loans each year are originated by mortgage brokers, and I am confident borrowers will look to our well-known and trusted national brand for one of the best consumer propositions in the market,” she continued.

Mortgage Choice Introduces New Remuneration Structure and Guidance

Mortgage Choice Limited says that the Board has approved a new broker remuneration framework which will provide franchisees with higher remuneration and reduced income volatility. The Company is confident the new model will enable franchisees to invest in their business while attracting new, high quality franchisees and loan writers to the network. This will provide a platform for growth and underpin the long term sustainability of Mortgage Choice.

Key features of the new model, which will be offered to all franchisees on an opt-in basis from August 2018, include:

  • increase in the average commission payout rate on residential lending from 65% to 74%;
  • unique hybrid trail commission structure which pays the best monthly outcome on either a flow or book basis; and
  • designed to reduce income volatility, providing better protection for franchisees in the event of a market downturn.

Susan Mitchell, CEO of Mortgage Choice, said all of the broker franchisees are likely to opt-in to the new model, as they will be better off financially.

“When we commenced discussions with franchisees, it was with a view to introducing a model that allowed them to earn more so they had the confidence to invest in their business, while still supporting them under a national brand with the services they value including IT, compliance, training, marketing and business planning. The hybrid trail commission structure we are introducing is unique. It rewards franchisees as they grow and provides better earnings certainty through periods of investment. We believe all franchisees will adopt the new model as it caters for businesses across the life cycle spectrum, from greenfield to more established brokers,” said Ms Mitchell.

To partially offset the impact of a higher average payout rate to franchisees, Mortgage Choice has initiated a program to improve operating efficiencies across its business. The Company is changing the way it delivers some of its core support services to franchisees as it moves to a more centralised, online and phone based model. It has commenced a program of implementing operational efficiencies across the business. This will result in an approximate 10% reduction in its operating expense base. Driving continual efficiency improvements will be a focus for the business over the next year.

The Company will continue to invest in its IT systems and expects to roll out its new broker platform in August, which will improve the customer experience and franchisee productivity.

“These changes are the product of extensive consultation with broker franchisees and the recognition we needed to rebalance our service provision with more competitive remuneration,” said Ms Mitchell. “Franchisees will have access to the same core services, just delivered in a more efficient way. At the same time, we are investing in a new Broker Platform that will improve broker productivity and enhance their service levels to customers.

“The demand for the services of a mortgage broker is strong and we believe these initiatives will provide the platform for a sustainable business model for Mortgage Choice and a framework for franchisees to succeed by helping more Australians make better financial choices.”

Guidance

Mortgage Choice expects its cash NPAT for FY2018 to be between $23.2m and $23.4m after accounting for one-off costs associated with redundancies and the change in CEO. As a result of the changes being introduced, there will be a one-off, non-cash negative adjustment of approximately $30m to IFRS NPAT for FY2018 to reflect the higher level of franchisee share of future trail revenue. The Company’s full audited results will be released to the market on 21 August 2018.

Assuming settlements at the same level as FY2018 and taking into account the new remuneration model and operational changes being introduced across the business, Mortgage Choice expects FY2019 cash and IFRS NPAT to be approximately $16.5m.

Mortgage Choice refutes allegations

From The Adviser.

Mortgage Choice, the ASX-listed broking group has responded to media criticism regarding a high-sales culture and poor remuneration structures for franchisees, saying that it is working closely with franchisees to assist them in growing their business.

Mortgage Choice responded to the reports from the Sydney Morning Herald and the ABC’s 7:30 program, suggesting that its franchise system — which was introduced 25 years ago when the group was established by multimillionaire brothers Peter and Rodney Higgins — was in need of update.

“The market has evolved, with other business models being introduced, specifically aggregator models that have higher payouts but don’t offer the same level of support services,” Mortgage Choice said in a statement.

The brokerage acknowledged that the balance between services offered and remuneration “needs adjusting” to encourage franchisees to invest in their businesses. As such, the group has said that it will be undertaking a review of its franchisee remuneration structure, with a view of implementing a “more competitive” model.

