Uncertain future for broker group and founder

by Madison Utley11 Mar 2019

An executive chairman who publicly pledged to fire himself should his firm fail to generate a profit, is being held to his word as the company posted a net loss after tax of $34.15m in the six months to December 31.

Despite founder Mark Bouris’ public optimism about Yellow Brick Road’s (YBR) future performance, its half year report released on Thursday last week showed a sharp net loss and significant goodwill impairment.

In addition, the report failed to be filed on time and YBR shares ceased trading for a one week period before resuming on Friday.

In a statement to the ASX, Bouris said the first half of the financial year had been challenging and that the company would reset and provide a “simplified balance sheet”.

“It has been an unusually tough six months… In all the years of being involved in the home loan business, I have never seen such difficult borrowing conditions,” Bouris’ statement read.

The group has been dogged by financial trouble for years. In 2016, YBR restructured through paring down its number of senior executives in order to cut costs. Those who remained were expected to perform expanded duties in order to compensate for the newly eliminated positions. 

Bouris himself took part in the initiative, stepping in to act as executive chairman. The strategy seemed to work, with YBR reporting a $400,000 net profit after tax the following year.

But by the end of 2017, YBR had accumulated losses of $38.5m and its share price had plummeted by more than 84% in the previous five years.

In August of 2018, a subsidiary of Mercantile Investment Company offered $0.09 per share in a takeover bid.

"The takeover bid is unsolicited and, in the view of the board of directors of YBR, it materially undervalues the existing and future value of the company and is opportunistic in its nature, timing and pricing," Bouris said in response.

YBR shares finished at $0.054 this past week.

Despite his grandiose claim to see himself out should YBR fail to show a profit, Bouris seems to be planning to stick around for the time being. The self-proclaimed business mentor and executive chairman said that YBR is working on new lending products, while considering ways to simplify and cut costs yet further.

The board is currently assessing the wealth management arm of the business as well as business structures, and is scheduled to post an update on its progress by the end of April.