Tag: Yellow Brick Road

YBR Acquires SA Mortgage Business

Yellow Brick Road has announced an agreement to acquire South Australia-based mortgage manager, securing previously under represented territory. The purchase will increase scale and importance with key lenders, adds a new lender to YBR panel, and adds additional broker distribution via new third party aggregators. It extends on the ground product sales team beyond Sydney to Victoria and South Australia.

Yellow Brick Road Holdings Limited (ASX:YBR) (“YBR” or the “company”) announces that its wholly-owned subsidiary, Loan Avenue Holdings Pty Ltd, has today entered into an agreement to acquire the business and assets of privately-owned non-bank lender Loan Avenue Pty Ltd (“Loan Avenue”).

Loan Avenue will provide the national company a strong distribution footprint in South Australia, diversifying the mortgage book geographically and diluting reliance on Sydney and Melbourne mortgage markets.

Executive Chairman Mark Bouris said the acquisition of Loan Avenue, an established and profitable business, continues the company’s drive for scale.

“Loan Avenue is a respected B2B brand and has been in operation for ten years with a significant footprint, made up of more than 100 brokers in South Australia and Victoria. This acquisition allows us to quickly build more scale in South Australia, diversify and deepen our distribution network and funding relationships and increase our management capability,” Mr Bouris said.

“Paul and Michelle Collins have done an incredible job founding and building this company into one of South Australia’s top three non-bank lenders. They are highly regarded within South Australia by their funders and distributors and bring a wealth of experience to YBR.”

“Loan Avenue brings us some other talented product managers and credit experts with stronger delegated lending authorities, boosting our credit capacity. Importantly, this acquisition strengthens our relationship with existing funders and gives us access to an additional funder.”

Loan Avenue’s mortgage product compatibility with YBR’s own mortgage manager (YBR Group Lending, formerly RESI Mortgage Corporation acquired in FY2014) affords simple integration minus the complexity that often comes with a scale acquisition.

Loan Avenue founders and vendors Paul and Michelle Collins have agreed to stay on following the acquisition to assist in maintaining and driving existing aggregator and broker relationships as well as supporting integration.

Paul Collins said “We are delighted to join such a fast growing and diversified group as YBR. Our focus will be to enhance our broker relationships and drive further product initiatives with YBR, whilst maintaining the high service levels for which we are renowned.”

The maximum aggregate consideration agreed to be paid for Loan Avenue is $4.100 million, made up as follows:

  • $2.6 million payable in cash on completion;
  • The issue on completion of 2,596,153 fully paid ordinary shares in YBR (“YBR Shares”) at an agreed issue price of $0.26 each, representing $0.675 million in value;
  • Deferred cash consideration of $0.450 million, payable in 3 instalments over the first 12 months after completion; and
  • Subject to satisfying certain earn-out conditions during the period ending on the first anniversary of completion, an additional amount of up to $0.300 million in cash and up to $0.075 million in YBR Shares (to be issued at the same agreed issue price of $0.26 each), payable as soon as Loan Avenue’s relevant performance against the earn-out conditions is agreed or determined.

All YBR Shares to be issued will be subject to a voluntary 12 months’ escrow period from the dates of their issue. No shareholder approval is required for the issue of the YBR Shares.

The acquisition of Loan Avenue remains subject to a number of conditions precedent and, assuming the conditions are satisfied, completion of the acquisition is expected to occur on 31 May 2016.

The cash components of the acquisition will be funded out of the company’s existing cash reserves and undrawn portions of its CBA facility.

 

YBR acquires brightday as part of their digital strategy

Yellow Brick Road (YBR) has acquired online advice platform brightday from News Corp.

The addition of brightday is the latest in a series of acquisitions for YBR.  While previous acquisitions have contributed to the business’ scale, this acquisition will provide an important capability for the company’s digital strategy the company says.

Executive Chairman Mark Bouris says Yellow Brick Road’s and brightday’s common partnership with OneVue, an independent investment software platform, allows for a logical and simple integration.

“This acquisition is a key part of our direct and online strategy to be launched to consumers in FY17,” Mr Bouris explained.

“brightday serves a similar customer segment to Yellow Brick Road. Our 2020 customer strategy ensures we can serve customers via the means and channel they prefer: many will prefer face-to-face support which is why we will double our branch network by 2020, while others have a bias towards direct-digital product, and the majority will seek a blend of both. The acquisition of brightday helps enable this.”