Mortgage Choice has been consulting with its franchisees regarding a new remuneration model “to underpin long-term sustainable growth” and attract “new high-quality businesses to the franchise network”.

The company has reportedly been undertaking a “confidential and collaborative process” to update the remuneration model, which has included numerous workshops across Australia with franchisees and reviewing more than 30 different remuneration structures.

Subject to discussions with its franchise network and board approval, the new remuneration model would be introduced by August 2018.

Speaking following the media reports, Mortgage Choice CEO Susan Mitchell said: “We acknowledge that our model is outdated, it needs to be more flexible, it needs to be less volatile in the way it pays our franchisees.”

She continued: “Our business was started as a full service model. All the services that were need to help a broker start their own business, providing brand, marketing, IT, compliance, training and all those sorts of things.

“Over the years, since the introduction of the Mortgage Choice model, there have been other models that have been introduced — aggregator models — that pay out a higher proportion of income but don’t offer the same level of service. So what’s happened is, I believe, our balance between remuneration and provision of service has gotten out of kilter, so we just need to address that balance between remuneration and service provision.”

The new CEO said that one of the most important things she wanted to do as CEO was to “drive a change process”, and her “first priority was to change this model”.

Indeed, the need for updating the commission model has been further emphasised by the findings of the 2018 Momentum Intelligence Broker Group of Choice: Switching Aggregators report.

Based on a survey of mortgage brokers from across Australia, Mortgage Choice was rated the lowest of nine groups, with 90 per cent of Mortgage Choice brokers saying that the number one reason they would leave the group would be because of its commission structure.

However, the group did score highly for it compliance assistance.

Allegations of poor behaviour “strongly refuted”

Addressing some of the allegations in the 7.30 report, the CEO said that the company “strongly refutes allegations in the media that its current model encourages poor behaviour or practices”. It added that the company has in place “robust” compliance processes and credit policy controls, which franchisees must adhere to.

Ms Mitchell said: “Our franchisees are very diligent and want to do the right thing for their customers. We take any allegation of fraudulent behaviour extremely seriously and we have a very thorough and structured compliance regime in place.”

Several commentors on The Adviser website have also voiced their frustration with the misrepresentation, with Renee saying: “I have owned a Mortgage Choice franchise for nearly four years and the model has assisted me in building a successful business that I am very proud of.

“These recent media allegations are not a reflection of my experience with Mortgage Choice or a reflection of how I do business, and it’s disappointing that I am put in a position to have to defend this. Doing the right thing by our customers, and being known for this, is how my business has grown, and this will continue to be our priority.”

Likewise, Mortgage Choice franchise owner Maria Zappia said that while she supports the right to “demand a more consistent payment model”, she absolutely “refute[s] out of hand any suggestions displayed in recent media reports that ‘desperate times have called for desperate measures’ in terms of fraud or any other wrongdoing”.

The commenter said: “I have been with this business 15 years and have worked hard to build a strong vibrant business, as so many of my fellow franchise owners have done. I can assure you we have (and have had for quite some time) one of the most stringent compliance regimes of any aggregator in this country. We are well known among our panel of lenders, including all of the major banks, for the high quality of our loan submissions. Very importantly, we are well known among our many thousands of customers for our incredible levels of customer service.

“The challenges of running a small business in this industry are many, but those of us who choose this path do so with the utmost integrity and always in the best interests of our clients.”

She continued: “At Mortgage Choice, we are in the midst of great change and I’m convinced that our CEO Susan Mitchell, together with the executive team and our board, ha[s] matters well in hand and [is] committed to delivering a remuneration solution that will benefit all franchise owners. Let’s give them every opportunity to finish the job.”

Noting some of the suggestions that brokers have been affected by stress-induced health issues as a result of financial distress from running a franchise, Ms Mitchell said that she did not believe it was a “fair representation” of Mortgage Choice.

The CEO said: “It’s very difficult to run a small business in Australia today, and one of the reasons why you would join a franchise organisation like Mortgage Choice is we help you do that, and you have a higher chance of success by doing that.

“Having said that, as CEO, there have been circumstances where I worked one on one with franchisees on a confidential basis to help them when they had hardship or health issues.

