Yellow Brick Road, the full service wealth management company that offers products and services for home loans, financial planning, insurance, superannuation, and investments, released their H1 FY18 results and reported an 85% increase in profitability with Net Profit Before Tax up to $0.53m (H1 FY17: $0.29m). This is the Company’s third successive profitable half. Higher revenue (up by 5%) and lower costs (down by 4%), have driven the improved result, together with an investment in digital, and a reduction in branch outlets. This though contributed to a short-term decline in origination revenue – Lending down 6%, and Wealth down 12%.
Revenue growth included:
- Strong increase in sustainable, recurring revenue streams, up by 17% to $47.8m (H1 FY17: $41.0m)
- High-margin scale income grew by 22% to $1.8m (H1 FY17: $1.5m)
- Increased recurring revenue helped Wealth revenue grow by 7% to $6.5m (H1 FY17: $6.1m)
- New revenue stream of $0.5m in Training and Support recognised as part of ‘Other Income’. The introduction of the YBR Professional Development Platform is expected to drive future organic growth and new opportunities.
Underlying Loan Book, and Underlying Funds Under Management (FUM) have increased substantially, contributing to the 17% increase in recurring revenue (Wealth and Lending combined).
Key fundamentals underlying the Company’s financial performance for the 6 months to 31 December 2017 were:
- 56% increase in underlying Funds under Management (FUM) to $1,446m
- 20% increase in Premiums under Management (PUM) to $17.6m
- 2% decrease in settlement volume to $7.74b
- 14% increase in Underlying Loan Book, drawn value, to $46.1b
The small decline in Lending settlement volumes has been offset by improvements in high margin, scale income.
In H1 the Company invested $1.9m in technology to develop and enhance operational platforms. These strategic initiatives support future growth in profitability across the Company’s distribution networks. These include:
- Money Manager Platform. Released to the network in Q2 FY18, this financial fitness digital tool will enhance the depth and extent of adviser client engagement and increase acquisition and retention.
- Vow Lending Platform (Vownet): Industry-leading functionality to establish a significant point of difference for the Vow network.
- Professional Development Platform: Intended to provide a new source of revenue and improve quality, consistency and risk and compliance assurance throughout the Company’s distribution network.
- Business Reporting Platform: Automated reporting platform to enhance business agility and efficiency.
The YBR branch network has been rationalised to create a higher quality network. As a result, there has been a reduction in branch network numbers and a related decline in Lending and Wealth volumes. This contributed to a short-term decline in origination revenue – Lending down 6%, and Wealth down 12%.