Consistent investment in consumer-facing advertising over five years has built a strong brand which Yellow Brick Road intends to leverage in the digital space. Mr Bouris said that this brand awareness is already yielding direct inquiries from many customers for insurance, as well as some funds management and superannuation product.

“This digital push is focussed first and foremost on accelerating our wealth business growth. We want 30 per cent of our customers accessing our wealth services by 2020. Wealth is a real differentiator for us and a major focus over the next four years.”

“Giving customers superior digital access and tools for investments and superannuation is an important tactic in building our wealth volumes. We have already seen great engagement through Guru, our robo pre-advice tool. brightday is the next enhancement,” Mr Bouris concluded.

Yellow Brick Road says broker future bright as big four bank decreases branch numbers

Yellow Brick Road Holdings Limited says a recent report that ANZ is reducing its branch presence while bolstering its broker channels is another signal that brokers are the future of the mortgage industry.

CEO of Lending Tim Brown said Yellow Brick Road’s strategic vision to dramatically increase broker numbers is being reinforced by the actions of the big four bank and by the statistics around popularity of brokers with property purchasers.

The JP Morgan Australian Mortgage Industry report announced that ANZ has been steadily reducing its branch presence since 2011, in favour of increasing its broker usage. The report also highlighted that the broker channel may be perfectly placed to capture greater market share with 75 per cent of refinancers expected to use brokers.

“If we look to trends overseas, a move towards utilising brokers for a larger percentage of lending has already been happening for some time. In the UK, 76 per cent of loans are done through a broker and 87 per cent of the actual loans are through mutuals, building societies or regional banks. That same trend is now beginning here as banks realise old ways of operating aren’t working,” Mr Brown said

Mr Brown says there is no doubt that the traditional bank structure plays into the hands of intermediaries.

“In this day and age, people want to have access to service providers outside the typical 9-5 business day. Our brokers at Yellow Brick Road and Vow Financial don’t work limited business hours, they are driven to take care of the customer’s desire for convenience and that means being flexible with the time and place that suits the customer’s needs,” he said.

“Brokers also have a small business mentality that banks just can’t compete with. They are integrated into their communities in a way banks can only pretend to be. They work harder because that way they build a reputation and make more money. Running the bank’s capped income model is never going to be as popular with consumers long term as the alternative of a broker who is incentivised to give better service, work longer hours, bring more customers in and provide customer-centric service.”

Last year, the Deloitte-run industry roundtable found that more than 51% of mortgages written are going through a broker and also predicted further growth, with expectations of an increase to 60%.

In their recent strategy update, Yellow Brick Road Group said they had a goal of growing to 300 branded branches and 1,000 broker groups by 2020.

“Hearing that one of the big four is forgoing its branch presence in favour of a greater emphasis on the third-party broker channel reinforces the increasing consumer popularity and effectiveness of brokers,” Mr Brown concluded.

Yellow Brick Road Restructures For Growth

Yellow Brick Road has announced 2015 results, and a restructure to grow their loan book to $100 billion by 2020. The core emphasis is to provide rounded financial advice to middle Australia, blending from mortgage selection through to wealth management.

In FY 2015 Yellow Brick Road Holdings (the Company) was focused on acquisition, with the purchase of Vow and Resi occurring in Q1 and the integration of these businesses through the balance of the year.

During the final three  quarters of FY2015, the scaled up business achieved three consecutive operating cash surpluses totalling $3.93m.

In FY2016, the Company has seen an opportunity to acquire significant scale organically, as market noise around home loan rates draws consumer attention to their mortgages. Consequently, we have made a strategic decision to  invest in a major market-share push, through increased Yellow Brick Road marketing activity. Substantial additional leverage is applied to this investment through the Company’s relationship with key investor Nine Entertainment Co, owner of the Nine Network. As expected, this marketing investment has generated an operating cash deficit in Q2 FY2016 of $1.70m. On a normalised basis, this operating cash deficit was $1.32m, an increase of $0.62m on last quarter which is roughly in line with the $0.64m increase in marketing spend. The Company retains more than sufficient funding to support this marketing investment. At the end of the quarter the Company had cash and undrawn finance facilities totalling $13.5m. Also as expected, this marketing investment is delivering significant uplift in new customer introductions, with Q2 FY2016 leads up +299% vs prior corresponding period (PCP). These began flowing through to loan settlements in December (+51% vs December 2014).

