YBR climbs towards cash neutral status

by Miklos Bolza01 Feb 2017
Yellow Brick Road has announced that the underlying trend in its operating deficit has improved by 91% from $1.48 million to $140,000 between Q2 FY16 and Q2 FY17.
“It has been a solid quarter for us where the underlying business trend came close to cash neutral, in line with expectations,” Scott Graham, chief commercial officer at Yellow Brick Road told Australian Broker.
Although the group posted an actual loss of $1.94 million in the second quarter for financial year 2017, this was amplified by “one off” expenses such as:
  • Tail end costs of $210,000 associated with the acquisition of RESI Mortgage Corporation and Loan Avenue as well as the disposal of the firm’s accounting practice
  • A media payment of $1.1 million for an outstanding invoice relating to campaign activity from Q2 2016
  • $500,000 to acquire trail rights on lending books within the YBR network
“These items are not part of the normal run of business. Removing them gives a better feeling of how the underlying business is trending,” Graham said.
Yellow Brick Road also delivered $4 billion in loan settlements, the third highest result in group history and an increase from the preceding quarter ($3.9 billion).
The lender’s total loan book grew by 20% to $40.8 billion from Q2 FY2016 when the book was $33.9 billion.
While the retail business delivered a growth settlement of 20% between Q2 in FY2016 and FY2017, the number of settlements for Vow Financial was down, sitting at $4 billion for the stated period. This slower growth increased the lender’s loan book by $6.9 billion.
YBR associates this decline with greater regulatory pressure on lending practices.
“This has made little impression on the bottom line,” Richard Shaw, chief financial officer of Yellow Brick Road said in a statement. “To compensate, brokers are pulling more opportunities into the Vow business with applications up 23%.”
The group anticipates a significant operating cash surplus in the six months prior to 30 June 2017, he added, with the firm committed to meeting market expectations.
Graham said that in this time period, YBR will focus on building its branch footprint in the larger open territories, rolling out its new wealth model, conducting local area marketing, and launching new cash flow management technology.
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