After a solid FY14 performance and a cracking start to FY15, management at Mortgage Choice Limited (ASX: MOC) have announced today that they expect growth to continue in future years as the company completes its evolution into a full-service financial provider.
To reiterate 2014’s results, Mortgage Choice’s loan book grew by 4.6%, with cash profit rising 18.6% to $18.7 million, and shareholders awarded a record 15.5 cents per share in dividends (5.8%, fully franked at today’s prices).
FY15 started off even better with the total number of loans approved rising by 12.5% and the total number of loan writers rising to 554 from 510 at the same time last year.
Although the company’s very successful ACT (Acquire home loan market share, Cross sell financial advice, Transition to full-range financial services) strategy is coming to an end soon after its touted three-year period, there are several developments that look likely to keep the earnings rolling in over the years ahead.
- Brand development
Mortgage Choice has been rebranding as a fully-fledged financial services provider, this strategy involves giving the company a ‘new visual identity’ (including a new logo), as well as reiterating the company’s purpose and quality approach to customer service.
- Project One
Involving heavy cash outlays of $7.5 million over two years, with a completion date set for FY16, Project One involves establishing a web-based Customer Relations Management (CRM) program for franchisees in order to improve their productivity.
If you’ve ever received automated offers for increases in your credit card limits, new insurance policies, overdraft facilities and so on from corporations like the Commonwealth Bank of Australia (ASX: CBA), most of this correspondence is sent via CRM programs.
Thanks to demographic information collected about participants and studies of trends (e.g. first home buyers might be more likely to also buy/need financial advice), corporations can target their offers to specific demographics to improve their acceptance rate.
Although expensive, this project is a sound investment in Mortgage Choice’s future.
- Broader spectrum of products
Investors can also expect continued growth in Mortgage Choice’s financial advice arms and its health policy website to contribute proportionally greater amounts to earnings in future years.
Combine increased scale with the new cross-selling capabilities from Project One and Mortgage Choice looks like one great dividend payer likely to deliver growing profits and a healthy income stream to investors over the next few years.
How can you match a 5.8% dividend AND solid earnings growth?
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Motley Fool contributor Sean O'Neill doesn't own shares in any company mentioned.
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