Half Year ending December 2016 FY17 Half Year Results FY17 presentation Presented by John Flavell (CEO) and Susan Mitchell (CFO)
Today: 1. Introduction 2. Financial performance 3. Progress against FY17 focus 4. Appendices 2 Mortgage Choice FY17 Half Year Results presentation
Introduction 3 Mortgage Choice FY17 Half Year Results presentation
Record half year lending result Highlights Settlements of $6.4b summary Financial Planning profitable Consistently profitable on a monthly basis Cash NPAT up by 16.2% Assisted by closure of HMC Dividend 8.5c Record interim dividend - up from 8.0c 1H16 4 Mortgage Choice FY17 Half Year Results presentation
1H17 1H16 1H17 vs 1H16 NPAT - Cash 11.7 m 10.1 m 16.2% 1H17 - IFRS 11.4 m 10.7 m 6.4% performance Lending - Loan book^ 52.4 b 50.7 b 3.3% highlights - Settlements 6.4 b 6.2 b 2.4% Wealth - FUA 423.1 m 311.6 m 35.8% - PIF 22.0 m 17.2 m 27.9% Basic EPS - Cash 9.4 c 8.1 c 16.0% - IFRS 9.2 c 8.6 c 7.0% DPS - Ordinary 8.5 c 8.0 c 6.3% ^Includes residential and commercial 5 Mortgage Choice FY17 Half Year Results presentation
Financial performance 6 Mortgage Choice FY17 Half Year Results presentation
$m 1H17 1H16 % 1H17 1H16 % Cash^ Cash^ change IFRS IFRS change Origination commission received 38.96 37.32 4.4% 38.96 37.32 4.4% Profit and Trailing commission received 48.27 47.40 1.8% 51.14 53.24 (3.9%) 87.23 84.72 3.0% 90.10 90.56 (0.5%) loss 28.46 27.10 5.0% 28.46 27.10 5.0% Origination commission paid Trailing commission paid 29.41 28.85 2.0% 31.63 32.91 (3.9%) 57.88 55.95 3.4% 60.09 60.01 0.1% statement Net core commission 29.35 28.77 2.0% 30.01 30.55 (1.8%) Diversified products net revenue 0.81 0.84 (3.6%) 0.81 0.84 (3.6%) Financial Planning net revenue 0.93 0.78 19.9% 0.93 0.78 19.9% HMC net revenue 0.44 0.84 (47.6%) - 0.46 (100.0%) Other income 1.39 3.13 (55.6%) 1.39 3.13 (55.6%) Gross profit 32.93 34.36 (4.2%) 33.15 35.76 (7.3%) Operating expenses 16.28 19.87 (18.0%) 16.28 19.87 (18.0%) Share based remuneration - - - 0.44 0.32 37.2% ^ Cash is based on accruals Net profit before tax 16.64 14.49 14.8% 16.43 15.57 5.5% accounting; excludes share based remuneration and the net present Net profit after tax 11.72 10.09 16.2% 11.43 10.75 6.4% value of future trailing commissions receivable and payable. This is an EPS (cps) 9.4 8.1 16.0% 9.2 8.6 7.0% DPS (cps) extract from our half year accounts. 8.5 8.0 6.3% 8.5 8.0 6.3% 7 Mortgage Choice FY17 Half Year Results presentation
Net profit before tax 442 $'000 155 155 28 NPBT records 583 8 strong 16,644 growth 16,202 15,345 1H16 Cash NPBT MC Net Commission FP net revenue Other income excl. OPEX excl. PD PD events net cost 1H17 Cash NPBT HMC Cash NPBT 1H17 Cash NPBT (excluding HMC) PD events events (excluding HMC) • Cash net profit for the half is driven by an increase in net commission income, an increase in revenue generated by FP, and a strong control on OPEX • The timing of the national professional development events has changed. In FY16 the professional development events occurred in the first half of the year, but in FY17, these events will occur in the second half of the year. This affects the direct comparison for ‘other income’ and ‘operating expense’ between the two periods, but the impact to the net profit before tax result is essentially neutral • In comparison to 1H17, 1H16 absorbed all of the costs associated with the closure of the Help Me Choose division. The division continues the orderly collection of trailing commission for products introduced prior to closure 8 Mortgage Choice FY17 Half Year Results presentation
Divisional results Divisional $000 1H17 1H16 1H15 MC FP HMC MC FP HMC MC FP HMC results Settlements 6.4b 6.2b 5.7b Gross profit (IFRS) 32,122 1,023 - 34,514 787 458 32,417 553 1,725 Gross profit (Cash) 31,459 1,023 442 32,728 787 844 30,095 553 1,559 OPEX 15,300 981 - 16,996 1,174 1,696 16,228 1,049 2,312 EBITDA (Cash) 16,724 55 441 16,258 (355) (785) 14,106 (463) (690) NPAT (IFRS) 11,418 16 - 11,884 (284) (851) 10,753 (359) (422) NPAT (Cash) 11,375 35 309 10,958 (266) (603) 9,836 (342) (522) YOY Growth (%) 4% 113% 151% • Core broking business cash NPAT up 4% • Financial Planning business cash NPAT up 113%, with this business delivering a monthly profit result in 5 out of the 6 months this half • HMC division was shut down, but continues to receive trailing commission from products introduced prior to closure; all costs of closure included in FY16 9 Mortgage Choice FY17 Half Year Results presentation