“So, I think the important thing is we want to help franchisees through their issues. They just need to come and talk to use about them, and we’ll proactively work with them for a solution tailored to their needs.”

Ms Mitchell continued: “The wellbeing of our franchisees is our number one concern.

“We provide any business owner experiencing hardship with personalised support, including from our field‐based teams.”

She concluded: “We are well progressed in consulting with franchisees on a new remuneration model that will help them to succeed and invest in growing their businesses.”

Mortgage Choice Under The Spotlight

According to the SMH, a joint media investigation by Fairfax and ABC’s 7.30 can reveal scores of current and former franchisees have been financially devastated after signing up to the high profile brand.

One of the country’s biggest mortgage brokers, Mortgage Choice, is in damage control as it faces an uprising from its franchisees on the back of a business model that is pushing many into financial ruin, depression and cutting corners on arranging loans.

Confidential documents show as many as 173 franchisees, almost half the franchisees in the system, are considering setting up a fighting fund to take legal action if the company doesn’t make the relationship fairer. Late last year they agreed to commit almost $200,000 to set up the fund if their demands aren’t met.

The investigation can reveal that a harsh business model and remuneration structure is pushing franchisees to cut corners, including churning customers, writing inflated loans to meet aggressive targets and in some cases committing fraud.

Mortgage Choice, which has a loan book worth $54 billion, has been making record profits for its shareholders, which include Commonwealth Bank and the founders, the Higgins brothers, who also sit on the board.

On Monday, shortly after being contacted by the joint investigation, Mortgage Choice issued a statement to the ASX saying it was reviewing its franchisee remuneration structure. It says the purpose of an “updated remuneration model was to increase franchisee remuneration and reduce franchisee income volatility to allow them to grow their businesses and assist more customers with their home loan needs.

See The ABC’s 7.30 program tonight.

Mortgage Choice To Major Overhaul Remuneration Structure

From The Adviser.

Mortgage Choice has announced that it has been consulting with its franchisees regarding a new remuneration model “to underpin long-term sustainable growth” and attract “new high-quality businesses to the franchise network”.

Subject to discussions with its franchise network and board approval, the new remuneration model would be introduced in the 2019 financial year (FY2019).

According to Mortgage Choice, the new model is aimed at increasing remuneration and reducing the income volatility of its franchise network.

The brokerage also stated that its management is conducting a further series of state-based workshops with its franchise network over the coming weeks to discuss the merits of the new model.

Mortgage Choice claimed that it has considered a number of remuneration alternatives off the back of independent market analysis.

The financial services provider also stressed that it will continue providing technological, marketing, compliance and training services to its franchisees.

Further, Mortgage Choice is set to initiate a training program to improve operating efficiencies across its business in order to partially offset any increases to the average payout to franchisees.

Additionally, the brokerage noted that it will continue to invest in new technology to boost franchisee productivity and enhance the customer experience.

“These changes are designed to support the long-term sustainable growth of Mortgage Choice, increase franchisee remuneration and attract new high-quality franchisees to our network,” CEO of Mortgage Choice Susan Mitchell said.

“We want to continue to help Australians with their financial services needs for many years to come, and having thriving, growing franchises that have confidence to invest in their business is critical to achieving this.”

The financial services provider expects to finalise its new remuneration model in July 2018 and to implement the model across the network on an opt-in basis in August 2018.

Mortgage Choice added that it would inform the market on key features of the revised remuneration structure once it has been determined and approved.

The brokerage insisted that a change in its remuneration model would not affect the FY2018 cash result, but it noted that market updates would include guidance on a one-off adjustment to the FY2018 IFRS result based on the change to the average payout rate to the franchisees once it is identified.

2 in 5 Aussies do not understand LMI

More than two in five prospective home buyers have admitted to not understanding Lenders Mortgage Insurance (LMI), according to new data.

This chimes with our research on the topic of LMI from our own surveys. In fact the confusion varies by type of buyer, and who is protected.  First Time Buyers are a particular concern. See our previous post “Is Lenders Mortgage Insurance a Good Thing“.

