2020 FULL YEAR RESULTS PRESENTATION
FY20 results - Highlights $33.3M $28.1M FY18 FY18 $33.0M $28.6M FY19 FY19 AFG Home Loans FY20 Residential services over settlements $38.1M $36.3M FY20 FY20 25,000 up 9% to $34.1B Reported NPAT up 15% to $38.1M Underlying NPAT up 27% to $36.3M retail customers 4.7 5.7 FY18 AFG Securities 4.7 5.9 FY19 settlements up 28% to Residential AFG Home Loans trail book trail book $1.35B 5.4 4.7 FY20 up 5% to up 14% to with loan book up 41% to $154.6B $10.5B Total dividend of 10.1 cents per share $2.9B in FY20 Final Interim 2
Operating Cashflow v NPAT Underlying Financial Results 40 30 Millions FY2020 FY2019 20 $000’s $000’s 10 697,611 659,999 6% Total revenue 90,585 75,235 20% Gross profit - FY17 FY18 FY19 FY20 38,078 33,029 15% NPAT reported NPAT underlying Operating cashflow 36,266 28,565 27% NPAT underlying 40,316 28,090 44% Net cash from operating activities Key take outs for the year 108,147 49,573 118% Unrestricted cash 39,524 19,624 101% Net interest • Total revenue increased 6% to $698M with growth in the AFG 157 bps 117 bps 34% Net interest margin Securities book of 41% and residential settlement growth of 9% Financial metrics FY2020 FY2019 • Underlying profjt increased by 27% with the historical AFG Home 17.1 cents 15.2 cents 12% Reported EPS Loans white label settlements now translating into cash fmow, 222,825 216,769 3% Number of shares (diluted) strong NIM and growth in the AFG Securities book 80% 80% - Dividends % of underlying profit 1 • Finished the year with a stronger balance sheet and higher profjts 27% 33% (6%) compared to FY19 Reported ROE 12.0 x 12.6 x (5%) Reported P/E ratio 2 • The business and industry performed strongly during the initial 12.6 x 14.6 x (14%) Underlying P/E ratio 2 months of the COVID-19 pandemic, quickly adapting to a new way of working 1 FY20 Effective cash payment equates to 71% as a result of equity raise • Strong cash fmow generation including trail book annuity type 2 Based on share price at 31/7/2020 and 31/7/2019 stream supports a continued dividend payout policy of 60-80% though this will remain under constant review 3
Settlements & Residential Portfolio AFGHL Portfolio Loan Book $155B $147B $138B $10.5B $9.2B $7.4B FY2020 FY2019 Settlements $000’s $000’s 34,065,322 31,280,639 9% Residential 3,141,246 3,153,426 (0%) FY18 FY19 FY20 FY18 FY19 FY20 AFGHL 1,786,747 2,093,914 (15%) White Label 1 White Label AFG Securities 1,354,499 1,059,513 28% AFG Securities 1 2,289,548 2,334,954 (2%) Commercial • Residential settlements experienced growth in all states 346,479 129,677 167% AFG Business 160,197 89,349 79% • Continued growth in AFG Securities underpinned by considered product Thinktank improvements and consistent credit turnaround times, with settlements Loan Book FY2020 FY2019 increasing 28% 154,570,685 147,419,133 5% Residential • AFG Securities loan book up 41% to $2.9 billion while maintaining 10,490,564 9,199,400 14% AFGHL quality of the book with arrears remaining well below industry averages. 7,578,490 7,134,649 6% White Label 1 Following a more conservative lending approach initiated by AFG as we 2,912,075 2,064,751 41% AFG Securities 1 responded to COVID-19, lodgement volumes have begun to improve 8,472,268 8,033,493 5% Commercial • The AFG Home Loans trail book up 14% to $10.5 billion 1 is a subset of AFGHL • Strong growth in AFG Business settlements to $346 million • Thinktank settlements up 79% to $160 million 4
Residential Lodgements Trading Update 7 6 5 Billions 4 Jan Feb Mar Apr May Jun Jul 3 7,203 9,945 11,196 9,405 11,269 10,406 12,417 Lodge # 2 3,764 5,491 6,148 5,218 6,127 5,565 6,340 1 Lodge Vol ($m) - 522,578 552,153 549,084 554,800 543,741 534,771 510,591 Average loan size Jan Mar Mar Apr May Jun Jul 25% 25% 26% 26% 26% 22% 21% Investor % 2019 2020 17% 16% 13% 12% 14% 21% 24% First Home Buyers % 27% 27% 33% 38% 36% 23% 23% Refinance % • AFG recorded year on year growth in each month of H2 FY20, with strong 39% 41% 38% 36% 36% 42% 39% Upgrader % growth in each state for Q4 compared to FY19 17% 17% 18% 17% 16% 14% 14% Interest Only % • During lockdown periods from March, brokers maintained their levels of 83% 83% 82% 83% 84% 86% 86% Principal & Interest % activity, with a shift in focus to refjnance loans Lodge Vol ($m) 372 568 569 268 381 446 507 AFG Home Loans • Recently, government initiatives have supported increased activity from 240 283 309 217 312 357 391 upgraders and fjrst home buyers White label 132 285 260 51 69 89 116 AFG Securities • July 2020 was a record lodgement and settlement month with $6.3 billion and $3.6 billion respectively FY20 Q4 YoY Lodgement increase • Initial COVID-19 uncertainty and impact on the funding market resulted +36% NSW in management reducing risk appetite which slowed activity through +34% QLD AFG Securities from April 2020 resulting in a changing mix of AFGHL +21% SA volume towards white label funders. As the funding market has returned, +23% considered credit conscious steps to increase AFG Securities lending VIC have been made with lodgements improving to $116 million in July 2020 +34% WA +36% NT 5
Strategic & Market outlook Strategic outlook Market outlook COVID-19 - Changing ways of working COVID-19 – Uncertainty remains • More bank branches are closing, brokers are crucial to competition and • Full scale of the likely disruption to lending markets is very diffjcult to the distribution of fjnancial products predict and not yet fully realised • The reach that brokers provide lenders and customers is vital - particularly • Expected to continue to impact employment levels, business confjdence smaller lenders who together with brokers provide competition and choice and property prices generally. High level of government stimulus has softened these impacts however how this plays out in terms of dragging • Restrictions on movement and limited access to branches has accelerated demand forward is yet to be determined the move to digital transactions • Brokers and their customers were quick to adapt to a new way of working • Government incentives have increased activity for upgraders and fjrst with more online interaction home buyers • AFG Securities COVID-19 related hardship percentage continues to Strong Foundations improve. A focused and disciplined approach to hardship and arrears to • Well capitalised, strong balance sheet with no debt and a strong brand. continue. The impact that the withdrawal of Government stimulus will Positioned to withstand new funding and economic shocks that may arise leave remains uncertain • Investment in technology ensured our brokers and staff could adapt • Lodgement activity in H2 FY20 and July 2020 has maintained its strong rapidly. This capability will continue to develop growth year on year in all states • Committed to building on our long-term strategy and earnings • Appetite for RMBS market has returned. Cost of funds are wider albeit diversifjcation, AFG is well placed supplemented by historic low BBSW • Strong cashfmow generation including trail book annuity type stream and AFG Securities loan book Update on the Connective merger • ACCC announced that they will not oppose the transaction • Court case: Closing arguments complete. Judge retired to 6 consider evidence
AFGHL Settlements AFG Home Loans $3.5 $3.0 $2.5 $2.0 $1.5 $1.0 $0.5 • AFG Home Loans trail book up 14% to $10.5 billion FY16 FY17 FY18 FY19 FY20 • Overall settlement volumes consistent with FY19 however the mix continued to shift towards AFG funded Retro and White Label AFG Securities Link products in the fjrst three quarters of FY20 • Mix trended back towards white label following the COVID-19 shutdown as AFG Securities credit appetite Funded directly by AFG was reconsidered 7
AFG Securities Settlements $1.6 $1.4 $1.2 $1.0 • Settlements of $1.35 billion, an increase of 28% $0.8 • Activity slowed in April 2020 as the business reacted to the $0.6 COVID-19 pandemic. As clarity returned to the markets AFG $0.4 resumed lending with lodgements improving to $116 million in $0.2 July 2020 FY16 FY17 FY18 FY19 FY20 • Arrears remain well below industry averages while COVID-19 hardship numbers have improved Link Retro • In FY20 the net interest margin also increased with the benefjt of a signifjcantly lower BBSW Loan Book $3.5 $3.0 $2.5 $2.0 $1.5 $1.0 $0.5 FY16 FY17 FY18 FY19 FY20 8
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