Average upfront rate Average trail rate 0.680% 0.200% Average 0.660% 0.640% 0.180% upfront 0.620% commission 0.600% 0.160% 0.580% rates have 0.560% 0.140% 0.540% improved 0.520% 0.120% Jan15 Feb15 Mar15 Apr15 May15 Jun15 Jul15 Aug15 Sep15 Oct15 Nov15 Dec15 Jan16 Feb16 Mar16 Apr16 May16 Jun16 Jul16 Aug16 Sep16 Oct16 Nov16 Dec16 1H16 2H16 1H17 2H17 1H18 2H18 1H19 2H19 1H20 2H20 1H21 2H21 Average rate total book • Average upfront rate for 1H17 is 0.655% Average rate total book (estimated) • Average trail rate for 1H17 is 0.189% Average rate new settlements* * Settlements post GFC changing commission rates 10 Mortgage Choice FY17 Half Year Results presentation
Progress against FY17 focus areas 11 Mortgage Choice FY17 Half Year Results presentation
FY17 focus areas Increase and diversify Market share growth franchisee revenue Brand awareness and NPAT growth (positive jaws) engagement 12 Mortgage Choice FY17 Half Year Results presentation
Broker Usage Housing finance trend (Owner occupied + Investment) $b 53.7% 53.6% 35 52.6% Home loan 51.9% 51.8% 51.9% 51.5% 51.5% 50.4% 50.1% 50.0% 49.7% 30 market 47.3% remains 25 46.4% 44.9% robust 44.2% 20 15 FY14 FY15 1H17 FY16 Mar13 Jun13 Sep13 Dec13Mar14 Jun14 Sep14 Dec14Mar15 Jun15 Sep15 Dec15Mar16 Jun16 Sep16 Dec16 • Continued strength in overall level of housing finance commitments provides Mortgage Choice with plenty Housing finance source: ABS 5609 of business opportunities Table 11 – Housing Finance, Australia, Dec16 (Seasonally • Broker usage remains above 50% adjusted series) • Mortgage Choice continues to be well placed to capture market share, even if the heat comes out of the Broker usage source : MFAA’s quarterly housing market survey of leading mortgage brokers and aggregators – Dec16 report 13 Mortgage Choice FY17 Half Year Results presentation
Settlements trend Loan book (Residential + Commercial) $m $b 1,300 54 Record 1,200 52 1,100 50 home loan 1,000 48 settlements 900 46 800 44 at $6.4b for 700 42 600 40 the first half Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Dec-12 Jun-13 Dec-13 Jun-14 Dec-14 Jun-15 Dec-15 Jun-16 Dec-16 • Mortgage Choice settled $6.4 billion in home loans throughout the first half of the year, which is a new record for the business • Loan book continues to grow despite continued run-off as a result of the low interest rate environment 14 Mortgage Choice FY17 Half Year Results presentation
3.8% 3.8% 3.7% 3.7% 3.6% Market Share stabilises 1H15 2H15 1H16 2H16 1H17 • Mortgage Choice market share has stabilised at 3.7%, however, there is more work to be done in this area • Numerous strategies are in place to help Mortgage Choice grow its footprint and deliver profitable market share growth over the coming years 15 Mortgage Choice FY17 Half Year Results presentation
Credit Reps and Advisers Network 45 Strong 44 38 34 33 36 34 28 11 16 45 2 38 growth in 39 31 broker and 17 648 12 422 423 425 2 618 417 412 405 395 394 386 380 372 368 580 572 563 541 franchise 523 515 508 509 501 490 numbers, Jun-11 Dec-11 Jun-12 Dec-12 Jun-13 Dec-13 Jun-14 Dec-14 Jun-15 Dec-15 Jun-16 Dec-16 Jun-11 Dec-11 Jun-12 Dec-12 Jun-13 Dec-13 Jun-14 Dec-14 Jun-15 Dec-15 Jun-16 Dec-16 Credit Reps (incl. LCR) MCFP Advisers Franchises MCFP Franchises but more • growth Strong growth in franchise numbers • The Business’ strategy of upskilling admin assistants to limited credit representatives is delivering results, with improvements in franchisee productivity, as well as an increase in the number of general insurance and needed asset finance sales • A new growth and development function is in place, which is helping to drive recruitment and accelerate broker productivity 16 Mortgage Choice FY17 Half Year Results presentation
Sale of greenfields and existing franchises Franchise Movement Continued 8 focus on 6 11 5 16 5 15 16 12 network 8 14 5 425 8 16 16 growth, 15 13 417 10 9 8 8 7 6 4 with 16 1H12 2H12 1H13 2H13 1H14 2H14 1H15 2H15 1H16 2H16 1H17 Opening Recruitment Inactive Closing greenfields Greenfields Sales of existing to new appointed • With a strong pipeline of potential franchisees, Mortgage Choice is forecasting more growth in this area throughout the second half of the year 17 Mortgage Choice FY17 Half Year Results presentation
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