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.”