Mortgage Choice and CoreData’s new Evolving Great Australian Dream 2018 whitepaper found 42.1% of respondents said they were not sure what LMI was, yet a third (32%) said they would need to pay it in order to get into the property market.

“Our data found that a majority of home buyers are in the dark when it comes to Lenders Mortgage Insurance and what it entails,” Mortgage Choice Chief Executive Officer Susan Mitchell said.

“According to our survey, only 32.1% of prospective buyers accurately stated that LMI is designed to protect the lender if a borrower can’t repay their mortgage.

“Another 8.2% of respondents thought LMI protected the borrower, while 17.6% believed it protected both the borrower and the lender,” said Ms Mitchell.

The research found that 44.8% of women did not to understand what LMI was, compared to 37.35% of men.

Buyers aged 29 and under (47.3%) were the most likely not to know what LMI was, while the 50 to 59 age group (40.75) had the highest proportion of buyers who knew what LMI was.

On a state by state comparison, Victoria (46%) had the highest proportion of buyers who did not know what LMI was, followed by Queensland (40%) and Western Australia (39.6%). NSW buyers topped the states when it came to correctly defining LMI at 34.6%.

Ms Mitchell said it was concerning that such a large proportion of Australians had either a limited or no understanding of LMI and that mortgage brokers can play an educational role for borrowers.

“For many first home buyers, LMI is likely to be a cost they have to pay to get into the property market, particularly if they do not have a deposit that is at least 20% of the purchase price,” she said.

“The reality is that saving for a home deposit is a major challenge for first home buyers and this has been the result of strong price growth over the last few years.

“According to CoreLogic, the median dwelling value in Australia is $554,605, and for a first home buyer to avoid LMI, they would need to save $110,921 for a 20% deposit and they would still need to have additional funds to cover costs such as legal fees and stamp duty.

“That is quite large sum to save and it only increases if a buyer is looking in cities such as Sydney and Melbourne.

“While LMI on the surface seems like a fee to be avoided, it does have the benefit of helping a buyer purchase a home with a smaller deposit, thereby allowing them to get onto the property ladder sooner rather than later.

“A buyer can choose to delay their property purchase to save a sufficient deposit, but the reality is property prices have risen consistently and the longer they delay, the more likely they are to miss an opportunity.

“Ultimately, in the long run, LMI is a fairly small expense in the overall cost of purchasing a home.”

Ms Mitchell said first home buyers could avoid LMI altogether if they were able to receive some sort of financial boost or a have a guarantor on their loan.

“First home buyers can avoid LMI by having a parent or family member go guarantor on their home loan, which then allows them to purchase without a 20% deposit” she said.

“In the case of the latter, it is important to note that lenders may require that any monetary gift must be held in an account for at least three months before home loan approval. Also, a lender may still require a borrower to demonstrate that they have 5% genuine savings.”

Ms Mitchell said it was important for first home buyers to have a good understanding of the purchase process.

“If you’re a first home buyer, you should speak to a mortgage broker who can guide you through the process of purchasing a property, from getting the best rate as part of the home loan application, through to settlement.

“They can explain the various options and costs involved, including LMI, thereby ensuring that you can confidently achieve your goal of home ownership,” concluded Ms Mitchell.

“As property prices continue to relax there has never been a better time for first home buyers to purchase. Therefore, it’s essential they have a clear understanding of LMI so that they know how it affects their ability to get into the market.”

Mortgage Choice Profit Up As Home Lending Settlement Volumes Dip

Mortgage Choice reported their FY18 1H results yesterday and gave us a good snapshot of their diversification from just a mortgage provider to a broader financial service provider, across car loans, personal loans, credit cards, commercial loans, asset finance, deposit bonds, and risk and general insurance.

On one hand profit was up 7% on a cash basis reached $12.5 million, up from $11.7 million in 1H17. Net profit after tax was $11.4 million, consistent with the result in 1H17. They grew their total loan book $54.0 billion, up 3.2% from $52.4 billion in 1H17, but they settled $6.0 billion in home loans 1H18, down 6% from $6.4 billion in 1H17. All states except Vic/Tas saw a fall. with the largest drop in WA (24%).

