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TRANSCRIPT
INVESTOR
PRESENTATION SEPTEMBER 2013
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CONTENTS
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• Overview of FY2013 Financial Results
- Profit & Loss
- Revenue Summary
- Expense Summary
- Cash Summary
- Balance Sheet
• Strategy Update
- Environment and Outlook
- Brand
- Distribution Footprint
- Comprehensive Product Suite
• Focus for FY2014
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SUMMARY OF RESULTS
• Revenue growth for the year was very strong reflecting the addition of new branches
and greater levels of productivity from existing branches
• Expenses, excluding marketing, were stable (3% growth)
• Economies of scale are emerging
• Marketing investment doubled during the period as the business aggressively
stepped up the promotion of the brand to create awareness, attract clients and
support local branch marketing activities
• Solid growth was achieved across all metrics as the key elements of the strategy
(brand, distribution footprint and product suite) were executed in line with our plans
• The results for the year were in line with management’s expectations and reflect
continued investment to grow the business with the second half results showing an
improvement as revenue momentum builds from initiatives put in place
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KEY METRICS - MORTGAGES
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* RBA monthly housing credit growth (including securitisations) average growth over the period of 1.1% per quarter
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KEY METRICS – WEALTH MANAGEMENT
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P&L SUMMARY
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REVENUE SUMMARY
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Consistent with our strategy and investments, branch based revenue is now
the core of the revenue for the business, whilst professional services is
playing an important supporting role.
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REVENUE SUMMARY
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Overall the growth in branch revenue was very strong and reflects the
addition of new branches as well as improved productivity from existing
branches as they mature.
• Mortgage and Finance revenue grew
sharply and is the major revenue
contributor
• Wealth Management is the fastest
growing revenue contributor with a large
scope for continuing growth
• General Insurance is a valuable ancillary
service that connects us with customers
and is building compounding annuity
revenue
• Increasingly when these products are
packaged under comprehensive advice
for clients our revenue per customer
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REVENUE SUMMARY
Professional Services produce revenue from their existing client base but
are increasingly providing valued specialist support to the rest of the
business.
• Following the 2012 restructure of general
insurance (direct), the business has
returned to growth
• Investment Services was restructured in
the first half of FY2013. Following the
restructure, the business is focused on a
wider range of opportunities, including
SMSF as well as continuing to provide
strategic advice to high net worth clients
• Accounting & Tax experienced a
reduction in productivity in the first half of
the year due to personnel and business
changes, but recovered with a 30%
increase in revenue in the second half
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EXPENSE SUMMARY
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Expenses reflect investment in the infrastructure required to support a
growing and developing branch network and is achieving economies of
scale. Marketing is used as an investment to grow the business.
• Marketing investment doubled to support
brand awareness, lead generation and
product launches
• Major expense items such as Personnel
and Administration & General remained
steady. The business is well positioned to
support future growth
• Premises and Communications &
Technology expense increased to
support the growing demands from a
larger business
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BALANCE SHEET
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With a strong balance sheet and healthy cash position the business is well
positioned to grow organically and, if appropriate, take advantage of
acquisition opportunities.
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CONTENTS
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• Overview of FY2013 Financial Results
- Profit & Loss
- Revenue Summary
- Expense Summary
- Cash Summary
- Balance Sheet
• Strategy Update
- Environment and Outlook
- Brand
- Distribution Footprint
- Comprehensive Product Suite
• Focus for FY2014
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OUTLOOK FOR 2014 – QUALITY ADVICE IN DEMAND
• Housing market is showing signs of recovery in major capital cities. This coupled with a low interest rate environment and large household cash holdings creates a positive outlook for the property sector
• Australians remain underinsured when compared with other developed nations, particularly when you consider our relatively high ratio of debt to household income
• Superannuation is growing as a household asset and the growth in SMSFs suggest Australians are taking more notice of this asset
• The average investor risk profile remains cautious about the volatility of investment markets however with low interest rates the search for yield is creating demand for advice and new product opportunities
• The financial services oligopolies in banking and wealth management are refining their strategies and becoming cost focused. Recent restructures and remuneration changes are creating the first signs of “fracturing” and “fragmentation” creating demand for an alternative
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BRAND UPDATE
Brand Metrics
• Prompted awareness up 6 points to 33%
• Consideration up 2 points to 7%
• Communications awareness up 4 points to
18%
• Only brand in research group of 10 to
increase in all metrics
Consumer Engagement
• Email subscribers/social media pool up by
47%
• Over 10,000 consumer leads generated
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The brand made terrific progress during the year as establish a nationally
recognised and trusted advice brand.
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DISTRIBUTION FOOTPRINT – BRANCH NUMBERS
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• Branch License Agreement build up
continues on plan at four per month
• Number of licensees has increased from
120 at 30/6/12 to 168 at 30/6/13
• Recruitment focus evolving from “demand
driven” to a more targeted approach:
– Geographic opportunities
– Monoline mortgage operators
– Bank Planners / Risk writers
– Independent Sub-Scale Planners
– Key Ethnic markets – Greek, Chinese,
Vietnamese, Korean, Italian
The distribution footprint continues to grow both in quantity and quality. The
business will now focus on specific target markets.
