February 22, 2012
Australia's largest independently-operated mortgage broker, Mortgage Choice Limited (MOC) today announced an interim financial performance that reflects the group's continued strength in its core business and an ongoing commitment to its diversified businesses.
The group announced a total cash revenue of $72.7 million, an increase of 5.2% on 2H11 and 2.6% on 1H11 and a rise in its cash gross profit to $27.1 million, an increase of 7% on 2H11 and 6% on 1H11.
The company posted a net profit after tax for 1H12 on a cash basis of $6.5 million, representing an 8.5% decrease on 2H11 and a 26.1% decrease on 1H11.
The fall in net profit was the result of increased operating expenses in 1H12, and lower than expected revenue from comparison website, HelpMeChoose.com.au. Operating expenses are expected to be lower in second half of the financial year due to a component being non-recurring.
The group loan book grew to $43.5 billion, up 5.6% on the $41.2 billion balance at 31 December 2010, while the company's share of new home loans rose to 4.5% - the highest since 1H07.
Its high performing dividend again delivered shareholders another strong return with the Board declaring a fully franked interim dividend of 6 cents per share, on par with the previous corresponding period.
Financial highlights for the six months to 31 December 2011
- Net profit after tax (NPAT) on a cash basis was $6.5 million, a fall of 8.5% on 2H11 and a decrease of 26.1% on the previous corresponding period (pcp).
- The group's total loan book, written by brokers in its franchise network and its aggregation arm, LoanKit, reached $43.5 billion. This was up 5.6% on $41.2 billion at 1H11.
- The group generated $5.6 billion worth of housing loan approvals, up from $4.8 billion in 2H11 and $5.1 billion in the pcp.
- Mortgage Choice only loan approvals amounted to $5.1 billion, up from $4.5 billion in 2H11 and $5.0 billion in the pcp.
- The Board declared an interim fully franked dividend of 6 cents per share, on par with pcp.
- Total group revenue on a cash basis was $72.2 million, an increase of 5.2% on 2H11 and 2.6% on 1H11.
- On an IFRS basis:
- NPAT was $6.4 million. This is down 27% on $8.8 million in the pcp
- Earnings per share stood at 5.4 cents compared to 7.3 cents in the pcp
- Total group revenue was $71.8 million, up 4.7% on the pcp.
Mortgage Choice CEO Michael Russell said, "Mortgage Choice has demonstrated a solid performance across a range of crucial metrics despite some operational expenses being brought forward and lower than expected revenue from HelpMeChoose.com.au."
"We are pleased to provide shareholders with a dividend result equal to that received in the first half of FY11 - an interim fully franked dividend of 6 cents per share."
Financial and operational performance
Reflecting its investment in the future and the challenges of operating in a subdued housing finance market, Mortgage Choice generated a half-year cash NPAT of $6.5 million, a 8.5% fall on 2H11 and a 26.1% drop on the pcp. On an IFRS basis, the group reported a 27% decrease to $6.4 million on the pcp.
The group's revenue and productivity both showed an improvement on the pcp with the loan book growing 5.6% to reach $43.5 billion, home loan approvals growing 9.8% to $5.6 billion, Mortgage Choice franchise numbers growing 1.1% to 372 and group market share growing to 4.5% of all new home loans, its highest level in five years.
Mr Russell said, "Our Mortgage Choice brokers hit near-record highs in productivity, with the number of settlements per loan consultant increasing to 32 in 1H12 from 28 in 2H11. Adding to this, our franchise footprint reached its highest level since a model restructure in 2009. We also increased the number of brokers in our aggregation arm, LoanKit, by 20% to 234 in the six months December 2011."
"During 1H12, Mortgage Choice strengthened its investment in the brand with the launch of a new integrated marketing campaign alongside the introduction of a new franchise recruitment strategy.
"It is extremely satisfying to report healthy revenue, recruitment growth, and improved broker efficiencies in a market where borrowers remained conservative.
"We have made the right transformational moves towards achieving positive earnings growth in 2H12."
Mortgage Choice is committed to the investment made in its two acquired businesses, comparison website HelpMeChoose.com.au and aggregator LoanKit.
Mr Russell said, "We have continued to invest in both our acquired businesses. LoanKit is growing to expectations, with broker numbers increasing by 20% in the six months to 31 December 2011 and monthly settlements are now in excess of $100 million."
"While HelpMeChoose.com.au did not perform to revenue expectations, and was the prime reason for lower than expected net earnings, we have implemented the necessary changes to remedy this result. Adjustments include a complete management restructure.
"We expect these businesses will generate positive earnings in FY13.
"During the course of the next financial year we will implement the final phase of our diversification strategy, being the launch of our financial planning business. This decision is being driven by the demand from our customers and franchise owners to offer a broader range of financial solutions."
State of the housing finance market
According to ABS data, 1H12 new housing finance commitments were up 4.9% on 2H11 ($122.6 billion compared to $116.9 billion).
"In December 2011, the total value of new housing finance commitments reached its highest level in two years. Expectations of a strengthening housing market have been bolstered by these figures," said Mr Russell.
"The number of owner occupied loans in December was above expectations, with NSW contributing a large portion due to the expiration on 31 December 2011 of its first homebuyer stamp duty concessions on existing dwellings.
"It is pleasing to see the value of investment housing loans in December 2011 rose 7.5% from the previous month and were at their highest level since June 2010 as investors return to the market."
Plans for the next year
Mortgage Choice will transition to the final stage of its diversification strategy in 2H12, by readying itself for the launch of its financial planning business in early FY13.
"In the new financial year we are gearing up to celebrate a number of key milestones during our 20th year in business including the highly anticipated launch of our financial planning business," Mr Russell said.
"Our due diligence for the financial planning business has been completed as has our business plan and we have no doubt the timing is right to deliver accessible financial planning solutions to all Australians.
"Today's financial results reflect our commitment to invest in the group's future and we expect stronger results in 2H12 on the back of higher revenues and reduced expenses.
"The company is dedicated to providing its shareholders with a consistent return despite market headwinds. Mortgage Choice is building a stronger value for all our stakeholders and will continue to source and leverage off existing and new growth opportunities.
"Our vision remains clear: to fortify Mortgage Choice's role as a home loan specialist that offers broader financial services to better meet the needs of its customers."
For further information or to arrange an interview, please contact:
Mortgage Choice Corporate Affairs
(02) 8907 0472 / 0407 416 124