Then again, financial planning Funds Under Advice climbed 49.9% from 1H17 to $634.2 million in 1H18.

Broking accounted for 88.2% of the company’s gross revenues in the first half of FY18, down from 90.2% in the same period of FY17, while the proportion of gross revenue from non-residential lending went up to 11.8%.

While the company’s number of broking franchises went up to 452 from 449 in the six months to June 2017, its number of brokers or credit representatives was slightly down to 649 by end-December, from 654 six months ago.

Origination and trail commissions received fell by 3.0% to $84.64m on a cash basis from $87.23m in the first half of FY17. The average upfront rate was 0.6538%.  Reduced expected run-offs has lifted trail projections.

(The black line represents the average rate of new settlements post GFC changing commissions)

Gross revenue growth from financial planning and diversified products, up 15.3% and 12.7% respectively, helped offset the decline in revenue from broking commissions, proving the merit of its diversification strategy.

“Home settlements are down slightly half on half due to changing market conditions, in particular, tightening lending policies, which can impact conversion from approval to settlement,” chief executive John Flavell told Australian Broker.

To increase broker productivity, it launched a new website in January and is launching a new broker platform in phases starting this month. Bolstering its brand presence involves growing the number of its retail shopfronts and launching a new advertising

 

 

 

 

 

 

Mortgage Choice delivers 10.2% growth in cash profit

Mortgage Choice Limited announced its annual results for the financial year ended 30 June 2017. NPAT on a cash basis was $22.6 million – up 10.2% on FY16, although revenue was up 1.1% to $199 million. They have 654 credit representatives in Australia and 486 franchises. 88.5% or gross revenue came from Mortgage Choice Broking.  Settlements rose 1.2% to $12.3 billion and the loan book grew to $53.4 billion.

  • NPAT on a statutory basis was $22.2 million – up 13.5% on FY16.
  • Mortgage Choice’s core broking business recorded its best ever settlement result, with settlements totalling $12.3 billion.
  • Mortgage Choice’s loan book reached a record $53.4 billion – up 3.2% on FY16.
  • Financial Planning gross revenue surpassed $10 million in FY17 while Gross Profit grew 26% from FY16.
  • Funds Under Advice and Premiums In Force both rose significantly, up 60.3% and 26.0% respectively to $532.4 million and $24.2 million.
  • A fully franked final dividend of 9 cents per share was declared by the Board. Total dividend for the year was 17.5 cents per share – an increase of 1 cent on FY16.
  • 46 new Greenfield Franchises added to the network, the highest number recruited in one year.
  • 11.5% of total cash gross revenue derived through diversified services.

“Throughout FY17, the Group performed very well, with settlements volumes, total loan book and financial planning revenue all growing to record levels,” Mortgage Choice chief executive officer John Flavell said.

“Cash Net Profit After Tax grew by more than 10% for the second consecutive year, highlighting the ongoing strength of the business.

“FY17 was a year that saw increased complexity across all areas of retail financial services. The volume and velocity of policy and pricing changes for lending products, as well as wealth and insurance solutions, was unprecedented. This complexity drove more consumers to Mortgage Choice than ever before.

“Mortgage Choice delivered increased value to our customers by addressing more of their financial needs and creating simplicity in a complex environment.

“Our core broking business performed very well, with home loan settlements reaching $12.3 billion for the first time and our loan book grew 3.2%, reaching a new high of $53.4 billion at 30 June 2017.”

Mr Flavell said it wasn’t just the core broking business that performed well throughout FY17, with the Company’s diversified services also delivering impressive results.

“Throughout FY17, the gross revenue generated from our diversified services continued to grow,” he said.

“For the year, 11.5% of the Company’s cash gross revenue came from our diversified offering – up from 10.5% in FY16.

“Our Financial Planning division delivered its first full year profit, with Funds Under Advice and Premiums In Force rising 60.3% and 26.0% respectively to $532.4 million and $24.2 million.

“As this business matures and our advisers spend more time building relationships with our network of mortgage brokers, referrals naturally grow. Throughout FY17, the number of referrals from the core broking business increased by 13%.

