YBR spends big on ‘major market-share push’

ASX-listed mortgage group Yellow Brick Road (YBR) is to ramp up its marketing activity through a national television network, with the group's efforts so far having generated a 300 per cent increase in leads.

Following its acquisition of Vow Financial and Resi in the 2015 financial year, YBR has set its sights on growing its share of the Australian mortgage market, which it says saw a surge in activity over the three months to 31 December 2015.

In a trading update, YBR outlined its vision for the 2016 financial year, which has so far created opportunities for the group to acquire significant scale organically, as “market noise around home loan rates draws consumer attention to their mortgages”.

“Consequently, we have made a strategic decision to invest in a major market-share push, through increased Yellow Brick Road marketing activity,” the group said.

“Substantial additional leverage is applied to this investment through the company’s relationship with key investor Nine Entertainment Co, owner of the Nine Network.”

YBR noted that this marketing investment has generated an operating cash deficit in the second quarter of 2016 of $1.7 million.

“On a normalised basis, this operating cash deficit was $1.32 million, an increase of $0.62 million on last quarter which is roughly in line with the $0.64 million increase in marketing spend,” the group said.

YBR noted it retains more than sufficient funding to support this marketing investment. At the end of the quarter, the company had cash and undrawn finance facilities totalling $13.5 million.

“Also as expected, this marketing investment is delivering significant uplift in new customer introductions, with Q2 FY2016 leads up 299 per cent versus the prior corresponding period,” the group said.

“These began flowing through to loan settlements in December.”

YBR achieved its highest month of mortgage settlements in company history in December 2015, with a more than 50 per cent increase in settlements when compared with December 2014.

According to the trading update, this momentum is flowing through into an increased share of the home lending market, with group share up to 4.55 per cent in October 2015, versus 3.44 per cent a year earlier.

[Related: YBR sees 50% increase in settlements]

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