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DISTRIBUTION FOOTPRINT – ADVICE CAPABILITY
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• The uptake by the network to broaden advice skills
and certification to serve the majority of personal
advice and products across each client’s household
of needs has resulted in a stepped increase in
revenue and activity in Wealth Management
• Broader advice opportunities are primarily sourced
through the initial mortgage engagement with
customers. Virtually all branches now possess the
capability to offer advice beyond mortgages
The advice capability of the branch network continues to evolve with single
product authorities now the minority as representatives complete their
training and engage clients with broader advice.
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BRANCH REVENUE DEVELOPMENT CYCLE
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The development cycle of the branch network continues to build and
shows that on average our branch’s monthly revenue is within our
expected ranges at this point in their development cycle.
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BRANCH REVENUE TRENDS
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*Annual Revenue based on run rate achieved in qtr
As the branch network matures and productivity initiatives “kick in” we are
seeing an increase in overall revenue outcomes.
Branch operating models are diverse, as are
revenue expectations.
• Sole Operator - $200K-$250K target after
three years
• Multi Adviser - significant infrastructure $1m
plus after 3 years
From Q1 FY12 – Q4 FY12
No. of branches > $100K increased 84%
From Q4 FY12 – Q4 FY13
No. of branches > $100k increased 104%
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COMPREHENSIVE PRODUCT SUITE
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We have worked hard this year to develop a comprehensive product suite
that rivals or betters any financial services platform in the market.
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BANKING – EMPOWER HOME LOANS
• Yellow Brick Road entered into distribution
agreement with Macquarie Bank in November
2012
• Launch of Empower product range in November
2012
• Launch of Flexi-Fixed option to cater for
increasing fixed rate market in late May
• Launch of Rate Smasher home loan in July to
take on on-line home loan providers
• Mortgage book overall grows by 100% in the
past 12 months
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In addition to our wide selection of mortgages, our recently launched
branded solutions have allowed us to promote ourselves aggressively.
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BANKING - CREDIT CARD, CASH MANAGER & TERM DEPOSITS
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YBR Empower Credit Card – launched August 2013
• Launched September 2013
• 1% cash-back on purchases
• 0% interest on balance transfers for 6 months
• Up to 55 days interest free on purchases
YBR Cash Manager – launched September 2013
• No ongoing fees
• Govt Guarantee up to $250,000
• Competitive interest rate 2.5%
• SMSF-ready to simplify tax & audit
YBR Term Deposits - launched September 2013
• Competitive rates on terms to 60 months
• No ongoing fees
• Govt Guarantee up to $250,000
• Specialised service provided
We have built a range of banking solutions that put our branches in the
“drivers seat” with their customers.
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BANKING - LEASING & FINANCE
YBR CAR - launched September 2013
• Motor vehicle buying and financing
• Delivering high value discounts to consumers and
small business owners
• Full range of financing options and leasing available
YBR Business Finance
• Plant and equipment financing for business purposes
• Lease, chattel, hire purchase and asset loan product
• Working capital and acquisition finance
• Non-property secured business lending
• Trade finance options for importers and exporters
• Retail financing programs for vendors
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Developing products that meet the needs of our customers has and will
continue to be our focus and will drive us to innovate.
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INVESTMENT - RETIRERIGHT
• The RetireRight product was launched
in June 2013
• Industry ranking within Top 10 of all
public offer funds (including industry
funds)
• Access to managed funds, direct shares
and model portfolios
• Innovative approach to simple pricing,
insurance choice and on-line ease of
use
• Economic benefit to Yellow Brick Road
arises from product margin, advice
margin and investment margin (Smarter
Money)
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Every Australian has two big financial dreams - to own their own home and
to retire comfortably.
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INVESTMENT - SMARTER MONEY
• Current activity:
– FUM at $98m (Sept 2013)
– 12 month return after fees 6.8% p.a.*
– Low annual volatility 0.8% p.a.
• Four researcher ratings completed
• Available on four investment platforms
• Over 50% take-up by YBR branches
• Used by external financial planners
• First institutional investor secured
• Online inflows growing steadily
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The fund has filled an important gap in the savings market and is well
supported by a growing number of distribution channels including our
branch network.
* 12 month return to 31/8/2013 for a “Platform” investor
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INSURANCE
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With the large under-insurance issue in Australia, we see insurance as a
critical foundation of quality, affordable advice.
• 80+ branches active in promoting insurance
services
• Life Insurance revenue up at $1.68M (from
$733k in 2012)
• One third of new premium flows to Yellow
Brick Road branded life products
• Industry first in offering full tailored personal
insurance options within superannuation
(RetireRight)
• Allianz small business insurance package
launched in May 2013
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CONTENTS
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• Overview of FY2013 Financial Results
- Profit & Loss
- Revenue Summary
- Expense Summary
- Cash Summary
- Balance Sheet
• Strategy Update
- Environment and Outlook
- Brand
- Distribution Footprint
- Comprehensive Product Suite
• Focus for FY2014
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FOCUS FOR FY2014 - UPCOMING INITIATIVES
• Finalise the product suite
- SMSF service (Sept 2013)
- Separately Managed Accounts (SMAs) for Fixed Interest (Oct 2013)
• With the product platform completed by Q1 FY2014 the remainder of the year will focus
on growing revenue with an emphasis on the recruitment, induction and productivity
from branches
• The key objective for the business in this financial year is to bridge the gap between
monthly revenue and expenses by June 2014. Our goal is to be monthly cash flow
positive by financial year end.
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