Mortgage Choice delivers 10.7% growth in cash profit

August 25, 2016

Mortgage Choice Limited (MOC) has today announced its annual results for the financial year ended 30 June 2016. 

Over the last financial year, the Group capitalised on market opportunities to deliver double digit profit growth whilst investing in the capability of its network to repeat these outcomes in the future.

Financial highlights for the 12 months to 30 June 2016

• NPAT on a cash basis was $20.5 million for FY16 – up 10.7%  on FY15;
• Mortgage Choice's core broking business recorded its best ever settlement result, with settlements totalling $12.2 billion - up 6.3%  on FY15;
• Mortgage Choice's loan book pushed through the $50 billion milestone, growing to $51.7 billion, up 4.4%  on FY15;
• Financial Planning Gross Profit up 38% from FY15;
• Funds Under Advice and Premiums In Force both rose significantly throughout FY16, up 19% and 28% respectively to $332.1 million and $19.2 million;
• A fully franked final dividend of 8.5 cents per share was declared by the Board. Total dividend for the year was 16.5 cents per share – a new high for the Company and an increase of 1 cent on FY15.

Other highlights for the 12 months to 30 June 2016

• Franchisee revenue growth up 7% from FY15;
• Strong network growth, with more than 600 credit representatives in the field for the first time;
• 10.3% of revenue generated from services other than mortgage lending.

Mortgage Choice chief executive officer John Flavell said the Company's latest annual financial results were a testament to the ongoing strength of the business.

“Throughout FY16 the Group performed very well, achieving (or exceeding) all of the business objectives we set for ourselves,” he said.

“Better yet, our impressive business results were recorded against a backdrop of considerable economic and market volatility. Complexity in the market has provided a real opportunity for our business to deliver increased value to our customers through the provision of help, guidance and advice.

“According to data from the Australian Bureau of Statistics, more than 50,000 and $32 billion worth of home loans were approved each month throughout FY16. This took place on the back of interest rates falling to historically low levels which maintained momentum in the lending market, helping to offset the negative impact that the prudential regulator's blunt approach had on investment lending.

“In the midst of this market volatility, Mortgage Choice continued to invest in the business, giving us solid results today, and setting us up well for FY17 and the longer term. 

“Moving into FY17, I believe there is even more we can do to help the Business grow and thrive. We will continue our transition into an omni-channel, integrated financial services company. This will deliver value to our customers and franchisees and strong returns to our shareholders.

“We are very growth biased and we will continue to invest in the business' capability. This will enable strong revenue growth which - coupled with diligent expense management - will deliver continued increases in profitability.”

Throughout FY16, Mortgage Choice invested heavily in the capability of its people, growing its credit representative number to 618.  Pleasingly, the Group's new and established loan writers were able to take advantage of the continued growth in the housing finance market, with the Business setting a new settlement record.

“Over the last 12 months, we settled $12.2 billion in home loans,” Mr Flavell said.

“This is the first time Mortgage Choice's average annual monthly settlements exceeded $1 billion.

“Our loan book also continued to grow, rising 4.4% throughout FY16 to $51.7 billion.”

But it wasn't just the Group's core broking business that performed strongly throughout FY16, with the Group's financial planning arm also recording impressive growth.

“Last year, we told the market that our financial planning business would deliver profitability on a monthly basis by the fourth quarter of FY16. I am happy to report that we achieved this outcome ahead of schedule in February,” he said.

“Over the last 12 months we have doubled the proportion of our debt customers whose wealth needs we are meeting to 10%. While this is impressive growth, there is still a significant opportunity for us in this space.

“Funds Under Advice and Premiums In Force have risen 19% and 28% respectively over the last 12 months. At the same time, gross profit for the financial planning arm has grown 38%. This business is now at the next stage of its maturity and I have no doubt that it will make a positive contribution to the Group's financial results from here on.”

Mr Flavell said Mortgage Choice remains committed to the diversified business model as the Company believes one plus one can equal something more than two for its customers and stakeholders.

“Throughout FY16, we strengthened our portfolio of diversified products, with the introduction of a Mortgage Choice branded asset finance offering,” he said.

“Heading into FY17, diversification will continue to be a focus for the Business as we look to become our customers' single provider for all of their financial needs.”

And while it is clear there are plenty of opportunities for Mortgage Choice heading into the new financial year, Mr Flavell said it was important for the Business to recognise its impressive performance in FY16.

“Our shareholders will once again be very pleased with the dividend result. The ongoing strength of the Mortgage Choice business means we have been able to deliver a total fully franked dividend of 16.5 cents per share – our largest ever annual dividend,” he said.

Future growth

Mr Flavell said he is confident about the future direction of Mortgage Choice and believes FY17 will be a strong year for the Business.

“In FY16, we laid the foundations for a very successful future,” he said.

“We set ourselves some aggressive business targets and we met, if not exceeded, all of them. Heading into FY17, we will step up this momentum. We have identified the four key priorities for the business over the next 12 months, and we will deliver on these whilst maintaining a laser-like focus on our 2020 vision.

Mr Flavell said the four key priorities for the Business in FY17 are;

• Franchisee revenue growth and diversification of revenue;
• Increased brand awareness and engagement;
• Market share growth; and
• Profit growth driven through revenue growth.

“We are in a very exciting stage of the business. At present, we are well down the road to successfully transitioning the Business into a diversified financial services company. This will add value to our customers, franchisees, and our shareholders,” he said.

“Throughout FY16, we achieved a lot as a business. Impressively, these achievements were realised against a backdrop of economic uncertainty and market challenges. Heading into FY17, I have every expectation that the market will continue to be complex – perhaps even more so than FY16. Our track record of delivering exceptional results in a challenging environment gives me the confidence to state that we have set ourselves up to thrive in FY17 and beyond”