As a major shareholder in the ASX-listed mortgage and wealth management company, industry pioneer Mark Bouris says he is "disappointed" with the group’s $9.5 million loss and languishing share price but remains confident in the company's medium-term goals.
YBR failed to turn a profit despite growing mortgage settlements by 28 per cent over the year to 30 June. The group's loss after tax widened from $2.6 million in FY15 to $9.5 million over the year to 30 June.
In a trading update, YBR’s executive chairman said the completion of a period of heavy investment in brand and distribution has been met with tough lending conditions and as a result the group’s revenue targets have not been reached.
“As a major shareholder I, like you, am disappointed,” Mr Bouris said. “Nonetheless, I am confident that the foundation we have laid for the company has put us in an excellent position to deliver better financial outcomes moving forward. As a nimble player in this marketplace we are in an advantageous position to respond swiftly and decisively to industry shifts.”
Mr Bouris highlighted the ongoing challenges of operating in an environment of low margins, increasing regulation and higher funding costs.
“An increase in the cost of funding has put pressure on margins across the industry,” he said.
“As lenders respond to regulatory pressure, borrowers face the hurdle of greater scrutiny on household expenditure measurement (HEM) and income verification, which plays into lower approval rates and impacts market size.”
The Wizard Home Loans founder also flagged ongoing regulatory pressures that are reshaping the mortgage broking and financial planning industries.
“The outcome of the current broker remuneration review will likely further shape the mortgage industry in FY17. For planners, new legislation that mandates a biennial obligation to seek client permission to continue servicing and charging will require significant changes to the servicing model of most,” Mr Bouris said.
“Importantly, as you will be aware, Australia’s investment lending landscape changed with tougher rules for offshore purchasers and restrictions to lenders’ investor ratios. This has resulted in a restricted environment for us, and our competitors.”
The shifting lending landscape has forced YBR to enter a period of consolidation. According to Mr Bouris, this means some “tough cost cutting” and “maintaining strict spending discipline, while bedding down the recent acquisitions”.
“It also means delivering our technology innovations and leveraging our brand equity. Strict discipline around productivity flowing from head office through to our vast and growing network across Australia will be central to hitting our financial targets.”
Mr Bouris revealed that he recently removed a level of management from the business.
“This broader restructure involved the removal of a number of management roles that are no longer required due to the fulfilment of projects and integration of acquired businesses. This will result in a decrease in direct staffing costs and a leaner, more efficient head office team,” he explained.
“I have asked the remaining senior managers to adopt what I call a ‘step in’ mindset so they will be stepping into the roles that have been eliminated and this will be done starting with me as executive chairman, where the wealth business will now report directly. This adaptation of our operations to suit the environment in which we operate is important.”
While the company has been plagued with a plummeting share price – down approximately 63 per cent over the last 12 months – Mr Bouris remains bullish about YBR’s plans to become a leading non-bank financial services provider. He says lending activity that provides scale is key to the group success.
“With over $37 billion in loans under management to date, we are pursuing a $100 billion loan book under management which equates to an approximate market share of 5 per cent,” he said.
“This lending business provides a foundation and opportunity for warm introductions for wealth management services which provide margin.”
The group is also aiming to target wealth penetration of 30 per cent of its client base by growing its network to 300 branded branches and 1,000 broker groups.