YBR reported Q2 FY2016 settlements up 38% vs PCP to $4.2bn. The group loan book ended the quarter at $33.9bn up 22% PCP. Overall funds under management was up 34% PCP to $700m.

A recent interview with Matt Lawler covers the business strategy and 2015 results.

Some further details of the strategy From Australian Broker

Mark Bouris has announced a major restructure of the Yellow Brick Road group as it strives to hit a $100 billion loan book by 2020.

The restructure aims to streamline the group by better aligning the company’s core business units – lending and wealth management.

The former leadership structure was shaped by two separate business entities: Vow Financial, headed by CEO Tim Brown and YBR, headed by CEO Matt Lawler. The new business structure will integrate the two business entities with Brown and Lawler operating across the entire group in the two strategic verticals – lending and wealth management – rather than operating separately across Vow and YBR.

As a result, Brown has been appointed to the newly created CEO – Lending and Lawler has been appointed to the newly created CEO – Wealth Management. Chief commercial officer (CCO) Scott Graham will support Lawler and Brown, continuing to oversee commercial strategy, marketing, media and investor relations.

“Our intention in 2016 is to double down on our wealth activities and maintain the momentum in our lending businesses. As a result I have re-appointed our current CEOs’ portfolios to align with the two business units and reflect their individual expertise and strengths,” YBR executive chairman Mark Bouris said.

According to Bouris, this more streamlined and cooperative approach will allow the finance giant to reach its goal of becoming the leading non-bank financial services company in Australia. This entails hitting a $100 billion loan book by 2020, as well as achieving 30% wealth clients and reaching 300 branded branches and 1,000 broker groups in the same time frame.

“Our company goals are ambitious but with the new structure in place we will be well-placed to achieve them. I’m confident these leaders have the drive, experience and knowledge to propel Yellow Brick Road Holdings forward towards our big objective to become the leading non-bank financial services company in Australia,” Bouris said.

Speaking to Australian Broker, CEO – Lending Tim Brown said his role will be to ensure both YBR and Vow brokers are well-placed to continue to gain market share.

“We have really enjoyed phenomenal growth over the last three or four years in both YBR and Vow, so part of my role is to make sure we continue that growth in a more challenging environment with a slowing property market, and continue to build the quality of our brokers and our licensees.

“We have no doubt that we can continue to gain market share, we have a great offering in both businesses and we will continue to push those offerings.”

Brown said the group has a number of new initiatives in the works, but a major focus will be around debt management.

“The RBA and APRA are concerned about the level of debt that people are taking on and we want to be at the forefront of that.”

CEO – Wealth Management Matt Lawler told Australian Broker that his priority will be to make wealth management and financial planning capabilities accessible and flexible across in the group.

“[My strategy] is probably two-fold because we have been on the wealth management journey with the Yellow Brick Road business for a few years now and we have had success in concentrated areas around Australia. The real focus for YBR is to make sure there is comprehensive wealth management right across all branches – it is really about embedding wealth management into every branch right around the country.

“Vow is very early on the wealth management journey so the focus with the Vow business is to make sure everybody is aware of the opportunities that present themselves from a wealth management point of view.

“That will be everything from getting every broker access to very simple products, such as simple insurance and simple investment products, right through to a smaller number of Vow brokers who have expressed an interest in fully implementing a financial planning capability in their business.”

 

Yellow Brick Road Reports Strong Growth

The latest results from YBR, in their 2015 annual report shows a 42% increase in loan settlements over the year to June. They grew their loan book to more than $30 billion or about 4% of Australia’s total home loan settlements. The mortgage and wealth franchise business includes Vow Financial and Resi Mortgage Corporation.

Yellow Brick Road’s own branded product, Empower, showed a 42% rise in settlements in the six months to June to $2 billion in loans over the 2015 financial year, whilst Vow Financial increased its annual settlements 46% to $10.38 billion and Vow Financial grew its advisor base by 29.7% and its broker agreements by 25.1%.

YBR has been expanding their franchise network which is now 255 branches across the country, the increase thanks partly to the addition of Resi’s 19 branches. Vow now has 891 independent mortgage and finance brokers as members of its network.