“At Mortgage Choice, we want to be Australia’s leading provider of financial choices and advice, delivering exceptional customer value. To achieve this, we understand that we have to be able to cater to our customers’ growing financial needs and deliver expert advice across a full suite of services.

“To this end, at the beginning of FY17, the Company launched a new branded asset finance offering. The new service offering was embraced by the network, with more than 1,600 vehicle, plant and equipment loans financed in the first year alone.

“As we move into FY18, our asset finance offering will continue to gather momentum and deliver growth for the Company.

“Beyond the strong financial performance, FY17 was also a record year for network growth. 46 new Greenfield Franchises were recruited over the year and the number of Credit Representatives across the country increased to 654, well up from FY16.

“As these new recruits become more skilled and increase their productivity over the coming months and years, we will see continued growth in the business.”

“In addition, our shareholders will be very pleased with the dividend result. The ongoing strength of the Mortgage Choice business means we have been able to deliver a fully franked dividend of 17.5 cents per share for the year, a 1 cent increase on FY16,” he said.

Future growth

Heading into FY18, Mr Flavell said he is confident the business can continue to deliver exceptional results in an increasingly complicated market.

“Mortgage Choice’s continual investment in the business will help us to drive solid results today, tomorrow and over the longer term,” he said.

“We will focus on increasing efficiency for the current network, the continued growth of our network via targeted recruitment and a commitment to assisting new recruits run successful, profitable businesses.

“In addition, we will continue to accelerate our local area marketing activities to deepen the relationships we have with our customers. Throughout FY17, we implemented a series of grass-roots brand awareness initiatives that proved to be very successful. You may well have noticed a new Mortgage Choice retail store in your local area, seen more Mortgage Choice branded cars on the road, or heard more Mortgage Choice advertising on the radio. Heading into FY18, the momentum created will be carried forward.”

Mr Flavell said the Company had identified its four key business priorities for the year ahead. These priorities include:

• Increase and diversify franchisee revenue and asset growth;
• Distribution growth;
• Deeper customer relationships; and
• NPAT growth.

“I am confident the business can deliver to all of the aforementioned priorities whilst maintaining our focus on our 2020 vision,” he said.

“We are in a very exciting stage of the business. We are successfully transitioning Mortgage Choice into a diversified financial services company, which is providing additional value to our customers, franchisees, and our shareholders,” he said.

“Throughout FY17, we achieved a lot as a business. These achievements were realised against a backdrop of increasing complexity and various market challenges. Whilst we are expecting the market to remain complex, we are well positioned to provide expert advice to more customers for all of their financial services needs.”

Mortgage Choice delivers continued record growth throughout Q3

Following record interim financial results, Mortgage Choice has continued its positive momentum throughout Q3.

In the six months to 31 December 2016, Net Profit After Tax, home loan settlements, loan book and financial planning revenue all grew to record levels.

Throughout Q3 the momentum has continued, with strong growth in mortgage broking and very impressive growth in financial planning.

“Over the third quarter we saw an 8% lift in group office home loan enquiries, setting a new record for the company,” Mortgage Choice chief executive officer John Flavell said.

“This lift in home loan enquiries has resulted in a 6% increase in home loan applications and a 4% increase in home loan approvals, compared to Q3 FY16. Mortgage Choice’s home loan approval result in March was a new record.

“Throughout Q3 FY17, the financial planning division has gone from strength to strength, with the value of Funds Under Advice and Premiums Inforce surging 59% and 30% respectively in comparison to Q3 FY16.

“Our network of mortgage brokers understands the value of providing their customers with access to professional financial advice. As a result, a larger proportion of our customers’ wealth needs are now being met.”

Mr Flavell attributed the continued growth in financial planning revenue and the ongoing strength of the underlying core broking business to two main factors.

“As a group we have delivered continuous productivity gains as well as network growth,” he said.

“To the end of Q3, franchise numbers have grown by 5%, while loan writer and adviser numbers have also continued to increase.

“These strong outcomes have come off the back of the effective execution of a very solid strategy.”