Yellow Brick Road says their H1 FY2017 result has delivered a maiden profit as a result of a focused and disciplined business approach and back to basics cost control.
Net profit after tax is $0.4m, a $4.5m improvement on H1 FY2016 (loss of $4.1m). The Company’s Underlying EBITDA (which excludes non-operating costs) was $3.1m, a $5.1m improvement on H1 FY2016 (loss of $2.0m).
The Wealth business gained strong momentum with revenue growth of 25%, including a 29% improvement in recurring revenues. Recurring revenue growth was derived from a 28% increase in underlying Funds Under Management (FUM) and a 20% increase in Premiums Under Management (PUM) since 30 June 2016.
The Lending business continues to perform strongly. Apart from an anticipated drop in settlement volumes from Vow Flat Fee lending (which is low margin and had minimal impact on the bottom line), all lending distribution channels – including other Vow lending – exceeded market growth.
A highlight was the YBR network’s 20% settlement growth. The drawn value of the Company’s underlying loan book grew 11% to $41b (30 June 2016: $37b) and the embedded value of the underlying loan book, capitalized on the Company’s balance sheet, grew 6% to $46.1m (30 June 2016: $43.3m). This strong performance has been achieved despite a tightening regulatory framework and with restrictions on offshore borrowers constraining market growth.
Central to this outcome has been a focus on delivering results that are sustainable so that the momentum and business efficiencies achieved benefit our shareholders’ long-term value. H1 2017 has also been a period of transition for the Company, with three new General Managers responsible for Yellow Brick Road Lending, Yellow Brick Road Wealth Management and Vow Financial appointed.
We have undertaken a managed reduction in operating overheads. The business is now operating with a sustainable, scalable cost base. The current level of overheads support an infrastructure that provides scalability to meet future business growth under a more efficient operating cost framework.
In H1 FY2017, high margin, scale income declined slightly. Scale income includes high margin revenue from white label (Vow or YBR branded) loans. White label settlement penetration of the Vow and YBR networks was less than anticipated. In response, to gain greater control and flexibility of our white label value proposition, and increase penetration, we have created a centralised group lending function to consolidate the capabilities and offerings of recent business acquisitions, Resi (August 2014) and Loan Avenue (May 2016) under common management. Importantly this provides us with:
- The capability to source white label loans from a variety of funders on high margin and high profit share terms
- Added flexibility to funnel business between funders to enhance the attractiveness of the Company’s branded products
- An experienced channel team to match the right loan applications with the right lenders, which will increase conversion rates
